LOA University Planning Programming Budgeting and Execution PPBE

LOA University: Planning, Programming, Budgeting, and Execution (PPBE) and Congress Roberta Tomasini Professor of Financial Management Defense Acquisition University roberta. tomasini@dau. mil 703 -805 -3764

PPBE and Congress Outline • PB 17 (8) • PPBE (4) – PPBE Phases – PPBE Process and Schedule • Congressional Enactment 2

PB 17 vs Current Caps and Prior Budgets (Dollars in Billions) $610 $590 $570 $550 $530 $510 Original BCA Caps $490 $470 FY 11 FY 12 FY 13 FY 10 -11 -12 Actuals FY 2015 PB Current Caps FY 14 FY 15 FY 16 FY 2013 PB/DSG FY 2017 PB FY 17 FY 18 FY 19 FY 2016 PB Original BCA Caps FY 21 3

How we hit the lower FY 2017 topline (Dollars in Billions) $10 $+5. 0 B $5 $-21. 8 B FY 2017 -$15 Fuel Savings, $-2. 8 B Inflation Savings, $-2. 4 B -$5 -$10 $-16. 8 B Gross BBA cut New Efficiencies, $-0. 4 B Net Program changes, $-11. 2 B Net Cut to Base Budget $0 OCO Relief -$20 -$25 Comparison to FY 2016 PB Plan for FY 2017 4

Cuts to hit the lower FY 2017 Topline • We will procure fewer weapons systems than planned: – 9 AH-64 Apache helicopters (Army) – 24 UH-60 Blackhawk helicopters (Army) – 5 F-35 A Joint Strike Fighters – 2 V-22 aircraft (Navy) – 3 C-130 J aircraft (Air Force) – 4 LCAC Service Life Extension Programs (Navy) – 77 Joint Light Tactical Vehicles (Marine Corps) • Aircraft procurement accounts reduced $4. 4 billion • Shipbuilding reduced $1. 75 billion • Other procurement accounts reduced $2. 6 billion • Reduce plans for new military construction projects by $1. 1 billion Comparison to FY 2016 PB Plan for FY 2017 5

FY 2017 Base Funding By Appropriation Title By Military Department Military Construction and Family Housing, $7. 4 RDT&E, $71. 4 Military Personnel, $135. 2 Procurement, $102. 5 O&M, $205. 8 Defense Wide $94. 5 Air Force $151. 1 Army $122. 9 Navy $155. 4 FY 2017 Request: $523. 9 billion 6

FY 2017 OCO Funding By Appropriation Title By Military Department Military Construction and Family Housing, $7. 4 RDT&E, $. 3 Military Personnel, $3. 5 Defense Wide $8. 5 Procurement, $9. 5 Army $25. 0 Air Force 15. 8 O&M, $45. 0 Navy $9. 5 FY 2017 Request: $58. 8 billion 7

FY 2017 Total Base and OCO Funding By Appropriation Title By Military Department Military Construction and Family Housing, $7. 6 RDT&E, $71. 7 Military Personnel, $138. 5 Procurement, $112. 0 Defense Wide $102. 9 Air Force $166. 9 O&M, $250. 9 Army $148. 0 Navy $164. 8 FY 2017 Request: $582. 7 billion 8

Secretary Carter’s Priorities for This Budget • Given the current level of budget resources ($800 B in Budget Control Act cuts), we can’t reduce all risk. Instead, the Department must: – Prioritize conventional deterrence against our most advanced adversaries – Focus more on the shape than the size of the force o Seek the best balance between force structure (size), modernization (capability) and readiness o Emphasize lethality and capability of the force rather than size o Emphasize posture rather than presence – Emphasize innovation o Attracting, retaining, and managing talent (Force of the Future) o Update war plans and operational concepts o Pursue “offset” technologies o Institutional efficiency and reform “Today’s security environment is dramatically different … and it requires new ways of thinking and new ways of acting” Secretary Carter, February 2, 2016 9

FY 2017 Force Structure • Force structure assessed sufficient to execute the strategy • Major elements include: – 14 SSBNs, 450 ICBMs – 96 Operational Bombers (154 total) – 287 -ship Navy with 11 Carriers in FY 2017 • (Building to a 308 -ship Navy) – 54+1 Tactical fighter squadrons – 990 k Army Total End Strength (460 k Active) • (30 Active BCTs in FY 2017) – 221 k Marine Corps Total End Strength (182 k Active) FY 2017 Force Structure Sufficient to Execute Strategy 10

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 11

Future Years Defense Program (FYDP) • Computer Database Maintained by OSD CAPE • Contains Approved Force Structure and Resources for all Defense Programs • Updated 3 Times this PPBE Cycle: – Program Objectives Memorandum (POM) – Jun – Budget Estimate Submission (BES) Dec – President’s Budget (PB) - TBD • Reflects PY, CY, BY, + 4 Out-Years 16 17 18 19 20 21 22 3 additional years force structure only • Component PPBE databases • Navy: PBIS • Air Force : ABIDES • Army: PROBE 12

PPBE Process – Planning Phase Lead by USD (P) YEAR 1 FEB/MAR President National Security Council CIA/DIA/JCS/OSD Planning Phase focus: NSS OSD Level JCS Level (JCS, COCOMs, SERVICES) • Threat vs. Capabilities • Update strategy • Guidance for programming & budgeting Every 4 Years QDR NDS NMS YEAR 2 APR/MAY Elapsed Time: 15 -16 Months CPR CIA – Central Intelligence Agency COCOM – Combatant Commander CPR – Chairman’s Program Recommendation DIA – Defense Intelligence Agency DPG – Defense Planning Guidance 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 SCMR – Strategic Choices and Management Review USD(P) – Undersecretary of Defense (Policy) DPG Guidance for POM/BES submission and OSD Integrated Program/Budget Review

FY 18– 22 Program/Budget Review Schedule Feb 16 Fiscal Guidance 27 -30 Jun 16 Component POM Briefs to 3 -Stars 30 Jun 16 Component POM Submissions Due (Line item/PE level of detail) 29 Jul 16 Issue Nominations Due 15 Aug 16 Issue Nomination Disposition 15 Aug– 10 Nov 16 Program Review 10 Nov 16 PDMs 1 Dec 16 BES due to OSD 1 Dec 16 Budget Justification Material due to OSD Dec 16 – Jan 17 Budget Review TBD PBDs TBD Budget Lock TBD President’s Budget Released 14

President’s Budget to Congress Notional Enactment Process and Timeline Feb HBC BUDGET RESOLUTION Mar Apr May Jun Jul Aug Sep Oct HEARINGS FLOOR MARKUPS CONF CONCURRENT RESOLUTION HEARINGS SBC HASC MARKUPS FLOOR HEARINGS MARKUPS FLOOR AUTHORIZATION SASC HAC HEARINGS MARKUPS HEARINGS FLOOR MARKUPS FLOOR SAC Version 3. 4, 11 -3 -15 FLOOR Appropriations Act CONF APPROPRIATION Version 3. 4, 11 -3 -15 Authorizations Act CONF HEARINGS MARKUPS FLOOR 15

Backups 16

Key PPBE Action Officers • AIR FORCE: Program Element Monitor ( PEM ) – Works for Air Force SAE (SAF/AQ) – Each Air Force program element is assigned a PEM – Interfaces with Using Commands, Material Command, Air Staff, Air Secretariat, OSD, and sometimes Congress – A PEM may be responsible for more than one program element • ARMY: Department of Army Systems Coordinator (DASC) – Works for Army SAE (ASA/ALT) – Interfaces with Using Commands, Developing Commands, Army Staff, Army Secretariat, OSD, and Congress • NAVY: Requirements Officer ( RO ) – Works for resource sponsor on OPNAV staff (e. g. , Navy Aviation resource sponsor is N 98) – Interfaces with Using Commands, Systems/Developing Commands, OPNAV Staff, Navy Secretariat, and OSD

USD (Comptroller) DAU – EPMC 15 -05 FY 2017 budget – Some Significant Items • • • • S&T @ $12. 5 billion (2. 4% of TOA) 63 F-35 - $10. 5 billion: F-35 A (43); F-35 B (16); F-35 C (4) (FYDP: $59 B) 10 new warships - $20. 2 billion (2 SSN; 2 DDG; 2 LCS; 1 LHD; 3 others) Cyber capabilities - $6. 8 billion (up from $5. 5 B) Rotary Lift aircraft - $6. 7 billion Unmanned Systems - $3. 2 billion Long Range Strike Bomber - $1. 4 billion ($12. 1 billion in the FYDP) Space Programs - $7. 0 billion (zero satellites) Ground Vehicles - $4. 1 billion Ammunition - $5. 0 billion (up from $3. 9 billion) Precision Guided Missiles - $2. 3 billion Ballistic Missile Defense - $9. 1 billion (MDA @ $7. 5 billion) Ohio Replacement Program - $1. 9 billion ($13. 2 billion in the FYDP) Nuclear Enterprise - $6. 1 billion (of which $1. 6 billion went to NNSA)

PB 2017 Focus on Technology Innovation • Funds science and technology to further innovation (FY 2017, $12. 5 billion; FYDP, $65. 0 billion) • Creates new connections with commercial sector – Establishing experimental defense innovation units – IN-Q-TEL • Funds innovative “offset technologies” to bolster conventional deterrence (FYDP, $18 B). Examples: – Assured positioning, navigation and timing – Large displacement unmanned undersea vehicles – High speed strike weapons – Arsenal plane – Hypersonics – Low-cost unmanned systems – High-Velocity Projectiles from “powder guns” Do. D needs to accelerate delivering new capabilities 12

Major Investments in the FY 2017 Budget • Aircraft F-35 Joint Strike Fighter (USAF, USMC, USN) F/A-18 (Navy) KC-46 Tanker Replacement (Air Force) AH-64 E Apache helicopters (Army) MQ-9 Reaper • Shipbuilding Virginia Class submarines (Navy) DDG-51 AEGIS Destroyers (Navy) Littoral Combat ships (Navy) • Space Evolved Expendable Launch Vehicle (Air Force) Global Positioning System (Air Force) (Quantities/Dollars in Billions) FY 2017 FYDP 63/$10. 1 404/$56. 3 2/$0. 4 16/$2. 2 15/$3. 1 75/$15. 7 52/$1. 1 275/$5. 6 24/$1. 1 24/$3. 9 2/$5. 2 2/$3. 4 2/$1. 3 9/$29. 4 10/$18. 3 7/$5. 6 5/$1. 8 --/$0. 8 23/$9. 4 10/$5. 6 Requires Funding in 5 -Year Plan + FY 2017 OCO *Includes Base + OCO Procurement and RDT&E Funding 11

Resource Allocation Process Overlap CY 14 CY 15 CY 16 J F M A M J J A S O N D FY 14 Cycle Execution 3 rd Yr FY 14 and prior FY 15 Cycle Enactment PB FY 16 -20 DPG 2 nd Yr Execution FY 15 FY 16 Planning Cycle FY 17 Cycle 2 nd Yr 3 rd Yr FY 15 and prior Program/Budgeting FY 16 -20 POM FY 16 BES PB Planning FY 17 -21 DPG FY 18 Cycle 2 nd Execution Enactment FY 16 and prior Program/Budgeting FY 17 -21 POM FY 17 BES Enactment PB FY 17 Exec FY 17 & prior Program/Budgeting Planning FY 18 -22 DPG FY 18 -22 POM FY 18 BES DPG – Defense Planning Guidance PB – President’s Budget POM – Program Objectives Memorandum BES – Budget Estimate Submission

Bipartisan Budget Act of 2015 • FY 16 (Base) – Current Law (BCA 2011) – Revised Cap (BBA 2015) – Delta Revised Security Revised Non-Security $523 B $548 B +$25 B $493 B $518 B +$25 B $536 B $551 B +$15 B $504 B $519 B +$15 B • FY 17 (Base) – Current Law (BCA 2011) – Revised Cap (BBA 2015) – Delta • • Total Federal Govt Discretionary Base increase $80 B (FY 16 $50 B; FY 17 $30 B) Defense – – – FY 16 Base FY 16 OCO FY 16 Net FY 17 Base FY 17 OCO FY 17 Net -$12 B (PB 16 $534 B - $522 B BBA 2015) +$7 B (PB 16 $52 B - $59 B BBA 2015) -$5 B -$21 B (PB 16 $547 B - $526 B BBA 2015) +$2 B (PB 16 $57 B - $59 B BBA 2015) -$19 B 22

Bipartisan Budget Act of 2015 Cont. • Debt ceiling suspended until March 2017 • Revenue sources: – Tightening tax rules for business relationships – Selling off crude oil reserve – Auctioning off government controlled wireless spectrums • Spending adjustments – Make changes to Medicare and Social Security 23

PPBE – Program/Budget Submission/Review Yr 2 JUL SEP Do. D “Large Group” OSD/ CAPE POM Issue Teams Components/ Defense Agencies 3 -Star Group SECDEF/DEPSECDEF SLRG & DMAG JCS CPA Program Review focus: • Compliance with DPG BES FYDP Update Issue Resolution DEC NOV OCT Year 3 JAN/FEB BES – Budget Estimate Submission CAPE – Cost Assessment & Prgm Evaluation COCOM – Combatant Commander CPA – Chairman’s Program Assessment 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 RMDs USD(C) & OMB Adv Questions/ OSD/OMB Budget Hearings MBI PB FYDP Update Services / PEO / PM Answer / Reclama Budget Review focus: - Pricing - Phasing - Funding policies - Budget execution

FY 2017 Budget Supports • Planned force structure levels • Service readiness recovery plans • A safe, secure and reliable nuclear force at New START levels • Force of the Future initiatives • Modernization: – DDG modernization and SSN upgrades – Surface ship advanced munitions and sensor technologies – Investment in space capabilities – Hypersonic research and development – Cyber tools for Combatant Commanders – Army aviation modernization plan – Marine Corps vehicle modernization plan • Key reform proposals (e. g. , TRICARE) 13

PPBE Overview (3/3): “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 Do. D Should Cost • Scrutinize every element of government 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) 26

PPBE Building Blocks (3/3) Program Elements PROGRAM ELEMENT (PE): Smallest aggregation of resources normally controlled by OSD • - PE NUMBER: Used to track and identify resources; seven digit number followed by an alphabetic suffix F - AF PROGRAM 2 ( GENERAL PURPOSE FORCES ) C - MDA E - DARPA J - JCS S - DLA BB - SOCOM DBD - DFAS 0203752 A - Aircraft Engine CIP 0204136 N - F/A-18 Squadrons 0207163 F - AMRAAM • A - ARMY N - NAVY M - MARINE PROGRAM 3 ( C 3, INTEL & Space) 0303158 A - Joint Command Control Program (JC 2) D - OSD 0307207 N - Aerial Common Sensor (ACS) 0305164 F - NAVSTAR GPS (User Equipment) Ref: Do. D 7045. 7 - H 27

PPBE Building Blocks (2/3) Future Years Defense Program (FYDP) DOD APPROPRIATIONS n m re u c &E T RD MAJOR FORCE PROGRAMS o Pr t en ry r st n o tio c u ry il ta C ta ili M l e ne on rs Pe ps & nc a n te n ai M r e th O Strategic Forces General Purpose Forces (1) Command, Control, Comm, Intell & Space (3) (2) Research and Development Central Supply & Maintenance (7) Guard & Reserve Forces O T H E R A I R N (4) A A R V (5) M Y (6) Y Mobility Forces D E F O A G E F N O C R I C E E S S T N Training, Medical, & Other Personnel Activities (8) Administration and Associated Activities NE (9) Support of Other Nations (10) Special Operations Forces (11) PO M D CO DO 28

PPBE Overview (1/8) Three Major Do. D Management Systems Planning, Programming, Budgeting and Execution Q DR Joint Capabilities Integration and Development System (JCIDS) Defense Acquisition System 29

Senior Leader Review Group AKA “The Large Group” • Secretary of Defense • Deputy Secretary of Defense • Secretary or Under Secretary of the Army • Secretary or Under Secretary of the Navy • Secretary or Under Secretary of Air Force • Chairman Joint Chiefs of Staff • Vice Chairman Joint Chiefs of Staff • Under Secretary of Defense (AT&L)* • Under Secretary of Defense (Policy)* • Under Secretary of Defense (Comptroller) /Chief Financial Officer* • Under Secretary of Defense (Intelligence)* • Under Secretary of Defense (P&R)* • Commandant or Assistant Commandant of the Marine Corps • Director of Administration and Management • Chief or Vice Chief of Staff of the Army • Chief or Vice Chief of Naval Operations • Chief of Staff or Vice Chief of the Air Force • General Counsel • ASD (Legislative Affairs) • ASD (Networks & Information Integration/Chief Information Officer • ASD for Public Affairs • Director, Cost Assessment and Program Evaluation • Director, Joint Staff • Deputy Chief Management Officer • Chief, National Guard Bureau * Or Principal Deputy 30

OSD Budget Review - Micro Level • Phasing – Development to Production (Concurrency) – Schedules: Acq Milestones, Testing, Contract Award – First/Fourth Quarter new starts are at risk • Pricing – Basis of Estimates for programs and Cost Exhibits – Contract data – Inflation, Learning curves, Production rates, Unit costs • Policy - Annual, Incremental and Full funding • Execution - likelihood budget request can be executed – Historical (3 -5 years) track record – Obligation Rates, Expenditure Rates – Availability of prior year funds for budget year efforts 31

Defense Appropriations “Colors of Money” Military Personnel (MILPERS) Active & Reserve Forces Operation & Maintenance (O&M) MILPERS O&M PROC RDT&E MILCON Active & Reserve Forces (civilian Salaries, supplies, spares, fuels, travel, etc…) Environmental Restoration Former Soviet Union Threat Reduction Overseas Humanitarian, Disaster, & Civic Aid Procurement Aircraft Missiles Weapons & Tracked Combat Vehicles Ammunition Other Procurement Shipbuilding & Conversion Marine Corps Defense wide procurement National Guard & Reserves Research, Development, Test & Evaluation (RDT&E) Basic Research Applied Research Advanced Technology Development Advanced Component Development & Prototypes System Development & Demonstration RDT&E Management Support Operational Systems Development Military Construction (MILCON) Facilities Family Housing Base Realignment & Closure (BRAC) Other Defense Health Program Chemical Agents & Munitions Destruction Drug Interdiction & Counter-Drug Activities Joint Improvised Explosive Device Defeat Fund Rapid Acquisition Fund Office of the Inspector General 32

Do. D Budget Overview (1/4) FM Scope: From Requirement to Capability Life Cycle Cost Analysis CAIV POE Estimate ICE Fiscal Environment Planning, Programming, Budgeting and Execution Annual Funding CCA FYDP DPG POM RMD Full Funding MFP PE BES Funding Policies (Exceptions) Incremental Funding Ao. A Congressional Enactment HAC SAC Budget Resolution HASC SASC HBC SBC President’s Budget Authorization & Appropriation Laws Acquisition Program Baseline Operational Concept Capabilities. Based Assessment Capability Docs Feedback Commitment Budget Authority Obligation Reprogramming Expenditure Budget Execution Outlay Force Structure Modernization Operational Capability Readiness Sustainability 33