Fixed or Flexible Funding? An Evaluation of Capital Investment Strategies
Abstract
By law, each military department must invest annually in the capital budgets of its depots at a minimum rate of six percent of their average funded workload. The relevant statute was enacted in response to the deteriorating state of organic depots in the 1990s, which lawmakers and military leaders attributed to insufficient investments in infrastructure. At present, there are 21 “covered” depots. The proposed research examines the rationale behind the DoD’s “six percent” policy, its impact on other spending priorities, and the potential for a more flexible, forward-looking, strategy. The research will be conducted by the Center for Public Policy and Private Enterprise (CPPPE) at the University of Maryland’s School of Public Policy. Senior Research Scholar and Interim Director William Lucyshyn will serve as the principal investigator. “Earmarking”—the legislative provision that mandates that approved funds be spent on specific projects—is a common practice at all levels of government. Although the public tends to associate it with “pork-barrel” spending (especially at the federal level), earmarking, like other financial management tools, has both benefits and drawbacks. For instance, in the case of military depots, it can be argued that in the absence of dedicated funding, routine investment in depots will be overlooked—that it, in fact, was overlooked—to fund more visible, higher-profile programs and projects. On the other hand, one might argue that the six percent policy hinders leaders’ ability to adapt to changing circumstances, compromising their ability to meet mission requirements. To be sure, the question over how to fund military depots is more complex than this distillation suggests. There are many variables at play that require detailed examination. In any case, there are indications that the “six percent” policy is not meeting its stated objective—i.e. improving depot capabilities. In 2009, the GAO stated that the lack of a “meaningful department wide assessment” of the shortcomings of organic depots has left the DoD with no way to accurately determine whether they have the resources and capabilities to meet sudden threats and warfighter needs. Questions need to be asked. Do the military departments view “six percent” as a spending baseline or the default requirement? Though the policy does not place upper limits on annual capital investment, there is an implicit assumption that previous years’ investments are a sufficient guide to the future. This is unlikely to be the case. It should also be asked whether each department’s depots require the same rate of annual capital investment. The objective of the proposed study is to evaluate current policy on capital investment in military depots in order to determine if and how the policy should be modified to optimize overall capabilities. In addition, the study seeks to develop a framework that can be used to identify and assess the benefits and drawbacks of three capital funding mechanisms—dedicated, flexible, or hybrid—under varying conditions. It is anticipated that the findings and recommendations contained in the proposed study will be applicable to agencies and jurisdictions throughout the country that grapple with how to fund priorities in the face of increasing budgetary pressure.
Document Details
- Document Type
- DoD Grant Award
- Publication Date
- Feb 03, 2017
- Source ID
- N002441710004
Entities
People
- William Lucyshyn
Organizations
- United States Navy
- University of Maryland