April 16, 2026

The Pentagon’s ability to innovate and respond ઝડપ to emerging threats may depend less on technology and more on how it manages its budget. On Fed Gov Today, Bill Greenwalt, former Deputy Undersecretary of Defense for Industrial Policy, makes a clear case: the Department of Defense (DoD) is constrained by an outdated financial system that limits flexibility, while civilian agencies operate with far greater freedom.

Greenwalt points to the Planning, Programming, Budgeting, and Execution (PPBE) system as the root of the issue. Established during the Kennedy administration under Secretary of Defense Robert McNamara, the system emphasizes centralized control and rigid planning. While it was intended to bring discipline to defense spending, Greenwalt argues it has evolved into a structure that makes it harder for the department to adapt. Today, DoD lacks the ability to quickly move money during the execution year—something civilian agencies routinely do.

This lack of flexibility stands in stark contrast to the rest of the federal government. Greenwalt highlights several examples: NASA organizes funding by mission, the Department of Health and Human Services operates with multi-year and no-year funds, and the Department of Homeland Security can carry over significant unobligated balances. These flexibilities allow agencies to adjust priorities as needs change. The DoD, however, remains bound by strict rules that limit its responsiveness.

That rigidity becomes even more problematic as the Pentagon tries to modernize its acquisition processes. Greenwalt discusses the emergence of new structures like Portfolio Acquisition Executives (PAEs), which are designed to manage investments more dynamically. He compares their intended role to that of venture capitalists—leaders who continuously assess performance and shift resources toward the most promising opportunities. But without the ability to reallocate funds quickly, PAEs cannot function as intended.

“The PAE structure today is not going to be able to do that,” Greenwalt explains, noting that the current budget system prevents the kind of rapid decision-making seen in the private sector. As a result, even well-designed acquisition reforms risk falling short if financial constraints remain in place.

Congress plays a central role in this challenge. Greenwalt describes the defense appropriations process as a key barrier, with a small number of staffers and lawmakers holding significant influence over how funds are allocated and managed. While these same appropriators grant flexibility to civilian agencies, they have not extended those authorities to the DoD. This inconsistency, he argues, raises an important question: if flexibility works elsewhere in government, why not apply it to national defense?

There are also political realities at play. Shifting funds between programs can have direct impacts on congressional districts, making lawmakers hesitant to support changes that might redirect investments. Still, Greenwalt suggests that national security priorities should outweigh these concerns, especially when the ability to respond to evolving threats is at stake.

Ultimately, Greenwalt emphasizes that meaningful reform must start with Congress. Lawmakers must decide whether to expand the PPBE system across government or, more likely, to grant the DoD the same flexibilities already in place elsewhere. At the same time, he notes that the department itself must advocate for change and move beyond a culture that simply follows appropriations directives.

The conversation underscores a broader point: innovation in defense is not just about new technologies or acquisition strategies. It also depends on the financial tools that enable those efforts to succeed. Without budget flexibility, even the most promising reforms may struggle to deliver results.