Performance-Based Budgeting (PBB), Allocative Efficiency, and Budget Changes: The Case of the U. S. Department of Commerce

Abstract

Although some studies reported that Performance-based budgeting (PBB) initiatives improved productivity of governmental functions, one issue has remained an open question regarding PBB implementation: the so-called allocative efficiency. A paucity of studies presented the evidence that PBB initiatives enhanced allocative efficiency of governmental programs, but their findings were primarily based on anecdotal stories or self-reported surveys. This study attempted to fill the gap in the literature by analyzing real budget dollars. Empirical findings using budget data for the U. S. Department of Commerce (DOC) during the 8 years of the George W. Bush administration do not show that PBB systems enhanced allocative efficiency. Organizational politics might hurdle successful implementation of PBB systems. Proof of causal links between performance evaluation scores of certain programs and their resource allocations is another huge challenge for PBB initiatives.