Planning Programming Budgeting System (PPBS)

Guest Post by Ron Sommer

Introduction: reading my post about system thinking and program evaluation, Ron mentioned a close practice that incorporate both budget and planning. I am glad he agreed to write a guest post about the topic, and hope you will find it fascinating too.

Moreover, this is the first blog post for 2018!  and opening the year with such a great topic is a good reason to celebrate (:


In ancient days, meaning the 1960’s, Planning, Programming, Budgeting Systems (PPBS) was considered an innovation in budgeting. PPBS was first introduced in the Defense Department in the USA in 1961 by Robert McNamara, and in all departments in 1965 until 1975. Though it failed to be widely adopted in government, PPBS is effective is less complex organizations such as NGO’s.

PPBS is an integrated management system that places emphasis on the use of analysis for program decision making. The purpose of PPBS is to provide management with a better analytical basis for making program decisions, and for putting such decisions into operation through an integration of the planning, programming and budget functions. Program decision making is a fundamental function of management. It involves making basic choices as to the direction of an organization’s effort and allocating resources accordingly. This function consists first of defining the objectives of the organization, then deciding on the measures that will be taken in pursuit of those goals, and finally putting the selected courses of action into effect.

Planning Programming Budgeting System (PPBS)
Planning Programming Budgeting System (PPBS)

An organization can be viewed in a simplified way as carrying out its functions through five basic and sequential phases: (1) planning, (2) programming, (3) budgeting, (4) operations, and (5) evaluation.

  1. Specification of Objectives – The objectives of the programs are to be specified in consistence with the long-term goals in quantitative terms as far as possible.
  2. Systemic Analysis – The possible alternative projects to achieve the program objectives are analyzed in a systematic way with the use of cost-benefit and cost-effectiveness analysis.
  3. Functional Classification – The budget is classified on a functional basis like functions, programs, projects and activities.
  4. Organization – Budget formulation addresses the organizational structure, managerial and administrative procedures of the programs/projects/activities.
  5. Evaluation – The mechanism for evaluation of performance on the basis of financial and physical performances to monitor, and take corrective actions, if necessary.

Each of these phases consists of a distinct but related function in the overall conduct of the organization’s affairs.

  1. Planning is an analytical activity carried out to aid in the selection of the organizations objectives and then to examine courses of action that could be taken in the pursuit of the objectives. Planning, in effect, poses the question of whether some particular course of action would contribute more to the attainment of the organization’s goal than its various alternatives.
  2. Programming is the function that converts plans into a specific action schedule for the organization. Programming consists of developing detailed resource requirements and the actions needed to implement plans.
  3. Budgeting is the activity concerned with the preparation and justification of the organization’s annual budget. The function of budgeting is to secure sufficient funds to put the program into operation.
  4. Operations consists of the actual carrying out of the organization’s programs. Preparing for operations is the object of all the other phases.
  5. Evaluation is the function that evaluates the worth of operating programs. Through program evaluation the worth of programs in attaining goals is measured and appraised. The result of evaluations is used to modify current operations, if indicated, or in planning future programs.

PPBS provides an opportunity for identifying the program alternatives which offer the biggest pay-off in achieving communal objections, or require lower costs, and these can be singled out for priority attention by planning groups.