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Formulation is the process federal Agencies plan, formulate, and estimate program budget. The budget formulation process takes place almost exclusively with the executive branch of government, though it can include a number of actors within the branch. The process is usually carried out behind closed door. The budget is built on future years needs with baseline of prior years’ execution. Decisions made during the formulation stage often have impacts several years into the future. The process usually starts 18-24 months prior to the execution year. The long lead times and the fact that appropriations have not yet been made for the next year mean that the budget is prepared with a great deal of uncertainty about economic conditions and congressional actions.

There are seven key formulation steps:

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