PLANNING-PROGRAMMING-BUDGETING INITIAL MEMORANDUM Introduction In August 1965, President Johnson directed that a PlanningProgramming-Budgeting System (PPBS) be installed throughout the Executive Branch, to be supervised by the Bureau of the Budget. The Subcommittee on National Security and International Operations is reviewing the application of this system in the national security area. The purpose of this staff memorandum is to provide a guide to questions on which the subcommittee may wish to take testimony during the 90th Congress.. PPBS: What Is It? Sitting at the apex of the Federal Government, a President is keenly aware of the shortage of resources for pursuing desirable goals of public policy, and of the difficult choices this hard fact of life imposes. Some goals must be eliminated, some postponed, others reduced in order to tailor the desirable to the feasible. A President needs the best help he can get in establishing an intelligent scale of priorities, choosing policies that would achieve desired results at the least cost, and marshaling, through Congress, the required resources. In matters of defense and foreign policy, a President seeks aid from many quarters-State and Defense, his own staff, the National Security Council, task forces, other departments and agencies involved with national security matters, members of Congress, and private citizens. In addition, the budgetary process helps to bring things into focus to weigh domestic versus foreign needs and to set priorities, to compare costs and benefits of competing programs, and once the budget has been fixed, to exercise Presidential direction and control of the operations of the Executive Branch. The Planning-Programming-Budgeting System is one more step in a continuing endeavor to make the budgetary process a more versatile and helpful instrument of the President and his principal advisers. As its name suggests, it is an effort to tie forward planning to budgeting via programming. Key elements in the approach are program budgeting and systems analysis. The traditional budget has been prepared and presented in terms of objects of expenditure, or "inputs," in the new jargon. In this form the budget has not shown the link between agency spending and agency purposes between the resources an agency uses and its missions or tasks, now, of course, called "outputs." By linking resources to purposes, inputs to outputs, in a program, and by planning ahead for several years, the program budget is expected to contribute to better appraisal by decision-makers of what a budget cut or increase would mean in terms of an agency's program-the goals to be pursued and the goals to be sacrificed or deferred. Systems analysis is intended to present decision-makers with a systematic and comprehensive comparison of the costs and benefits of alternative approaches to a policy goal, taking advantage of techniques variously described as operations research or cost-effectiveness studies. There is an emphasis on quantitative analysis. Computers have made it possible to handle large quantities of data and applied mathematics has provided ingenious statistical techniques for dealing with some kinds of uncertainty. Some of the less historically-minded proponents of PPBS strongly imply that it is something brand new, providing decision-makers for the first time with a rational basis for choosing between alternative policies. Actually, cost-benefit analysis seems to have begun in the Garden of Eden (see Genesis, 3), and the problem from the outset has been to avoid an underestimation of costs and an overestimation of benefits. Costs and gains have been compared throughout our government's history whenever a decision to spend or not to spend had to be made, and Congress explicitly called for cost-benefit studies as far back as the Rivers and Harbors Act of 1902. Operations research demonstrated its usefulness in World War II. Statistical control, pushed by Robert Lovett as Assistant Secretary of War for Air in World War II, was the forerunner of many functions of the Comptroller of the Defense Department and a predecessor of systems analysis. The idea of performance or program budgeting can be traced back at least to President Taft's Commission on Economy and Efficiency, which published its path-breaking report, "The Need for a National Budget," in 1912. And program budgets for periods extending well into the future have long been the rule in progressive banks and business firms. PPB may for the first time identify these techniques as a "system," give them a special name, and advertise them, but the approach itself is as old as the problem of the buyer who would like to make two purchases and has money only for one. Some of the more enthusiastic advocates of PPBS seem to suggest that it can work miracles in all corners of government. But it is no magic wand. It is a set of sharp tools which in experienced hands and guided by sound judgment can be a helpful aid in some of the business of government. In his original statement of August 25, 1965, directing the extension of PPBS throughout the Federal Government, President Johnson said that, once the new system is in operation it will enable us to: (1) Identify our national goals with precision and on a (2) Choose among those goals the ones that are most urgent (3) Search for alternative means of reaching those goals (4) Inform ourselves not merely on next year's costs, (5) Measure the performance of our programs to insure These are high hopes. It remains to be seen to what extent PPBS will fulfill them. The Experience in Defense The major experiment to date with PPB began in the Department of Defense in 1961, and the system has been applied to six defense budgets-Fiscal Years 1963 through 1968. Very strong claims are made for the contribution of PPB to Defense. Charles Hitch, who as Comptroller of the Defense Department had the primary responsibility for fashioning and directing the system, summarized his view of it in these words: we have provided for the Secretary of Defense and his principal military and civilian advisors a system which brings together at one place and at one time all of the relevant information that they need to make sound decisions on the forward program and to control the execution of that program. And we have provided the necessary flexibility in the form of a program change control system. Now, for the first time, the largest business in the world has a comprehensive Defense Department-wide plan that extends more than one year into the future. And it is a realistic and responsible oneprogramming not only the forces, but also the men, equipment, supplies, installations, and budget dollars required to support them. Budgets are in balance with programs, programs with force requirements, force requirements with military missions, and military missions with national security objectives. And the total budget dollars required by the plan for future years do not exceed the Secretary's responsible opinion of what is necessary and feasible. With this management tool at his command, the Secretary of Defense is now in a position to carry out the responsibilities assigned to him by the National Security Act, namely, to exercise "direction, authority, and control over the Department of Defense"-and without another major reorganization of the defense establishment. This Defense PPB system has, of course, been applied only during a period of rising national defense budgets (from $54.3 billion in FY 1963 to about $75 billion in FY 1967). It is not clear that the system would ease the problems of managing a contraction of the military services and of deciding, in a period of declining appropriations, what combination of forces would best promote the national interest. Even in Defense the benefits of the PPB system have been overplayed by its proponents. It is not a statistical litmus paper, scientifically sorting good projects from bad. It may be used as easily to rationalize a decision as to make a rational choice. It is no substitute for experience and judgment, though men of experience and judgment may find it helpful. The PPB approach was used to justify the purchase of a $277 million oil-fueled aircraft carrier that was cbsolete before it was |