<DOC>
[105 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:49529.wais]
S. Hrg. 105-600
COMPETITION FOR COMMERCIAL ACTIVITIES IN THE FEDERAL GOVERNMENT
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HEARING
before the
SUBCOMMITTEE ON OVERSIGHT OF
GOVERNMENT MANAGEMENT, RESTRUCTURING,
AND THE DISTRICT OF COLUMBIA
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
JUNE 4, 1998
__________
Printed for the use of the Committee on Governmental Affairs
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U.S. GOVERNMENT PRINTING OFFICE
49-529 cc WASHINGTON : 1998
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COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND
THE DISTRICT OF COLUMBIA
SAM BROWNBACK, Kansas, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Michael Rubin, Staff Director
Laurie Rubenstein, Minority Staff Director
Esmeralda Amos, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Brownback............................................ 1
WITNESSES
Thursday, June 4, 1998
J. Christopher Mihm, Acting Associate Director, Federal
Management Workforce Issues, U.S. General Accounting Office,
accompanied by Bill Reinsberg and Marilyn Wasleski............. 2
G. Edward DeSeve, Acting Deputy Director, U.S. Office of
Management and Budget.......................................... 7
Hon. Craig Thomas, a U.S. Senator from the State of Wyoming...... 12
John Berry, Assistant Secretary for Policy, Management and
Budget, U.S. Department of the Interior........................ 16
W. Scott Gould, Chief Financial Officer and Assistant Secretary
for Administration, U.S. Department of Commerce................ 19
Alphabetical List of Witnesses
Berry, John:
Testimony.................................................... 16
Prepared statement........................................... 55
DeSeve, G. Edward:
Testimony.................................................... 7
Prepared statement........................................... 48
Gould, W. Scott:
Testimony.................................................... 19
Prepared statement........................................... 63
Mihm, J. Christopher
Testimony.................................................... 2
Prepared statement........................................... 27
Thomas, Hon. Craig:
Testimony.................................................... 12
COMPETITION FOR COMMERCIAL ACTIVITIES IN THE FEDERAL GOVERNMENT
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THURSDAY, JUNE 4, 1998
U.S. Senate,
Oversight of Government Management, Restructuring,
and the District of Columbia Subcommittee,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:06 a.m. in
room SD-342, Dirksen Senate Office Building, Hon. Sam
Brownback, Chairman of the Subcommittee, presiding.
Present: Senator Brownback.
Also present: Senator Thomas.
Senator Brownback. The hearing will come to order.
OPENING STATEMENT OF SENATOR BROWNBACK
Senator Brownback. Welcome to all of you this morning.
I'd like to welcome everyone here today for this important
oversight hearing to examine the current OMB process and
policy, also known as OMB Circular A-76, for establishing a
competition for commercial activities within the Federal
Government. We are here to address OMB's leadership role in
this area and to see how we can improve it.
Under A-76, Federal agencies are required to identify
commercial activities performed in-house and provide an
inventory of these activities. These activities must then be
competed.
Implementation of A-76, however, has been inconsistent
throughout the Federal Government, as seen in the displayed
chart. We can provide that to people who would like to see it.
We brought this up at the prior hearing about the
inconsistencies of the A-76 process and we will be happy to
hear responses to this from the OMB as we go through it. As you
can see, some agencies fully engage--actually, not even fully
engage but are much more engaged than others. Some down at the
bottom, the Commerce Department, no engagement whatsoever, and
I am looking forward to our Commerce witness to tell us why
they do not believe they should or why they do not or just why
the lack of competition or implementation of A-76.
The Subcommittee held a hearing earlier this year on draft
legislation which would address the weaknesses of A-76, the
Fair Competition Act, S. 314. It would establish a level
playing field for competing commercial activities performed by
the Federal Government. Under the current draft both private
industry and Federal employees would be able to compete for
these activities.
We have heard the frustration expressed with the current
competition process, the A-76 process, from all sides of this
issue. Federal employee representatives say that agencies
ignore A-76 and directly contract out commercial activities.
Private industry representatives say that Federal agencies
ignore A-76 and keep commercial functions in-house. We will
continue to work on this legislation to address these and other
concerns raised about A-76.
I have also asked GAO to study how OMB A-76 is working
under OMB's leadership, specifically with the U.S. Departments
of Commerce and the Interior. Preliminary results indicate that
Federal agencies are simply disregarding OMB's competition
policy. Furthermore, OMB's own competition policy, A-76, is not
a significant priority within OMB. We will have a GAO witness
testify and speak about the findings that they have found under
their study.
The purpose of today's hearing is to get to the bottom of
this. Why is the current competition process not working? Why
are agencies ignoring the current guidelines contained in A-76?
Why is OMB's own policy not a priority within OMB and this
administration? Why is implementation of the OMB circular
inconsistent from one Federal agency to the next?
We will be hearing from representatives from the GAO, OMB,
the Department of Commerce and the Department of the Interior,
who I hope will answer these important questions. I want to
emphasize that our final goal is to make sure we are getting
the most for each taxpayer's dollar.
With that we have three panels of four total witnesses that
will testify today. As I noted in here, this is actually the
third hearing on this overall issue, although this one we will
focus specifically on the A-76 process.
With that I would like to call up the first panel witness,
J. Christopher Mihm, Acting Associate Director, Federal
Management Workforce Issues with the U.S. General Accounting
Office, who will testify today regarding the GAO study that was
recently completed.
Mr. Mihm, thank you very much for joining us. Please
identify the other two people who are at the table with you.
TESTIMONY OF J. CHRISTOPHER MIHM,\1\ ASSOCIATE DIRECTOR,
FEDERAL MANAGEMENT AND WORKFORCE ISSUES, U.S. GENERAL
ACCOUNTING OFFICE, ACCOMPANIED BY BILL REINSBERG AND MARILYN
WASLESKI
Mr. Mihm. Yes, sir. Mr. Chairman, I am very fortunate to be
joined today by two of my colleagues, first Bill Reinsberg, who
has been leading much of our work, looking at managed
competition in civilian agencies, and Marilyn Wasleski, who
leads much of our work at the Department of Defense, looking at
A-76 and out-sourcing issues.
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\1\ The prepared statement of Mr. Mihm appears in the Appendix on
page 27.
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Senator Brownback. Welcome.
Mr. Mihm. It is a pleasure to be here today. With your
permission, Mr. Chairman, I ask that my written statement be
included in the record and I will take just a few minutes to
hit some of the highlights.
Senator Brownback. Without objection.
Mr. Mihm. Thank you, sir.
This morning I would like to cover three major points.
First, A-76 can be an effective management tool for improving
operational efficiency and reducing costs. Second, within
civilian agencies, A-76 has been little used in recent years
and OMB accordingly, in our view, needs to augment its
leadership efforts. And third, I will point out the elements
that we have found to be necessary for a more active A-76
program.
Turning to the first point, with the agreement between
Congress and the administration to balance the Federal budget,
agencies must increase their efforts to ensure that their
operations are as efficient as possible. In that regard, A-76
is one of a series of tools that managers can use to make sound
business decisions and to enhance performance through
competition and choice.
Experience with A-76 suggests that competition is the key
to realizing savings, whether the functions are eventually
performed by the private sector or remain in-house. Savings
achieved through A-76 are the result of closely examining the
work to be done and then reengineering those activities to
perform them with fewer personnel.
Reported savings estimates, in some cases as much as 20
percent, must be taken with caution, but nevertheless there
appears to be a clear consensus that savings will be achieved
when agencies undertake a disciplined approach such as that
called for under A-76, to reviewing their operations and
implementing needed changes or contracting out services.
Turning to my second point, strong OMB leadership is needed
to invigorate civilian agencies' A-76 programs. As shown in the
table in my written statement, there has been very little
activity among civilian agencies since the late 1980's in A-76.
OMB's March 1996 revision of the A-76 supplement streamlined
procedures and made other much-needed reforms. Since then,
however, OMB has not consistently worked with agencies to
ensure that the provisions of A-76 are being effectively
implemented.
For example, OMB has not aggressively followed up with
agencies that fail to submit commercial activity inventories,
with the result being that as of April 1998, six of the 24
largest agencies still had not provided inventories.
OMB has also not systematically reviewed the inventories to
determine if agencies are missing opportunities to generate
savings.
And finally and most important, it is not clear how
consistently OMB has raised questions during the budget process
about agencies' implementation of Circular A-76. That
integration into the budget process is really where A-76 can
get its teeth.
As I understand Mr. DeSeve will discuss, OMB has recently
taken some steps that, in our view, are a move in the right
direction. However, sustained OMB commitment and follow-through
will be vital to the success of that effort.
Turning now to my third and final point this morning,
several elements are needed for a successful A-76 effort across
Federal agencies. First, as I have just noted, leadership
commitment to use A-76 is important. Consistent and forceful
leadership from OMB is essential to provide incentives for
managers to subject themselves to the rigors of A-76.
Second, A-76 will be most effective when it is integrated
within a performance-based approach to management
accountability. The annual performance plans that agencies are
to develop under the government Performance and Results Act,
which was passed under the leadership of this Committee,
provide a ready-made annual vehicle that agencies and Congress
can use to consider whether or not the most cost-effective
strategies are in place to achieve agency goals.
As part of this consideration, Congress can ask an agency
about the tools the agency is using to increase effectiveness,
including the status of its A-76 programs, and the specific
choices that are being made about whether to keep a commercial
activity or contract it out. In other words, Congress has a
vehicle for beginning to raise these types of issues up on its
radar screen.
Third, improved cost data are critical. The government's
lack of complete cost data, particularly for indirect costs,
has increased the difficulty of carrying out A-76 because the
government is not able to accurately determine the cost of
activities it plans to compete. Continuing efforts to implement
the Chief Financial Officers Act and the Federal Accounting
Standards Advisory Board or FASAB managerial cost accounting
standards are central to ensuring that agencies resolve their
long-standing problems in generating vital information for
decision-making.
Fourth, an effective A-76 effort requires considerable
contract management capability. An agency must have adequate
capacity and expertise to successfully carry out the
solicitation process and effectively administer and monitor
contracts once they are awarded. Our work has shown that
contract oversight and monitoring has been a consistent
weakness in Federal efforts.
In summary, Mr. Chairman, A-76 has shown itself to be an
effective management tool for increasing efficiency of the
Federal Government and saving scarce funds. However, despite
its proven track record, A-76 is seldom used in civilian
agencies. OMB needs, in our view, to more consistently strong
send messages to the agencies that A-76 is a priority
management initiative.
Its recent efforts are an encouraging first step, but only
a first step. Thorough implementation and follow-through will
be needed to get A-76 on track. Agencies' development and
Congress' use of annual plans under the Results Act provides an
opportunity to consider A-76 and other competition issues
within the context of the most efficient means to achieve
agency goals.
Mr. Chairman, this concludes my statement and I would be
pleased to respond to any questions that you may have.
Senator Brownback. Thank you. Thank you for your statement,
your study and the conciseness of it.
It does seem very puzzling in your chart, that the Defense
Department has 760,000 total agency FTE's and they are
reporting 445,000 plus involved in commercial activities. One
would think that the military does not have that many functions
necessarily associated with commercial activities.
Then you go down to the Commerce Department, 34,900
employees, far less, and zero involved in commercial
activities. Did they just choose not to participate in the
activity?
Mr. Mihm. I can speak to your question, Mr. Chairman. The
chart I am referring to is a slightly different chart that
comes from our testimony. I can bring you up a copy of that. It
talks about the total FTE's that have been studied.
Senator Brownback. Well, let's use your chart. I thought
this one was. I'll look at your chart.
Mr. Mihm. Ours is on page 7 of the written statement.
Senator Brownback. So you go with united agencies, then.
Why do you think, then, that civilian agencies--are just not
participating in this. Do they not think that there are people
that are doing commercial activities or performing commercial
activities within their agencies?
Mr. Mihm. I think there is a combination of reasons and we
have had quite a few discussions with officials across the
government, in particular the Departments of Commerce and
Interior. Over the last few years they have perceived that
there are higher priority management improvement initiatives,
such as those led by the National Performance Review. They view
A-76, in this sense correctly in our view, as one of a series
of tools that they can use to improve effectiveness.
Now, what concerns us is even viewing it as one of a series
of tools, one would expect that there would be greater
opportunities identified to apply that particular tool.
There has also been concern expressed by officials in these
agencies that they do not have the staff with the capacities or
the knowledge, skills and abilities in order to do the
systematic reviews that are needed to compete commercial
activities, to let the contracts and to manage the contracts
once they have been awarded.
In our view, what has to happen is that OMB needs to really
be making it very clear to agencies that A-76 is a priority
initiative and it needs to drill this right into the budget
process and, through the government Performance and Results
Act, to start setting up some quite rigorous expectations that
OMB will be looking at commercial activities and, where
appropriate, agencies should be using A-76 to contract out.
Senator Brownback. You seem to be pointing out a clear
systems failure or some type of failure in the civilian
agencies in the use of A-76. Is that correct?
Mr. Mihm. Yes, sir. It just has not been a priority
initiative.
Senator Brownback. And you are citing several different
reasons to this, but that we have had a failure of this law.
Has it always been this way since A-76 has been in place? Have
we always had the civilian agencies not participating or not
seeing this as any sort of priority?
Mr. Mihm. No. As a matter of fact, in the late 1980's and
the early 1990's, as the top of the chart shows, there was some
significant action that was taking place within civilian
agencies. You can see there that 2,000--in some cases 5,000 in
1988--civilian FTE's were studied. The Department of Commerce
had a large percentage of that. The General Services
Administration did a large number of studies, as well as the
Department of Transportation. Since then, as the data also
indicates, there has been a great fall-off in the interest and
use of A-76 among civilian agencies.
What we think needs to happen again is getting this into
the normal decision-making processes that OMB uses and really
drilling this into the budget process, using the Government
Performance and Results Act as one vehicle.
Senator Brownback. For instance, in 1988 how many employees
did the Department of Commerce say they had involved in
commercial activities? Did you look at that?
Mr. Mihm. We did look at that. I don't have that readily
available. With your permission, Mr. Chairman, we will make
sure we supply that for the record.
INFORMATION FOR THE RECORD
The Department of Commerce's last complete update of its
commercial activities inventory, done in 1983, showed over
5,000 Full-time Equivalent (FTE) positions performing
commercial activities.
Senator Brownback. And what did they say in the most recent
study that they had of FTE's performing commercial activities?
Mr. Mihm. The last time the Department of Commerce did a
complete update of its inventory of commercial activities was
1983, so it does not have a recent list of its commercial
activities.
One of the things that we view as being particularly
important about the current OMB call for agencies to review
their inventories is that the Department of Commerce and other
cabinet agencies will be going through again and updating their
list of commercial activities and the number of FTE's that are
working in them.
Senator Brownback. You have made a number of suggestions as
to how its implementation can be improved. Are there other
things, beyond its implementation, that you have studied,
whether it needs to have more enforceability, more requirements
associated with it? Have you studied any of those aspects?
Mr. Mihm. No, sir. We really haven't looked at that. We
have looked at similar initiatives that have taken place in
State and local governments. In fact, some of the testimony
that we have provided in front of this Subcommittee and other
subcommittees talked about some of the lessons learned that we
saw in various States and in the City of Indianapolis as to how
they ran their privatization effort, which included A-76-like
activities, but we have not looked at the issues that you are
raising.
Senator Brownback. But in conclusion on your study,
basically the civilian agencies just are not doing this.
Mr. Mihm. Yes, sir. We do not see that it is being used. We
understand and fully agree with the position that A-76 is one
of a series of tools that managers need to use. However, when
we see zero FTE's being studied, and in some cases agencies not
doing any studies over the last 10 or 11 years, that leads us
to wonder whether or not A-76 is being fully appreciated as one
of the tools that agencies can use.
Senator Brownback. Good. That is an excellent study. I very
much appreciate your willingness to study and look at this
aggressively because in my estimation since we have been
looking at and studying the bill that is brought forward, there
has just been a systems failure of the current system and we
needed to look and understand was that estimation on mine and a
number of other people's parts accurate or inaccurate? And your
study certainly gives us the factual basis of information to
conclude that there has been a systems failure under the
current system.
I also note that you think there is some improvement taking
place and some positive steps here recently, but we have had a
systems failure over the last number of years, particularly of
the civilian agencies.
Mr. Mihm. Yes, sir. And the key to success for the steps
that are taking place now, in particular the memo that the OMB
director sent out in mid-May, will be effective implementation
and follow-through on the part of OMB and the agencies.
Senator Brownback. Thank you very much. Thank you for doing
the study. I don't know if there is a chance for you to stay
around. I hope for the hearing not to last too long but it
might be good to have you here to be able to respond if we have
additional questions later on.
Mr. Mihm. I would be pleased to, sir.
Senator Brownback. Thank you very much. Thank you for
conducting the study and I thank your cohorts, as well.
The second panel will be the Hon. G. Edward DeSeve, the
Acting Deputy Director of the U.S. Office of Management and
Budget. Mr. DeSeve, we welcome you back to the Subcommittee yet
again.
TESTIMONY OF G. EDWARD DeSEVE,\1\ ACTING DEPUTY DIRECTOR, U.S.
OFFICE OF MANAGEMENT AND BUDGET
Mr. DeSeve. Mr. Chairman, I am delighted to be here.
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\1\ The prepared statement of Mr. DeSeve appears in the Appendix on
page 48.
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Senator Brownback. Well, these can be tough inquiries and I
am sure they are not days that you look forward to. Maybe you
would rather go to the dentist on days like this than be here.
But we do have serious things that we need to look at. We are
having difficulties and failures in this system and I want to
hear why it is we are seeing these sorts of systematic failures
taking place because I sure think we need to address them.
Thank you for joining us and the floor is yours. If you
hear any of these comments that you would like to address
quickly as they are fresh in your mind, feel free to do that;
then we can take your full testimony later, if you would like
to.
Mr. DeSeve. I thought I would just give you a verbal
statement which summarizes my full testimony and then respond
to your questions.
Senator Brownback. OK.
Mr. DeSeve. I am pleased to be with you today to discuss
OMB Circular A-76 and how the Federal Government acquires
commercial support activities.
As I noted in my testimony before you on March 24, we share
the goal of seeking the most efficient and cost-effective
source for provision of commercial support activities. The CFO
Act, the Government Performance and Results Act, the Federal
Acquisition Streamlining Act and the Clinger-Cohen Act and the
A-76 process, all taken together, reflect important efforts to
improve our effectiveness while recognizing the complexities of
our financial, operating and management systems.
The Defense Department is clearly setting the pace in the
implementation of A-76. The Department is evaluating which
functions are commercial in nature and subject to competition.
The Department is now providing its employees the training and
resources necessary to develop historical workload data,
performance and evaluation criteria, the ability to perform
results-oriented contracts and to compete within the private
sector and with its own employees for functions currently being
performed by civilian and military personnel.
We are now engaged in the largest effort undertaken to
compete commercial activity support services. More than 200,000
FTE's have been scheduled for review within the Defense
Department. This represents more than twice the total number of
FTE studies under A-76 by all agencies since 1981.
The studies are expected to generate $6.4 billion in
savings by the year 2002 and are in addition to the other
acquisition, restructuring, consolidation, utility and family
housing privatization initiatives that have also been
undertaken by DOD.
To put this in a somewhat broader reinvention context, as
of the end of 1997, the administration had cut the civilian
workforce by more than 316,000 employees using various
reinvention tools, creating the smallest Federal workforce in
35 years and, as a share of total civilian employment, the
smallest Federal workforce since 1931.
In May of this year, OMB issued its 1998 A-76 inventory
call. This inventory, which is due to OMB no later than October
31, 1998, will be reviewed by the President's Management
Council, the Chief Financial Officers Council, will be
published in the Federal Register and will be submitted to
Congress.
In conjunction with these reviews, an interagency panel
will compare agency submissions to achieve consistency in the
determination of what is inherently governmental and what is
commercial in nature. It is critical that agencies like
Commerce and Interior retain the flexibility to focus on any of
a series of reinvention priorities, including certainly the use
of A-76.
Coordinating these competitions with other reinvention
tools now available is a complex effort, particularly as we
strive to ensure that the interests of our employees, the
agencies, the private sector and the taxpayer remain protected.
Over time, we believe that civilian agencies will come to
rely more heavily on public/private competitions in order to
increase savings. The March 1996 revision of A-76 was carefully
crafted to encourage and permit agencies to incorporate into
their reinvention and restructuring plans the work of A-76. It
does no good to require cost comparisons of activities that can
or should be discontinued, divested or fundamentally
restructured.
We need to reflect new technology and changes in mission
requirements. Regionalization, consolidation, termination,
closing of unneeded facilities, application of electronic
commerce and other techniques may be more appropriate
reinvention approaches and agency managers must reflect
discretionary authority to implement these changes while
remaining good employers.
If changes are made to Circular A-76, they must contribute
to the reinvention process and move it forward. Our principles
for the review of proposed A-76 changes are quite clear.
First, they must promote competition to achieve the best
deal for the taxpayer, not simply undertaking out-sourcing.
Second, it must not increase the level of judicial
involvement in the government's management decision-making as
to whether to out-source or not.
Third, they must recognize that current guidance to promote
a level playing field is in place.
Fourth, the complexities of public/public and public/
private competition must be reflected in such changes.
Fifth, any changes must be fair and equitable to all
interested parties.
Sixth, out-sourcing must be viewed in the context of the
larger reinvention effort.
Finally, it is inappropriate and may be detrimental to
require the head of an agency to undertake competitions in
accordance with a schedule mandated by law.
Thank you very much, Mr. Chairman. That concludes my
statement. I would be happy to answer any questions the
Subcommittee has.
Senator Brownback. Mr. DeSeve, thanks for the statement and
any written record you would like to put in, we would be happy
to have as part of the record.
Really to get to the point of it, in looking at the chart
on page 7 of the GAO study, and I don't know if you would like
to get a copy.
Mr. DeSeve. I have a copy.
Senator Brownback. OK. You look at 1988. DOD FTE's involved
in this competition, civilian agency FTE's, and you then go
down through this chart and it looks like particularly on the
civilian agency area, that they have just said, ``Look we are
not doing this anymore.'' The old mule just laid down in the
middle of the road; ``We are just not moving. We are not going
to do this.''
And, for whatever reason, DOD says, ``OK, we will do this.
We will fully engage.'' And DOD is providing you the leadership
on this, not OMB. And certainly these agencies, many of them,
and certainly the Commerce Department not having any FTE's
involved in commercial activity, really strikes me as an odd
statement.
Why have they just stopped participating in this?
Mr. DeSeve. I am going to let Department of Commerce give
its own reason for not filling out the inventory form. I do not
think that is acceptable. We are trying, by putting a new call
for inventory out now, to work with each of the agencies to
make sure that everybody responds and that we carefully review
the commercial functions and inherently governmental functions.
It needs to be done and the process for doing that is in place.
In terms of agencies using A-76 as one of a set of tools, I
think they chose other tools during that period. In the
reinvention process we said to the agencies, ``First decide if
you have to be in that business at all. We do not want to pave
the cowpath. We do not want to out-source something where you
should not be in the business at all.''
So we saw OPM, for example, divesting its investigations
function. This Subcommittee had a series of hearings in which I
participated and you participated. We talked about creating a
private corporation, an ESOP, where that function would spin
off. As a result of that and getting rid of their function of
training--they did not out-source it; they got rid of it, they
got out of the business--OPM has cut its workforce by more than
50 percent.
The same set of choices was made by other domestic
agencies, such as GSA which eliminated almost a third of its
workforce along the way. So they chose a hatchet in some cases,
as opposed to a machete. OMB A-76 might be categorized as a
machete and some of the other efforts might be described as
hatchets.
The cutting was done, after all, and I think that is what
we were trying to get at. We were trying to reduce the cost of
government and eliminate unneeded functions.
At the same time, DOD, which had also engaged in the same
kinds of activities, found that A-76 was particularly valuable
to them. It is, however, a cumbersome tool. It is a tool that
we believe takes at least 2 years from the point of initiation
to the point of realization.
Some agencies wanted to see different tools used to produce
more short-term results, whether those were RIFs, elimination
through attrition, whether they were buy-outs, whether they
were divestitures, whether they were downsizing or devolution
to State and local governments, those tools were chosen in
place of A-76.
We think that is not enough. We think A-76, as better
understood and better implemented, can, in fact, yield great
results. DOD was not alone. We worked very closely and need to
work very closely with DOD in setting its priorities and
undertaking OMB A-76 reviews. I can't tell you the number of
conversations I and my staff have had with them and we've
encouraged them and they have been very receptive.
Senator Brownback. So for me to understand your system of
A-76, it is basically whether or not the agency wants to do it
and you really do not care. I mean, you would like to see them
participate but if they do not and they choose another set of
tools, that is fine by you as OMB. Is that correct?
Mr. DeSeve. That is correct. It is like the Government
Performance and Results Act. We want to see the result. We want
to see the outcome of a smaller, more efficient government. The
means and strategies an agency uses should be consistent with
the agency's individual plans. We are certainly working to
encourage greater understanding, streamlining and use.
A-76 has really been something that agencies have shied
away from because of the time it takes and the complexity
involved in the process.
Senator Brownback. I am sure you have heard the charge that
you have stated frequently that there has been a decline in the
workforce of the Federal Government during this administration
and I am sure you have heard the charge that most of that has
come from the Department of Defense. And your numbers here seem
to suggest that there is a lot more pushing on the Department
of Defense to do some of these things than there is on a number
of the civilian agencies that are involved.
Clearly the charts that we have here, the information put
forward by the GAO suggest that at least on the A-76 processes
that you or others are strongly encouraging the Department of
Defense to do this but are very much laissez faire with regard
to anybody else.
If one were to study the end product and try to determine
why we got to this point, the Department of Defense is doing
this, the others are not, and there appear to be no
consequences whatsoever to the civilian agencies. If they want
to participate, fine; if they do not want to, that is fine. But
you do see this taking place in the Department of Defense.
I note all that for you, Mr. DeSeve, because it looks like
to me, and now you have the GAO study saying it, as well, that
there is a systems failure on A-76 taking place amongst the
civilian agencies. You just heard the testimony that we had and
it had been my hunch for some time that that was the case. It
turns out that that is indeed the case.
You have the Department of Defense, the military agency
that is participating greatly in this, according to GAO
numbers, according to your numbers. We have the Department of
Commerce which has many commercial competitive activities and
the OMB saying, ``That is fine; we are not going to push you on
this at all. And if you choose other tools, if you choose to
add employees, if you choose to continue to compete, that is
fine.''
That strikes me as a real systems failure if one is looking
to try to identify commercial activities that are competing
with the private sector, that we do not have any OMB leadership
on this. The agency can choose, decide if they want to or do
not want to participate in this, and the GAO confirms that,
that we have a complete systems failure taking place.
What has happened, for instance, in the number of FTE's at
the Department of Commerce, total, over the last--if you have a
good period of time on there, over the last 5 years?
Mr. DeSeve. From 1993 to 1996 actually they have lost 2,900
FTE, which is about 8 percent of their workforce. If you extend
that to 1997, they have lost a total of 4,100 or 11.2 percent
of their workforce without using OMB Circular A-76. The
choices----
Senator Brownback. How did they do that?
Mr. DeSeve. I am going to ask Mr. Gould to comment on that.
I think what you will find is that through buy-outs, through
reductions in force in selected areas and through contracting
mechanisms not entailed in A-76. A-76 is the prescribed
mechanism for competing FTE. Other contracting, either for new
work, for expanded activity, is not covered by A-76, so that
out-sourcing, privatization and contracting can be accomplished
in other ways than through the formalized A-76 mechanism.
Senator Brownback. Let me follow up on that and I want to
ask another question regarding that but I have used my time and
I want to pass to Senator Thomas for him to ask a few
questions.
Senator Thomas. Thank you very much.
Senator Brownback. Thanks for joining us.
Mr. DeSeve. Senator, it is good to see you.
OPENING STATEMENT OF SENATOR CRAIG THOMAS, A U.S. SENATOR FROM
THE STATE OF WYOMING
Senator Thomas. How are you, sir? Nice to see you.
First of all, I appreciate very much having this hearing. I
think the point of the whole program, of course, is to take a
look at the purpose of A-76, which is, as I understand it, to
take commercial activities within the government and give the
private sector an opportunity to see if they can, in fact,
perform them more efficiently. Isn't that what you consider to
be the purpose of it?
Mr. DeSeve. No, sir, I don't.
Senator Thomas. Don't you? Tell me what it is, will you,
please?
Mr. DeSeve. Yes, Senator. I believe it is a chance to
provide lower cost, a savings for the taxpayer, whether the
private sector wins the competition or the public sector wins
the competition.
Senator Thomas. I think that is what I said. Do it more
efficiently.
Mr. DeSeve. I misunderstood. I thought you said----
Senator Thomas. Well, why don't we do that, then? Why isn't
that happening? Now, this policy has been in place since
President Eisenhower; isn't that right?
Mr. DeSeve. I would have to look. That is probably----
Senator Thomas. Well, I will tell you it is.
Mr. DeSeve. I will rely on you for that.
Senator Thomas. It has been in place a very long time and
still we have a million people on the Federal payroll doing
things that are commercial in nature, most of which the private
sector has not had an opportunity to compete for. Now, do you
call that success?
Mr. DeSeve. No, sir, I call that the status quo and I don't
think it's----
Senator Thomas. That is exactly what I call it, too, and we
in Congress are trying to do something about that.
Mr. DeSeve. I agree with you and I think the Defense
Department is providing great leadership in that area.
Senator Thomas. I do, too.
Mr. DeSeve. And I believe that other domestic agencies will
see that process work in DOD and----
Senator Thomas. How long does it take, for heaven's sake?
How long has this policy been in place?
Mr. DeSeve. Unfortunately, A-76 itself takes about 2 to
2\1/2\ years.
Senator Thomas. I am talking about how long does it take to
implement a program, a concept that has been in place for a
very long time?
Let me just say I am a little impatient. We have been
through this before and the feeling I get is that there is
resistance from your agency and the rest of the Federal
Government. You just don't want to do anything any differently
from what you are currently doing. And even though GAO pretty
clearly points out in their testimony that A-76 is not a high
priority among the civilian agencies, pointing out here that
many of the agencies do not even respond to OMB's A-76
inventory requests, and yet I hear from you, ``Oh, things are
OK. We don't need to do anything. We are doing it.''
Now, that is really hard for me to understand.
Mr. DeSeve. Let me be very clear. Things are not OK and the
reason we put out a new inventory call was to get the agencies'
inventories up to date, to encourage them to properly
characterize their functions----
Senator Thomas. ``Encourage'' bothers me a little.
Obviously encouraging does not get the job done, and that is
why we in Congress are talking about some kind of statutory
authority. I have met with you several times in an effort to
make it as reasonable as we can. We are willing to continue to
work with you.
I am focused on results, the bottom line. I get awfully
impatient with the idea of talking all the time about what we
are doing when the measurement of result is really the issue,
and the results do not show that it is being done.
Mr. DeSeve. And again, Senator, I do not mean to belabor or
restate the issue. When we look at results, as we would under
the Government Performance and Results Act, we look at the
total reduction in the size of the workforce----
Senator Thomas. Wait a minute. That is not the issue. The
issue is to take commercial activities and to see if they can
be done more efficiently, not the number of FTE's. The number
of FTE's are down because of the Department of Defense
downsizing and the savings and loan cleanup, and we all know
that.
So numbers down is not the only issue, is it?
Mr. DeSeve. No, sir, but I think cost savings----
Senator Thomas. What about the Army Corps of Engineers?
Tell me a little about how they have reduced their number of
FTE's.
Mr. DeSeve. I don't know the answer.
Senator Thomas. Well, I will tell you the answer.
Mr. DeSeve. I do not have it in front of me.
Senator Thomas. Their budget has gone down substantially
and the number of employees have not.
Mr. DeSeve. I will be happy to look at the data and supply
it for you.
Senator Thomas. Well, isn't that your job, to look at that?
Senator Brownback. The witness needs to be allowed to
answer fully.
I think, Mr. DeSeve, as you can tell, we are both pretty
frustrated about what we----
Senator Thomas. We have had these types of answers, Mr.
Chairman, before.
Senator Brownback. I know, but I am trying to be nice about
it.
Senator Thomas. And I appreciate that.
Mr. DeSeve. And Senator Thomas and I do not disagree on a
lot of these issues and I understand his frustration in this
area.
Senator Thomas. So we are trying to create a statutory
basis for accomplishing the same goals that you and I have
talked about, and I don't understand the objection to that.
Mr. DeSeve. I don't think we have objected to that,
Senator. I think we set out a set of principles that we would
like to see a statute adhere to. I do not believe we have
objected to the statute. I do not believe we have objected to
the ideas that you put forward, as long as they stay within the
principles.
There have been some bills out there at one time--not now
but at one time--that would have simply out-sourced everything,
regardless of cost. That was not a good idea, so we objected to
that.
Senator Thomas. Agreed.
Mr. DeSeve. But we have indicated a willingness to work
with the Subcommittee to try to understand your frustrations
and try to do something about a bill.
Senator Thomas. Maybe, Mr. Chairman, I should have had this
as a statement rather than questions. I apologize if I haven't
given you a chance, Mr. DeSeve.
What about the May 12, 1998, memorandum? Why doesn't it
provide a timetable for competition? What are you going to do
differently to make this inventory call work, since the past
two have not?
Mr. DeSeve. I guess what we are going to do differently is
we are going to say that agencies have done many good things;
here is another chance, again especially with DOD breaking a
path for us and showing us how to do things a little better in
some of the areas. Agencies have not had a good roadmap
themselves.
So first we are going to say go back again and look much
more carefully now at your workforce; tell us what is
inherently governmental; tell us what is not. Let's get some of
your peers who have been successful to review what you have
done and perhaps give you some suggestions where you can think
more thoughtfully about what that inventory looks like.
And then we are going to strongly encourage agencies in the
balanced budget world. After the Balanced Budget Act, the
strictures are still on place. We talked about surpluses. But
the caps in the domestic side are still in place and we believe
agencies are looking for new and expanded tools to meet those
caps.
So that is our process from now through the budget season
to try to get them to move in that direction.
Senator Thomas. OMB Circular A-97 implements the
Intergovernmental Cooperation Act that requires local
governments to certify to OMB that services cannot be produced
reasonably and expeditiously through ordinary business channels
before a Federal agency can provide such services. How many
such certifications have you on file?
Mr. DeSeve. I would have to look. I do not have that data
before me. I didn't come prepared to testify on that. I just do
not know.
Senator Thomas. I believe the answer is zero. Mr. Chairman,
thank you. I will wait a while.
Senator Brownback. Mr. DeSeve, thanks. We just look at the
world differently, I guess is the problem here. The GAO study
verifies what I suspected for some period of time, that we just
weren't seeing the OMB leadership with the civilian agencies.
You are verifying that by saying it is one of several tools.
I think you can gather from Senator Thomas and I and many
members of the legislative body that we think it should be
clearly a very aggressively used tool. That is not happening.
Commercial competition with Federal agencies decreased over the
past 10 years. We do not think it is getting done.
I am glad to hear your number of workforce decline in the
Department of Commerce taking place. I want to look at it and
com-
pare it to some other agencies. Our point with that would be,
as well, that that is not the whole issue here. We are talking
about the FTE numbers is a good indicator. I think it is a very
positive indicator if it is going in the right direction. But
here you have a competition with private sector by the public
sector that regardless of the issues of FTE size, should be
clearly evaluated and we should not be having this head-to-head
competition in places if it can be done more efficiently.
And you have most of your civilian agencies really not
participating in this at all by GAO studies, by your own
numbers. And neither of us think that that is an acceptable way
to go. Apparently the OMB--it is fine and there are no
consequences for going a different way.
Now, if that is different, if there are consequences for
them not participating, I would sure like to know about it.
Mr. DeSeve. Sir, there is an absolute budget cap that comes
from the Balanced Budget Act for discretionary spending or
military spending and we allow the agencies the flexibility to
choose the path in meeting that cap, whether it is divestiture
to State and local government, whether it is getting out of the
business entirely, whether it is downsizing the workforce in
other ways or using A-76.
So we try to manage in such a way to give them the
flexibility within their overall target, and the targets are
very aggressive. This year, for example, if there is a 3
percent pay increase, that is 3 percent less in S&E budget.
That cheese is going to bind, as my grandfather used to say, at
some point and we believe that having them be much more
familiar with A-76 and our continuing to focus on it--and we
heard your message. The inventory call, and the new procedures
for evaluating the inventories were certainly reflective of the
kinds of issues that you have put forward.
We agree with them and believe in them and I cannot defend
the pace of change in this tool. I can only put it in the
context of broader reinvention.
Senator Brownback. Well, thank you for coming here today.
You can go get your root canal now and get relieved from the
two of us. We have a difference of opinion here.
Mr. DeSeve. I know this is going to sound masochistic but I
honestly enjoy coming because I think that both you and Senator
Thomas and other Members of this Subcommittee are honestly
trying to make things better.
Senator Brownback. We are.
Mr. DeSeve. This is not a personal attack and it is not
even an attack on the fundamentals. It is really a difference
of opinion about whether we should use, as I said earlier, the
machete or the ax. We believe there is a time for the machete
and we are going to continue to work with the agencies to try
to show you how that can work.
Senator Brownback. I don't view it as either machete or an
ax but something that we clearly should be doing and that, if
appropriately done, like the Department of Defense is doing,
can be quite a positive tool. I have run a government agency
before and if you let them just avoid it and choose their own
path, they are not going to do this. And I think the proof is
in the pudding. We are seeing that taking place. So machete or
ax or plastic knife, call it what you would like.
Thank you very much for joining us.
Mr. DeSeve. Thank you very much, Mr. Chairman. Thank you,
Senator Thomas.
Senator Brownback. The third panel will be the Hon. John
Berry, Assistant Secretary for Policy, Management and Budget,
U.S. Department of the Interior. The other panel member is the
Hon. W. Scott Gould, the Chief Financial officer and Assistant
Secretary of Administration for the U.S. Department of
Commerce.
Gentlemen, thank you very much for joining us. We have lots
of questions for you. We would be happy to take your statements
into the record and we appreciate your being willing to join
us.
Mr. Berry, you are first up.
TESTIMONY OF JOHN BERRY,\1\ ASSISTANT SECRETARY FOR POLICY,
MANAGEMENT AND BUDGET, U.S. DEPARTMENT OF THE INTERIOR
Mr. Berry. Mr. Chairman, thank you for this opportunity. If
I could I would like to start with just a short overview of the
Interior. I know Senator Thomas is here and this may be a
little boring to him but I will only take 30 seconds or so on
it to give you the context of where we are and where we are
trying to get to.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Berry appears in the Appendix on
page 55.
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Interior manages over 450 million acres of Federal land on
the continental United States and 3 billion acres offshore on
the outer Continental Shelf, which essentially boils down to
one-sixth of our nation's land mass. We have over 57,000
buildings, dams, equipment and aircraft. We have 66,000 people
and they are operating at over 2,000 sites around the United
States.
We are as close as the bottom of the hill and we are as far
away as the islands of Micronesia, to give you a sense of the
scope and scale of our Department.
We are one of the most streamlined agencies in the Federal
Government. You could not find a more streamlined agency. We
manage that Department which I just described and that mission
with no undersecretaries, no deputy undersecretaries, only five
assistant secretaries and eight bureau directors. There is not
one other Department in the Federal Government that can make
that claim to you.
Since 1993 we have cut 11,700 employees out of the
Department of the Interior. That is a 15 percent reduction and
the second largest in the domestic Federal Department cabinet
agencies.
In the D.C. area, in the headquarters, just so you do not
think we are cutting these from the field, the bulk of this cut
has come from the headquarters. We have taken 16 percent of our
D.C. management headquarters out. Again that is the second
greatest cut in domestic cabinet agencies, so we are very proud
of that.
The question is how have we done this? Essentially
accomplishing this at the same time when our recreational load
is going up on public lands, on the Bureau of Land Management,
Fish and Wildlife Refuges. The public demands for the use of
the outdoors has increased over this same period of time where
we have had a decline.
The question is and our response is how have we done this?
We have done it two ways: essentially trying to operate smarter
and by building strong partnerships with the private sector.
Let me touch on smarter for a second.
Smarter, for example, is using purchase cards, electronic
purchase cards that have allowed us to cut our procurement
staff 24 percent since 1993 and a 35 percent cut in the
personnel in our central office finance functions. That is just
by shifting those functions over to the private sector using
cards that private sector companies can tell us and manage that
data for us easier than we can ourselves. So we have been able
to achieve significant reductions in our central office finance
functions.
We have put in place 34 reinvention labs that have
eliminated red tape, habitat conservation plans which work with
private sector landowners to accomplish goals of important
Federal laws that Congress has adopted, and have cost-avoided
through those measures over $100 million.
Finally, we work very closely with the Congress, with the
GAO and the IG on identifying areas where we can be better, we
can be smarter. The Appropriations Committee and our
authorizing committee--Senator Thomas could take a great deal
of pride in this--brought a concern to a number of hearings,
concern over the cost of how much it was taking to do things in
the National Park Service. Our construction projects were just
taking too much.
We organized a study with the consent of the committees,
with the National Academy of Public Administration--that will
be in June--that is going to essentially require us in our
Denver service center to get out of the contracting business
and to shift those functions, reducing our Denver workforce
significantly and shifting more functions in Denver over to the
private sector.
I can tell you now ahead of schedule, having been briefed
by NAPA on that report, that we are going to carry out those
recommendations. We are going to do it and you will be very
proud and pleased to see the results at the end of it.
The second area which I wanted to just touch on very
quickly, Mr. Chairman, is partnership with the private sector.
Forty percent of our budget authority--our BA for the
Department of the Interior is $10 billion, so that means $4
billion is spent on outside contracts with private contractors,
grants or agreements with State and local government. Over 17
percent of that is specifically with private companies.
Over the last 5 years 95 percent of our procurement actions
have been awarded competitively, and that is the highest rate
in the U.S. Government.
We use over double our workforce in volunteers. In the
National Parks we have over 90,000 volunteers. On Fish and
Wildlife lands we have over 30,000 volunteers. We are
essentially doubling our workforce. And these are not folks who
are just standing answering questions. They are people who are
out in the field actually accomplishing work. They are retirees
who we are trying to bring back in with their skills to
accomplish our mission.
Then finally, and this is something I know that is close to
Senator Thomas' heart, is how we deal with concessions
contracts in the Park Service, BLM, Bureau of Reclamation and
Fish and Wildlife. In the National Park Service alone we have
over 600 contracts, concessionaire contracts, that employ over
25,000 private sector people on our National Parks, enjoying
gross receipts of over $700 million and the taxpayers get back
from that very profitable association over $48 million return
every year from the private sector.
Concessionaires and our contracts at some of our parks
greatly outnumber the employees at our parks. Yosemite is a
good example of that. Yosemite, our concessionaire at Yosemite,
a private sector contract, has 1,650 employees. The National
Park Service employees at Yosemite are only 750, less than half
of our number of employees there.
And we have a wonderful relationship with our
concessionaires in that they have actually, at Yosemite, for
example, helped us rebuild after the massive floods we suffered
2 years ago.
If I could, I would just put in a pitch for Senator Thomas'
bill. Senator, we are deeply appreciative of your efforts this
year on moving some concession reform standards and really are
grateful for your efforts with the Secretary on S. 1693. If we
can eliminate some of that preferential right on the concession
stuff, it is really going to help us do more on that concession
and move more of these functions into the private sector, so we
are really pleased with your efforts in that regard. Thank you.
Finally, A-76. It is one of our good tools. Under Secretary
Babbitt's administration we have performed nine studies, most
of them in the aircraft service areas. We have taken a photo
lab from the Rocky Mountain Mapping Center and put that into
the private sector. Our computer operations for the USGS in
Reston, we have had great results in all those efforts. We are
very impressed with it, very pleased.
We have completed our inventories and have done that
annually and submitted those to OMB and we will again this year
resubmit, as directed by Mr. DeSeve, our inventory this summer,
as directed.
The most recent A-76 survey of the Department found 58
commercial activities with more than 10 employees; 53 of those
58 are in the National Park Service and the total is about
5,000 FTE's in terms of the impact.
But the bottom line in how I look at is what we ought to be
about is achieving the most efficient result we can. If the
private sector can do it better, then by God, they ought to be
doing it, and we ought to be getting that work transferred over
to them as soon as we can, and we are about that.
For example, this NAPA study and the Denver service study,
I am not going to wait 2 years. That will be implemented within
6 months of June. We will draw down those people using creative
things like buy-outs, early-out authority, which hopefully we
are going to get from the Congress this year to help us do
those things more creatively, with less pain to our Federal
employee workforce. But the end result will be a leaner Federal
workforce that will be much more heavily reliant on private
contractors to carry out design, construction management in how
we do things in the Na-
tional Park Service. And we are going to be about accomplishing
that in 6 months, not 2 years.
So there is no question of our heavy reliance on the
private sector. A-76 is one way of getting there. Reinvention
is another. Using increasing concessionaires is another. And
finally, management reforms is one basic one.
So with that, Senator, I apologize for going a little--I
saw the red light and I apologize. I appreciate your
indulgence.
Senator Brownback. Thank you very much for that upbeat
report. We will have some questions but I do appreciate that
and how you have presented it.
Mr. Gould, welcome to the Subcommittee.
TESTIMONY OF W. SCOTT GOULD,\1\ CHIEF FINANCIAL OFFICER AND
ASSISTANT SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF
COMMERCE
Mr. Gould. Mr. Chairman, Senator Thomas, thank you for the
opportunity to appear before you today to discuss commercial
activities specifically as they relate to the use of OMB
Circular A-76 at the Department of Commerce. I would like to
ask that my written statement be entered into the record and I
have a short oral statement I would like to give.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Gould appears in the Appendix on
page 63.
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Senator Brownback. Without objection.
Mr. Gould. Thank you. Over the past several decades and
continuing under the leadership of Secretary Daley, the
Department has taken steps to ensure that Americans receive the
best value for the tax dollars they spend on our programs. To
accomplish this we need to apply the principles of competition
and the free market to ensure that required services are
provided at the best value to the taxpayer.
This means identifying work that may be performed by an in-
house organization, a contractor or through an interservice
support agreement and ensuring that all parties are given the
opportunity to compete to perform the work.
A-76 is one valuable tool among many for achieving our cost
efficiency and management performance goals. I wish to
emphasize that over the past 6 years we have added many such
tools to our toolbox as we collectively explore ways to make
government more efficient and effective.
Congress has also acted to promote improved government
performance by passing the CFO Act, the Clinger-Cohen Act, GPRA
and the Federal Acquisition Streamlining Act.
Throughout the first Clinton administration, while the
Office of Management and Budget was revising the A-76
supplemental handbook, we at Commerce shifted our emphasis to
the principles of government-wide reinvention. During those
years we explored new methods for cost savings and improving
government performance, such as downsizing, reengineering,
reinvention labs, performance-based organizations, franchise
funds and customer service improvement.
As a result of our efforts, overall from 1992 to 1997 we
achieved a 7.4 percent reduction in our total FTE's. We reduced
the number of managers and supervisors across the Department by
23 percent from December 1992 through December of 1997 and we
have placed relatively greater staff power on the front lines,
delivering services directly to our customers.
In the early 1990's OMB indicated that a comprehensive
revision of the supplemental handbook was under way. A-76
activity as undertaken not only by the Department but I also
believe by many other Federal agencies was reduced, pending a
review of policy concerns with the old version of the circular.
In March of 1996 the supplemental handbook was reissued.
Shortly afterward in June of 1996, OMB requested that each
Federal agency prepare and submit an updated inventory. Very
little activity at the Department of Commerce was identified
for inclusion in that inventory.
In September of 1997 we responded to OMB's request and
identified one of our NOAA ships for review. Additionally, we
are conducting a study of our finance and accounting functions
to determine how its efficiency and effectiveness can be
improved.
Under the leadership of Secretary Daley, the Department has
aggressively worked to strengthen internal management and
ensure the effective use of public funds allocated for carrying
out its mission. I would like to share just some of these
efforts and successes with you.
We are merging polar orbiting environmental satellites in
cooperation with DOD and NASA to share technology and data.
This cooperative effort is estimated to save over $1 billion
during the life of the program.
Since Secretary Daley was confirmed, we have reduced the
number of political appointees by 100, over a third. We have
proposed using statistical sampling to help us conduct the most
accurate and cost-efficient 2000 census possible. We estimate
that the use of sampling will save at least $276 million in
fiscal year 1999 alone.
We are adopting an integrated program management approach
to acquisitions called the ``Concept of Operations'' to
reengineer the acquisition process, improve the quality of what
we buy and reduce the time needed to make purchases.
And finally, next month we will complete testing on a fully
operational pilot of an integrated core financial system known
as the Commerce Administrative Management System.
We have also taken an active role in overseeing NOAA's
efforts to identify alternatives to the NOAA fleet. In fiscal
year 1997 NOAA out-sourced 25 percent of its total requirement.
Over the past years NOAA has decommissioned one-half of its
hydrographic fleet and is moving ahead with plans to contract
with the private sector for much of its hydrographic data
requirements. In addition, we have downsized the NOAA corps
from 415 in fiscal year 1994 to 299 in fiscal year 1997,
resulting in savings of $6 million a year.
These are just some of the examples of activities
demonstrating our commitment to improve management processes
within the Department and its operating units, and increase the
efficiency and effectiveness with which we administer our
programs. It provides, I believe, an important context for
understanding that A-76 is one tool among many that can be used
to achieve greater efficiency in government.
As stated earlier, we do believe that A-76 is an important
technique in helping us improve program management. Secretary
Daley and Deputy Secretary Mallett are committed to
reengineering and reinvigorating the Department's program. We
have heard your message. Several fundamental issues should be
considered in order to maximize the effectiveness of the A-76
program as one of our management tools.
First, it is critical that accurate and timely data
measuring the true cost of operations is readily available and
reflected in inventories of commercial activities. Only by
having consistently reliable information, both with respect to
financial resources and FTE's, can we expect to make the type
of sound business decisions that the circular is intended to
foster. Further, this information is essential to understanding
the full benefits achieved as we proceed to implement the
circular.
A cost comparison study performed under the rubric of A-76
can and should be considered an effective strategy for
maximizing quality of service delivery.
Finally, it should be noted that the importance of
effective oversight of our procurement activities increases as
we increase our level of contracting with the private sector
for commercial products and services. The responsibility for
ensuring that Federal funds are expended appropriately once
they are in the hands of the private sector is very
significant.
Focussing on the Department of Commerce and our plans for
moving forward in this area, very simply, again we have heard
you. We will develop an updated inventory of our commercial
activities. We will develop a practical list of out-sourcing
opportunities based on the findings of that inventory history
and will expeditiously identify resources to make those studies
happen.
In summary, Mr. Chairman, I want to reiterate Secretary
Daley's commitment to this program, ensuring that the
Department of Commerce works toward the benefit of American
businesses and citizens. Thank you. This completes my remarks
and I am glad to answer, I am sure, the many questions you may
have.
Senator Brownback. Thank you very much, Mr. Gould, and Mr.
Berry.
So that I understand, the Department of Commerce will be
participating this year fully in A-76?
Mr. Gould. That is correct.
Senator Brownback. OK. Because you haven't in the past so I
want to make sure that you will be this year.
This Subcommittee has had a number of hearings on different
functions within the Department of Commerce that compete with
commercial sectors or have commercial sector activities. We
have had quite a few studies done on it--GAO studies. Are you
familiar with those?
We had a hearing on the Weather Service. We have had them
on NOAA, corps fleet. There have been GAO studies on NOAA. You
really have quite a few activities over at the Department of
Commerce that are competing with commercial sector already and
have been identified and studied previously. Are you going to
fully address those now?
Mr. Gould. Yes, Mr. Chairman. If I may just add a point
that my colleague Mr. Berry mentioned, presently 50 percent of
our budget authority does go in either grants or contracts to
the private sector. So half of what we are appropriated every
year already ends up in the hands of nonfederal entities.
So we feel we do have some substantial experience there in
contracting out and procurement and using the competitive
process to be able to deliver the best value for the taxpayer.
Senator Brownback. Why have you chosen not to participate
in A-76 in the past?
Mr. Gould. Well, I would identify the following reasons.
First, we have deliberately directed our efforts to a full
toolbox, an array of opportunities to lower costs, decrease
FTE's and shrink our budget, and we believe the facts speak for
themselves.
You just heard the numbers, the reduction in FTE's, 7.4
percent in a 5-year period. Those are the types of results that
we think are the goal of A-76. We believe they can also be
achieved through other means and we have demonstrated that.
Senator Brownback. I don't mean to challenge you on your
numbers because Mr. DeSeve's numbers were very positive for the
Department of Commerce and your numbers are not quite as--it is
pretty close to what his were.
But I was looking at the budget for fiscal year 1999
Federal employment, Executive Branch. Now, they are showing
your percentage as increasing 20 percent. Now, is that because
of projected FTE requests that you have in?
Mr. Gould. That is correct and let me give you three
snapshots on numbers.
Senator Brownback. What is your current FTE that you have
at the Department of Commerce?
Mr. Gould. Thirty-two thousand, five hundred. What you are
seeing is the enormous spike effect of our ramp-up for the
decennial census, which will grow the size of the Department of
Commerce for a brief period to conduct the decennial, from in
the low 30's to the mid 70,000 FTE's. We are beginning to see
that effect in the ramp-up for the decennial census.
But we believe that if you look at the base, from 1993 to
1996 you see a reduction of 7 percent and if you work off a
1993 base when the administration began to 1997, you actually
come into the 11.2 percent figure that Mr. DeSeve cited a
moment ago.
So I believe that all of those numbers, in fact, are
consistent and acknowledge the fact that in aggregate, the
addition of those people that will be needed to conduct the
decennial census, an extraordinary amount of people, 260,000
part-time positions and when you divide those by a full-time
equivalent, you come out into the mid 70,000 FTE's.
Senator Brownback. I am glad you explained that. I would
also note for the record the Department of Defense, which
neither of you would necessarily be aware of, had a reduction
in force of 23.9 percent during that same period of time, so
more than double the Department of Commerce, from a far larger
group, a far larger number that was in place there.
My big concern for both of you is, I think, we agree that
the government should be involved in more steering than
growing. I guess that is the philosophy. People that think
about these things think it is correct, as well, for
particularly the Department of Commerce. I will hand off to
Senator Thomas, the Department of the Interior, which he would
know far more about than I would, has not engaged that
philosophy.
I want to be real blunt with you because we have done
hearings on this, studies on this and there seems to be a real
hesitancy in that Department that is reflected in this chart
here. We are asking about the Department of Commerce because it
reflects so many other civilian agencies' attitude towards this
competition.
The FTE number is an important number. It is a good
indicator number. It is a good indicator of being prudent, I
think, with resources, but it really does not get at this issue
here, which is competition with the private sector. And it
seems as if the Department of Commerce, the agency that in my
estimation should be leading the charge of letting the private
sector do what it does and the government do what it does, is
being the one that is being the most resistant to it. That is
why we probably look at you more than any other, because it
seems to me you should be the one leading this effort, and you
have not been.
So I hope you are reflecting a change in attitude. I still
stand by earlier statements that we have had a systems failure
on A-76 because if we were not having these hearings, I don't
know that we would have anything taking place. Maybe we would
have some--that is an overstatement, but we need to have
improvements because the GAO studies and others are pointing
out the current system just does not consistently work, and
that is why both of us are so interested in improving that.
Senator Thomas.
Senator Thomas. Thank you, sir.
Thank you, gentlemen. I appreciate it very much.
Interior, of course, has done some good things and
hopefully will do much more. I think, as Senator Brownback
said, the FTE number is not really the issue. We all want to do
it as efficiently as possible. The real issue is that we ought
to give an opportunity for the private sector to see if they
can perform these activities at a higher quality and for a
lower price.
So the idea that half of your money goes for grants or goes
to procurement or those kinds of things really is not what we
are focusing on here.
The Denver service center is a good example, isn't it, of
how that might be changed? It basically does engineering, does
planning. Companies do it in the private sector generally by
contract.
Mr. Berry. There is no question. When I came and why I was
happy to be very quick to do the NAPA study is when I looked at
the percentage number of overhead in Denver on what we were
charging--the Park Service was charging itself for contract
management and for contract oversight and things like that, it
was not in line with what I was familiar with what was going on
in the private sector. It was significantly higher.
So I knew that this study was going to come out and was
going to be helpful in terms of how do we get those numbers
more in synch with the private sector. And the response is one
that I think we anticipated, and that is it is going to be by
relying on the private sector.
So what you are going to see in Denver is that whereas
Denver now does everything, from cradle to grave on these
projects, on the construction projects that you authorize,
Denver will now be focussed on predesign and then contract
management of the private contractors.
So you are going to see--the report is probably going to
recommend--there are 500 people now in Denver and I suspect
when this is done and we are at the end of the day a year from
now we will be around 300 people in Denver. So it is going to
be a significant change in terms of how Denver is going to
operate and function.
Senator Thomas. That is good.
Mr. Berry. Thanks to your leadership and Congressman
Regula's leadership on that, as well.
Senator Thomas. I think the Senator said about steering and
rowing--there has to be then some adjustment in agencies to do
contract oversight.
Mr. Berry. Absolutely.
Senator Thomas. And to the extent that we just take an
agency and contract out something and leave the agency as it
was, then you have not accomplished a great deal.
Mr. Berry. Part of that effort, Senator, if I could, is the
NAPA report is recommending and we will be following through on
retraining for the employees that are left, that we can refocus
those skills in terms of contract management.
Senator Thomas. It is discouraging when the purpose of the
park is to preserve the resource and you need people who are
experts in that and then you go and see the guys in the green
shirts emptying garbage and doing things that do not need that
kind of special expertise. So hopefully we can make some
positive changes.
Commerce--OMB asked you, I think, to update your commercial
activities. The agency has indicated it is unlikely to change
from 1983. Interesting. Your commercial activities are not
going to change from 1983?
Mr. Gould. No, I do not think that is a reasonable
perspective. We did our first master inventory in 1983 and came
up with 174 commercial activities, a very comprehensive review.
My sense is the organization sort of lived off that into 1991,
and 1992. We did a lot of studies, some out-sourcing,
discovered that it was a blind alley down one way, another was
productive, and actually went ahead and did the studies,
completed them and out-sourced to the private sector.
Then, as I have said, 1992, and 1993 we began to switch
over to a broader range of tools in the toolbox. A-76 largely
remained dormant. When we were asked last by OMB to provide an
update, we had one thing--the NOAA ship Ka'Imimoana, which is
actually involved in ocean research and buoy tending and the
like.
It did not work. The private sector came back with no bid.
There are a number of reasons for that but we just did not get
a hit there and we need to take a look at that master inventory
again. We need to ask the question, are there other things that
we can be out-sourcing?
Again if I may, Senator, there is an example of a blind
alley I just went down in the last 6 months that may be helpful
to you in your inquiry. Do I have a moment to describe that,
the financial and accounting area?
Senator Thomas. Please.
Mr. Gould. In the quickest possible terms, we thought that
out-sourcing the finance and accounting function in the
Department had some merit. We had 70 percent of our assets with
a disclaimer of audit opinion, 30 with a clean audit, and that
is not a situation, as CFO, that I can abide for long.
I needed to create a driver for change in the organization
and thought that competition to which you have referred would
be a useful tool. We brought in an outside contractor. We
examined that.
In the end I was confronted with an interesting problem. I
have a goal to achieve clean financial audits in the Department
across the board by fiscal year 1999 and I could out-source
some finance and accounting mechanisms in one of my major
bureaus. But the time it would take me to do that would cause
me to fall short of the goal to get the clean financial audits
and, in my view, I have gone at the idea of getting the clean
financial audits as a paramount value for the Secretary and a
priority for him to have clean financial audits for the
Department.
So there is a simple and a small example of where having
the freedom to choose about whether to go forward with A-76 and
do that study or not was important to us and it has led to, I
believe, a strategy that will result in clean financial audits
for the Department across the board by fiscal year 1999.
Senator Thomas. Well, let me restate what we are trying to
do, the goal here and the language in the bill itself that we
are talking about.
It simply requires that there be an identification of
things that are commercial in nature. Then there is hopefully
an opportunity to conduct a public/private competition. It does
not require that the function be contracted out. It just says
we ought to take a look at which entity produces the best
result for the taxpayers.
As I exhibited my impatience a little while ago and you
both have talked about the merits of this concept, as I think
most anybody would. The fact is, however, that it has been in
place for over 40 years. Because it is not statutory, there has
been no way to enforce it, so it has not been done. This
opportunity to compete has not been implemented, and that is
all we are seeking to do.
You may decide that the private sector is not the best
option in every case, but I hope we don't see more Icemans--the
Department of Agriculture doing work for the FAA. But that is
off the point?
You took almost 2 years to do the NOAA ship study?
Mr. Gould. Yes, sir.
Senator Thomas. And you did not get a bid? That is
interesting.
Mr. Gould. Yes, sir. Six months in preprocurement planning
and the balance, 13, in basically going through the procurement
process, and we did not get a bid.
Senator Thomas. I think all of us share the same goal. We
intend, frankly, to move forward with this bill and draft it in
such a way that it works for you and it also is meaningful. It
would take an inventory of commercial activities and give the
private sector a chance to compete for them and see if they can
do them better.
That is about the size of it. Thank you, sir.
Senator Brownback. Thank you, Senator Thomas.
Thank you both, gentlemen, for being here. I will note I
appreciate both of your Federal service. Having been a Federal
employee before, I appreciate what all of you do and what
everybody does. I have not found anybody that I know of working
for the Federal Government that does not do it with a good
heart and they want to do what is right.
We are confronted--we both believe and many of us do--that
the taxpayer burden on this country is such that we have just
got to get it down and that we need to be far more efficient
with taxpayer dollars. We need to do the things we should do.
We need to do them well and right. I think there are just a lot
of things that we could be looking at.
Having run a small agency before, I know if there is not
really a push on the system, not a whole lot of things happen
because the inertia of it takes over pretty easily. And this is
not to castigate any employees.
I also want to advise Senator Thomas and others that I am
going to be looking, as well, on Capitol Hill for things that
should be competed. We did that on the House side and had a
fair number of things competed. I think if we are going to talk
it, we need to do it. So there will be a few interesting things
that will take place with that.
Thank you all very much for joining us. If there is any
other additions that need to be added to the record, the record
will be kept open for 1 week from today.
The hearing is adjourned.
[Whereupon, at 11:21 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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