Understanding Acquisition: The Colors of Money

By March 25, 2021Army ALT Magazine
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The first thing to understand about the colors of money is that there are no colors and no actual money, and it only gets more complicated from there.


By John Dillard, Col. USA (Ret.) and Steve Stark


The financial management of defense acquisition is so complex and unintuitive that almost any analogy breaks down quickly. An overview of what “the colors of money” means would—in a classroom at the Naval Postgraduate School or Defense Acquisition University—be part of a much larger, several-hour long discussion on defense financial management. Colors of money is shorthand for categories of budget appropriations. Colors of money is a single dimension of defense financial management that itself is multidimensional and next to impossible to illustrate in two dimensions. The graphic that follows is necessarily simplified and does not address every potential complication.

Colors of money, like lots of concepts in defense-speak, is misleading but not inaccurate. There is, in fact, no actual money. Neither are there colors. Congress gives DOD budget authority, that is, but the authorization to obligate the government to pay bills with appropriated funds.

There are five colors of money, but color is only one dimension. Another dimension is time. Each color has a use-by date. Another dimension is the different ways that Congress and DOD slice and dice the different categories of budget authority. Colors of money is a way of expressing and controlling what a budget authority may and may not be used for. It is accounting, but also a way to understand how Congress and DOD talk to one another. If you look at the research, development, testing and evaluation budget, that tells you something about the Army’s modernization budget. It’s not “the modernization budget,” it’s just what Congress has said that the Army can spend toward its modernization goals in terms of research and development of new capabilities. Likewise, procurement is another side of the Army’s modernization budget, as these two comprise the principal categories for acquisition managers.

Other terms that you hear associated with the colors of money are—in no particular order—the POM, PPBE, FYDP (often pronounced “FIE-dip”). The POM is the program objective memorandum, which is an product of the programming part of PPBE—the planning, programming, budgeting and execution process. FYDP, the Future Years Defense Program, is the classified database spanning 10 years of all funding categories, projecting DOD’s needs in each.

Those with an in-depth understanding of defense financial management find it virtually impossible to talk about the colors of money without getting into PPBE, POM and FYDP, the fiscal year’s defense plan and other things, because they’re all linked and interdependent.

PPBE—a topic for another day—is where it all starts. PPBE, according to the Congressional Research Service, is intended “to establish a framework for connecting strategic objectives with resources.” (Emphasis added.) The pea-soup clarity of the terminology masks another temporal dimension to the defense financial management profession in that it is a constant and nonstop annual process employing many thousands of experts.



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Read the full article in the Spring 2021 issue of Army AL&T magazine.
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