To win the space race with China, the US needs these budgetary reforms

Last month saw another Chinese trip to the moon, as well as the successful launch and recovery of Elon Musk’s SpaceX Starship rocket — part of a star-studded scramble by state and nonstate actors alike in the modern-day space race. Less sexy than cool launches, but just as important, are the budgetary reforms needed to win it.

Congress and the Defense Department can boost the US edge in space if they take seriously the need to reexamine how the nation allocates resources to space-based activities supporting national defense. Among potential areas of reform, the Planning, Programming, Budgeting, and Execution (PPBE) process merits distinct scrutiny as one traditional mechanism for funding, developing, and delivering major space systems.

PPBE is the calendar-driven resource allocation process underpinning how the United States funds its national security priorities, so its efficiency is a big deal. Anybody who has worked in defense budgeting can tell you how important PPBE is, but they are also likely to tell you that it is a major headache. Since its inception in the 1960s, PPBE has helped the DoD incorporate data-driven analysis and manage massive Pentagon shopping lists, but its rationalistic principles are too “one-size-fits-all” for DoD’s wildly diverse acquisition needs — and especially for the nature of a space race.

In support of the efforts of the congressionally-directed Commission on PPBE Reform, the Baroni Center for Government Contracting interviewed multiple government and industry personnel who observed budgetary issues in full play while supporting space programs. Some observations suggested that program budgeting is too often wielded as a vehicle for congressional power plays and military service budget battles. Through PPBE, program offices draft spending plans which cross multiple thresholds of vetting authority, which, when combined with the usual Congressional process of debating a budget and appropriating funds, means it can be two and a half years from conception to execution on a contract. Areas of investment which constitute less of a legacy priority, such as cyber and space, can take even longer to receive funds.

Interviews also found that PPBE often tends to favor five-to-seven-year programs for space, even when capabilities could or should be delivered into orbit in rapid fashion. Program budgeting prompts the services to become overprotective of funding lines for pre-existing programs, including underperforming legacy programs. This protectiveness purportedly comes at the expense of modernization efforts and new space program architectures, which can be forced to wait out long PPBE cycles before they are incorporated into crowded budget portfolios.

Another incompatibility between space priorities and the PPBE process is that PPBE emphasizes a linear interaction of budgets and technology. This is not conducive to successfully developing and deploying many types of transformative technologies, but especially not space-based systems, which largely succeed through trial and error rather than lightbulb-style innovation and decision-making. Space technologies are particularly software-heavy and therefore dependent on continuous testing and revision cycles. Even though they require continuous refinement, advantageous disruptive technologies can be surprisingly affordable, and the Space Force is looking toward the commercial sector to provide them. However, the defense community cannot fully take advantage of that fact when the highly methodical PPBE is infamous for fostering delays and risk aversion in defense resourcing.

The Commission on PPBE Reform’s final report highlighted several examples of defense entities who have innovated upon their program budgeting within the context of PPBE and other acquisition processes, which should give some hope to the space community.

The Space Development Agency (SDA), which has remained faithful to its two-year cycles of satellite development and launch, has made an admirable effort to maneuver the shortcomings of classic defense resourcing. It follows a unique protocol by maintaining relative budget autonomy in its funding lines, holding more frequent and intentional meetings with House and Senate staffers, and by purchasing relatively cheap commercial technology. It also incorporates slight variations on the typical PPBE steps — for example, it determines satellite budgets before the full requirements for a layer of satellites are known. Successfully navigating its extremely tight schedules, SDA experiences what seems to be a refreshing departure from the current status quo across DoD — a commercial market that is not always caught up with the pace of its organizational mission.

With China pressing onward in its remote-sensing satellite buildup, the successes of SDA are encouraging. Defense acquisition models like those espoused by the SDA provide clues to winning the space race as competition heats up above the earth. Still, reform on a larger scale may be necessary to maximize progress.

To promote and protect funding for space-based capabilities, our defense resourcing system needs to allow space budgets the breathing room to grow and replace old priorities. The Commission on PPBE Reform suggested many ways to nurture that growth, and its final report’s number one recommendation was to improve the alignment of budgets to strategy.

Flip the order of the wording in the Commission’s first recommendation, and it does not work. Budgets must follow strategy, but it does not make sense to align strategy to budgets. And yet, that is exactly what is happening, as the space technologies which the defense community proclaims to prioritize for joint strategic aims are waiting for the budget to accommodate them.

Thankfully, there are many ways to counter this trend.

One first step in the right direction, with or without extensive reform, would be for the space community to do more to take advantage of preexisting financial flexibilities and other agile approaches, like the Middle Tier of Acquisition (MTA), which SDA has used to great advantage. While some of their approaches may not work for major capability acquisitions, SDA provides several potential models for the future of rapid space acquisitions hinging on commercial innovations and affordable technology.

Congress and DoD also need to do more to prevent budget sprawl. Cutting-edge defense programs and agencies like SDA are protective of their limited funding lines, and for good reason. Keeping program budgets consolidated and mission-focused is key to achieving flexibility and speed in developing and deploying new tech. Moreover, for the implementation of new technologies, DoD and Congress must be willing to discontinue and replace older, underperforming programs to make way for new programs. Streamlining budget structure could have a big impact on helping the Pentagon and its contractors make headway on their massive unfunded backlogs and wish lists.

For any long-term or near-term reforms to be possible, DoD program offices will need to increase their interface with Congress. This is crucial to mitigating the fears about loss of oversight or creeping costs which plague appropriators. As noted by the Commission on PPBE Reform, increasing the number of engagements between DoD and Congress would be particularly helpful during the year of funding execution or after the submission of reprogramming actions, as it would facilitate Congress’ ability to monitor the adoption of new innovations and assess the budgetary impacts of funding realignments. Additionally, the use of rapid and agile acquisition authorities would be less of a bogeyman for Congress if increased communications improve transparency into the progress of space programs.

Instead of bending progress to meet the demands of PPBE, the DoD and Congress must harness PPBE to meet the demands of a more modern definition of progress and keep pace the with competitors. It would be a tragedy if, out of all possible issues, internal budgetary processes posed the greatest threat to the fulfillment of the United States’ lofty grand strategy, incomplete without a strong space posture.

Olivia Letts is a Research Manager with George Mason University’s Baroni Center for Government Contracting. Through this role she has worked on research for DoD concerning several major areas for potential reform in the government acquisitions and contracting realms, including case study research in support of the efforts of the Commission on PPBE Reform. She previously worked as an associate analyst in defense consulting.