Reform of Budgeting for Acquisition: Lessons from Private Sector Capital Budgeting for the Department of Defense
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Authors
McCaffery, Jerry
Jones, Larry
Subjects
Capital Budgeting
Capital Assets, ''Corporate'' Methods of Budgeting
Capital Assets, ''Corporate'' Methods of Budgeting
Advisors
Date of Issue
2006-04-01
Date
01-Apr-06
Publisher
Language
Abstract
The ongoing replacement of Department of Defense (DoD) capital assets, as well as other much needed capital investments, will likely take place during a time of decreasing, or at least slowly growing financial resources over the long term. Some of this is due to the growth of entitlements, some to the size of the predicted deficit. Still another pressure is the long-term cost of military activity in Afghanistan and Iraq, predicted by CBO to be $450 billion over the next ten years. In addition, the Department of Defense is in the midst of an era of ''transformation'' under Secretary of Defense (SECDEF) Donald Rumsfeld that calls for the modernization of DoD warfighting doctrine, capital goods and business systems. The budgeting system has already been modified during Rumsfeld''s tenure (McCaffery & Jones, 2004, p. 403-435). Occasionally, it has been argued that the federal government and other public agencies should adopt ''corporate'' methods of budgeting to include the use of separate capital and operating budgets that are prevalent in the private sector. In the past, this argument has not made much progress, but the current trends enumerated above move us to consider that this argument should be revisited. It is clear that significant changes would have to occur in the present system if private budgeting methods were adopted by the DoD and other public organizations, but there are examples of public organizations that have made this leap, as the governments of New Zealand and Australia, as well as most of the states in the US have at least adopted some private budgeting methods with varying degrees of success.
Type
Report
Description
Proceedings Paper (for Acquisition Research Program)
Series/Report No
Department
Financial Management
NPS Faculty
Identifiers
NPS Report Number
NPS-FM-06-072
Sponsors
Naval Postgraduate School Acquisition Research Program
Funding
Format
Citation
Distribution Statement
Approved for public release; distribution is unlimited.