Ministry of Defence

Two approaches towards “operational capability” – Bring them as closer as possible

imazhi_artikulli_3.jpgAbstract. Strategic Defence Review (SDR) in Albania has already reached the stage, when lining-up and linking operational capabilities (as final products of this process) with the corresponding resources is becoming a necessity. At this stage, some of the initial signs of challenges in making this linkage possible have come up. One of them is related to different approaches to the operational capability, the building of which is one of the main goals of SDR. Being part of this process, based on his own experience in the area of defence resources management, the author tries to put these challenges in the focus of this article, as well as offering some ways to overcome them. The article is viewed from an academic perspective, particularly addressing concepts, due to a relative absence of them in our defence planning process.

Since February 2011, the Albanian Armed Forces (AAF) in cooperation with six other state institutions and agencies which have constitutional responsibilities in the security area, have initiated a Strategic Defence Review (SDR) process. It is being viewed as an attempt, to jointly plan adequate capabilities, to deal with a carefully crafted list of security scenarios. The different level working groups involved in the process of scenario development, and in the identification of proper operational capabilities to be built, have been cautious enough not to loose sight of the objective realities of Albania and the region, in terms of threats and risks to our security, but also the resources to be devoted to cope them. Unique by the dimensions and the scale of inclusiveness as it is, in general the whole process, supported by the Office of the US Secretary of Defence, seems to be running relatively well. By now, this process has reached the phase of linking proposed operational capabilities with financial resources projected in the defence budget figures for the next 20 years. That constitutes a very important moment with some of the most expected challenges not only because of the already known gap between ambitions and resources, but also (and probably much more) because of the differences in culture and the way of “doing business” between programmers and budgeters. It is something already recognized and accepted by all schools of defence resources management, an acceptance which however doesn’t automatically bring solution. We are currently experiencing the same approaches gap in AAF, which calls for more debates and analyses, to find the common ground.
First of all, we should understand where these differences consist. By their area of interest, the programmers are more focused and interested on the operational capabilities (outputs) which could be considered as “end products” of the process, whereas budgeters are more preoccupied about funds (inputs), which are to be allocated in different areas of activities, during the implementation of the defence programs, in to build these capabilities.
As such, as two different approaches, it’s natural that in any resource management system (notonly in defence) they expose differences in interests, concepts, mindset in general for the people involved. Because of that fact, and the consequences associated with them, any management system is interested to narrow that gap if not possible to avoid it.
The Albanian Mid-term Budgeting System (PBA) tries to narrow this gap by mandatorily askingfor some concrete and tangible indicators to be clearly stated, put forward as objectives to be achieved by budgetary programs. For that purpose, PBA Operational Manual (2009) provides the definition of budget program productions: “…as a precise definition of a product or service, which is to be achieved…All the products (of this process) are similar to each other in that of being: concrete, measureable, realistic, achievable, and definite by the time perspective” (6).
Despite the definition and the strict requirement to state them clearly in the budgeting programs, in reality, the list of outputs generally has resulted generic and apart from listing some of the major equipment, systems, and some infrastructure objects, it has failed to offer a clear picture of what is expected to be achieved through this budgeting. They have remained far from becoming a vivid picture of the aimed results (i.e. operational capabilities) which major unit commanders are really interested for.
In an “ideal world”, it wouldn’t be very problematic that connection (achieved by budgeting) between funds and requests for operational capabilities, stated in plans and elaborated more in defense programs, in other words, that very linkage of the part of inputs related to money with corresponding outputs (capabilities) required and attempted by programmers and unit commanders to be achieved. In this case (ideal world) “defence programs” would provide the only foundation for developing “budgeting programs.” In a simplistic way of speaking, it would be enough just to cut from the consolidated block of defence programs extended in time (usually 6 years time frame) that part, corresponding to the budgeting year. After that, every category and subcategory of activities programmed in the defence programs would have to be converted into the budgeting categories and subcategories.
In the “real world”, the situation poses difficulties and challenges. Decisions and orders for changes to money allocations may come for many reasons, which usually are imposed by unexpected changes in domestic or regional security landscape. These changes could also be imposed by other factors, out of the security context. They may be changes in prices, failure in achieving the pre-planned state budget incomes, emerging national obligations and participations in other regional initiatives, and beyond. All these reasons cause discrepancies in defence programs (prepared years in advance) compared to current developments, therefore posing the need for revisions and reflections over the activities planned sometime in the past for this specific budgeting year.
On the other hand, as part of the State Budget, the Defence Budget is organized differently from the Defence Programs, which logically (should) pave the way for the budget. Defence Budget cannot be organized structurally in a different way from the State Budget, as such, it follows the latter and is organized through the same “categories” and “subcategories”, as the State Budgeting is. This is natural, because the Sate Budget aggregates in one structure all other institutions designated to be supported by the State Budget. To keep control over all of them, some broad areas and indicators are necessary to be applied in relation to personnel, operational expenditures, investments etc. For each of them, to be easily identifiable, some “code numbers” (or “budget categories”) have been established and agreed, each of them further elaborated in “sub codes” (or “sub budget categories”). In different countries there are different techniques. In Albania, all funds allocated for state employees’ salaries are represented by the “category 600”, funds for insurance (life, medical) are allocated under the “category 601”, operational expenditures for normal functioning of any institution are allocated under the “category 602”, whereas expenditures for investment (major equipment and infrastructure) are under the “category 231”, etc. It’s understandable that each of the abovementioned categories can be broken further down in sub-articles, which in total go to tens of thousands.
In this way, every budgeting institution establishes and keeps a particular relation with the Government, in order to achieve financial support for its own objectives. For that purpose, one of the priority concerns of the budgeting institutions in defence sector, (primarily Ministry of Defence but also Major Commands) should be serving as a facilitator in connecting MoD and Major Commands with the Ministry of Finance. To achieve that, they should do the best to convert what is so far expressed in “defence programs language” into “budgeting language”.
b_264_198_16777215_00___images_aktualitet_foto_1.jpgIn conditions of a mature “programming” process, it might be relatively easy, because (hypothetically) the only thing to be done should be just viewing the defence programs structure by another point of view (Fig.1). In this case, the programmers view the program build up (as described by left to right arrows) developed in time, through the known components: “Personnel” “Operation and Maintenance” (O&M), “Equipment”, “Infrastructure” (principally also Research and Development, R&D, which practically is missing in our defence programs). We should bear in mind what was mentioned above, that operational capabilities, or “outputs”, dominate in the defence programmers’ concept. Operational capabilities themselves should be visualized as a composition of the components of “personnel”, “equipment”, “infrastructure”, packed together in concrete military units which cannot stay “static”, but conduct either training/exercises or operations, or all them together.
Quite different than this approach, in “budgeters’ view”, (figuratively expressed through the topdown arrows) the same programs’ build up, is being viewed and conceived as “inputs”, expressed into money terms, more specifically, into budgeting categories (“600”, “602”…etc).
Refereeing to Pict.1, it is obvious, that for a programmer, “personnel” category (money) is represented by one single component. On the other hand, for a budgeter, it is distributed and represented by five different components (budget articles), such as salary (“category 600”) life insurance (“category 601”) some compensations (uniforms, food, etc, included into O&M, or “category 602”) social support (“category 604”, pre-pensioning and pensions) some other bonuses (“category 606”, housing, spouses’ support etc).
Being two different approaches, two different perspectives, in viewing the same thing, conducted for two different functions in managing the defence resources, i.e. programming of expected outputs from one hand and budgeting of the activities to achieve them on the other hand, they ask for and are practically handled by people with different education and mindset. That is the reason why in practice, running process encounters difficulties, sometimes friction, even cracking or stopping. What is concerning in this process, is the fact that in any case when the smooth conversion capability requirement → money results impossible, it is “budgeting” that takes the lead, with its own solutions which appear to be imposed to defense plans and programs. That could probably avoid a challenge in short run, but in a long term perspective cannot be without serious consequences. Usually they appear to be either insufficient, or inadequate or premature capabilities, which, on the other hand, result to insufficient capacity of the armed force to conduct operations. Problems encountered in almost every country in struggling to achieve a harmonious and smooth transition request for capability → budget, have their own root causes deriving from tradition, experience, different methodologies, the level of professionalism, institution culture and institutions’ team work attitude. Almost all of them are subjective by their very nature and might be overcome through maturing the system and the structures involved. In addition, there are some other challenges and obstacles which are objective in their nature and difficult to overcome. First of all, they stem from the intrinsic characteristics which differentiate “operational capabilities” from “financial resources”; the earlier, the operational capabilities, are always “discrete”, which means they are formed as packages, or as portions of composing elements. They neither can be perceived, nor can be built differently. The latter, the “financial resources”, in their very essence, are quite the opposite of the discrete state. They remain or flow in a continuum, and might take the nature of portion packages, only when linked closely with concrete activities or products.
This point is worth elaborating further. For that, it’s necessary to go deeper into the essence of the operational capability. Practically, an operation capability could be designed for a variety of purposes. It can be a combat capability/unit (regardless of the level, platoon, company or higher). It can be a combat support (CS) capability/unit (reconnaissance, fire support, communication) or a combat service support (CSS) capability/unit (logistic, medical support etc). In any case, this operational capability should be visualized as unitary, measurable, with clear contours (in numerical aspect, in terms of some certain tactical-technical attributes, volumes etc). It’s already mentioned that these measurable components are: “personnel”, “O&M”, “equipment”, “infrastructure” and (in some instances) R&D. If all components are measurable (let’s say – “with clear contours”) it’s understandable that the same attributes, “clear contours” (being them seen quantitatively or qualitatively) will characterize their grouping to broader operational capability. Furthermore, amongst these components, which together make this capability, there are some logical ratios which should be respected, otherwise we couldn’t have the desired capability. So, for example, it doesn’t make sense for a platoon of 30 people to have more than 30 individual weapons, and so on.

b_324_245_16777215_00___images_aktualitet_foto_2.jpgFor a better understanding of this, in Fig.2, six different kinds of operational capabilities are symbolically displayed, differing qualitatively or quantitatively from each other. Let’s suppose (figuratively) that in any case their components (personnel, O&M, equipment and infrastructure) are rightly proportionate to each other, the operational capability itself takes the shape of a regular parallelepiped, with rectangular faces which sit in a right angle to each other. After accepting this geometrical symbolism, we can assert that because of this regularity, these operational capabilities can be combined, divided in pieces, recombined again to serve a given mission, possessing again some rightly proportionate capabilities, able to fulfil the mission (Fig.3). So, due to their proportionality (symbolically let’s say geometrical regularity) they offer the possibility to fit to each other with “no gaps”.
b_272_271_16777215_00___images_aktualitet_foto_3.jpgEveryday practices have shown that when it comes to calculate the total cost of an operational capability, usually at the end, we realize that the ambition to build that capability exceeds available financial resources. As a consequence, there appears a need for reductions, to draw inside “the green” all activities necessary to build that capability, which is to match them with the budgetary ceilings put forward by the pertinent authorities (usually defined in the Minister’s guidance for the budgeting year). This is the moment when the budgeters start to “utter” more with some characteristic problems to follow.
To make an operational capability financially affordable, one has two options, either to reduce it or to stretch it out in time (sometimes, a combination of both, could be reasonable and applicable). In any course of action, it is crucial to keep proportions balance of its components. For a budget officer this is a painful nuisance. Often, reduction by portions results challenging. One more portion, even a very small one, and the cost pops over “the green”, which means inability to support with money. A portion less and the cost drops under “the green”, which means unused money. Unfortunately, in many cases, budgeters pursue an easier way, which is faster for sure, but less productive from the operational capability perspective. They make reductions by operating in the “realm” of “budgeting categories”, ignoring some “devil operational considerations”. In this regard, it is mostly the “category 602” (O&M, training in particular) which suffer most of reduction, but sometimes investments (“category 231”) are suffering from these reductions as well. These cuts, with no proportions in sight (which is so crucial for an operational capability) cause these capabilities to become distorted, atrophied. As such, it results ineffective (at least to a certain extent).

b_320_307_16777215_00___images_aktualitet_foto_4.jpgIt is obvious, in the case when cuts are made respectively in “category 602” (O&M - usually in training and exercises part of that) or “category 231” (mostly equipment investments), the consequence related to the operational capability will be – people staying inactive (respectively because of the lack of training or equipment). In cases when cuts are made in “category 600” (salary) the consequence will be – equipment in storage because of the lack of personnel to operate them, and so on. In cases like these, the shape of the operational capability (keeping the same geometrical symbolism) will no longer be a perfect parallelepiped, but an “irregular” shape as it is depicted in Fig.4. These irregular shapes should be considered (as they really are) as capabilities running short of expectations, unable to be combined with other capabilities in an attempt to contribute to larger and more complex operational capabilities.
In addition to its prerequisite of being composed by harmonious and proportionate components, operational capability is problematic also in another aspect. Its value, its capacity to successfully conduct operations is never calculated as an average of its own components, but takes the value of the lowest component. In this aspect, an operational capability looks much as a chain, the strength of which can never be higher than the weakest link of it. It is logical, if we suppose a unit manned 70%, whereas equipped 100%, in other words, if one company based on its TOE (Table of Organization and Equipment) should have 100 personnel, but in fact has 70, regardless of the fact that it might have all the equipment required in TOE, the real effectiveness cannot be higher than 70%, because armament with no humans to operate it, does not produce operational effects. It is the same reasoning in cases when manning level is higher than the equipment attached to the unit, and so on.
It’s known that for a unit commander, same as for a programmer, the “money factor” is simply a means towards the end, which is always a desired capability appropriate for the mission. Sometimes they consider money and people dealing with them, as strangers. Financial personnel are seen very often as “different than us” or just “they” (in a better case), but there are (worse) cases when the attitude towards them becomes rigid and not trustworthy. On the contrary, for a budgetary/financial person, the “money factor” means very much if not everything. For him/her, it is important that funds be allocated in compliance with the “ceilings” established in an official document (coming from above) and afterwards, be spent rhythmically, in accordance with the detailed plan. Unfortunately, very often, for them, the term “operational capability” is something abstract, which brings concerns, leaving somebody else to deal with it. For sure, the whole system of defence resource management could work better when these two approaches are not positioned extremely against each other. In other words, the more and the better a unit/institution leader thinks as a manager, on the other hand the clearer a budgeter understands that money is just a means towards an end (operational capability) the more efficient this system will be.
In any case, to some extent, the fate of the organization and its capacity to achieve the planned objectives relies on the quality and the level of planning and executing its own budget. Their leaders and staffs, regardless of the level should realize the essence of the budget, the process it goes through, and in particular, all the techniques applied to monitor and react during the course of its execution. Subordinate units, as well as other parallel units/institutions should prepare, should know and posses their own budget, as part of the whole, which, is to be fused and consolidated afterwards into the Defence Budget. It calls for all the units and institutions of the defence sector to broaden their “range of sight”, in particular to better understand how their own problems in achieving their own objectives, such as reforming, program development, budgeting, etc, are interrelated and interdependent to those of the other units/institutions of the same level or higher in the chain of command. In addition they should keep in mind strategies and plans of the armed forces, being in the same time aware of cost implications of any decision made, closely linked to a striking balance between efficiency and effectiveness.

Conclusions and recommendations:
1.    Budgeting process should take more in consideration what has been made during the other phases of defence resource management, namely: Planning and Programming, in order to better put itself under their “service”. It should possess and go into the essence of the “defence programs”, as well as finding and adopting the adequate ways to achieve that smooth conversion from the defence programs to budgeting programs. In so doing, the defence resource management process can gain continuity which guarantees a successful management of the available (and scarce) defence resources, that optimum “money-result”, which is the main gauge of the efficacy of any management system.

2.    It is very crucial to bear in mind that support with funds of any activity of the armed forces should be done in capability portions. For that, the budget categories and subcategories, as well as proportions among them, for every activity, cannot be decided arbitrarily. They should derive from the cost of corresponding component of every operational capability, organized and disciplined into defence programs or subprograms. Any reduction or cut, any change in the fund allocation, which might come out as must during the budget execution, should be done through the same concept, based on proportions, in order to avoid “capability distortion”, which would make it ineffective.

3.    In Albania, budgeting programs (to some extent) keep track of some indicators or “end products” assigned to support financially, but even though sometimes in very lengthy lists, they haven’t provided enough information to understand and identify operational capabilities to which they are dedicated. Defence resource management methodologies should do more to find efficient ways in order that any indicator in the list is (as much as possible) clearly and organically linked to the operational capabilities designed in the defence programs.

4.    It is impossible that the abovementioned recommendations be achieved without a new mentality in shaping of the personnel charged to manage the defence resources. They should master (at least) satisfactorily both the programmer’s approach and the budgeter’s one. On one hand, this calls for commanding structures, all institutions charged to develop visions and to program operational capabilities to “think financially”, to become aware that programs, regardless of how good they are, could bog down if not linked to the corresponding funds. On the other hand, budgeting personnel and institutions should know better and consider more the long-term visions and approaches (formulated into defence plans and programs). In the end, there are exactly these visions which should be materialized in the concrete terrain, whereas budgeting is but an available mechanism for them.
Col. Foto Duro, Director of Defence Policies, MoD
___________
(6)  PBA Manual, Tirana, 2009, pg.A.1-4

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