Headquarters U.S. Air Force
Integrity - Service - Excellence
Progress and Challenges in
Performance Based Budgeting;
an Air Force Perspective
Mr. Mark Danburg
Mr. Matt McGuire
SAF/FMBMA
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Agenda

Emphasis on Performance

Performance-Driven Organizations

Evolution of the Air Force Performance Budget
 Progress to Date

Meeting the Challenges for Continued Progress

Examples of a Performance Budget Methodology

Questions

Back Up Slides

Analysis of Performance
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Emphasis on Performance
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Performance Budgeting
Guidance/Legislation

1990 Chief Financial Officers Act

1993 Government Performance Results Act

1993 National Performance Review
2002 President’s Management Agenda, MID 901, 910,
913

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2004 OMB Circular A11 - Performance Budget Meets
GPRA Requirements
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OMB Circular A-11 required agencies to develop
and report on performance based budgets

Key terms/phrases of interest:
 Clearly explains
 Relationship
 Strategic goals
 Outcome-oriented long-term and annual performance goals
…measures that show results
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Increased Focus on Performance from
Current Administration
“It is time to pay far more attention to the use of Federal
performance information as a powerful performance-improving
tool:
1) useful for communicating priorities, progress, and raising
issues;
2) for illuminating what works and should be continued and
what does not work that needs attention;
3) for allocating scarce resources wisely.”
Oral testimony of Jeffrey Zients, Oct 2009
Deputy Director Management
Office of Management and Budget
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Performance-Driven Organizations
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Attributes

Establish a Leadership Tone at the Top


Build an Analytics-Based Mindset


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Commit to rewarding leaders who produce results
Reward production of relevant outcome-based performance measures,
reliable performance information, and a disciplined approach to monitoring,
evaluation and reporting on the program (both internal and external)
Develop Relevant Performance Goals and Supporting Measures

Determine achievement of anticipated outcomes and contribution to the
success of the mission

Performance measurement systems should provide intelligence for decisionmakers, not just compile data
Build an Analytics Capability

Establish best practices in the performance lifecycle processes

Leverage and enhance organizational structure, policies, staff competencies,
staff motivators, and enabling technology tools

Establish/enhance integrated decision support and information reporting
processes
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Elements Required for
Performance-Based Decision Making
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Relevant Information (e.g., appropriate performance measures)

Reliable Information (e.g., timeliness, completeness, and data
accuracy)
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Strong Analytic Capabilities

Timely Decisions and Cost-Effective Implementation

External Reporting Transparency

A Spirit of Accountability
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Strategic Planning Linkage with
Performance Budgeting

Performance Budgets Should be Linked to each Agency’s
Strategic Plan

Strategic Goals and Objectives Need to be Established with
Measurable Outcomes (and supported by senior leadership)

Programs Aligned with Strategic Goals and Objectives

Performance Budgets Should Link the Resources Used to Meet
Performance Targets

Use of a Consistent Set of Performance Measures from Planning
through Budget Execution
The Goal is to Continually Deliver Better Quality Products and
Services While Increasing Efficiency and Effectiveness
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Performance Measure
Best Practices

Focus on Agency Strategic Plan – Each priority should have
several objectives. The Performance Measures should track
progress on meeting the objectives that support each priority

Measures should be outcome oriented. A series of measures
may be necessary to address some objectives

Data should be available to provide information on measures – if
it is not, focus on measures that can be supported with existing
data

Keep the number of performance measures to a minimum.
Having hundreds of measures is too hard to analyze and doesn’t
support leadership understanding on key issues

Study how other organizations build their performance strategy –
benchmarking is an excellent way to conceptualize design of a
performance measurement system for your agency
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Evolution of the Air Force Performance Budget
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The Air Force Framework
Has Evolved Over Time
FY 2011 PB
FY 2010 PB
FY 2009 PB
AIR FORCE
STRATEGIC
PLAN
FY 2008/2009 PB
AIR FORCE
STRATEGIC
PLAN
BALANCED
SCORECARD
FORMAT
Feb 2007
DoD
DECISION
LANES
FORMAT
Feb 2008
FORMAT
Linked
Appropriation
Budget
Highlights and
PBB
May 2009
FORMAT
Linked
Appropriation
Budget
Highlights and
PBB
Demonstrated
Relationship
with Air Force
Core Functions
Feb 2010
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Current Air Force
Performance Budget Framework

Discusses linkage with higher
level guidance documents
Major sections:

Overview

Appropriations Summaries

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Shows the budget as it is
presented for
Congressional action
MILPERs, O&M, RDT&E, Acquisition, MFH, MILCON, etc
Performance Based Budget
Discusses progress and
performance aligned to
AF Strategic Plan

Overview and linkages with AF Core Functions

Reinvigorate the Air Force Nuclear Enterprise

Partner with the Joint and Coalition Team to Win Today’s Fight

Develop and Care for Airmen and their Families

Modernize Our Air and Space Inventories, Organizations and Training

Recapture Acquisition Excellence

Overseas Contingency Operations Funding

Air Force Working Capital Funds

Appendices
Addresses supplemental
requests, OCO, and
other key budget areas
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Progress to Date

Establishment of a Performance Measures community of
stakeholders across the Air Staff

Sharing of information with Air Force Posture Statement and Air
Force Budget Overview has resulted in improvements in both
products and better consistency of messaging

Better understanding across the Air Staff of who is measuring
what and how to leverage other products and analysis

Feedback from Congressional staffs has been very positive on
the product (easy to read and understand Service priorities and
progress)
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Meeting the Challenges
for Continued Progress

Garner agreement on Performance Measures that link to
Strategic Goals and Objectives (working closely with AF
Strategic Plan office)

Determine relationship between performance and funding
(increased analytics)

Applying performance measures to aid decision support in all
PPBE phases (evolving from a compliance item to a decision
tool)

Transparency of performance measures
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Examples of a Performance
Budget Methodology
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Start with Senior Leadership Priorities
(Example Only)
Priority X: Train and take Care of our People and Their Families
1) Objective: Right people, right skills at the right time
2) Objective: Meet the needs of our people and their families
3) Objective: Highly trained workforce
Objectives supporting
each Priority need to be
documented and have
leadership buy-in
Priority Y:
Priority Z:
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Example of Construct (continued)
Priority X: Train and take Care of our People and Their Families
Objective 1: PM = Recruiting Goal versus Actual by Specialty Code
Objective 1: PM = Retention Goal versus Actual by Specialty Code
Objective 2: PM = Member Satisfaction Rate versus Goal
Objective 2: PM = Spouse Satisfaction Rate versus Goal
Objective 3: PM = Percentage meeting Training Goals versus Actual
Performance Measures should focus on
meeting each objective
Specific Goals and Thresholds Determined by Leadership
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Example of Construct (continued)
Priority
Train and Take Care of Our
People and Their Families
Objective
Have the right people, with the
right skills, at the right time
Meet the Needs of our People
and their Families
Highly trained workforce
Performance Measures
Goal
Actual
Status
Trend
Resources
MILPERS: $100,000,000,
O&M: $68,000,000, Cost Per
Recruit: $14,000
Recruiting Goal vice
Actual by Specialty Code
100%
101%
Retention Goal vice
Actual by Specialty Code
80%
77%
MILPERS SRB: $600M
Member Satisfaction
Rate vice Goal
80%
81%
MWR Act: $5K per member,
Tuition Assistance: $12K per
member
Spouse Satisfaction Rate
vice Goal
80%
69%
Percentage meeting
training Goals vice Actual
98%
98%
CDC: $4K per member
Basic Training: $25K per
member, Specialty Training:
$36K per member
Each priority should be addressed with a summary if possible. The sections
that follow should discuss the overall situation, how the performance measures
are calculated and provide details of each initiative funded in the budget.
Explain what the Agency plans to achieve with each initiative in performance
terms.
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Ideal use of Performance Measures
Across PPBE Phases
Planning
Programming
Budgeting
Execution
What is the desired
performance outcome
needed to meet
plans?
What resources are
required to meet the
desired performance
outcome?
Can we predict
performance in the
budget to help justify
resources?
Feedback on actual
performance to each
phase to improve
future decisions
Performance Measures can be used to integrate all phases of PPBE
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How Performance Measures
Assist Decision Support

Are we meeting recruiting and retention goals?

Funding changes to recruiting or retention bonuses?
 Increases in recruiting and retention initiatives in challenging
specialty codes?

Are our People and their Families happy?
 Issues causing satisfaction increases or decreases?
 Options to increase initiatives or change processes to increase
satisfaction

Are we meeting training goals and addressing changing mission needs?
 What training is required to meet forecasted mission requirements?
Answers to questions should drive funding or process decisions in the PPBE
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Performance and Budget Integration
Conclusion

Progress is Ongoing

More resources is not always the solution to better performance

Continued emphasis on using consistent measures for improved
decision support (planned outcomes versus actual across the
PPBE)

Still working to evolve performance measures to be more
“outcome” oriented

Need to share best practices across Services (especially for
similar performance areas like “People” and “Modernization”

Need to include performance measures in existing information
systems
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Questions?
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BACK UP SLIDES
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Analysis of Performance
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Performance Analysis
Drivers on Performance

Historical budget execution analysis with performance measures
by fiscal year may provide some insight to the level of impact
funding has on performance

Need an understanding of policy or process changes impacting
performance for analysis

Lagging indicators are fairly common
 Analysis is not as easy as pulling execution data from the
accounting system. Meeting with the program managers is
important to get an understanding of the baseline, key initiatives, or
other changes impacting program performance over time

Correlation Analysis can be performed after an understanding of
changes (both funding and process) to programs is captured
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Data Validation and
Variable Identification

Technique:

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Toolsets:

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Graph Data : Picture is worth a thousand words; so convert your
data to a graphical representation.
Scatter Plot Diagrams, Histograms, Pareto Charts (MS Excel)
What you're looking for:

Clusters of data points, Trend Indications, Potential outliers,
Frequency amongst variables
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Application and
Descriptive Statistics

Technique:

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Toolsets:
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Determine central tendency & Normality: Compute the Mean,
Confidence Intervals, & determining the shape of the data
distribution.
Goodness-of-Fit feature (Crystal Ball), RI$K wizard (ACE-IT), Cost
Estimating Manuals/Guidebooks (Multiple acceptable sources)
What you're looking for:

Skewness, Symmetry about the mean, Kurtosis (Peakness),
variable frequency fit within the distribution curve -- all will
indicate what distribution your data tends to follow (normal,
lognormal, weibull, triangular, etc.)
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Define Interaction
Between Variables

Technique:


Toolset:

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Correlation / Regression Analysis: Statistically quantify how one
variable effects the other. Defining these dependencies are
crucial to understand impact of What-If scenarios requested by
Decision Makers.
Goodness-of-Fit feature (Crystal Ball), CO$TAT & RI$K wizard (ACE-IT),
Computations, Add-Ins, and Stats Functions (Visual Basic & Excel)
What you're looking for:

Correlation Coefficients (e.g. r2, and others ) and their tendency
towards -1.0 & +1.0, indicating degree of pos. or neg. correlation.
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Accounting for Multiple Scenarios

Technique:

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Toolset:
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Monte Carlo Simulation: Regardless of the pedigree of your data
and the diligence of your analysis, there will be inherent “error”
due to the uniqueness of the circumstances generating data;
nonetheless, data driven responses to this risk can be accounted
for by assigning statistical distributions and correlation
parameters to your data variables.
Monte Carlo Simulation features (Crystal Ball), (ACE-IT),
(SEER),
What you're looking for:

Delta change in output as degree of certainty increases or
decreases.
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Example of Trend Analysis:
Air Force Recruiting
Recruiting Metrics
104%
$ 000s (TY)
$25.00
101%
101%
101%
101%
100%
101%
102%
101%
100%
102%
$20.00
100%
$15.00
98%
96%
$10.00
94%
95%
$5.00
92%
$0.00
90%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Fiscal Year
Cost Per recruit (MILPERS)
Filename/RPS
Number
Cost Per recruit (R&A and Examining)
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GOALS
% of Goal
$30.00
Government Performance Results Act of
1993 led the way

GPRA 1993 found that waste and inefficiency in Federal
programs undermines the confidences of the American people
in Government

Purpose of GRPA 1993



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
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(1) improve the confidence of the American people in the capability of the Federal
Government, by systematically holding Federal agencies accountable for achieving
program results;
(2) initiate program performance reform with a series of pilot projects in setting
program goals, measuring program performance against those goals, and reporting
publicly on their progress;
(3) improve Federal program effectiveness and public accountability by promoting a
new focus on results, service quality, and customer satisfaction;
(4) help Federal managers improve service delivery, by requiring that they plan for
meeting program objectives and by providing them with information about program
results and service quality;
(5) improve congressional decision making by providing more objective information
on achieving statutory objectives, and on the relative effectiveness and efficiency of
Federal programs and spending; and
(6) improve internal management of the Federal Government.
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