STATEMENT OF LINDA J. BILMES

ACTING CHIEF FINANCIAL OFFICER AND

ASSISTANT SECRETARY FOR ADMINISTRATION

U.S. DEPARTMENT OF COMMERCE

BEFORE THE

HOUSE COMMITTEE ON GOVERNMENT REFORM

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY

October 28, 1999 - 2:00 p.m.

Introduction

Good afternoon, Mr. Chairman and members of the subcommittee. I am Linda Bilmes and, since February 1999, I have been serving as the

Acting Chief Financial Officer and Assistant Secretary for Administration

for the Department of Commerce. Previously, I held the position of

Deputy Assistant Secretary for Administration for approximately one

and a half years.

I appreciate the opportunity to appear before you today to discuss private sector contracting with the Department of Commerce and, more specifically, the Department's implementation of the Federal Activities Inventory Reform Act of 1998, which goes hand-in-hand with the policies established in OMB Circular A-76. As the Acting Chief Financial Officer and Assistant Secretary for Administration, acquisition management in general and the FAIR Act and OMB Circular A-76 specifically fall within

my purview.

Secretary Daley and the Department of Commerce are committed to the principles embodied by the FAIR Act. That is, we believe that private

sector firms should, to the greatest extent possible, have the opportunity

to compete with Federal entities to carry out commercial activities.

As the Acting CFO/ASA, I am responsible for policy-making and oversight for a broad range of administrative functions. I consider the FAIR Act to be an important and useful tool in the portfolio available to help us serve the American public more efficiently. Over the span of President Clinton's Administration, we have made notable management improvements through the deployment of various re-engineering efforts coinciding with significant downsizing of the Department as a whole. We routinely examine new activities to determine their suitability for outsourcing before FTE are allocated to carry them out.

We believe the FAIR Act is an important contribution in the options available for management improvements. We are also improving our performance by vigorously implementing the CFO Act, Clinger-Cohen Act, Federal Acquisition Streamlining Act, and the Government Performance and Results Act. In this last category, we have expended considerable effort to increase the effectiveness of our Annual Performance Plan. In fact, this year our Plan received a score of 86 from Congress - one of the highest in government.

Commerce has an aggressive, innovative acquisition program. Over the past eleven years, the funds expended on contracts has more than doubled from just over $500 million in 1987 to more than $1.1 billion in 1998. Our use of A-76 has been helpful in this regard, with contract wins in many areas, including:

• PTO's work in providing copies of patents, which had cost the Department $1.5 million annually and required 78 FTE,

• NOAA's library and information services, which had cost the Department $722,000 annually and required 28 FTE, and

• The Office of the Secretary's activity in providing mail and messenger service, which had cost the Department $400,000 annually and required 8 FTE.

The decennial census accounts for another billion-plus dollars in procurements. We estimate that contracts in our core programs save the Department from directly employing between 5,000 and 7,000 FTEs.

As part of our procurement innovations, we established the Commerce Information Technology Solutions (COMMITS) - the first ever government-wide acquisition contract (GWAC) reserved exclusively for small, minority and women-owned firms. Over the next five years, this unique initiative is expected to make up to $1.5 billion in Federal technology contracts available to the 29 participants.

From FY 1992 through FY 1998, Commerce increased its service contracting by approximately 15 percent and reduced its FTE by roughly

7 percent. During this time we also reduced the number of managers and supervisors, placed greater staff power on the front lines, and improved service delivery to our customers. Under Secretary Daley's leadership, we continue to explore fresh opportunities for streamlining and improving Commerce operations.

1998 A-76 Inventory

Now I'd like to discuss the extensive process we used to classify our activities and develop our A-76 inventory in 1998.

• Using the OMB-provided definitions and template, we requested the bureaus to develop and submit an inventory of all of their activities.

• We met with bureau representatives and worked closely with them to ensure adherence to OMB's guidance.

• We identified cross functional activities, such as the classification of FTE assigned to human resources management, to develop and ensure a consensus and consistent approach throughout the Department.

• Upon receipt of the bureaus' information, we reviewed and clarified

any questioned areas, through dialogue with our bureau contacts, revising the inventory as appropriate.

• Finally, we reconciled all Departmental data with official payroll information maintained by the National Finance Center.

As a result of this rigorous process, we were very pleased to meet OMB's October 31, 1998 deadline and to be the first in government to submit its

A-76 inventory to OMB under the revised Raines guidelines.

FAIR Act Implementation

In October of last year, as you know, the FAIR Act was signed into law. The comprehensive strategy that we used to first develop our inventory in 1998 well-positioned the Department to respond to the requirements under the new legislation for annual updates. To accomplish this, we followed the same model that served us well in 1998.

• Based on OMB-provided advice and formatting guidelines, we tasked the bureaus with reviewing and updating their portions of the overall inventory.

• We reviewed their input, used the same methods to reconcile it as discussed earlier, and entered into discussions for any needed clarification or revisions.

• Following this process, we were again among the first to transmit the Department's submission - delivering it to OMB on July 9.

On September 30, 1999, OMB published a notice in the Federal Register that our inventory, along with 51 other agencies, was available to the public. Since then, we have received 34 requests for copies of the inventory, and one challenge, received just this morning.

As reflected in the current inventory, 27 percent of our workforce is involved in commercial activities. Of this, 13 percent has been classified as exempt

and 11 percent has been classified in core activities not open to competition - leaving 3 percent in commercial competitive activities.

We have reviewed this 3 percent in detail and believe it is reasonable because of factors mentioned earlier:

• Extensive A-76 activity during the 1980s,

• Restructuring and downsizing in the 1990s, and

• Aggressive contracting.

All of which have contributed significantly to reducing that portion of the Department's activity that remains available for contracting.

Current Activities

During FY 1998, the Department expended 28 percent of its discretionary funding on procurements. This is an increase over the past 15 years of 11 percent. In 1998, we spent an additional $1.1 billion in direct grants. This results in limiting our universe for additional contracting opportunities to 44 percent of our discretionary budget authority.⁽¹⁾

Over the two and a half years since Secretary Daley took office, the Department has used A-76 and the FAIR Act to provide valuable baseline data. We are currently assessing several new opportunities for outsourcing. These include aspects of our information technology management and the administration of the Workers Compensation Program.

During the last year, we have redirected staff resources and continued to build upon our existing expertise to aggressively implement the FAIR Act throughout the Department. We will continue to review the Department's inventory in detail, and work closely with our bureaus to ensure that private sector firms have every opportunity to compete with Federal agencies.

I believe the feedback we have received and will continue to receive from

OMB and GAO will prove helpful in this effort, and I look forward to receiving GAO's report on its findings.

Thank you again for the opportunity to appear before you today. I would be glad to address any questions you may have at this time.

1. Discretionary budget authority is budgetary resources provided in appropriations acts.