The Institute for the Economy in Transition

Performance Oriented Defence Budgeting: A Russian Perspective

Vasily Zatsepin CATE 2005, Brno, Czech Republic, 4th May 2005 1

Objective To bring the Russian Government Arms Program (GAP) to the forefront in defence budgeting research:

 origins and features of GAP  causes of its inefficiency  implementation of performance-oriented budgeting in Russian Defence Ministry The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 2

Russian Defence Budgeting Specifics

     2004: introduction of a performance-oriented budgeting system by Russian Government September 2005: first draft of such budget to be presented to State Duma 43% of the national defence expenditures are classified 2005: 10% total increase over 2004 in real terms in national defence expenditures All that increase to be spent on GAP The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 3



What is GAP?

GAP

≠

GAAP  GAP = Government Arms Program (or State Arms Program)  Inherited from Soviet times  Introduced in 1980s when the Soviet leadership had to react to PPBS success in the US  Significantly differs from its American prototype The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 4

Comparison of Two Programming Systems Characteristics

PPBES(USA) GAP (Russia)

Planning Programming:

cycle duration, years depth, years moving time horizon

Budgeting Independent analysis Policy and Standardised documents Leadership quality Accountability Secrecy Yes 1 (2) 5 Yes Yes Yes Yes High Transparent Minimal No 5 10 No No No No Low Opaque Full

The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 5

The GAP Myth: Blind Men or Tailors?

Q: What causes GAP’s overall inefficiency?

A: The answer lies somewhere between the two extremes above. The GAP’s secretive mechanisms became a tool of special interest groups to control a vast share of defence budget.

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What to do?

Use critical intervention

  GAP is “oversold” in public opinion –

change public opinion

Defence Ministry lacks accountability –

develop an open performance measurement system

 Finance Ministry exercises real control over defence sector by hiding defence budget requests –

make defence budget request procedure open

The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 7

Where to move?

Our vision of Russian defence sector includes:  No GAP – instead transparent performance-oriented defence budgeting system  No written military doctrine – instead strict annual Total Armed Forces Analysis procedure as basis for defence budget requests  Concepts or intentions, but not both simultaneously for the same subject The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 8

Conclusion

Can it be the main problem of performance measurement in defence?

    There are natural, logical and social

limits of rationality

(G ődel’s incompleteness theorem, Heisenberg ’s uncertainty principle, Aristotle ’s dialectics, etc.) There are cultural and ideological

thresholds

(Sapir-Whorf hypothesis, etc.)

War

is still “merely a continuation of policy by other means” (Clausewitz) No determined correlation between achieved effectiveness in defence sector and war outcomes (PPBS and McNamara’s “body counting” – Vietnam, PPBES and Bush – Iraq, etc.) The Institute for the Economy in Transition CATE 2005, Brno, Czech Republic, 4th May 2005 9

The Institute for the Economy in Transition   

Military Performance Further Reading

JULLIEN, Francois. Traite de

l’efficacite

. Paris: Bernard Grasset, 1996.

VAN CREVELD, Martin. Fighting

Power: German and US Army Performance, 1939-1945

. Westport: Greenwood Press, 1982.

ABRASHOFF, Michael.

It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy

. New York: Warner books, 2002.

CATE 2005, Brno, Czech Republic, 4th May 2005 10

The Institute for the Economy in Transition

Any Questions?

Vasily B. Zatsepin

Senior Research Fellow Department for Military Economics Phone: +7-095-2290971 E-mail: [email protected]

www.iet.ru

5 Gazetny Lane Moscow 125993 Russian Federation CATE 2005, Brno, Czech Republic, 4th May 2005 11