Document created: 27 April 03
Air University Review,
January-February 1976
a search for a management philosopher’s stone
Major Lorentz A. Feltes
SINCE the rise of organized human endeavor, managers have been engaged in a search for a philosopher's stone which, when touched, would provide solutions to the problems of organized mankind. Both practicing managers and academic theorists have committed considerable time and treasure to this search for fundamental truths on the art and science of allocating and managing resources. The paths to this philosopher's stone have been many and are as varied as the disciplines taught at major universities. Schools of thought range from the classical to the anticlassical, from the scientific to the behavioral, from the autocratic to the democratic, with many hybrids in between. Each school seems to be expanding its search and literature at astounding rates, and these schools share the characteristic of defending the ordained and superior truths contained in their respective bodies of knowledge.
A well-traveled road in the search for truths to make government operations more efficient and effective is the pursuit of budgetary reform, the national budgetary process that is central to the allocation of resources and formulation of priorities that impact on the future destiny of organized mankind. It is the purpose of this article to examine and analyze the promise and performance of the phenomenon called planning, programming, and budgeting (PPB) on federal government operations.
The theoretical seeds of planning, programming, and budgeting are found in the classical school of management thought, where there exists a powerful concern for the application of reason and science to the problems of organization. PPB was further enriched and developed by economics, the queen mother of the social sciences. The economist's notion of a rational and omniscient economic wizard capable of optimizing his social utility is at the root of PPB. The movement of American Society from agricultural to industrial primacy and the concomitant increase in the complexity of organized human endeavor also increased the search for a rational truth to optimize policy-makers' decisions of choice among ever increasing competitive demands on scarce resources.
The rudiments of PPB first appeared in the private sector in 1924 at General Motors Corporation.1 It was first applied in the public sector during World War II by the War Production Board to develop a Controlled Materials Plan.2 During the 1950s the RAND Corporation, under contract to the United States Air Force, refined and developed the PPB concepts in the form of systems analysis. Systems analysis attempted 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."3 In their attempt to compare costs of alternative weapon systems, RAND discovered that the Department of Defense (DOD) accounting system could not provide the cost and other information essential for comparative analysis of Air Force weapon systems. Governmental accounting systems, which serve as the language of the budgetary process, were placed under suspicion. The process of identifying, classifying, and recording governmental resource use had to be changed in a manner to meet the decision-making needs of policy-makers. Only with a change in governmental accounting practices could policy-makers have a data base to improve policy-making.
When Robert McNamara became Secretary of Defense in 1960, he bought with him two RAND economists, Alain C. Enthoven and Charles J. Hitch, along with an accountant, Robert N. Anthony. All were installed in top policy-making posts in the DOD along with many of their youthful disciples. By 30 June 1964 PPB was fully operative in the Department of Defense and received its first real test in government. 4 The initial performance appeared promising to President Johnson, and on 25 August 1965 he issued a directive calling for the extension of PPB to all federal government agencies. In a statement to his extended Cabinet, President Johnson said that PPB "will enable us to:
1. Identify our national goals with precision and on a continuing basis.
2. Choose among these goals the ones that are most urgent.
3. Search for alternative means of reaching those goals most effectively at least cost.
4. Inform ourselves not merely on next year's costs but on the second and third and subsequent years' cost of our programs.
5. Measure the performance of our programs to insure a dollar's worth of service for each dollar spent."5
Thus, what started as an identified weakness of governmental accounting practices served to create one of the most comprehensive and controversial revisions to U.S. governmental decision-making practices in modern history. A Bureau of Budget Bulletin of 12 October 1965 required 22 agencies, including all the executive departments, to adopt PPB and encouraged 17 others (mostly smaller ones) to do so. 6 Secretary McNamara and his disciples had discovered the philosopher's stone that could bring efficiency and effectiveness to government.
PPB has been defined and described in various ways. A fundamental definition involves definitions of the components of planning, programming, and budgeting. Planning refers to the production of the range of meaningful potentials for selection of courses of action through a systematic consideration of alternatives.7 Programming is defined as the more specific determination of the manpower, material, and facilities necessary for accomplishing a program. 8 A program represents a combination of activities designed to fulfill a particular objective.9 Budgeting is a process of systematically relating expenditure of funds to accomplishment of planned objectives.10
According to Leonard Merewitz and Stephen Sosnick, PPB has five distinguishing features: (1) program accounting, (2) multiyear costing, (3) detailed description, measurement of activities, (4) zero-base budgeting, and (5) quantitative evaluation of alternatives.11 Program accounting involves organizing information by purpose or task. It differs from financial accounting, which is oriented toward object or class of expenditure. Multiyear costing involves the building of budgetary requests for not just the approval year but also years into the future. This may include the life cycle of the proposal. Detailed description and measurement of activities must cover six program components: objectives, targets, choices made, alternatives considered, outputs, and effectiveness. Zero-based budgeting involves defense and review of the total expenditure proposed for a program, instead of incremental changes from the previous year or base appropriation. Quantitative evaluation of alternatives involves the use of special studies, which may take the form of cost-benefit analysis, among others. Central to cost-benefit analysis is primacy of the quantitative factor.
There are several less detailed, more commonsense definitions of PPB. According to Charles L. Schultze, PPB "is a means of helping responsible officials make decisions. It is not a mechanical substitute for good judgment, political wisdom, and leadership of these officials."12 Alain Enthoven refers to PPB as "a reasoned approach to problems of decision, accurately described as quantified common sense."13
Finally, Robert Anthony defines PPB in terms of three distinct administrative processes: strategic planning, management control, and operational control. These are spread out over an expanded and interactive budget cycle, which he defines as follows:
Strategic planning is the process of deciding on objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, and on the policies that are used to govern the acquisition, use and disposal of these resources.
Management control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organization's objectives. Operational control is the process of assuring that specific tasks are carried out effectively and efficiently. 14
Implicit in the Anthony concept of the administrative process is an extension of this process to the budgetary process. It also involves centralization of the planning function and delegation of the primary managerial and control responsibilities to the supervisory and operating levels respectively. The Anthony model appears to best describe the evolving form of PPB.
Prior to 1960 and the advent of PPB, the Department of Defense was characterized by a separation between budgeting and military planning. Budgetary control and fiscal guidance were exercised by the Secretary of Defense, and planning was left to the individual services. There was little interface between the services. Interservice rivalry dominated the decision-making arena. Although planning extended over several years, budgeting was myopic with only a one-year projection. Budgeting and accounting were in terms of resources (men, money, and material) while planning was fiscally unrealistic.15 The major problem with the old DOD approach was the lack of a bridge or crosswalk to translate military requirements into financial terms for the budget submission. DOD "budgeteers" talked one language while planners talked another. When PPB was installed in the Department of Defense, it did provide a bridge between planning and budgeting. Programming was conceived to be the element to provide this necessary bridge.
One of the purposes of bringing PPB to the Defense Department in the early years was to insure strong civilian control over military affairs. This it accomplished—perhaps to an excessive degree. A secondary purpose was to bring rationality to defense decision-making by the systematic comparison of program alternatives on the basis of costs and benefits. Program elements, such as B-52 or F-4 squadrons, were identified s the basic building blocks. These program elements were categorized into major force programs (MFP) such as strategic forces and general purpose forces. There are ten MFP'S in the DOD. These MFP's form the core of the Five Year Defense Plan (FYDP), which cuts across the organizational lines of the individual services. Thus, the Secretary of Defense can evaluate alternative defense objectives. To provide flexibility, the DOD version of PPB incorporated a formal change control system that permits evaluation of program changes throughout the year. As a final step, the annual DOD budget includes a detailed analysis of the financial requirements of the first increment of the approved FYDP. According to Charles Hitch, the DOD version of PPB provides
. . . 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. . . . Budgets are in balance with programs, programs with force requirements, force requirements with military missions, and military missions with national security objectives.16
The extent to which this was actually realized is a matter over which many will disagree. However, it can be said that Secretary McNamara brought centralized and, to some extent, more scientific decision-making to the Department of Defense.
When Melvin Laird succeeded Secretary McNamara in January 1969, he and President Nixon initiated a complete reappraisal of the DOD management process. The distinguishing features of the Laird and Nixon management philosophy were "participatory management" and "decentralization," which are anticlassical in origin. Beginning in 1969, decision-making was shifted from the DOD staff agencies to the service secretaries. According to Laird, there are
. . . many decisions that should be made by the Services Secretaries and they should have the responsibility for running their own programs. I have no business being involved in how many 20mm guns should go on a destroyer. That is the Secretary of the Navy's business. I must let the Services take a greater role.17
The objective of this revision to PPB was to provide a better balance of military and civilian judgment in the defense decision-making process by providing better and earlier strategic and fiscal guidance to the services and the Joint Chiefs of Staff. As a result of Mr. Laird's emphasis on decentralized management, the responsibility for military planning was shifted back to the services, while the role of OSD Systems Analysis was de-emphasized.
In summary, it is evident that PPB changed with the turnover in administration. PPB was tempered by a school of management thought and a theory of government during the Nixon era that espoused the virtues of federalism with its concomitant decentralization and participation in decision-making. Most of PPB's features still remain throughout DOD. Today, PPB appears to be best characterized by the managerial model of Anthony versus that described by Merewitz and Sosnick. While PPB is still alive and evolving, its implementation in Defense provides an interesting study of human arrogance, power struggle, and ideological rivalry in the pursuit of truth on the ideal form of management. The impact of PPB on DOD efficiency and effectiveness is difficult to measure and evaluate. Equally difficult to evaluate are the DOD costs of implementation and benefits to military decision-making. It has not yet provided a governmental substitute for the profit motive. Performance evaluations of very few, if any, colonels and generals are tied to it. Perhaps they should not be, since their raison d'être involves more than objective considerations of efficiency.
By 1968, PPB had spread from DOD to the whole federal government, with varying degrees of success. It was also implemented in many state and local governments. A very interesting chronology of PPB failure was developed by Mosher and Harr in a case study of an attempted PPB innovation at the State Department. They touched upon ageless themes of leadership, communications, professionalism, and human relations. To many in the State Department, PPB looked too much like a gimmick of the nonsubstantive administrative types. It was viewed as an attempt by accountants and economists to usurp traditional professional prerogatives. The intellectual arrogance of the early PPB evangelists probably did more to hurt the PPB movement than any objective appraisal of its relative merit. After the PPB failure at State in 1967, the PPB movement began to wane. The many other schools of management thought converged upon it with their own truths and criticisms. Wildavsky suggested that PPB failed "because it requires ability to perform cognitive operations that are beyond present human (or mechanical) capabilities."18 The humanists believed it lacked concern for the individual. Rationalists attacked it for not going further. Few understood it. Many felt threatened by it. The U.S. Senate held hearings on it. Many of the early PPB proponents became frustrated with the lack of support it received and left government disillusioned.
In June 1971, the federal government abandoned its compulsive version of PPB.19 The federal abandonment occurred in FY 1973 when George P. Schultz, director of the new Office of Management and Budget (OMB), declared:
Agencies are no longer required to submit with their budget submissions the multi-year program and financial plans, program memoranda and special analytical studies as formally specified in Bulletin No. 68-0 or the schedules that reconcile information classified according to their program and appropriation structures.20
Is PPB a dead issue in the federal government? No, not really. Although imperfectly executed, it is alive and thriving in DOD. OMB discarded program accounting, detailed description of activities, and zero-based budgeting. It restricted multiyear costing and benefit cost analysis to expenditures that would represent new policy decisions The basic seeds of PPB rationalism, although hybrid, have been planted and are taking hold in government. Economic man continues to provide input to the policy process.
The system development, implementation, and operating costs for PPB are difficult to estimate. With any new system there are also social and political costs. Let us discuss five costs associated with the PPB system: program accounting, multiyear costing, detailed description and measurement of alternatives, zero-based budgeting, and quantitative evaluation of alternatives.
A comparison of total costs pre-PPB, during PPB, and post-PPB is difficult, if not impossible. It can be stated that PPB required an increase in personnel devoted to the administration of the system (calculation time and cost) who might otherwise be free to devote their time to the substantive matters of program execution. The accounting principle of materiality dictates that the "system" should not attempt to track events that are so insignificant that the work of recording them is not justified by the usefulness of the result. Nonadherence to this principle is a problem of PPB.
The difficulty of costing PPB has a parallel in that there is little empirical evidence on the benefits of PPB for improving governmental decision-making or increasing efficiency and effectiveness. The promise of substantial benefits, outlined by President Johnson earlier, may have been realized to some extent in DOD. PPB performance in other federal agencies, where there is more difficulty in quantifying the impact of programs on society, the individual, or family, is very nebulous. It did focus attention on policy problems and the complexity of decision-making in the public sector. It also contributed to a better understanding of the problems and processes of government. Unfortunately, it would probably take a costly accounting system or comprehensive survey to determine the true costs and benefits of PPB.
PPB requires that organizations make clear and specific definitions of programs to achieve objectives. This requirement raised many problems and questions. There is a difficulty and bureaucratic resistance to making specific and definitive statements on objectives such as providing for the common defense, eliminating poverty, promoting the general welfare, etc. To emphasize the difficulty, a quotation from the writings of Luther Gulick and Lydall Urwick, although made over thirty years ago, is still appropriate:
Programs are not made in heaven. There is nothing out there that is just waiting to be found. Programs are not natural to the world; they must be imposed on it by men. No one can give instructions for making programs. There are as many ways to conceive of programs as there are to organize activity.21
Since programs in the PPB framework provide the bridge between plans and resources, the form of the programs is a key to the success of the system. A program structure can be viewed as the conversion process between inputs (political philosophy) and outputs (meeting the needs of citizens). Thus, the structure of programs should reflect the needs of people in society. Problems arise in comparing the marginal utility of alternative programs (e.g., cure cancer or reduce crime, guns versus butter). The fact that there is no real consensus on the proper role of government in a democracy further complicates the problem of program development.
Compatibility with traditional organization structures and management methods is another problem with PPB. Government is not organized on a program basis. Programs often cut across organizational and functional lines. In DOD, for example, the major force program of the strategic forces is composed of Army, Navy, and Air Force units. Improving education, one of four major program categories in the Department of Health, Education, and Welfare, cuts across state, local, and federal levels of government. This also raises the question of who is responsible for the attainment of a program's goals. The functions of control and accountability are obfuscated and made practically impossible when program, accounting, and organizational structures are not synchronized.
Ideally, the organizational structure should follow program lines; that is, each department or agency should have responsibility for a group of programs that converge toward a general objective. This would require a massive overhaul of existing laws and traditional forms of governmental organization. Second, the fact that program structures should be dynamic in response to changing needs would necessitate continual reorganization. Although government might be more responsive to the needs of its citizens and adaptive to its ever changing environment if its organization followed changing demands (reflected in changing programs), the political costs of continuous reorganization and loss of functional specialization might outweigh the economic and social benefits derived.
PPB also places heavy emphasis on the quantitative measurement of outputs and the translation of these measures to financial terms. The problem here is that many, if not most, government programs have no specific measurable output.
It is one thing to quantify the benefits from the application of stated volume of firepower to a specific target. It is quite another to quantify the benefits to the individual, his family, and society generally of a program to rehabilitate alcoholics, particularly if one considers the impact of intervening causative factors.22
PPB's search for a surrogate profit measurement for government is still beyond reach. The marginal returns on investing additional dollars in defense versus eliminating pollution and its impact on "bottom line social welfare" are impossible to compare and difficult to quantify. Perhaps PPB is ahead of its time in its attempt to quantify political values. Are measurements of this nature even socially desirable, given their "Brave New World" implications? Are resources so scarce that this may become necessary in the future?
A third problem associated with PPB involves its interface with the Congress and its politically oriented power of the purse. The political dynamics of the Congress are dominated by parochial party interests and pluralism. Congress also serves to check the executive branch and balance its tendency toward centralization, which PPB fosters at the planning level. Is it any wonder that PPB was not favorably received by the Congress during PPB hearings in 1967 before the Committee on Government Operations of the U.S. Senate?
Growing out of the Jackson Senate Hearings on PPB, the politics of executive authority and impoundment of 1972 and 1973, and the impeachment proceedings of 1974, Congress actively entered the quest for public sector budgetary reform. A significant change in governmental budgetary and decision-making processes occurred with passage of the Congressional Budget and Impoundment Control Act of 1974.23 Major provisions of this new public law, which codifies many basic tenets of PPB, include:
In asserting its traditional and Constitutional "power of the purse," Congress has adapted many of the early precepts of PPB. The initial impact of this new Congressional version of PPB on governmental decision-making processes has already started in FY 1976, 200 years after the birth of the America Republic.
THE PURSUIT of budgetary reform continues. Man continues to search for a philosopher's stone to bring rationalism and inspiration to public decision-making and the problems of allocating and managing scarce resources. Congress has grabbed the torch of rationalism with its own version of PPB. Many of the original PPB concepts were incorporated into the new Congressional Budget and Impoundment Control Act of 1974.24 Hitch stated that "PPB is here to stay."25 Indeed, despite modification and change, "PPB rationalism" is alive and thriving. Perhaps Congress is changing PPB's name to "Government by Objectives" (GBO) through budgetary reform.
However, executive branch PPB, as an "ordained truth" of the process of allocating and managing scarce national resources, has lost much of its orthodoxy, fever, and mystic appeal. It is becoming understood. Much of its centralizing bias has been corrected through modification with the "participatory principles" of the democratic school. When tempered by the "collective wisdom of the people" through Congressional involvement, perhaps PPB's promise and performance will be enhanced. Its marginal utility to decision-makers in the nondefense sectors of government continues to be debated. PPB did, however, focus considerable attention on the complex problems and difficulties confronted by policy-makers in the public sector on the arcane art of resource allocation and husbandry. It made a contribution to understanding the problems of government.
The true contribution of executive branch PPBS to making government operations more effective and efficient, more responsive to the needs of citizens, and more meaningful to participants in government will unfold in the future. Hopefully, the Congressional version of PPBS will succeed. Nothing less than the future security and economic stability of America may be at stake.
National Guard Bureau
Washington, D.C.
Notes
1. Felix A. Nigro and Lloyd G. Nigro, Modern Public Administration (New York: Harper & Row, 1973), p. 348.
2. Ibid.
3. Ibid.
4. Ibid., p. 349.
5. Frederick C. Mosher and John E. Harr, Programming Systems and Foreign Affairs Leadership (New York: Oxford University Press, 1970), p. 92.
6. Nigro, p. 349.
7. David Novick, ed., "The Department of Defense, "Program Budgeting (Cambridge, Massachusetts: Harvard University Press, 1965), p. 91.
8. Ibid.
9. Ibid.
10. Ibid.
11. Leonard Merewitz and Stephen H. Sosnick, The Budget's New Clothes (Chicago: Markham Publishing Company, 1972), p. 2.
12. Charles L. Schultze, "Why Benefit-Cost Analysis?" Program Budgeting and Benefit-Cost Analysis, ed., Harley H. Hinrichs and Graeme M. Taylor (Pacific Palisades, California: Goodyear Publishing Co., 1969), p. 1.
13. Alain C. Enthoven, "The System Analysis Approach," Program Budgeting and Benefit-Cost Analysis, ed., Harley H. Hinrichs and Graeme M. Taylor (Pacific Palisades, California: Goodyear Publishing Co., 1969), p. 159.
14. Fremont J. Lyden and Ernest G. Miller, eds., Planning-Programming-Budgeting (Chicago: Markham Publishing Company, 1973), p. 17.
15. Charles J. Hitch, Decision-Making for Defense (Berkeley, California: University of California Press, 1965), pp. 25-26.
16. Ibid., p. 39
17. "Mel Laird: Coach, Quarterback, or Both?" Armed Forces Management, October 1969, p. 34.
18. Aaron Wildavsky, The Politics of the Budgetary Process, 2d ed. (Boston: Little, Brown & Co., 1974), p. 206.
19. Merewitz and Sosnick, p. 301.
20. Ibid.
21. Luther C. Gulick and Lydall Urwick, Papers on the Science of Administration (New York: Kelley, 1937), p. 302.
22. Stanley B. Botner, "Four Years of PPBS: An Appraisal," Public Administration Review, July-August, 1970, p. 424.
23. "Congressional Budget and Impoundment Control Act of 1974," Public Law 93, U.S. Code Congressional and Administrative News, no. 7, 15 August 1974, pp. 17, 20 ff.
24. Public Law 93, p. 344.
25. Hitch, p. 70.
Contributor
Major Lorentz A. Feltes
(M.B.A., University of Utah; M.P.A., Auburn University) is Deputy Chief, Budget Branch, Air National Guard Directorate, National Guard Bureau. Commissioned from Officers Training School in 1964, he served with SAC and USAFE in management analysis and budget positions. As a Guardsman, he served in comptrollership positions at Truax ANG Base, Madison, and the ANG Fiscal Stations, St. Louis, Missouri. Major Felters is a graduate of Air Command and Staff College.Disclaimer
The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.
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