Thursday, February 5, 2009

Interagency Capability Portfolios? (pt. 2)

GAO has a report assessing DOD's shortfalls in the development of a capability portfolio approach to acquisition. This points to just how challenging an interagency portfolio analysis would be to institutionalize. But it also indicates how sensible a decision this would be for the US to make. We've spent a long time gutting the civilian portions of our national security establishment, how do we institutionalize a process for evaluating that balance short of catastrophic failures on the scale of an Iraq or Afghanistan? Also see Korb and Pemberton's A Unified National Security Budget for the United States from 2006.

Here's GAO's executive summary:

To achieve a balanced mix of executable development programs and ensure a good return on their investments . . ., the successful commercial companies GAO reviewed take an integrated, portfolio management approach to product development. Through this approach, companies assess product investments collectively from an enterprise level, rather than as independent and unrelated initiatives. They weigh the relative costs, benefits, and risks of proposed products using established criteria and methods, and select those products that can exploit promising market opportunities within resource constraints and move the company toward meeting its strategic goals and objectives. Investment decisions are frequently revisited, and if a product falls short of expectations, companies make tough go/no-go decisions. The companies GAO reviewed have found that effective portfolio management requires a governance structure with committed leadership, clearly aligned roles and responsibilities, portfolio managers who are empowered to make investment decisions, and accountability at all levels of the organization.

In contrast, DOD approves proposed programs with much less consideration of its overall portfolio and commits to them earlier and with less knowledge of cost and feasibility. Although the military services fight together on the battlefield as a joint force, they identify needs and allocate resources separately, using fragmented decision-making processes that do not allow for an integrated, portfolio management approach like that used by successful commercial companies. Consequently, DOD has less assurance that its investment decisions address the right mix of warfighting needs, and, as seen in the figure below, it starts more programs than current and likely future resources can support, a practice that has created a fiscal bow wave. If this trend goes unchecked, Congress will be faced with a difficult choice: pull dollars from other high-priority federal programs to fund DOD’s acquisitions or accept gaps in warfighting capabilities.

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