ASMC – Middle Georgia Chapter 9 Feb 2012 Luncheon Planning, Programming, Budgeting, and Execution (PPBE) Update

Julian “Rob” Roberts Professor of Financial Management Defense Acquisition University – South Region Huntsville, AL [email protected]

256-922-8041

Outline

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PPBE Process and Schedule

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Changes and updated terms

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“Will Cost” vs “Should Cost” 2

Resource Management System

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PPBE is the Primary Resource Management System for DoD:

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Articulates strategy Identifies size, structure and equipment for military forces Sets programming priorities Allocates resources Evaluates actual output against planned performance and adjusts resources as appropriate 3

PPBE Phases

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Planning (OSD Policy)

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Assess capabilities / review threat Develop guidance Programming (OSD CAPE)

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Turn guidance into achievable, affordable packages Five-year program (Future Years Defense Program) Budgeting (OSD Comptroller)

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Test for efficient funds execution Scrub budget year Prepare defensible budget Execution Review (concurrent with program/budget review)

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Develop performance metrics Assess actual output against planned performance Adjust resources to achieve desired performance goals 4

4 Major Changes in the FY 12-16 PPBE Cycle DepSecDef memo, dated 9 Apr 10

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DPPG (was GDF and JPG; now DPG for FY 13-17 ) One budget year (was two on the “on years”)

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Makes this an annual budget cycle vs a biennial budget Focus on a 5-year period

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Changed FY12-17 period to FY 12-16 DOD conducting Front End Assessments

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Eight issues with SecDef oversight via the “Large Group” All other issues led by DepSecDef via the DAWG ( now DMAG ) NOTE: FY 13-17 PPBE Cycle has six issues 5

Front End Assessments

SecDef memo, dated 31 Mar 11

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Security Force Assistance Institutionalize UAVs Family Programs and Mental Healthcare Anti-Access / Area Denial Research and Development Cyber Capabilities 6

PPBE – Planning Phase

President National Security Council CIA/DIA/JCS/OSD

OSD Level

FEB/MAR

NSS NDS Planning Phase focus:

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Threat vs. Capabilities Update strategy Guidance for programming & budgeting QDR Every 4 Years

APR/SEP

CIA –

Central Intelligence Agency

COCOM

– Combatant Commander

CPR

– Chairman’s Program Recommendation

D, CAPE

– Director, Cost Assessment & Program Eval

DIA

– Defense Intelligence Agency

DPPG –

Defense Planning & Programming Guidance

FEAs –

Front End Assessments

JCS

– Joint Chiefs of Staff

NDS –

National Defense Strategy

NMS

– National Military Strategy

NSS

– National Security Strategy

OSD

– Office of the Secretary of Defense

QDR

– Quadrennial Defense Review

USD(P)

– Undersecretary of Defense (Policy)

VCJCS

– Vice Chairman, Joint Chiefs of Staff

DPPG FEAs D, CAPE/VCJCS/ USD(P) To DoD “Large Group”/Integrated Program/Budget Submission & Review JCS Level (JCS, COCOMs, SERVICES) NMS CPR DPG

for FY13-17 cycle

JUL

FEAs POM Components/ Defense Agencies

OCT

DoD “Large Group” OSD/ CAPE Issue Resolution JCS

PPBE Integrated Program/Budget Review

NOV DEC JAN/FEB

3-Star Group SECDEF/DEPSECDEF SLRG & DMAG CPA

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Program Review focus: Compliance with DPPG CPMs BES

– Budget Estimate Submission

CAPE

– Cost Assessment & Prgm Evaluation

COCOM

– Combatant Commander

CPA

– Chairman’s Program Assessment

CPM

– Capability Portfolio Manager

DMAG

– Deputy’s Management Action Group

FYDP MBI

– Future Years Defense Program – Major Budget Issues

OMB PB

– Office of Management and Budget – President’s Budget

POM

– Program Objectives Memorandum

RMD

– Resource Management Decision

SLRG

– Senior Leader Review Group

RMDs BES USD(C)/ OMB Adv Questions/ OSD/OMB Budget Hearings MBI PB FYDP Update FYDP Update Services / PEO / PM Answer / Reclama Budget Review focus: - Pricing - Phasing - Funding policies - Budget execution

“Will Cost” vs “Should Cost”

USD (AT&L) and USD(C) 22 Apr 11 Memo

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Will Cost

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Used for programming and budgeting Used for acquisition program baselines (APBs) Used for all reporting requirements external to DoD Should Cost

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Scrutinize every element of govt and contractor costs 3 ways to develop should cost estimates:

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Bottoms –Up estimate

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Determine specific discrete and measurable items Use competitive contracting and contract negotiations to identify should cost savings (old FAR definition) Model Programs

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Air Force : JSF, Global Hawk, SBIRS, EELV, AEHF Army: Joint Air Ground Missile, UH-60M, GCV, Paladin Product Improvement (PIP), NETT Warrior

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Navy: JSF, E-2D, Presidential Helo, LCS, Ohio Replacement Program 9

Air Force

Implementation of Will-Cost & Should-Cost Mgt SAF/FM and SAF/AQ - 15 Jun 11 Memo

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Applies to ALL ACATs (ACAT I, II and III); required at all milestone decisions and annually

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“Non-advocate Will Cost-Estimates”

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Previously, specific requirements for these estimates for ACAT I programs only Now, same requirements (“same level of rigor”) will also apply to ACAT II and III

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Aims to provide sufficient resources to execute the program under normal conditions, encountering average levels of technical, schedule, and programmatic risk (usually no less than the mean confidence level, typically between 55-65%) “Used as basis for all budgeting and programming decisions” “Basis for all metrics and reporting external to the department” Shall be approved by office/entity outside of program office chain-of-command (AKA “ICE”) 10

Air Force

Implementation of Will-Cost & Should-Cost Mgt SAF/FM and SAF/AQ - 15 Jun 11 Memo

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“PMs must begin to drive leanness into their programs by establishing Should-Cost estimates at major milestones ”

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Designed to drive productivity improvements

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Used as an internal management tool to incentivize performance to targets Based on realistic technical and schedule baselines and assumes success oriented outcomes from implementation of efficiencies, lessons learned, and best practices

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At a minimum, PMs are expected to identify specific discrete measurable items or initiatives that achieve savings against the Will-Cost estimate

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ACAT I, II & III programs on the Acquisition Master List will present Should-Cost estimates at their next major milestone Difference between Will Cost (budget) and Should Cost will be held at Service level (initially for the five pilot programs only)

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PMs to brief execution with respect to Should Cost at Spring Program Review (SPR) and Investment Budget Review (IBR)

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PM requests release of “difference” at these reviews Funds released via joint decision by SAF/AQ and SAF/FM (SAF/AQX and SAF/FMB for ACAT II and III) 11

Questions?

12