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Performance Based Budgeting – Is it just another buzzword?

Performance Based Budgeting ImageRecently the US Chief Information Officer (CIO) Steven Van Roekel (@stevenvdc) has been discussing the Federal Information Technology FY 2014 Budget Priorities on social media such as Twitter and elsewhere. In his budget priorities presentation, he discusses the shift towards Performance Based Budgeting (PBB). So what exactly is PBB? Sounds like a great buzzword, right? Is it just another “initiative” that program managers will have to “comply with”?

Actually, no.

The concept of performance based budgeting (PBB) has been around for a while and various Departments (e.g. Department of Education, Department of Labor) are starting to implement PBB in several areas with success. PBB is one way of budgeting that Departments/Agencies/program managers can use to change the dynamic of how we invest our limited dollars.

It requires a change in thinking at the start.

Traditional Budgeting Starts with the Spend

Traditionally, each year program managers will update their budget request (personnel, facilities, equipment, operations and maintenance, etc.) according to their cost estimates adjusted to meet the milestones listed in their integrated master schedule (IMS). If dates slip to the right and/or if costs increase, program managers will simply provide justification for the request for a change in the plan. The problem with this approach is that it focuses on how to spend the money. It may take several years before anyone can recognize that the program is over schedule and budget, and quite possibly does not deliver the result intended. This leaves the government (and taxpayers) with the same problem and no solution.

PBB Focuses on Outcomes

PBB differs from traditional methods by focusing on what the intended outcome should be, i.e., what are you going to improve/prevent? It would also include those measures where outcomes would be difficult to measure utilizing an objective method; however, Departments (such as Department of Homeland Security (DHS) have been successful in transforming these goals/objectives into measurable activities. The PBB method aligns funds to the measurable objectives necessary to achieve the goals, over time, outlined in a Department/Agency’s strategic plans. It changes the dynamic from thinking of how to spend the money to a focus on the results.

PBB aligns very nicely to the intended purpose of the Government Performance and Results Act (GPRA), specifically to improve program performance, as well as increase effectiveness and accountability by setting goals, measuring performance against these goals and focusing on results, service quality and customer satisfaction.

How You Can Apply PBB

In order to apply PBB, program managers will first need to assemble an integrated process team (IPT) comprised of various stakeholders (program, budget, human resources, etc.) to answer the following questions:

  • Why does the program exist?
  • What problem is it supposed to solve?
  • How does it align with the Department/Agency’s goals and objectives?

Once the IPT has documented how the program aligns to specific goals and outcome, the next step is to develop meaningful, and achievable, performance targets over several years. The IPT will need to design performance measures that show how the program aligns to the objectives and document how achieving these will provide a measurable benefit over time. After the performance measures are developed, the IPT will then outline the activities necessary to achieve the targets and then align funding necessary to accomplish the activities by year.

Once the measures have been established and the budget submitted, the PM would be required to monitor and frequently report on the status of their measures. Through continuous monitoring and feedback from the IPT, the program can adjust as necessary in order to meet their desired targets.

The end result of this shift in approach should be better program performance and more efficient use of budgets. What are your experiences with establishing a PBB for your agency?

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