1. 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 julian.roberts@dau.mil 256-922-8041

2. Outline PPBE Process and Schedule –Changes and updated terms “Will Cost” vs “Should Cost” 2

3. Resource Management System PPBE is the Primary Resource Management System for DoD: 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

4. PPBE Phases Planning (OSD Policy) –Assess capabilities / review threat –Develop guidance Programming (OSD CAPE) –Turn guidance into achievable, affordable packages –Five-year program (Future Years Defense Program) Budgeting (OSD Comptroller) –Test for efficient funds execution –Scrub budget year –Prepare defensible budget Execution Review (concurrent with program/budget review) –Develop performance metrics –Assess actual output against planned performance –Adjust resources to achieve desired performance goals 4

5. 4 Major Changes in the FY 12-16 PPBE Cycle DepSecDef memo, dated 9 Apr 10 DPPG (was GDF and JPG; now DPG for FY 13-17) One budget year (was two on the “on years”) –Makes this an annual budget cycle vs a biennial budget Focus on a 5-year period –Changed FY12-17 period to FY 12-16 DOD conducting Front End Assessments –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

6. Front End Assessments SecDef memo, dated 31 Mar 11 Security Force Assistance Institutionalize UAVs Family Programs and Mental Healthcare Anti-Access / Area Denial Research and Development Cyber Capabilities 6

7. 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 APR/SEP PPBE – Planning Phase President National Security Council CIA/DIA/JCS/OSD (JCS, COCOMs, SERVICES) NMS DPPG NSS Planning Phase focus: Threat vs. Capabilities Update strategy Guidance for programming & budgeting NDS OSD Level JCS Level QDR FEB/MAR To DoD “Large Group”/Integrated Program/Budget Submission & Review FEAs D, CAPE/VCJCS/ USD(P) CPR Every 4 Years DPG for FY13-17 cycle

8. PPBE Integrated Program/Budget Review Components/ Defense Agencies BES PB MBI Adv Questions/ OSD/OMB Budget Hearings JUL JAN/FEB OCT Issue Resolution SECDEF/DEPSECDEF SLRG & DMAG POM OSD/ CAPE CPA DEC NOV JCS USD(C)/ OMB 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 – Future Years Defense Program MBI – Major Budget Issues OMB – Office of Management and Budget PB – President’s Budget POM – Program Objectives Memorandum RMD – Resource Management Decision SLRG – Senior Leader Review Group FYDP Update FYDP Update 3-Star Group Program Review focus: Compliance with DPPG CPMs Budget Review focus: - Pricing - Phasing - Funding policies - Budget execution RMDs Services / PEO / PM Answer / Reclama DoD “Large Group” FEAs

9. “Will Cost” vs “Should Cost” USD (AT&L) and USD(C) 22 Apr 11 Memo Will Cost Used for programming and budgeting Used for acquisition program baselines (APBs) Used for all reporting requirements external to DoD Should Cost Scrutinize every element of govt and contractor costs 3 ways to develop should cost estimates: Bottoms –Up estimate Determine specific discrete and measurable items Use competitive contracting and contract negotiations to identify should cost savings (old FAR definition) Model Programs Air Force : JSF, Global Hawk, SBIRS, EELV, AEHF Army: Joint Air Ground Missile, UH-60M, GCV, Paladin Product Improvement (PIP), NETT Warrior Navy: JSF, E-2D, Presidential Helo, LCS, Ohio Replacement Program 9

10. Air Force Implementation of Will-Cost & Should-Cost Mgt SAF/FM and SAF/AQ - 15 Jun 11 Memo Applies to ALL ACATs (ACAT I, II and III); required at all milestone decisions and annually “Non-advocate Will Cost-Estimates” –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 –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

11. Air Force Implementation of Will-Cost & Should-Cost Mgt SAF/FM and SAF/AQ - 15 Jun 11 Memo “PMs must begin to drive leanness into their programs by establishing Should-Cost estimates at major milestones” –Designed to drive productivity improvements –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 –At a minimum, PMs are expected to identify specific discrete measurable items or initiatives that achieve savings against the Will-Cost estimate –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) –PMs to brief execution with respect to Should Cost at Spring Program Review (SPR) and Investment Budget Review (IBR) –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

12. Questions? 12