Budget decisions are too often disconnected from outcomes, and many budget officials know it. The problem, according to one contractor, is that agencies don't know how to prioritize, set targets and analyze results. And that means there just might be a business opportunity out there for the right contractors.
This probably isn’t much of a news flash, but a lot of people developing budgets in the federal government don’t think the budgets are producing results.
John Saaty, president of Decision Lens, shared with me survey results from a recent conference of the American Association for Budget Program Analysis. A core group of the attendees were budgeteers from the federal government. Budgeteers is Saaty’s’s word, but I like it.
- 58 percent see no clear link between budget outputs and outcomes.
- 5 percent don’t know what the outcomes are.
- 50 percent cannot produce the full cost of programs and activities.
- 32 percent say they have only a rough cost allocation method.
- 83 percent said the best place to find waste is in high and low priority programs.
Folks, those are some pretty distressing results, particularly in today’s tough budget environment because if you can’t do those things, how do you make budget cuts without unnecessarily damaging your agencies’ budget? The answer is, you can’t.
One of the culprits is that agencies don’t use a systematic process of prioritization, Saaty said. And yes, Decision Lens makes a product for that, but he and his company have produced a report that outlines seven criteria for making intelligent budget cuts, and prioritization is just one of the seven.
1. Target Setting
What is the impact of a specific topline target?
2. Budget Scrub
How will funds be spent?
What programs/activities are least important?
4. Results Analysis
Which outputs contribute the most to priority outcomes?
5. Cost Analysis
What is the cost of producing an output?
How efficient is each process?
What is the relative return on investment for outputs?
While Saaty didn’t say this, it seems to me that each of these areas represents a business opportunity for contractors who want to help agencies weather this budget cutting era.
While the seven steps seem logical and almost obvious, it doesn’t make them any easier to do, he said.
Part of the challenge is that the process blends qualitative and quantitative data, and it creates a system of prioritization and tradeoffs.
And it is different; “The biggest hurdle is cultural,” he said.
Decision Lens has customers across the government, including the Joint Improvised Explosive Device Defeat Organization at the Defense Department, the Army Special Operations Command, the Agriculture Department, Coast Guard and FAA. So, the idea does resonate.
Interestingly, the roots of Decision Lens, founded by Saaty and his brother Daniel, goes back to their father, who worked at the State Department on nuclear weapon treaty negotiations.
Thomas Saaty developed the analytical hierarchy process, or AHP, to use math and psychology to make complex decisions.
In a nutshell, it’s a process for identifying priorities, outcomes, criteria and other factors in making a decision. Numerical values are assigned, and then you can analyze the impact of different decisions on your outcome.
The Saaty brothers used AHP to found Decision Lens in 2005.
The process isn’t just for budgets. Decision Lens counts a few professional sports teams as customers, including the Green Bay Packers, the Oakland A's and the Arizona Diamondbacks.
NEXT STORY: Sequestration remains a mystery