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Reform the Pentagon’s budget process, or lose our military and tech advantages


What do artificial intelligence, quantum computing, the Defense Innovation Unit and reprogramming requirements have to do with one another? The answer is, “Everything.” For unless both Congress and Department of Defense (DOD) seriously reform the manner in which they move funds from one appropriations account to another, the DOD’s ability to introduce new technologies rapidly will be seriously compromised — and with it, potentially, the nation’s defenses.

The development and fielding of new technologies involve a considerable amount of risk. Not all programs that are attractive on paper actually will succeed in the laboratory. Not all that succeed when subjected to developmental testing will succeed when put to the operational test. The earlier a potential cutting-edge program is determined unlikely to succeed, the sooner its funds should be transferred to a different program, via a system termed “reprogramming.” Unfortunately, congressional restrictions render it exceedingly difficult to transfer funds from one new program to another with any degree of alacrity.

As currently mandated, Congress permits the Defense Department to transfer only $6 billion from one appropriations account to another in any given fiscal year; of that amount, one third — termed Special Transfer Authority — draws from the Overseas Contingency Operations accounts. The $6 billion that can be transferred represents less than 1 percent of the department’s annual budget. The chief financial officers of most corporations have far more discretion when moving funds from one account to another. 

Congressional restrictions do not end there, however; indeed, they only begin with a DOD proposal to move funds across accounts. Above a threshold that Congress has specified for programs in each appropriation account, the DOD must first obtain approval from the Office of Management and Budget, and then from each of the four defense oversight committees: the House and Senate Armed Services Committees and the two defense subcommittees of the House and Senate Appropriations Committees. (Any transfer of intelligence-related funding also requires the approval of the two congressional intelligence committees.) 

The thresholds that Congress has set for programs can only be described as risible. For example, the Defense Department can only move funds from a given research and development budget line item, or one in the procurement account, without prior committee approval from every one of the four committees if that line item totals less than $10 million, or less than one-ten-thousandth of the total appropriations account. Moreover, if the funds are intended for starting a new program, the $10 million threshold cannot be exceeded over a three-year period. Should the department wish to reduce a line item, it also must obtain congressional approval for any actions involving cuts in excess of either $10 million or a fifth of the program in question, whichever is the smaller amount.

If the congressional restrictions were not enough, the Defense Department has made life more difficult for itself by conducting only one review of programs in between submission of its annual budget requests. In 2003, when serving as DOD comptroller, I proposed adding “execution” to the planning, programming and budgeting process, reflecting the so-called mid-year execution review. It was in this review that funds from slow-spending programs could be transferred to those spending more quickly, as long as the congressional committees agreed to the transfers. 

At the same time as I proposed to codify “execution” into the process, I also envisaged that the Defense Department would conduct at least two execution reviews in addition to the long-standing mid-term review. Sadly, while this was incorporated into the system, the additional reviews were not. By way of comparison, in the corporate world, such reviews, and the transfers they engender, are held as frequently as weekly or even daily.

The combination of congressional limitations and DOD inflexibility undermine any effort to transfer funds rapidly, from a hi-tech program that appears to be going nowhere to one that is far more promising. The rigidity of the system also renders it more difficult for organizations such as the Defense Innovation Unit to transfer funds from disappointing or slowly developing commercial programs to those of greater military promise that also offer more rapid introduction in the field.  

If Congress is as serious as it claims to be about ensuring that America secures and maintains the lead over China and Russia in artificial intelligence and other high-technology applications for military operations, it should revisit and revise those seemingly arcane budget rules that stifle innovation and military modernization. And, in parallel, the Defense Department should do all it can to ensure that the funds it receives from Congress can be applied both quickly and efficiently. In this way both Congress and the DOD could most effectively foster and reward the innovation that would ensure American military dominance on the battlefield for many years to come. 

Dov S. Zakheim is a senior adviser at the Center for Strategic and International Studies and vice chairman of the board for the Foreign Policy Research Institute. He was undersecretary of Defense (comptroller) and chief financial officer for the Department of Defense from 2001 to 2004 and a deputy undersecretary of Defense from 1985 to 1987.

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