Defense acquisition reform has been the brightest spot amidst the Trump Administration’s disruptive efforts to change the workings of the federal government. Secretary Pete Hegseth is pursuing speed, time-based iterative innovation, and commerciality to get the warfighters what they need in the span of months rather than decades.
This is refreshing to see after numerous fits and starts and unsuccessful efforts by past administrations and Congresses to essentially try and re-create an innovation system the Pentagon once had in the 1950s. But just like those past efforts, Hegseth’s push will fail if it does not address the dysfunctions of the underlying defense budget system.
The good news? The budget flexibilities it needs already reside in the civilian agencies. They merely need to be replicated at the Pentagon in order for defense acquisition reform to have a chance of success. The key to it all is providing budget flexibility to help the Pentagon move at roughly the same speed as Silicon Valley.
Just as China has been doing with its military-civil fusion policies, the Pentagon’s is attempting to leverage commercial technology and achieve civil-military integration of the US and allied industrial bases. This shift is in response to almost 30 years where commercial innovation has surpassed defense innovation, a trend that has only grown more intense as commercial research and development (R&D) expenditures continue to outpace and overwhelm defense R&D.
The new emerging defense acquisition system designed to break down those barriers is based on Other Transactions Authority (OTA), time-based Middle Tier (MTA) and Rapid Acquisition Authorities, a revamped joint requirements system based on iterative, rapid operational prototyping, and a new project management structure consisting of Portfolio Acquisition Executives (PAE). The ability of these PAEs to move money around within year of execution to fund efforts that are working and kill those that are not will be critical for any of this to succeed.
Why all of this is so important is that the current acquisition system is still a linear peacetime system that ultimately requires up to 25 years (as was seen in the F-35 and V-22) to deploy a new initial operational capability (IOC) from the date of a program start. This timescale does not even count the time it takes to become a “program of record” — which takes up to three years to generate requirements, followed by three years of internal budget programming and appropriations approval, and then a two-year competition and contracting process to initiate a new program start.
This new program will then be evaluated by a fictitious budget baseline, based on paper briefing charts established years before any metal was ever bent or software written. As program execution then commences through specific rigid acquisition milestones, an annual re-validation occurs through the budget and appropriations process that rarely allocates the previously planned out-year’s budget to the program. Compliance with the acquisition rules and the inevitable rework driven by budget changes adds another 10-20 years to initially field a capability. All of this is in stark contrast to programs developed in the 1950s and early 1960s that delivered real capabilities in under five years total. The private sector and China are moving at these timelines or much faster. The Pentagon is being left behind.
The key to moving faster is rapid iterative operational prototyping, quick and early decision making on requirements, source selection, and contracting, and most importantly of all flexible budgeting.
Time To Look At PPBE
Dan Patt and I outlined how we got here in our two reports “Competing in Time” and “Required to Fail,” but the short version: Congress expanded OTA authority and created MTAs in 2016 to enable the Department to move faster. To the secretary’s credit, our recommendation to abolish JCIDS and replace it with a joint requirements system based on iterative operational prototyping was announced last year. With JCIDs gone and the enhanced use of OTAs and MTAs decades of time can be taken from the process. Still, effective iterative operational prototyping will depend upon changing the budget process.
It’s time to go further and attack the root cause of the budget time problem – the Planning, Programming, Budget Execution (PPBE) process. Secretary McNamara’s system once established by the “Whiz Kids” and the “Best and the Brightest” has bedeviled the Pentagon ever since. Central planning and a hierarchical bureaucracy replaced a time-based agile decision making and operational prototyping system. Despite an early effort to apply the PPBE system governmentwide as an arguable best management practice, it was rejected by all other federal agencies — no other entity in the world has adopted the PPBE process with the closest comparison being the five-year plans of the former Soviet Union.
Congress did take up the recommendation to establish a PPBE Commission, but the result was less than hoped for. The Commission’s report was incremental and conservative rather than recommending a wholescale deconstruction of the PPBE system. While the Department has committed to implementing the Commission’s rather tepid recommendations, this will not happen until at least 2028. Meanwhile, the defense appropriations subcommittee — the last true believer in PPBE — has continued to oppose giving the Pentagon any real budget flexibility. This pushback was most recently seen in report language on the 2026 Defense Appropriations Act addressing the Army’s request for agile funding.
This all contrasts with the flexibilities given to the rest of government by the eleven other appropriations subcommittees. The public would probably not know about these flexibilities except for a requirement put in by Congress for the PPBE Commission to compare DOD’s budget system with the rest of government; the Commission shuffled this mandate off to RAND. While the RAND reports are comprehensive and well worth reading, even what little the Commission did say about other agency authorities is eye-opening.
It turns out that NASA organizes its funding by mission rather than by rigid appropriation categories, and receives two-year appropriations rather than one. HHS operates with multi-year and no-year funds, and can recycle expired balances into a department-wide capital investment account. DHS can carry over half its unobligated balances into the following fiscal year. The VA receives advance appropriations that maintain budget stability through continuing resolutions and government shutdowns, plus additional flexible multi-year funds. And NNSA has no-year appropriations with no colors of money at all.
That the Pentagon has none of these authorities continues to sabotage its ability to provide our forces with critical capabilities on a timely basis.
For the Pentagon to succeed in any competition with China it needs each and every one of the flexible authorities already granted to the civilian agencies – not in 2028, or 2030, but now. Whether the defense appropriations subcommittee will support any of this remains to be seen, but the discrepancy between its approach and that taken by the other appropriations subcommittees is just so diametrically opposed as to raise questions about the underlying motivations for this disconnect.
Consistency and parity between the agencies in budget authorities and processes should be a policy goal of both Congress and the administration. Decades ago, it became clear that the vast majority of appropriators and the executive branch preferred civilian agency budget systems to the Pentagon’s. Let’s fix the wrongs of the past and move forward with providing DoD the same flexibility these civilian agencies have.
Bill Greenwalt is a senior fellow at the American Enterprise Institute (AEI) think tank, a former senior staffer on the Senate Armed Services Committee and a former deputy undersecretary of defense.
