Program Budgeting and the Performance Movement

The Elusive Quest for Efficiency in Government

William F. West

• Publisher: Georgetown University Press
• Year: 2011
• Print ISBN: 9781589017771
• eBook ISBN: 9781589017917
• Topic: Politics & International Relations
• Subtopic: Public Affairs & Administration
• Index: Politics & International Relations

Formal systems of comprehensive planning and performance-based management have a long if disappointing history in American government. This is illustrated most dramatically by the failure of program budgeting (PPB) in the 1960s and resurrection of that management technique in a handful of agencies over the past decade. Beyond its present application, the significance of PPB lies in its relationship to the goals and assumptions of popular reforms associated with the performance movement.

Program Budgeting and the Performance Movement examines PPB from its inception in the Department of Defense under Robert McNamara to its limited resurgence in recent years. It includes an in-depth case study of the adoption and effects of PPB at the National Oceanic and Atmospheric Administration. The fact that program budgeting is subject to the same limitations today that led to its demise four decades ago speaks to the viability of requirements, such as those imposed by the Government Performance and Results Act, that are designed to make government more businesslike in its operations.

Chapter 1

Introduction: Lessons Not Learned

Public executives at all levels of government and in all kinds of organizations have increasingly been expected to articulate their objectives and to measure the effectiveness of what they do. Supported by public perceptions of governmental excess and inefficiency, such requirements have been promoted by advocates of planning and performance assessment in consulting firms, universities, legislatures, and even the bureaucracy itself. What is often called managing for results (MFR) or performance-based management is, in turn, part of a broader set of prescriptions that are loosely tied together by the assumption that public administration should be more like business administration.

Formal systems of performance-based management have had disappointing results in America, despite their continued popularity. Although advocates of MFR have often attributed this to factors that can be overcome with sufficient time and commitment, others have questioned its premises. One set of issues has to do with the validity of performance measures in many contexts. How accurately can they describe the linkages between agency activities and the “outcomes” that public organizations have been created to achieve? Do they sometimes have the potential to redefine objectives in ways that are unintended or undesirable?

To the extent that performance can be measured, a second and related set of issues has to do with the use of such information in promoting efficiency. What is it realistic to expect government officials to accomplish with planning and performance assessment given the organizational, technical, legal, and political realities that define the environment of public administration in the United States? Can MFR coordinate the allocation of resources within and among organizations that have diverse purposes and fragmented constituencies? This book is concerned with both types of issues but especially the latter. As such, it complements other analyses of the performance movement in this series (Radin 2006; Frederickson and Frederickson 2006; Moynihan 2008).

Much of this book focuses on a specific technique designed to rationalize organizational performance. Program budgeting (PPB), is a device from the 1960s that is often dismissed as an unsuccessful exercise in managerialism. It never completely disappeared, however, and it has enjoyed a modest resurgence in the federal bureaucracy. Its recent implementation has encountered the same obstacles that led to its widespread abandonment three decades ago.

Beyond its current application and historical significance, program budgeting is relevant as an effort to achieve the most important goals of the performance movement. In this regard, the following analysis helps to explain the limited substantive impact of requirements for planning and performance assessment, such as those imposed by the Government Performance and Results Act (GPRA) and by the Performance Assessment Rating Tool (PART) used by the Office of Management and Budget (OMB) during the George W. Bush administration. It also provides a context for revisiting alternatives to the value of businesslike efficiency that have been largely overlooked in the public administration literature in recent years.

Background

Planning, programming, budgeting systems (PPB) were introduced to the US Department of Defense (DoD) by Robert McNamara when he became secretary in 1961. As a former business professor and corporate executive, McNamara was drawn to PPB because it promised to yield a substantially more efficient allocation of resources and responsibilities among the various factors (weapons systems, operational units, facilities, etc.) that contributed to national defense. It was a way to rationalize the execution of DoD’s mission without having to rationalize its organizational structure. PPB sought to accomplish this through an elaborate process that linked planning with budgeting by objectively evaluating and comparing the activities of organizational units in terms of the purposes they served. Accordingly, it was also a tool whereby McNamara hoped to centralize his control over services that had traditionally enjoyed a good deal of autonomy.

PPB was appealing as an alternative to traditional DoD budgeting practice, which allegedly focused decision makers’ attention on organizational expenditures in isolation from their goals and which resulted in incremental (rather than strategically informed) adjustments to previous years’ amounts. Influenced by its compelling logic and its apparent success at DoD, President Lyndon Johnson extended PPB to the entire federal government in 1965. It had a minimal impact on the civilian bureaucracy, however, and was terminated there after little more than five years.

Scholars offered competing explanations for the failure of PPB. Advocates of the technique attributed its demise to bureaucratic inertia and to the lack of expertise and other resources required for its successful implementation. Yet others claimed that the goals PPB sought to accomplish were fundamentally at odds with a decision-making environment characterized by complexity, uncertainty, a lack of consensus about means–ends relationships, and fragmented institutional authority. Critics such as Aaron Wildavsky (1969) and Martin Landau (1969) argued that program budgeting was unrealistic for the same reasons that comprehensive planning and analysis were unrealistic more generally.

PPB survived only at DoD during the next thirty years. Recently, however, it has reemerged in three civilian agencies—the National Oceanic and Atmospheric Administration (NOAA), the National Aeronautics and Space Administration (NASA), and the Department of Homeland Security (DHS). Much as it was at DoD under McNamara, it has been introduced in these organizations as a tool for integrative management across programs and units that contribute to similar objectives but that have historically operated with considerable independence. NOAA, NASA, and DHS face challenges of coordination that are hardly unique in this respect but that are arguably severe as a matter of degree.

The early and more recent histories of PPB suggest a number of questions. Given the obstacles it encountered in other agencies, why did PPB survive at DoD? Did it ever promote the management objectives that it was intended to serve in that organization? If so, has it continued to promote these goals? And given its ineffectiveness in the 1960s, why has it reemerged in a handful of civilian agencies? Has it been any more successful this time around than in its first life? How does more recent experience speak to the competing explanations that were offered for its abandonment forty years ago?

The current use of program budgeting remains limited, notwithstanding the magnitude of the defense budget and the importance of the other agencies that have recently adopted it. Yet PPB can also be viewed as an extension of the current performance movement that has had such a significant impact on the theory and practice of public administration in the United States and abroad. Most MFR systems thus assume that planning and the objective assessment of programmatic outcomes can be tied together to coordinate across organizational boundaries through a cyclical and iterative management process. Planning furnishes the criteria for assessment through the articulation of ends and means, just as assessment may subsequently lead to a refinement of plans. MFR further assumes that the information so generated will produce more rational spending decisions through comparisons of government activities based on their relative contributions to government objectives.

These assumptions underlie the most important manifestation of MFR at the federal level in the United States (Frederickson and Frederickson 2006). GPRA requires agencies to describe their missions and subordinate goals and activities through strategic planning. This hierarchical structure of ends and means then becomes the basis for the measurement and comparison of outcomes. Like most other performance management requirements, however, GPRA says little about how planning, assessment, and budgeting can be integrated to promote greater efficiency. The framers of this act assumed that these linkages would be established but left the details to be worked out later within individual agencies and on a government-wide basis by OMB. The broader relevance of PPB lies in the fact that some technique incorporating its essential elements is required if the performance movement is to promote this coordinative goal in any systematic way. In fact, each of the agencies that has resurrected program budgeting has justified it as an effort to comply with GPRA’s intent.

The following chapters suggest that the most important goals of MFR cannot be realized for the same reasons that PPB cannot substantially rationalize government performance. Although these reasons include the organizational resistance and resource constraints that defenders of PPB and MFR typically cite in explaining the limited effects of such techniques, they also include more fundamental obstacles that are grounded in the realities of bounded rationality and bureaucratic politics. Indeed, the former constraints are typically difficult to disassociate from the latter. The following chapters also suggest that efforts at synoptic planning can be undesirable in ways that have received too little attention in recent years.

Organization of the Book and Principal Findings

Chapter 2 presents a historical overview of PPB that begins with a brief discussion of its two primary antecedents. One, which dates to the Progressive Era, was the idea that government expenditures could be organized in terms of functions or purposes as an aid to management. The other, which dates to the post–World War II era, was the development of analytical techniques that could be used to compare the marginal benefits of those expenditures. Chapter 2 then describes the adoption of PPB by DoD in the early 1960s, as well as its subsequent rise and fall in the civilian bureaucracy during the latter half of that decade. Although there are few detailed, contemporaneous descriptions of the implementation of program budgeting outside DoD, there are many impressionistic accounts of the problems it encountered, both generally and within particular agencies (Novick 1969; Haveman and Margolis 1970; Lyden and Miller 1972).

PPB is sometimes portrayed as a management fad that was discarded and that is no longer worthy of scholarly attention beyond the postmortems that were offered for its demise (Schick 1973). Yet program budgeting survived in an organization whose budget constitutes roughly half of all federal discretionary spending. Not surprisingly, then, although academics have given relatively little attention to the subject since the early 1970s (but see Jones and McCaffery 2008), there is no shortage of applied research by government entities and think tanks assessing the implementation of PPB at DoD (e.g., Bowsher 1983; BENS 2000; Kutz and Warren 2002; Kutz and Rhodes 2004; JDCST 2004). Relying on some of this work and on interviews with several current and former DoD officials, chapter 3 provides a broad overview of the evolution of PPB in the four decades that have passed since Robert McNamara resigned as secretary of defense.

The history of program budgeting at DoD is an interesting study in organizational change that could easily be the subject of a separate book. Although crosscutting assessments of DoD activities had a significant influence on defense policy in the 1960s, it is less clear whether this was the result of PPB per se or of a relatively informal organizational arrangement that empowered a small and loyal group of headquarters staff to advise the secretary of defense on selected issues. In either case, the PPB process at DoD has evolved in two ways that have severely undermined its usefulness as management tool. One way is its decentralization. Whereas the implementation of PPB gave the Office of the Secretary of Defense the initiative to shape policy under McNamara, centralized analysis assumed an increasingly reactive role in the 1970s that has continued to the present. The other development is the bureaucratization of the process. Though PPB has always been complex, DoD’s current system has come to involve so many actors and steps and to require the development of so much information that it has moved well beyond the limits of human cognition. The upshot of these developments is the reinforcement of bounded rationality in the form of “base-plus incrementalism.” Ironically, in this regard, DoD’s planning and budgeting are routinely subjected to the same criticisms today that led to the implementation of PPB during the Kennedy administration (BENS 2000; JDCST 2004).

Chapters 4 and 5 present a case study of the adoption and subsequent implementation of PPB at the National Oceanic and Atmospheric Administration. NOAA is composed of organizations that were drawn together from throughout the federal government for the purpose of integrating related functions, and it was still perceived as facing important problems of coordination thirty years after its creation. In response, the retired navy admiral who was appointed NOAA administrator in 2001 instituted PPB to achieve better coordination across and within the agency’s five major line components (Moore 2004). The innovative version of program budgeting developed by Conrad Lautenbacher modified the military’s system by requiring line managers to assume a much greater role in planning and analysis. It did this through a matrix structure involving functionally oriented teams whose membership cut across formal organizational boundaries (NOAA 2008). Although the choice of PPB undoubtedly reflected Lautenbacher’s own professional background, it also sought to address criticisms that had been levied against NOAA by its political principals and by other constituents. In addition, it was designed to comply with the general demands for planning and assessment imposed by GPRA and by performance management requirements that had recently been instituted during the George W. Bush administration.

NOAA’s management system had mixed results. The development of a program structure led to a more comprehensive understanding of NOAA’s goals and of how different parts of the agency furthered those objectives. The introduction of “matrix management” also improved communications and led to greater shared awareness across organizational components. Yet the system also required a good deal of time and effort from managers with other responsibilities, and its effect on the allocation of resources was confined primarily to the distribution of additional funds on a very selective basis. In these latter respects, virtually all the obstacles that impeded the implementation of program budgeting at NOAA might have been anticipated from accounts of its failure in 1960s. The agency replaced PPB with a less ambitious system of planning and budgeting in 2010.

The appendix to this book provides less detailed overviews of the adoption and implementation of program budgeting by two other federal agencies, DHS and NASA. DHS is required to use PPB by its enabling legislation, but it has nonetheless struggled to put a viable system in place. This has been due to a lack of resources, resistance from component agencies, and inadequate support from political officials in both the legislative and executive branches. Program budgeting has had an easier time at NASA because it has enjoyed the support of senior leadership and because its formal introduction was the culmination of a series of incremental changes. As in the case of NOAA, however, its substantive effects have been marginal.

The analysis here speaks to the competing explanations that were offered for PPB’s earlier demise. Again, its defenders stressed the bureaucracy’s lack of expertise and commitment, combined with the inherent conservatism of large organizations (e.g., Novick 1969). Agency executives allegedly did not understand or appreciate program budgeting, and bureaucrats and elected officials lacked the will to make hard decisions that would disrupt established programs and clientele relationships. In fact, it may be a truism that strong leadership support is a necessary condition for PPB to have a significant impact as a management tool. As with the introduction of any demanding organizational change, moreover, the implementation of PPB is bound to be difficult without the dedication of substantial new resources. Some or all of these factors have come into play in each of the three agencies that have recently adopted program budgeting.

In addition, however, the following chapters provide ample support for the arguments of Wildavsky (1969) and others that PPB is subject to more fundamental limitations as a practical theory. The most important of these are grounded in constraints associated with bounded rationality and with the decentralized and pluralistic political environment of public administration in the United States (Downs and Larkey 1986). Success is always contingent on one’s expectations, of course, and policy analysis can influence decisions on a selective basis (again, assuming that leaders are receptive to it). A salutary result of PPB in the 1960s may have been that it hastened the institutionalization of policy analysis in the federal bureaucracy (Schick 1973; Radin 2000a). At the same time, there is little reason to believe that formal processes of strategic planning and the objective assessment of agency outputs can be used to rationalize what government does in a comprehensive or even a systematic way. The reasons for this include

the difficulty of measuring the outputs and (especially) the outcomes of many government programs;

problems of accountability and control that attend efforts to manage across fo...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Illustrations
• Acknowledgments
• Abbreviations
• 1 Introduction: Lessons Not Learned
• 2 A Brief History of Planning, Programming, Budgeting Systems
• 3 The Survival and Evolution of Program Budgeting at the Department of Defense
• 4 NOAA’s Adoption of PPB and Matrix Management
• 5 Evaluating NOAA’s Management Initiatives
• 6 PPB and the Holy Grail of Performance Management
• 7 Administrative Doctrine and Administrative Reality
• Appendix
• References
• Index