16

I think, at this point in time now, this coming year, whoever
wins the presidency, it ought to be a situation, I think, where the
congressional leaders talk to the administration and point out how
important this law is and what an important tool or process it is
to really improve the Government and the congressional oversight.
Again, I think, if we don’t get really top-notch people in the agen-
cies in leadership positions, like at the deputy secretary level, I
don’t think you will have the success with this program that the
Congress is hoping for.

So I think the leadership is absolutely crucial here in, let’s say,
again, the 24 largest agencies of the Federal Government.

Mr. CLINGER. One of the areas that this committee and the Gov-
ernmental Affairs Committee in the Senate are going to be con-
cerned with in the future, and the administration is interested in
pursuing, is civil service reform, which, I think, has not been really
given serious attention for a long period of time.

How do you feel the concepts which are embodied in GPRA might
be—could they be helpful as we address this?

Mr. BowsSHER. Yes. The civil service reform is very important, be-
cause, if you look at other countries, you will see that they really
changed dramatically the reliance on their traditional civil service
system and moved it over to a much more results-oriented person-
nel system.

I think that what you are seeing now is more flexibility being
given to some of these experiments that they are doing in the exec-
utive branch. One of the areas that they are doing is trying to give
the agency that is trying to carry out the program more exibility
in how they organize. You know, like at GAO, we have gone to lit-
erally 4 levels instead of 18 levels of GS ratings, so that we can
really run the GAO more like a professional accounting or consult-
ing firm in the private sector, and it has made all the difference
in the world.

So I think that you have to—as each of the agencies come for-
ward with their plans, I think the modification of some of the civil
service rules is very crucial. We had a symposium some time
back—I will let Nye may be make a few words on that—where we
brought some of the leaders from the corporate world to the GAO
and some of the Government officials who have worked in this
area, even some from other countries, and there is no question that
there is really a major effort to try to get organizations and the
people in organizations much more trained and working in a re-
sults-oriented effort.

Nye, do you want to add to that?

Mr. STEVENS. Yes. One of the principles that emerged from that
symposium was that we needed to get all of our systems in line
within Federal agencies, that it’s also the support system, like the
personnel or human resource management system, that needs to be
honed and sharpened so that it contributes the maximum to the
mission of the agency.

The Civil Service Reform Act of 1978 did embody some of the
same kinds of principles of individual responsibility, of setting
goals for employees, holding them accountable for meeting those
goals, differential awards and incentives, even some measures that
were designed to get at the poor performers program. The manage-


37

have had greater success in reducing both deficits than the United States has. And
the most successful nations have build their efforts on performance measurement.

Although the private sector can provide interesting insights for formance, the
really useful models on these questions are countries like Australia, France,
Zealand, and Sweden, and the United Kingdom. The drive to shrink government has
been surprisingly global. Where it has been most successful, the government reduc-
tion movement has been coupled with tactics to improve government performance.
In Australia, the focus has been on “letting managers manage” by working to re-
move barriers to energetic administration. In New Zealand and the United King-
dom, the focus has been on “making managers manage” by introducing market com-
petition into government services. But in all of these cases, performance measure-
ment has been at the core.

Performance measurement in these countries has been important for two reasons.
First, performance measurement has helped government policy makers move from
a focus on inputs—how much they spend on programs. “to ‘a focus on outputs—what
results they get from the money they spend. The American reform effort has con-
centrated just on the first half of this equation. It is little wonder that it has proven
so frustrating, because the input focus (how much money to spend) has proceeded
independently of what really matters, what the money buys. With this disconnec-
tion, it is hard to ask the important questions or to provide answers that satisfy

one for long.

nd, performance measurement has helped government policy makers move
from process—how decisions get made—to results. For a decade, the American fed-
eral government has struggled to devise procedural solutions for tough substantive
roblems. Elected officials have tried automatic deficit reduction tactics like
ramm-Rudman and have proposed spending ceilings like the balanced budget
amendment. No process, however, can force elected officials to make decisions they
do pot want to make. And no process can prove a guide through tough substantive

problems.

« GPRA builds on the success of other nations by demanding that government
agencies make performance the touchstone for their actions. It provides members
of Congress with a way of focusing government on what it does instead of what it
spends.

3. Performance Measurement Provides Congress with Critical Information about
Agencies’ Strategic Decisions

The fate of the laws Congress passes depends on how agency off jals manage
them. Members of. Congress rightly expect that managers will a ister the laws
as passed. From the administrators’ point of view, however, the situation is often
far more complex and full of conflict. They face competing demands on how aggres-
sively to administer these laws, which can lead to inconsistent decisions, and dif-
ferent laws can ask them to do conflicting things. They sometimes do not have
enough money to do all that a program's beneficiaries might expect, which can
produce frequent complaints. And they rarely have enough time to satisfy all legisla-
tive goals simultaneously, which means they must make hard choices.

Executive branch officials must constantly make strategic choices about where to
invest their energy, how to balance conflicting demands, and how best to achieve
the goals they seek. Sometimes they do it like explorers in a jungle, hacking their
way with dull machetes through the policy forest. Sometimes they ‘do it much more
carefully, planning their steps to maximize legislative goals. One way or another,
these decisions determine what gets done and what public programs produce.

Recent rounds of budget cutting have made this process much harder, Downsizing
of the federal government’s workforce have hit some agencies harder than others,
so those remaining have frequently had to learn how to do new jobs with less help.
If budgets have been cut, citizens’ expectations rarely have shrunk, so government
workers have faced even harder problems.

This leads to two implications. First, government managers can solve these prob-
lems only by thinking and acting strategically. They need to decide how to balance
competing demands, which problems demand the most immediate attention, how to
app ly new technology to do their jobs smarter, and how to deliver more for leas. In
the midst of such turmoil, government managers often feel they have no time to
plan strategically. But in the face of such hard problems, the only possible solution
is for them to act and think carefully. The tougher the problems, the more impor-
tant strategic planning becomes.

Second, congressional authorization and appropriation will increasingly need to
build on these strategic plans. The more important strategic planning becomes, the
more important it will be for members of Congress to review these plans. They will
frame the important tradeoffs that managers deep inside agencies will make. GPRA



33

what are the stakes for Congress itself in the Government Perform-
ance and Results Act?

There are 10 different points, in fact, that I raise in my testi-
mony, and I want to just summarize it briefly here. But begin with
a quick story. I’ve got a dog who spends most of her days lookin;
out the front window, t: ing desperately to get to the squirrel
that’s on the other side. She's struggling. She barks, she whines,
she growls, and never quite manages to get the squirrel. And we’ve
always managed to try and ask the question, what would happen
if that ever happened? What would happen if she ever caught that
squirrel?

That, in a way, is Congress’ problem now of trying to figure out
what to do about the deficit. What would Congress do if the budget
ever got balanced? Or, put differently, what would Congress do if,
in the search to balance the budget, the current balanced budget
strategies don’t succeed?

I think the most important stake for Congress in the Govern-
ment Performance and Results Act is the leverage that it gives
Congress to try to deal with those questions, to try to deal with
those things that have to be done, and to try to move it from a de-
bate over ow much money ought we to spend for something to
what kind of results do we get for the money that we provide in
tax dollars. Where do we cut when we need to cut, where to spend
where we will get the most value for the money that we do spend,
how to deliver results in a world that inescapably leads us to the
balanced budget debate?

There are, it seems to me, at least three basic stakes for Con-

ess that I want to try to explore just briefly here. I ask that my
full testimony be inserted in the record. The first is for authoriza-
tions; the second for appropriations; and the third for the basic
budget debate between Congress and the administration.

First, on authorizations, there are two things in particular that
it seems to me that performance-based management can do for the
authorizations process. It can improve oversight and can improve
policymaking. On the oversight side, there is the question of strate-
gic planning and the question of what it is that agencies are doing,
what it is that they think that they are doing, and how it is that
they talk about what it is that they think that they are doing. In
short, it is a window into the critical decisions that agencies Fave
to make day-to-day on how they going about doing what it is that
they do.

Too often we weigh these claims on the basis of competing claims
by political forces out there. In fact, as the colloquy between Mrs.
Maloney and the Comptroller General pointed out, simply having
information about what it is that agencies do and how they do it
allows discussion on a far different level than would be possible
otherwise.

Being able simply to ask questions about the IRS computer mod-
ernization project would not have been possible without some kind
of bottom line information about its results. It doesn’t solve the
problem but at least allows the conversation to proceed at a much
different level and allows key questions to focus on the most impor-

nt issues.


42

Office of Management and Budget Director Alice Rivlin has made GPRA the core
of her OMB 2000 restructuring effort. OMB has sought to change the focus of ita
‘budget examiners from budget requests (inputs) to performance results (outputs).
The budget office will have to complete this transition—and so, too, will executive
branch agencies before ‘a budget submission in performance format would even be
possible. It might well take the full seven-year GPRA phase-in period to get to a
place where a performance-based presidential budget would be feasible. (iP federal
agencies are not required to submit annual performance reports until March 2000.)
But such a performance-based budget surely is a next-round target at which to aim.

¢ GPRA can provide the foundation for even more sophisticated improvements in
federal budgeting. Most notably, it could aid the transition to a performance-based
presidential budget submission to Congress. Such a budget could enormously im-
prove the ability of the president and Congress to grapple with the truly fundamen-
tal budgetary issues.

10. Performance Measurement Can Vastly Improve Congressional Policy Making

Members of Congress today are wrestling with immensely complex problems. And
they need the best tools they can get. GPRA is an invaluable addition to the con-
gregsional toolbox. In reviewing the steps it requires, it would be easy to mistake

PRA purely as a set of techniques for executive branch managers.

However, GPRA is at its core a tool of greatest use to members of Congress. The
very process GPRA creates shines a light on the issues that most demand congres-
sional attention: the choices and tradeoffs executive branch officials make in imple-
menting the law; which policy strategies and tactics work best, and which ones

don’t; who is responsible for which results; and where new resources can best be
put to use.

In struggling with these issues, members of Congress often find themselves trying
to straddfe an unbridgeable chasm: on one side, with admirable goals that win en-
thusiastic support; and on the other side, with tough decisions on the details of pol-
icy. What performance measurement can provide is a bridge between them. It does
not necessarily make the trip painless, but it can make it possible.

Effective implementation of GPRA therefore ought not to be a goal in itself. That
can only promote mindless bean counting. Members of Congress, instead, ought to
pursue GPRA because it provides a tool to do what has to be done: grapple with
the truly important and fundamental issues that lie inescapably over the horizon,
past the balanced budget del

 GPRA should not be viewed as an end it itself It provides, rather, a tool to help
members of Congress do what they have to do, and to do it in ways that no other
existing tool allows.

Mr. CLINGER. Thank you, Dr. Kettl, very much. ;

May I say to all the panelists, all of your testimony will be in-
cluded in full in the record, and so you may summarize, if you
choose.

Mr. Lauterberg. .

Mr. LAUTERBERG. Thank you, Mr. Chairman.

My name is Robert Lauterberg. I am director of planning and
budget in Virginia. I appreciate this opportunity to describe for yeu
Virginia’s performance budgeting process. The process that Vir-
ginia has implemented integrates strategic planning, performance
measurement, and budgeting. .

My background, prior to coming to State government, was in the
private sector where I did strategic planning. My experience taught
me that most successful large business organizations have already
integrated these three elements: strategic planning, performance
measurement, and budgeting. It helps them to remain competitive,
to prepare for changes in technology, for changing competitive
threats, and to improve the bottom line by focusing resources on
their most cost-effective uses. | . .

Government programs must also work to improve their competi-
tiveness, in order to compete for scarce resources. Virginia's next
biennial budget will have the third lowest rate of growth in the last
25 years, largely as a result of the slowing economy. At a 9.4 per-


10

STRONG CONGRESSIONAL OVERSIGHT NEEDED TO ENSURE GPRA INTEGRATION INTO
DAILY OPERATIONS.

As was to be expected during the initial efforts of such a challenging management
reform effort, the integration of GPRA into program operations in pilot agencies has
been uneven, This integration is important because Congress intended that out-
come-oriented strategic plans would serve as the starting points for agencies’ goal-
setting and performance measurement efforts. Ultimately, performance information
is to be used to inform an array of congressional and executive branch decisions,
such as those concerning allocating scarce resources among competing priorities. To
help accomplish this integration, GPRA requires that beginning with fiscal year
1995, all agencies are to develop annual performance plans that provide a direct
linkage between long-term strategic goals and what program managers are doing on
a day-to-day basis to achieve those goals. These plans are to be submitted to OMB
with the agencies’ budget submissions and are expected to be useful in formulating
the president’s budget.

Congress can play a decisive role in the implementation of GPRA by i
performance goals and information be used to drive day-to-day acti
agencies, Consistent congressional interest at authorization, appropriation, budget,
and oversight hearings ‘on the status of an agency’s GPRA efforts, performance
measures, and uses of performance information to make decisions, will send an un-
mistakable message to agencies that Congress expects GPRA to be thoroughly im-
plemented. Chairman Clinger and the Committee on Government Reform and Over-
sight took an important first step last year when they recommended that House
committees conduct oversight to help ensure that GPRA and the CFO Act are being
aggressively implemented. They also recommended that House committees use the
financial and ‘am information required by these acts in overseeing agencies
within their jurisdiction. !2

A further important step toward sharpening agencies’ focus on outcomes would be
for congressional committees of jurisdiction to hold comprehensive oversight hear-
ings—annually or at least once during each Congress—using a wide range of pro-
gram and financial information. Agencies’ program performance information that
can be generated under GPRA and the audited financial statements that are being
developed to comply with the Government Management Reform Act (GMRA) shoul:
serve as the basis for these hearings.

GMRA expanded to all 24 CFO Act agencies the requirement for the preparation
and audit of financial statements for their entire operations, beginning with those
for fiscal year 1996. Also, consistent with GMRA, OMB is working with six agencies
to pilot the development of consolidated gecountability reports. By integrating the
separate reporting requirements of GPRA, the CFO Act, and other specified acts,
the accountability reports are intended to show the degree to which an agency met
its goals, at what cost, and whether the agency was well run. I have endorsed the
concept of an integrated accountability report and was pleased to learn that OMB
plans to develop guidance, which is to be based on the experiences of the initial six
pilots, for other agencies that may wish to produce such reports for fiscal year 1996.

QUESTIONS FOR CONGRESS TO ASK

I believe that by asking agencies the following or similar questions, Congress will
both lay the groundwork for communicating to agencies the importance it places on
successful implementation of GPRA and obtain important information on the status
of agencies’ GPRA efforts.

How Well Is the Agency Measuring Outcomes?

‘The experiences of many of the leading states and foreign countries that have im-
plemented management reform efforts similar to GPRA suggest that striving to
measure outcomes will be one of the most challenging and time-consuming aspects
of GPRA. Nevertheless, measuring outcomes is a critical as; of GPRA, particu-
larly for informing the decisions of congressional and high-level executive branch
decisionmakers as they allocate resources and determine the need for and the effi-
ciency and effectiveness of specific ams. ;

‘As expected at this stage of GPRA’s implementation, we are finding that many
agencies are having difficulty in making the transition to a focus on outcomes. For
example, to meet the goals in its current GPRA performance plan, the Small Busi-
ness Administration (SBA) monitors its activities and records accomplishments
largely on the basis of outputs, such as an increased number of Business Informa-

3 House Committee on Government Reform and Oversight, 104th Cong., Ist Sess., Oversight
Plans for All Committees, (Comm. Print 1995).


70

Mr. CuINcER. Right. Tell me a little more about the incentives
that are built into the systems. I mean, I'm interested in—we es-
tablish goals, we establish measurements, but what kinds of incen-
tives are provided to encourage the bureaucracy to try to make the
goals that you establish?

Mr. Homes. Well, I mean, I would certainly encourage you—and
I can provide material on the budgeting system in Australia, be-
cause I think it’s, in a sense, the crown jewel in our reform effort.
And it’s because it fundamentally addresses the relationship be-
tween three dimensions of performance: one is fiscal, macro per-
formance; one is the actual allocation of resources according to
strategic priorities; and the third one really is about efficient and
effective use of resources.

The budgeting system, as it operates in Australia, provides a set
of incentives through, for instance, one of the very crucial ones,
predictability in policy and funding. That makes a tremendous dif-
ference to performance at the agency level if you have some pre-
dictability. Now, that’s not about making life easy. It’s within a
very tight budget constraint and a requirement to do evaluation

to produce performance information. But predictability I re-
gard as being an essential element of an incentive system.

A second one that I think is very owerful is autonomy. I happen
to believe that autonomy may well be the most important factor in
improviny performance in the public sector, both in Australia and
in New Zealand. The New Zealanders may deny that, but I believe
that that’s what is the case even in New Zealand.

Giving people flexibility within an environment where it’s clear
what they are expected to do is a very powerful incentive to im-
prove performance. I think that’s what people have said here about
the fact that, if people know what is expected of them and they are
given the authority to do it, they will generally respond in a very
positive way.

So it’s a much longer and more complex set of relationships, but
too often, I think, people jump, when they think of incentives,
to individuals and rewarding individuals through financial rewards
and things, and I think there are many broader incentives that
have an important role to play.

Mr. FAIRBANKS. Mr. Chairman.

Mr. CLINGER. Mr, Fairbanks.

Mr. FAIRBANKS. If I might quickly add, I think there are incen-
tives just tied to the interest of Congress, because I would venture
to say that nobody in the Federal Covernment would like to come
before your committee and be embarrassed by the results that they
have on their piece of paper. So merely the existence of measure-
ments and an annual, moderately high profile review of those
measurements is going to create interpersonal incentives for people
to care about the results they produce.

I would imagine that virtually everybody in the Federal service
is very anxious to perform and to have the reputation of having
performed. Simply the interest of this committee and the Congress
is a powerful tool in terms of motivating people to care about the
numbers and the results that they achieve.

Mr. CLINGER. One of the things that we’ve found—we've just, ba-
sically, reformed the Federal procurement system rather dramati-


52

Responsibilities of Affected Agency Heads

1, Designate agency staff that will participate in the process to ensure the broad-
est level of participation of agency employees,

2. Conduct the required activities in accordance with the guidelines provided with
this memorandum and any guidance provided by the responsible Secretary.

3. Develop the materials and presentation of findings required by the guidelines.

4. Report on the outcomes to the Governor's Office and responsible Secretary, as
required by the guidelines.

5. Develop the agency's 1996-98 budget proposals based on the guidance received
from the Governor's Office and Secretary and the instructions issued by the Depart-
ment of Planning and Budget.

Responsibilities of the Department of Planning and Budget

1. Develop the schedule for agency assessment meetings and notify each affected
agency of the meeting date, time, and place.

2. signate the appropriate DPB staff to attend the assessment meetings along
with the Governor’s Office and Cabinet Secretaries or their representatives.

3. Issue instructions to state agencies for developing the appropriate budget sub-
missions for the 1996-98 biennium which support the achievement of the agency's
identified goals.

4. Review the budget submissions and make recommendations to the Governor for
inclusion in the Governor’s budget to be submitted to the 1996 General Assembly.
This Executive Memorandum shall remain in full force and effect until December
20. 1995, unless superseded or rescinded by further executive action.
GEORGE ALLEN,
Governor.

Mr, CLINGER. Thank you very much, Mr. Lauterberg.

Before I recognize Mr. Holmes, I wanted to recognize Congress-
man Davis.

Mr. Davis. I am sorry I wasn’t here to introduce you, Bob.

Bob Lauterberg, we consider him a native son of Fairfax, even
though he came here in his early 20’s and has been with the Gov-
ernor just doing an outstanding job. I would just note for the com-
mittee—they have heard Mr. Lauterberg’s thoughtful comments—
but Governor Allen really has led the way in doing more with less
and bringing efficiencies to State government, holding the line on
taxes. His welfare reform measure, I think, could serve as a model
for national welfare reform.

Bob has been instrumental in working on all these issues, and
I am just really proud to have him here before the committee so
that we can share some of the gains we have had in Virginia with
the committee.

Thank you.

Mr. CLINGER. Thank you very much, Mr. Davis.

T now recognize Mr. Holmes.

Mr. HOLMES. Thank you, Mr. Chairman.

I welcome the opportunity to appear before you today. I am
aware of the fact that a colleague of mine who once appeared at
an OECD session, after speaking for 5 minutes, all the people lis-
tening asked could they have a translation into English. So if at
any stage you have difficulty with my Australian accent, then
please stop me. .

I, of course, am going to draw from my experience and the expe-
rience of Australia’s reforms but also am well-informed about New
Zealand and the United Kingdom reforms. I wanted to, I think,
perhaps take a slightly different perspective, and I will do this rel-
atively quickly, and then talk a bit about performance measure-
ment.


50

vate sector or in other governments. For example, a clear basis of comparison exists
where some states opt to administer programs that are federally-administered in
other states.

5. Compare the efficiency/effectiveness of alternative program design
models and pi th substantially similar missions. Performance meas.
ures may be used to icate which of two or more programs with similar missions
is the most efficient and/or effective. For example, if two federal programs provide
job training assistance, performance measures may help to identify which should be
expanded and which should possibly be curtailed.

6. Base Program funding decisions on historical funding/performance re-
lationshipe. Funding decisions should be based on desired outcomes, taking into
account the historical relationship between funding and level of program perform-
ance. For example, Virginia's economic development programs are budgeted on the
basis of their demonstrated ability to generate business investment (in hundreds of
millions of dollars) and to create jobs (in thousands) in proportion to a given funding

level.

CONCLUSION

Performance accountability systems are key tools in the effort to redefine and im-
prove state government. They allow policy makers, agency directors, program man-
agers, legislators and the general public to evaluate the effectiveness of government
programs. If properly applied, they can enhance decision making, improve account-
ability, support long-term thinking, and evaluate resource use,

The benefits of performance measurement should be no less compelling at the fed-

vel. At a time when the federal government is seeking to return more respon-
ies to the states, a great debate is occurring between providing states with
ity to administer programs, and maintaining federal mandates to ensure the
continuation of program benefits. Performance measurement is one possible solution
to this dilemma.

Performance measurement goes hand-in-hand with increasing program flexibility
because it preserves an important element of accountability, even as strict pr m
mandates are rolled back. The combination of performance measurement and flexi-
ble program design allows grant recipients to innovate and to constantly seek more
cost effective solutions to public policy problems.

COMPONENTS OF VIRGINIA’S PERFORMANCE ACCOUNTABILITY SYSTEM
CONTINUOUS IMPROVEMENT

Performance Budgeting

Program Implementation
Performance Measurement

Program Evaluation

Issues AssessmentStrategic Planning

OFFICE OF THE GOVERNOR,
COMMONWEALTH OF VIRGINIA.

EXECUTIVE MEMORANDUM 3-95
GOAL SETTING AND PERFORMANCE BUDGETING

Purpose

To provide guidelines for agencies to undertake an assessment of their activities
examining elements such as the agency’s role and purpose, its customer needs, orga-
nizational structure, current activities and how they are accomplished, and the eniti-
cal issues facing the agency. The results of this assessment will form the basis for
developing proposals for the 1998 biennial budget and improving overall agency
management and accountability.
Applicability

All Executive Department agencies except institutions of higher education.
Effective Date

June 2. 1995.


56

clarity of purpose

clarity of task

authority to perform their tasks and achieve their purpose

accountability for the use of the authority given

It is at this organizational level that mission statements, strategic plans, pi

pos! setting and performance measurement have 80 much potential to contribute to
etter performance in the public sector. But this requires that government provide

objectives and allow organizations to get on with it. Reporting and the full range

of associated components of transparency becomes the basis for assessing perform-

ance.

In a paper “Management Reform: Some Practitioner Perspective on the Past Ten
Years” written with David Shand and published in the October 1995 issue of the
Governance journal, we elaborate on many of the points raised above. I have pro-
vided a copy to the committee staff. The paper focuses on the reform experience of
Australia, New Zealand and the United Kingdom.

‘The views expressed above are based particularly on the experience with public
sector management reform in Australia and New Zealand. In both cases the reform
effort was strongly supported by the budget agency. There was no suggestion that
new mechanisms needed to be established to manage the reforms or to focus on
something called management.

‘Australia’s reform program in particular “attempted more than any other to bal-
ance the relationship between the center and its accompanying parts, between pol-
icymaking and the service-wide systems that support it (notably for Budgeting and

ersonnel management). It is the need for balance in these elements which is crucial
if the “multitude of factors that need to be balanced at the level of strategic deci-
sion-making,” are to be adequately addressed.” Changing the decision-making, budg-
eting and personnel management rules so that they supported and required per-
formance was seen to be the route to good outcomes (the extent to which Australia
has sought to focus on outcomes contrasts with the greater focus on outputs in the
New Zealand and United Kingdom public sector management reforms). An evalua-
tion of the reform effort in Australia indicated that sr ten years progress had
been made, although reform remains a pilgrimage rather than a destination. The
evaluation provides a wealth of material on the Australian experience and I com-
mend it to interested parties. It is noteworthy that the development of a comprehen-
sive evaluation strategy has been a key component of the performance focus in Aus-
tralia, I would be happy to elaborate on this or any other aspect of the Australian
experience.

PERFORMANCE MEASUREMENT

Performance measurement in the public sector as it is evolving around the world
at the level of national government is having its major impact at the management
level. This reflects the fact that it is of most relevance to learning and decision-mak-
ing at the operational level. While performance measurement, particularly where it
is derived from evaluation, can and must inform strategic decision-making it ia a
fact that in the public sector, there are a range of factors which affects decisions,
including the relative place of particular policies and programs in the government's
overall priorities. It is also important to recognize that the different roles of federal,
state and local governments influence the uses of performance information.

‘The fact is that performance information is surrounded by ambiguity. At the oper-
ational level it may seem sensible to make a tight link between performance and
resource allocation—if a two day waiting pened 1s related to a certain level of re-
sources then a reduction to one day should be achievable with a particular increase
in resources. But the fact is that, even at this level of decisionmaking, a change in
processes may lead to the same result without any increase in resources. Such im-

rovements in performance will depend importantly on an enabling environment.
erformance information becomes part of the learning process, which supports this
enabling environment.

At a more strategic level, where performance measurement indicates that a pro-
gram or policy is working well, decision makers are left with a question as to wheth-
er this should result in more or fewer resources. Again, performance measures aid
decision-making, they do not replace it. They are part of the fabric of a learning
process.

To quote from the document provided separa’

‘Some countries’ reforms have been criticized, and justifiably so, for a naive
belief in the literal truth of performance measurement and untested assump-
tions about the impact of sanctions or rewards. This is particularly so at the
level of effectiveness measurement. But there is a need not to throw the baby



60

read publication, not something for Ph.D.’s, not something for uni-
versities, but a document that could be read by the average citizen.

Each of our 24 city departments track their own series of objec-
tive, quantifiable results. The data is transmitted monthly through
a local area network to be included in a monthly report. In fact,
the departments get in a little bit of trouble if they don’t have all
their data in by the 15th of the following month. The monthly sum-
mary includes each department’s results and is reviewed by the
mayor and the council, and by senior management. It is also dis-
tributed throughout our organization and to the media. The meas-
ures include cost statistics and service outcomes.

One of the things we are working on now to make this even more
meaningful to the work unit is developing unit cost measures for
all of our services so that we can share them with employees. We
are working to construct a financial system that will create unit
cost figures for every work crew, and we expect to share these with
our work crews and create a competition within our crews on who
can do the best job of delivering services at the lowest price.

We also doa fot of benchmarking. Phoenix has adopted a 10-city
list of U.S. cities of similar size which are known for excellent per-
formance. We benchmark our performance against each of these
well-managed cities. We are participating in a pilot project spon-
sored by the International City-County Management Association,
ICMA, in which 37 cities in the United States are developing com-
parable measures that they can use to compare their output per-
formance for police department, fire department, neighborhood
services, and support services.

Phoenix also reaches out to benchmark private companies for
better ideas for serving the public. Unfortunately, in a number of
areas, the public sector greatly lags the private sector in perform-
ance. To develop good performance standards and measures, we
have had to benchmark the private sector. We have modeled our
water billing system after the American Express Company. Our de-
velopment services department is partnering with the Motorola
Corporation to take advantage of Motorola’s process improvement
practices.

In addition to our objective, quantifiable measures, we also meas-
ure citizen satisfaction. Because in the end, to all of us, and I’m
sure to each of you, citizen satisfaction is the ultimate test of our
services. Since 1985, we have conducted a biannual statistically
valid community attitude survey that measures the public satisfac-
tion with each of our major services.

These surveys ask our citizens to rate service quality. We also
ask them, incidentally, how they would prefer that we spend their
tax dollars in the budgetary process. And I might point out that
some of the power of this system was pointed out in a recent sur-
vey.

Th the early 1990's, Phoenix fell into a severe recession, more se-
vere than most of the rest of the country. And the city of Phoenix
has to balance its budget; it has no option. Each year we must bal-
ance our budget. Actually, 1 year we had a budget that was less,
as an absolute dollar amount, than the previous year, so we had
a declining dollar amount total budget.


48

ents more flexibility to be innovative, and overseeing program grants to ensure that
program goals are met. The Virginia Board of Education, for example, has imple-
mented a new set of rigorous, academic standards for each grade leve] in K-12, and
js encouraging local school districts to implement innovative approaches to achieve
the standards in their schools. At the same time, the Board has called for biennial
testing to measure progress and to validate the effectiveness of alternative ap-
proaches.

5) Prioritizing how tax dollars are spent. In the absence of objective perform-
ance measurement, program funding is extremely difficult to discontinue once a pro-
gram has been put into place. Performance measures will encourage funding deci-
sions based on the relative effectiveness of competing programs. The Governor's pro-
posed budget, for instance, contains at least three new alternatives for housing juve-
nile offenders: 1) boot camps; 2) wilderness work camps; and 3) incarceration in tra-
ditional youth facilities in which mili school-style discipline will be imple-
mented. The length of incarceration varie: among the three alternatives, and the
cost per bed also varies, sometimes inversely. Only empirical data will anawer the
question which approach, or combination of approaches, will yield the best results
in terms of cost and effectiveness,

Virginia’s performance measurement system: progress to date

As part of Virginia’s 1996-1998 biennial budget process, each executive branch
agency was required to submit three to five performance measures in its budget re-
quest. At least one of the measures was required to be an “outcome measure” that
measured broad program results. The remaining measures were expected to relate
to the agency’s two to four highest priority activities.

Upon submission by the agencies, the measures were reviewed by analysts with
Planning & Budget for both form and content. After some minor revisions, staff esti-
mated that approximately 65 to 75 percent of the measures were determined to be
technically usable. A subset of these, while usable, stil] required refinement or were
not reflective of the agencies highest priority activities.

The most prevalent problem ‘the budget analysts found in the preliminary agency
submissions was an absence of outcome-related measures and/or a lack of under-
standing of what constituted an outcome measure. In some cases, a short term ac-
tivity focus was presented (e.g., “complete Task A within 30 days”) rather than de-
veloping true measures of a top activity’s accomplishment over time. A
misclassification of measures (input, output, outcome, efficiency, quality) by both
agency staff and Planning & Budget analysis was relatively common.

‘With the first revision by Planning & Budget staff, analysts demonstrated a some-
what limited understanding of the true nature of performance management. This
situation has since been remedied by providing budget analysts with extensive
training on selecting and developing performance measures.

Planning & Budget also enlisted the assistance of the Joint Legislative Audit Re-
view Commission in reviewing the measures submitted by agencies. Its findings are
summarized below:

The positive aspects of the measures identified by the JLARC review indicated:

« Most agencies focused on improving performance, not just measuring it

© Measures often indicated a target or a standard

« In many cases, measures related to high-level administration priorities or statu-
tory requirements

* Measures often related to the core mission of the agencies

« Measures created appropriate incentives

« Many measures were outcome focused.

‘The largest concerns surfaced by JLARC included: |

« Many measures lacked a reflection of statutory or constitutional missions

Data availability issues were in evidence (some things may not be measurable
due to the cost and/or availability of data) .

‘« Success criteria were missing in several instances, or were very subjective

* An inconsistent level of detail was found across the measures |

« Customers and clients were not well defined in the measures of some agencies

Planning & Budget has since designed a comprehensive performance measure-
ment training program for agency staff that covers the issues and concerns that
were identifies the review of the agency measures as initially submitted. In addi-
tion, the training addresses collecting data, identifying baseline data, and selecting
performance standards/targets.

Secretarial liaisons have been identified and briefed to ensure coordination and
follow-through at the cabinet level. The liaisons will review the measures to ensure
they are reflective of the agencies’ highest priority programs, and that the process
is receiving appropriate attention by agency management.



20

Government has a duty to the taxpayers to provide its services
at the lowest cost possible without sacrificing the quality of nec-
essary services. It also has a duty to provide its services to the pub-
lic at the highest possible quality. This is a businesslike approach
and one that the private sector often uses. Now we apply it to the
Government, and we should get better results and more careful
management of costs.

We have outstanding witnesses today that the Chairman has se-
cured, and we look forward to continuing to hear their comments
on strategic plans and recommendations that incorporate results-
oriented performance measures.

I thank the Chairman for this time.

Mr. CLINGER. I thank the gentleman.

The gentlelady from New York, Mrs. Slaughter.

Mrs. SLAUGHTER. No questions.

Mr. CLINGER. No questions.

Senator Thompson.

Senator THomPpsoN. Thank you. Before Mr. Bowsher and these
gentlemen and their expertise get away from here, I would like to
ask another couple of questions.

It is obvious to me, in listening to you, that this is going to re-
quire a major effort from congressional committees, authorizing
committees, subcommittees. If we don’t tell these agencies what we
expect and work with them in developing their plans, for example,
its not going to work. And OMB is going to be reviewing all these
plans.

From what I’ve seen from the pilots, it’s not all that easy for
these agencies to change their way of thinking in coming up with
plans that really can be used for outcome-based analysis. You
know, improve efficiency and things like that, that’s not going to
get it anymore, is it?

Mr. Bowsuer. That’s right.

Senator THOMPSON. It’s a quite a job. And when you think
through it, I’m wondering, what your thinking is in really changing
that kind of mindset. Because in many of these agencies, it’s not
like a business. A business can really tell bottom line, basically,
how well they are doing, usually, and that’s not what the Govern-
ment is about.

The Department of Education doesn’t educate anybody, and the
Department of Justice doesn’t arrest any muggers, with very few
exceptions, unless they are on Federal property or something. What
they do, basically, is give grants to other people to do these jobs.
So how do you develop a plan to determine what your outcome
ought to be when others really are where the rubber meets the
road?

Second, when you get into some of these programs—I’m chairing
the Juvenile Justice Subcommittee, for example, and I got into
these questions when we started thinking about the reauthoriza-
tion—how do you tell the effectiveness of these programs? We're
giving money to States and grants, and some strings here, and may
be no strings over there. And somebody comes up with a great idea,
“This ought to do some good,” and we appropriate so many millions
of dollars for it, have no idea whether or not it’s doing any good.


38

requires agencies to write strategic plans (which is important in itsel), to publish
those strategic plans (which is eritical to Congress), and to use these strategie plans
as the foundation for measuring results (which in the end is most important). This
process might seem obscure and esoteric. The transparency it creates, however, can
vastly improve congressional oversight, authorization, and appropriations processes
because it opens a window into the most important decisions of executive agencies.

© The law and logic of GPRA requires government agencies to write strategic
plans. These plans will guide members of Congress to the truly critical decisions
that these agencies make in implementing the law.

4. Strategic Plans Provide a Road Map to Achieving Results

It is one thing to focus on results. It is another thing to determine how to achieve
them. Strategic plans not only provide transparency to the process by which man-
agers set their priorities. They also provide a road map for how managers propose
to reach results.

Businesses, of course, have used strategic plans for years, but they are far newer
to government. Good strategic plans have six steps:

* Define the mission. Legislation defines public programs. It does not—and can-
not—prescribe the operating focus for an agency’s operations. Talk about. writing
“mission statements” can sometimes seem like abstract consultant-speak. But_mis-
sion statements can explain to the world outside the agency how agency officials
view their work. And the process of producing such a statement can prove extremely
powerful in stimulating a conversation within the agency about what really matters.

+ Frame the goals, The mission and culture combine to describe the general pur-
poses of the agency, what it seeks to achieve, and how it goes about achieving them.

‘raming the goals, in clear and specific language, provides the critical link between
the law and the specific activities of agency officials to manage the law.

* Set the objectives, Operating managers must translate broad agency goals into
specific objectives for managers. Framing objectives create a bridge between goals
and the work plans for individual units. It charts how each manager's work fits into
the agency’s overall mission.

« Assign responsibility for achieving objectives. Not only is it important to define
what ought to be done. It is also critical to decide who ought to do it. Performance
measurement can improve accountability only if it helps link organizational goals
with specific objectives and clearly defines responsibility for producing results.

‘« Specify output/outcome measures. Agency officials must define measures (or “in-
dicators ”) to assess whether managers are achieving their objectives, and then col-
lect information on those measures.

* Compare results with goals. Finally, agency officials must compare results with
goals. The outcome measures allow them to compare their actual performance with
what they sought to achieve.

1e Internal Revenue Service, for example, has already developed a strategic plan
that charts the agency’s path through these steps. The agency has defined a broad
mission:

Mission: The purpose of the Internal Revenue Service is to collect the proper
amount of tax revenue at the least cost; service the public by continually im-
proving the quality of our products and services; and perform in a manner war-
ranting the highest degree of public confidence in our integrity, efficiency, and
fairness.

It has set three goals:

1. Increase voluntary compliance

2. Maximize customer satisfaction.

3. Achieve quality-driven productivity through systems improvement and em-
ployee development,

Under the first goal, IRS has specified two objectives:

la. Collect at least 90 percent of the total tax dollars due and owing, through
increased voluntary compliance and enforcement.

1b. Achieve the recognition of the public, outside stakeholders, and IRS
ployees for the ethical conduct of IRS regarding: fair and uniform applic
of tax laws; maintenance of the highest standards of integrity; and confidential-
ity of tax information

The measurable indicators for the first objective is the amount that IRS collects
of taxes due and owing. It has set performance goals of 86.6 percent in fiscal year
1995, 86.8 percent in fiscal year 1996, 87.2 percent in fiscal year 1997, increasin;
to 90 percent by 2001. IRS'has also assigned specific responsibility to individu
units for achieving these objectives. It has gone through a similar process for the
other goals and objectives.

The IRS strategic plan tells everyone:



69

What that means is, the Federal Government’s own role is going
to have to change. It’s going to have to promote the kind of learn-
ing that happens by sharing information, but also ensuring that
the States conduct these measures to begin with, because, regret-
fully, not all States are now at the level that Virginia and Phoenix
are.

Mr. CLINGER. Thank you. Too often, I think, at the Federal level,
we take the view that we can’t trust lower levels of Government
to do anything, I mean, that we have to maintain a much more sort
of omniscient control over everything they do. And I think it does
require us to change that kind of thinking. We can’t just automati-
cally assume that every government is not going to be willing to
do a good job.

How has this worked in Australia, for example?

Mr. HouMes. Well, I mean, it is a very political issue, intergov-
ernmental relations. So it requires a political commitment to the
issue. 1 think I would support very much what Don Kettl was say-
ing, that you have to be clear about what the roles and responsibil-
ities are of the different levels of government. That, I think, helps
you define what it is that they should be doing.

Then the responsibility of the national, Federal Government, in
terms of the information that it should be, in a sense, demanding,
I think should always be kept to a minimum. I think, consistent
with your point about this trust issue, there are examples in this
report here, which I am leaving, which illustrate some of the things
that have been done in Australia.

But, increasingly, there are efforts to put together teams of peo-
ple in common areas, such as education and health, to work to-
gether to develop outcome indicators and then to try and talk about
who’s responsible for what outputs within those outcomes and to
develop cost information. It requires a tremendous effort to focus
on the partnership which this should be.

Mr. CLINGER. One of the things that seems to be coming clear to
me, as a result of this hearing, is that this is—you know, you've
got to be in this for the long term. This is not going to be some-
thing we accomplish just passing a law and saying, “OK. Now we're
dealing with performance-based operations.” It’s going to take a
long period of implementation to make this happen. And that
means that you've got to have consistency over several, perhaps,
administrations.

You've just changed governments in Australia. Do you think that
there will continue to a commitment to this system under the
new government, or is there likely to be a change in emphasis?

wr Homes. It is a change after 13 years, I should hasten to
add.

Mr. CLINGER. Right.

Mr. Hotes. I would think, for the essential public management
dimensions, which I see GPRA as being importantly about, that
there will be a great deal carried through with the new govern-
ment. No doubt there will be a number of changes, but I think, fun-
damentally, it will continue.

Mr. CLINGER. It will continue.

Mr. HoumEes. It’s bipartisan.


PERFORMANCE-BASED GOVERNMENT: EXAM-
INING THE GOVERNMENT PERFORMANCE
AND RESULTS ACT OF 1993

WEDNESDAY, MARCH 6, 1996

HOoUusE OF REPRESENTATIVES,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
JOINTLY WITH
UNITED STATES SENATE,
COMMITTEE ON GOVERNMENTAL AFFAIRS,
Washington, DC.

The committees met, pursuant to notice, at 9:35 a.m., in room
2154, Rayburn House Office Building, Representative William F.
Clinger, Jr., and Senator Fred Thompson (co-chairmen) presiding.

Present from the House Committee on Government Reform and
Oversight: Representatives Clinger, Morella, Horn, Mica, Davis,
Fox, Gutknecht, Shadegg, Flanagan, Bass, Slaughter, Peterson,
Thurman, Maloney, Barrett, Norton, Meek, and Holden.

Present from the Senate Committee on Governmental Affairs:
Senator Thompson.

House Committee on Government Reform and Oversight staff
present: James Clarke, staff director; Judy Blanchard, deputy staff
director; Kevin Sabo, general counsel; Jonathan Yates, counsel;
Diann Howland, professional staff, Edmund Amorosi, director of
communications; Judith McCoy, chief clerk; Cissy Mittleman, pro-
fessional staff; David McMillen, Matthew Pinkus, minority profes-
sional staff; and Cecelia Morton, minority office manager.

Senate Committee on Governmental Affairs staff present: John
Mercer, counsel; Claudia McMurray, general counsel; and Michal
Sue Prosser, chief clerk.

Mr. CLINGER. The Committee on Government Reform and Over-
sight, in a joint meeting with the Senate Governmental Affairs
Committee, will come to order.

We are here to receive testimony on the importance of perform-
ance measurement in Government and the status of the Govern-
ment Performance and Results Act of 1993. I am delighted that the
Vice President highlighted Government performance in his speech
on Monday at the National Press Club, and I hope that that com-
mitment will translate into an interest in the implementation and
enforcement of this statute, which was passed by the Congress and
enacted into law in 1993. We look forward to working with the Vice
President very much on this issue.

GPRA has the potential to be an extremely powerful tool for use
in managing Federal programs and policies; however, Congress

(60)


72

over the next 2 years, at least, and we've had to provide the train-
ing subsequent to that. But we do have the system in place. We
have relied on the strategic planning to craft this budget.

Mr. Davis. How successful have your efforts been at privatiza-
tion? Recognizing that privatization is not the end that you strive
for, what you strive for, of course, is delivering the most efficient
service at the lowest cost, and privatization is a tool that can be
utilized to do that, but what has your success rate been on that,
successes, failures?

Mr. LAUTERBERG. It’s been very successful. As part of the strate-
gic planning that we incorporated into the budget process, we had
the agencies identify the activities that they perform and then to
look to see if there were private sector alternatives to the agencies
performing those activities.

With performance measurement, once we have that fully in place
and we’re able to benchmark State government services versus
those available in the private sector, I think we can make even fur-
ther strides toward privatization. But in this budget, we've pro-
vided for privatizing over $600 million in activities.

Mr. Davis. We found—this is kind of an open-ended question to
all of you—when I was the head of the county government in Fair-
fax, which has the second largest budget of any county in the coun-
try, just putting forward the option of privatization many times
would make your public sector more efficient. All of a sudden, faced
with the possibility of having whole sections privatized, they be-
came suddenly more efficient in ways that, without that option
hanging over them, you couldn’t get the improvements.

Have any of you had any experience that you would like to relate
to the committee?

Mr. Fairbanks.

Mr. FAIRBANKS. Congressman, our experience is exactly the
same. And J have to say that we don’t privatize. What we do is
compete. Our city workers bid against the private sector. Whoever
has the lowest bid gets the work. When we first started that, we
lost them all to the private sector. Now we’re winning about 60 per-
cent.

But the effect is just as you say. Just the discussion of privatiza-
tion often encourages cooperation. Recently, we began exploring
privatization in water meter reading. And, amazingly, some fairly
quick concessions were made on labor contracts that allowed some
work rule changes that allowed a dramatic cost cut in meter read-

ers.

The other odd thing that happened is, as we got into bidding, we
found that employees, supervisors, and middle managers pulled to-
gether to try to come up with the best way to save money. Before,
the middle managers would blame the supervisors and the employ-
ees; the employees would blame the services and the middle man-
agers. As we got into to bidding, we found that everybody saw they
were in the same boat, and we found that it actually created cohe-
siveness and it created a desire to work together and share ideas.

Mr. Davis. Any other comments on that? If not, that’s fine. I
yield back, Mr. Chairman.

Mr. CLINGER. Thank you, Mr. Davis.


71

cally to eliminate a lot of the arcane and convoluted and very, very
specific regulatory control over how procurement officers, for exam-
ple, do their business. And the complaint that we heard from,
again, Federal procurement officers was, “Give us some flexibility.
Allow us to do our job. Don’t just totally bind us in red tape and
very specific regulations in how we do that job.” .

I think that it does provide an incentive if you have the kind of
flexibility and the ability to really think and not just have to sort
of slavishly go through and make sure you check off this regulation
and that requirement, this requirement, and so forth.

I think that is why, it seems to me, it was suggested here that
regulations should not be a part of this overall exercise, that they
would somehow slow down the process of establishing performance-
based goals. But it seems to me that regulation, we need to have
that as part of the mix. I mean, if we’re really going to be serious
about trying to provide the flexibility, the autonomy that you men-
tioned, we’re going to have to also have an ability to look at the
regulations and determine if they are really helping or hindering
our ultimate goal.

Mr. HoLMES. Could I just comment on that, Mr. Chairman?

Mr. CLINGER. Yes.

Mr. HotMes. I think it’s actually absolutely essential, because
what you need to look for is, in a sense, unbiased choices between
policy instruments. Very often, regulation is a mechanism which
can replace a public expenditure.

I might just get a mention in here about concerns about separat-
ing capital and recurrent budgets. In that regard, the risk of bias-
ing choices between those two budgets is, I think, a problem I’m
very conscious of, working in the developing world. But exactly the
same point, I think, applies. Regulation is another policy instru-
ment available to government to achieve particular objectives. I
can’t see how it can be separated from the same broad principles.

Mr. CLINGER. Thank you.

Senator Thompson.

Senator THOMPSON. Nothing further, Mr. Chairman.

Mr. CLINGER. The gentleman from Virginia, Mr. Davis.

Mr. Davis. Thank you, Mr. Chairman.

Let me just ask Mr. Lauterberg, 1 understand from your testi-
mony that the Commonwealth of Virginia last year moved directly
into performance budgeting. How were you able to implement the
system so quickly?

Mr. LAUTERBERG. Well, by necessity, really. The Governor has a
4-year term, and he has one budget, one biennial budget that he
introduces, sees through the General Assembly, and then imple-
ments for the next 2 years. So, if we were going to implement this
reform, it had to be done. So it was a necessity for us.

What we’ve done—and if you had the luxury, I think the way the
Federal Government has here, to be more deliberate about it, one
of the things I think we could have done differently was to have
more front-end training for the budget staff, and for agency person-
nel who will be implementing the performance measures. We didn’t
have the ability to do that.

So, as part of the budget submissions, the agencies were required
to submit the performance measures that they will be monitoring


74

To provide an example, in the area of improving foyernment procurement man-
agement practices, I have long advocated requiring Federal agencies to make more
effective use of the cost-management tools and procedures known generally as value
engineering, or VE.
is a long-standing and widely accepted technigue in both the public and pri-

vate sectors. Countless GAO and OIG reports as well as Senate and Hou: hear-
ings demonstrated that better implementation of VE would reduce capital and oper-
ation costs, and improve and maintain optimum quality of construction, administra-

» program, ‘acquisition and grant projects. However, despite its proven capabili-
s, VE was under-utilized in the Federal acquisition process.
Mr. Chairman, as you know, the House approved my amendment to the Depart-
ment of Defense Authorization bill last year to requiring agencies to implement
value engineering, and if the estimates prove correct, save potentially billions of dol-
lars in lost opportunities to reduce costs to the Federal government. That VE provi-
sion was signed into law as a part of P.L. 104-106 on February 10, 1996.

We can always do more, and do better. We should continue oversight as GPRA
initiatives take full effect over the next few years. Congress correctly gave GPRA
a time line into the 21st century, and we can’t rush to draw conclusions prematurely
until it has been more fully implemented.

We have an important opportunity here to re-educate ourselves, as well as to im-
prove government performance.

Our colleagues would be wise to take the opportunity and use it constructively.

ie)



31

Mr. CLINGER. Carolyn, can you begin to wrap it up?

Mrs. MALONEY. OK. Well, later on today, we're having another
hearing in another subcommittee.

I was looking for the time to come on. Is the time not on, not
working?

Mr. uncer. No, I’m not using the time clock.

Mrs. MALONEY. You're not using it?

Mr. CLINGER. No.

Mrs. MALONEY. I kept waiting. Where’s the time light, you know.

We're having a hearing later on today, and I was reading the
GAO report last night of the IRS. They came out with a report 5
years ago to make certain changes. Five years later, they come out
with another highly critical report that the changes haven't been
made. Then, according to the IRS’s own planning, and after spend-
ing $8 billion, they will only be processing electronically 17 percent
of their paper. So, in other words, GAO has been coming out with
a series of reports, making specific recommendations that an agen-
cy apparently isn’t listening to.

Mr. BowsHER. No, I think they are listening. What they are hav-
ing a hard time with is achieving it. In other words, I don’t think
there’s any problem that the commissioner over there is not trying
to achieve what they were trying to do, and that is modernize those
systems at the IRS. It’s just, as we point out in the report that you
read, that the talent and the success has not been there to the ex-
tent that she would like or we can report.

Its a big roblem over there at the IRS to modernize the tech-
nology and the systems that they said they would do. So you’re ab-
solutely right, it’s a major problem. I don’t think it’s lack of atten-
tion; I think it’s a lack of getting themselves organized, recruiting
the right people, and, in this day and age of technology, you have
to have that talent there if you're going to go into that kind of a
program.

Mrs. MALONEY. But it’s 5 years later. You had the same report
5 years before. They still haven’t acted. I mean, I’m sure they say
they are. But that happens a lot of times. They say, “Yes, we're
going to act,” then they don’t, for whatever reason. So what do you

lo in that case?

Mr. BowsHER. Well, I think you have to keep them working at
it. And I think, eventually, you have to make a decision as to
whether this program is going to be successful or not. I think the
Government has had a very poor track record here on these big,
modern computer systems, whether you’re at Defense, whether

ou’re over at some of the social agencies, and certainly at IRS.
hey have not had a lot of success in modernizing those systems.
And we keep reporting, just as you say.

Mrs. MALONEY. Thank you, Mr. Chairman.

Mr. CLINGER. The gentleman from Wisconsin.

Mr. BarRETY. Thank you, Mr. Chairman. Since the subject of
this hearing is “Performance-Based Government,” and implicit in
that is efficient use of Government, not wasting time, and not hav-
ing Government just go through the motions, I have no questions.
Thank you.

Mr. CLINGER. Very refreshing, Mr. Barrett. Thank you very
much.


17

ment of it, however, has been somewhat disappointing over the
years, but it’s not really a problem of the legislative framework
really being there.

A number of the reforms that the private sector people suggested
in our symposium, when you look at it very carefully, there are not
statutory barriers to carrying out many of those things. There is
no statutory barrier to allowing managers a good deal more flexibil-
ity in dealing with the employees that they have, for example.

Mr. CLINGER. Thank you.

I now recognize the gentlelady from Florida, Mrs. Thurman.

Mrs. THURMAN. I pass, Mr. Chairman.

Mr. CLINGER. Then I would be pleased to recognize the other
gentlelady from the State of Maryland, Mrs. Morella.

Mrs, MorELLA. Thank you, Mr. Chairman.

I just want to thank you for calling this joint hearing today of
the House Committee on Government Reform and Oversight and
the Senate committee. It will help us focus our attention on a proc-
ess that, as has been mentioned, has the potential to be a key ele-
ment in fundamental changes going on in the way Government
manages itself.

This process, set. up by, the Government Performance and Results
Act of 1993, and to be phased in over a number of years, requires
agencies to develop long-range strategic plans, develop annual per-
formance plans, measure the performance against the goals, and,
as a last step, report to Congress on how well the goals were met.
Ultimately, GPRA envisions that agency budgets would be tied
closely to this performance-oriented process. It really makes sense,
if we can implement right.

GPRA, together with the Government Management Reform Act
and the Chief Financial Officers Act, should help both Congress
and the executive branch to carry out their responsibilities in a
manner acceptable to the American people. I believe that the
GPRA process, by concentrating on the results or outcomes of agen-
cies’ business, puts the emphasis in the right place.

I am concerned, however, that this process might be viewed as
just another exercise or the latest fad, I suppose, and thus not get
the attention and support that it deserves. To help dispel these no-
tions, this is why we have this panel before us today and the subse-
quent panels, to gain additional insights into the process and about.
how it’s actually being implemented, what is working, what is not
working and why.

Your attention, Mr. Bowsher, to what is happening across the
Government is particularly instructive. I know that we have other
witnesses that are going to be sharing their experiences with per-
formance-based management in other Governments, including
State and local governments. I think it’s important that these les-
sons that are learned help us to evaluate the Federal process.

Another concern that I have is that the GPRA process itself
might be viewed as another drain on already scarce resources. I
don’t know whether you have addressed that, Mr. Bowsher. I might
ask you about that. And you may have responded to some of the
points that I brought out, but just in general, if you would like to
pick up on what you consider to be the highlights of that.

Thank you.


23

agencies are generating those reports, and then they are supposed
to have their strategic plan here in 1997, their 5-year plan. So the
best thing that Congress can do is to work with the agency heads
in oversight hearings as to how well is it all working, what
progress are you making, things like that. Only if you do that will
it really become real in their lives.

Mrs. THURMAN. As a follow-up, as we go through even the de-
bates that are going on today, and there may have been some work
that has been Fappening because of a result of this, and it gets ig-
nored. I mean, it will kind of set over there, but yet there’s a lot
of work that’s been going on. Very frustrating for those people in
those agencies that have been doing that work. Then all of a sud-
den here’s a bill on the floor that goes totally against what might
have been projected as an outcome that could have been achieved
a different way.

So while the oversigh is important, I think there also has to be
a mechanism by which, at the time legislation is going on and/or
review in a committee of legislation, have access to that so that
we're not just spinning our wheels out there.

Mr. BowsueEr. Yes. I think that’s why it’s so important to get the
authorizing committees into the business.

Mrs. THURMAN. OK. So that’s a suggestion.

Mr. BowsHER. Absolutely. And I think, if you get working along
these lines, then, hopefully, more of the legislation that is crafte:
would be done under the umbrella of this way of managing the
Government. It won’t happen overnight, but that’s what you really
want to achieve.

Mrs. THURMAN. May I ask another question? As you may know,
we've been talking about the whole rules issue within this Con-
gress, as well as to whether it should come back to the legislature
or not. Have you had any thoughts on how that might work within
this framework that we're talking about?

I mean, if agencies are out there doing outcome and they are try-
ing to set certain areas, and part of their way is doing that through
rules besides just waiting for the legislature or Congress to act on
that, I’d be interested to know if you have any thoughts or if that’s
even been a consideration.

Mr. STEVENS. Basically, I think you’re referring to the regulatory
reform initiatives,

Mrs. THURMAN. Exactly.

Mr. STEVENS. Yes. And there is very much a GPRA connection
there, in that the pattern that most of the regulatory agencies have
followed up until now has been fairly prescriptive. It has been lay-
ing out quite detailed requirements for the height of guardrails in
a working environment, for speed limits and that sort of thing in
a highway environment. The challenge the GPRA raises is to have
them look at what actual outcomes and real differences are made
by those programs.

The Comptroller General used, in his opening statement, a Coast
Guard example in which, when they focused on ship inspections,
they defined their job as doing ship inspections. And they did more
and more each year and thought they were doing fine, but they
hadn’t really asked the tough question: What does ship inspection
have to do with marine fatalities?


19

But I truly believe that what you need, much like an annual
stockholders meeting, you need a Searing once a year in the Con-

ess as to just how well is the organization working and how are
they working toward some of these program goals and that.

0 if you did some of that, it seems to me, you would get the at-
tention of the ncy head. I think a d example right now, un-
fortunately, is the TRS. because the Rs has not been able to do
well in their systems and their annual audit. And I know it’s got
the commissioner’s attention. She really would like to get it
straightened out and that, but it does take the problems of the
training of the people in new systems, and everything else, to
achieve that.

But I think, if Congress keeps the right focus, I think you can
keep it from being just another management or paperwork exer-
cise,

Your third major question, if I was following, is whether this is
a drain on the people. There’s no question, when you make change
in an organization, you then have to allocate certain resources and
certain talent to making those changes, and that is a drain, in a
lot of people’s view. But you have to make those investments every
once in a while or your organization stagnates, and that is, to a

eat extent, what has happened in Government. It’s also what’s

appened in a lot of private companies, too.

I remember when I went into the quality management effort at
GAO, in 1991, I passed out, at my annual management meeting,
the 1921 list of the Fortune 500. It’s amazing how few of those
companies are still on the Fortune 500. And many of them, if they
were at the top, are no longer near the top, which shows that, even
in the private sector, making change so that you are more in line
with the current needs is not easy.

And it isn’t easy in Government. But you have to make those
kinds of investments every once in a while to modernize your orga-
nization. With technology that is becoming available today, the or-
ganizations that are going to survive and do well have to make
that investment. So there’s no question, it’s not going to be an eas)
time for a lot of the people within the organization. Someone will
complain about a drain.

Mrs. MORELLA. It’s particularly important, I would imagine, to
have administrative leadership that is strong.

Mr. Bowsuer. Very, very important to have the executive branch
leadership that can carry this kind of a change out. That’s right.

Mrs. MORELLA. And the leaders within the departments. Thank

you.

Thank you, Mr. Chairman.

Mr. CLINGER. I thank the gentlelady.

I would like to recognize the gentlelady from Florida, Mrs. Meek,
for any questions you might have.

Mrs. MEEK. No questions, Mr. Chairman.

Mr. CLINGER. Thank you. Then I now recognize my colleague
from Pennsylvania, Mr. Fox.

Mr. Fox. Thank you, Mr. Chairman. I am pleased we are kicking
off the first of three hearings to explore the overall goals of the
Government Performance and Results Act, agency compliance pro-
cedures, and future objectives for this important legislation.


32

The gentleman from Minnesota, Mr. Peterson.

Mr. PETERSON. I will associate myself with the gentleman from
Wisconsin’s remarks.

Mr. CLINGER. We're very grateful.

Senator Thompson, any further questions?

Senator THOMPSON. No.

Mr. CLINGER. General Bowsher, we want to thank you very, very
much, and your colleagues, Mr. Stevens and Mr. Mihm, for your
very helpful testimony. We appreciate it very much and look for-
ward to working with you as we move toward effective implementa-
tion of this very important legislation.

Mr. BowSHER. We look forward to working with the committee,
both committees. Thank you.

Mr. CLINGER. Our next panel, if they would now come forward
as I introduce you.

First is Dr. Donald F. Kettl, professor of public affairs and politi-
cal science at the University of Wisconsin at Madison, and a non-
resident senior fellow at the Brookings Institution here in Wash-
ington; Mr. Robert W. Lauterberg, director of planning and budget
for the Commonwealth of Virginia; Mr. Frank Fairbanks, city man-
ager for the city of Phoenix, AZ; and Mr. Malcolm Holmes, senior
public sector management specialist with the World Bank, and
former senior official for the Ministry of Finance of the Government.
of Australia.

Gentlemen, we are delighted to have you here today, delighted
to have you with us this morning to share your expertise in this
very difficult but, I think, very important exercise that we're en-
gaged in here. I guess we would begin, if we may, with Dr. Kettl.

Mr. Barrett. Mr. Chairman.

Mr. CLINGER. Oh, I’m sorry.

Mr. BARRETT. I just want to welcome Professor Kettl here.

Mr. CLINGER. Oh, indeed. I yield to the gentleman from Wiscon-
sin.

Mr. BARRETT. He is not a constituent of mine, but I attended the
University of Wisconsin, and he’s got a good reputation there, and
Iam very pleased that he is here today.

Mr. CLINGER. Delighted. Dr. Kettl.

STATEMENTS OF DONALD F. KETTL, PROFESSOR OF PUBLIC
AFFAIRS AND POLITICAL SCIENCE, UNIVERSITY OF WISCON-
SIN AT MADISON, AND NONRESIDENT SENIOR FELLOW, THE
BROOKINGS INSTITUTION, WASHINGTON, DC; ROBERT W.
LAUTERBERG, DIRECTOR OF PLANNING AND BUDGET, COM-
MONWEALTH OF VIRGINIA; MALCOLM HOLMES, SENIOR
PUBLIC SECTOR MANAGEMENT SPECIALIST, WORLD BANK,
AND FORMER SENIOR OFFICIAL, MINISTRY OF FINANCE,
GOVERNMENT OF AUSTRALIA; AND FRANK FAIRBANKS, CITY
MANAGER, PHOENIX, AZ

Mr. KeTTL. Thank you, Congressman.

It is a great pleasure for me to be here. I am, as you introduced
me, Mr. Chairman, a professor in the La Follette Institute of Public
Affairs, at the University of Wisconsin, and also a nonresident sen-
ior fellow at the Brookings Institution Center for Public Manage-
ment. The basic question that I want to try to address today is:


14

the heads of those agencies into a contract basis and things like
that.

So I would say those three countries are ahead of us, and I think
some of the States and even some of the local governments are
ahead of us as well. I think now, in the last 2 years, there has been
quite a bit done at the Federal level, but it has only been in the
recent, I'd say, couple of years that the Federal Government here
has got going on this type of an effort.

Senator THOMPSON. What about the corporate world? Is this not
something that basically is pretty much stock in trade?

Mr. BowsHer. Yes. I think when the Japanese brought in some
of their management techniques and some of the corporate compa-
nies felt the pressure of that competition, they started to have to
make changes here in the last decade or more. And one of the
things that I found very impressive here is trying to get the Gov-
ernment to change, especially a place like DOD, is not easy.

We did a study sometime back between the inventory of medi-
cines and surgical supplies they had at Vanderbilt University Med-
ical School and Walter Reed Hospital. And we found that Walter
Reed Hospital had three times as much inventory as what Vander-

ilt had.

Now, Vanderbilt was more along with the corporate world. What
they were saying is, the important thing is to get that medicine or
that surgical instrument or item to the doctors or the patients
when they need it, faster, not to stock inventory. The Army was
more in its traditional mode of stocking warehouses at a central
place, a regional place, and then at the hospital itself, then on dif-
ferent floors in the hospital.

The way the corporate world has done it is, they have actually
got the suppliers to deliver on a much more, they call it, “just-in-
time” basis. So that’s really what was happening down there at
Vanderbilt. They were getting a prime contractor, as they called it,
to do the warehousing and to do the delivering right there.

Now, the Army was not quick to change, but they finally hired
a retired Navy captain, if you can believe that, who had worked for
Wal-Mart, and he had learned how Wal-Mart did it. So he started
making the change out there, and now they are terrific believers
in that. I was recently up in Philadelphia at one of the big defense
logistics centers where we had done quite a few audits, and they
are making a big change now on what they call the retail items in
the inventory.

If you think about it, in the 1980’s, in the early 1980's, when we
built up the defense budget, we doubled the defense inventory. We
went from 45 billion to 90 billion. Worse, we went from 10 billion
to 30 billion of nonmoving items. In other words, what we did is,
we filled the bins; we filled the warehouses. To a great extent,
that’s what that organization and the people in that organization
were being tested on or reported on. But the truth of the matter
js, that shouldn’t have been the results or outcome, and now they
are just starting to turn it around.

So I think we have a lot to learn from industry. I think we have
some other models here in the State and local governments and
even some of these other countries.


B

Gentlemen, thank you all, It has been very, very instructive, very
useful testimony. You may be receiving some requests to answer in
writing, if you wouldn’t mind doing that, but we really appreciate

our testimony here today. I want to specifically thank my col-
Yeague, Senator Thompson, for coming over to share in this ve
important hearing which our two committees are going to be deal-
ing with down the road. Thank you all.
e committee stands adjourned.
[Whereupon, at 12:05 p.m., the committees were adjourned.]
{Additional material submitted for the record follows:]

PREPARED STATEMENT OF Hon. CaRDISS COLLINS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS

Mr. Chairman, this hearing will examine the early progress of the Government
Performance and Results Act (GPRA), one of the principal management reforms of
the 103rd Congress which gave impetus to President Clinton’s continuing initiative,
the National Performance Review.

I commend the chairman for continuing the oversight begun last year by Chair-
man Horn and Congresswoman Maloney on GPRA, a significant management re-
form whose effects will not become fully apparent for some time yet. In the mean-
time, we can usefully monitor its progress, while offering encouragement and sug-
gesting potential improvements ;

GPRA is the latest in a series of recent laws, such as the Chief Financial Officers
Act and the Inspector General Act, intended to improve performance and to reduce
waste, fraud and abuse. It is intended to improve the efficiency and effectiveness
of Federal programs by requiring agencies to set clear goals for program perform-
ance, and to develop mechanisms to measure the results.

Once GPRA is fully implemented, Federal managers will be held more clearly ac-
countable for the successes and failures of programs at their agencies. And Congress
will have better information to use in evaluating agencies’ future status and funding
requirements.

A principal goal of GPRA is to create a Federal government that routinely oper-
ates with a “customer focus” which drives a continuous reexamination of key serv-
ices, major business processes and the issues affecting their performance.

GPRA is also ex; d to help the President and Congress develop a budgetinj
process which funds programs according to more realistic expectations of goals an

formance, rather than using funds to “reward” or “punish” agencies deemed to

“successful” or “less than fully successful” based on more amorphous or political
considerations.

Implementation of GPRA throughout the government, beginning in 1997, includes
a sequence of strategic plans which define the mission of an agency, performance
plang which express an agency's goals in an “effective, quantifiable and measurable

form” as required by the law; and annual performance reports which evaluate how
realistic an agency's als were and whether they were met.

In March, 2001, OMB would make recommendations to Congress and the Presi-
dent, based on the totality of the GPRA process to that point, on implementing per-
formance budgeting throughout the government.

Mr. Chairman, the attention accorded to GPRA reflects both serious congressional
initiative as well as the renewed sensitivity to management concerns in the Execu-
tive branch since President Clinton took office. It flatly contradicts those critics who
think the Administration hasn't been doing enough.

This hearing on GPRA is particularly timely in view of the March 4 proposal by
Vice President Gore’s National Performance Review that eight agencies Would be re-
vamped in a pilot project to create “performance-based organizations”, which would
enjoy greater flexibility in handling the government’s budget, personnel and pro-
curement rules. These agencies would be headed by officials who might operate
more like the CEO's of private corporations hired under contract, and whose tunure
would be dependent on meeting specific performance targets.

Many questions must be answered about how these PBo's would work in practice.
Passing legislation and conducting oversight relating to them will, no doubt, require
some adaptation of the way we have done things here in the Congress. GPRA will
require this as well.

‘is hearing will help to demonstrate the positive results that can be achieved
if these tools we have put into place are allowed to work as we intended.



58

Mr. Mica. Will the gentleman yield just a moment?
Mr. Shadegg, is Tempe different than Phoenix, the city of Phoe-
nix!

Mr. SHADEGG. Yes.

Mr. Mica. They are two different cities?

Mr. SHADEGG. They are distinct cities.

Mr. Mica. That’s d, because I’m from the University of Flor-
ida, and we are still having bad flashbacks about our experience
with Tempe. Thank you.

Mr. SHADEGG. Thank you, Mr. Chairman.

Mr. CLINGER. Mr. Fairbanks.

Mr. FaIRBANKS. Thank you, Congressman. I think we'd still
claim Tempe as a friend, though. We wouldn’t abandon them.

I would like to speak today really as somebody who is in the
trenches. I am directly involved in the dirty business of dealing
with citizens and employees and delivering services directly to citi-
zens. For me, this issue is probably a little different than it is from
your perspective and from the perspectives of some of the other
speakers. To me, this is really an issue of accountability and re-
sponsibility. It is an issue of the relationship between management
and elected officials and employees, and how we work together to
make sure the job gets done for the public.

In Phoenix, we are determined to be the best, and we want to
be the best by delivering high quality services at the lowest pos-
sible cost. We want to make our community the very best commu-
nity it can be. And it is not good enough for us to be the best
among governmental entities.

One of the things that is happening today is, there are tremen-
dous competitive pressures on businesses, and businesses, eve
day, are speeding up their processes, improving their service qual-
ity, finding faster and better ways to service the public.

What starts to happen to government is, the citizen walks into
one of those businesses and gets excellent service done faster than
it has ever done before, in a friendlier way than it has ever done
before. And then they walk across the street to their government,
and what happens there? All too often, they meet somebody that
doesn’t care, somebody that isn’t in a hurry, somebody that isn’t
committed to doing a good product.

When that happens, we deserve the judgment that citizen makes
of us. If we want to change that situation, we need to find ways,
at every level, to create a situation, when that citizen walks in,
that citizen gets the best service they got that day, the best service
they got that week.

For us, measuring performance is a fundamental tool in this
process. Measurement systems are fundamental because they focus
the attention of employees and managers on results, on outcomes.
Measurement systems create a bottom line for us. How often do we
hear, government doesn’t have a bottom line? A good measurement
system can create that bottom line for us.

Many things go into working on a positive work environment.
For employees, there are always a lot of things to do. There is al-
ways a lot of work that doesn’t happen. It’s easy to forget why we
are working for government. It’s easy to forget why we are there,
unless we have measurements. Measurements direct the attention


6

by those programs. So this, I think, is a good illustration, the Coast
Guard example and the job training program, about what a dif-
ference it really, truly makes.

One of my main central themes today, though, is that strong and
sustained congressional attention must be applied if GPRA imple-
mentation is to be a success. Without it, the congressional and the
executive branch decisionmakers may not obtain the information
they need as they seek to create a Government that is more effec-
tive, efficient, and streamlined.

The authorizing, the appropriation, the budget, and the oversight
committees all have key interests in assuring that GPRA is suc-
cessful, because, as Senator Thompson pointed out, the GPRA can
become a very valuable tool in making the Government more effi-
cient and effective and for Congress to do its oversight. Chairman
Clinger, you issued a letter of instruction here recently, rec-
ommending that the House committees conduct their oversight, in-
cluding GPRA and CFO, to see how well they are doing. I think
that was really excellent.

Among the questions that we think Congress can ask at hearings
are: How well is the agency measuring outcomes? How are the
GPRA performance goals and information being used to drive the
agency's daily operations? Because if you don’t get the program
down to actually where the daily operation are, then just issuing
an annual report or having some goals at the headquarters will not.
get the job done. How is the agency using performance information
to improve its effectiveness? And what progress is the agency mak-
ing in building the capacity necessary to implement GPRA?

As we have looked at some States and even some other countries
in trying to implement this, why, it is obvious that you need some
good training, and sometimes you even need some new talents in
the organization to really make the change in effort as to how you
are trying to deliver these Government programs.

I think maybe a final question might be, what steps has the
agency taken to align its core business processes to support mis-
sion-related outcomes?

So, Mr. Chairman and Senator Thompson, this basically is a
summary of our presentation. We would be very happy to answer
any questions.

[The prepared statement of Mr. Bowsher follows:]

PREPARED STATEMENT OF CHARLES A. BOWSHER, COMPTROLLER GENERAL OF THE
UNITED STATES

Mesere, Chairmen and Members of the Committees:

I am pleased to be here today to discuss the contribution that the Government
Performance and Resulis Act (GPRA) can make to congressional and executive
branch decisionmaking and the key role that Congress can play in fostering PRA
implementation.

"Fhe effort to reduce the deficit has created the need to reexamine and update the
federal government's apending priorities. Ax a result, deficit reduction ie placing
added pressure on agencies to-clearly demonstrate that they are making sound an
ellective use of Laxpayere’ dollars. However, the hard decisions that must be made
to reduce the deficit and manage downsized federal agencies are made more difficult
when agencies—as is often the case—lack clear, results-oriented goals and when re-
Hable, accurate, and timely program and financial information is not available. Bet-
ter performanee and financial information can advance the debate on the need for
and the effectiveness and efficiency of specific federal programs.



29

in and begin to probe, “What does this information tell you?” “How
is it linked to really what you're trying to achieve?” They will say,
“Well, it’s really not” or “We think it’s linked in some indirect way.’
So the first lesson we've seen is that there is a real focus on mak-
ing sure what you measure is really linked to your goals.

A second thing that we've seen is that they focus on the “vital
few,” or what has been called the “vital few.” They don’t try and
develop hundreds or more performance measures. They try and get
it down to just those essential measures that are providing to Con-
gress and the American people and themselves, as agency officials,
the information they need to manage the programs, things like out-
comes and financial information to tell them costs.

The third thing that they do is, they focus on trying to create a
balanced set of indicators; that is, measures that pull them in dif-
ferent directions, create incentives that force them to balance off
competing priorities.

And, finally, the fourth thing that they do, and they spend quite
a bit of time, successful organizations, on this, is that they go about.
trying to make sure that the measures they establish are what are
commonly referred to as “responsibility-linked”—that is, that there
is a reasonable cause-effect relationship between something good
that happens in the outside world and the action of the Federal
agency, that it’s just not what the Australians, when we visited
there, characterized to us as an “end world hunger”-type measure,
which is just—the only thing you conclude at the end of the year
is, world hunger is still there, so you need to give the program
more funding.

There’s a real need to make sure that we don’t get to the those
types of measures. So the “responsibility-linked” measures are the
fourth of the common characteristics.

Mrs. MALONEY. In this Congress, there has been a great deal of
talk and focus and legislation to block int to the States. How
does the Federal Government obtain adequate measures for the
performance of programs which it delegates to the States through
block grants? As you know, many of our Federal programs came
into existence because States were not performing responsibilities
adequately. How are we going to measure performance on block
grants?

Mr. BowsuHER. Well, we talked about that earlier, because what
you've got to do then—and actually there is more of the Federal
Government money that goes out to the State and local govern-
ments and to the private sector today, to actually implement the
programs, than most people realize—so what you've got to do is,
you've got to think through all the way down to that level, not just
the Federal Government’s role, but the role of, in that case, like a
block grant to the State, as to what are you trying to accomplish
and how well are you doing it.

You've got to go out there and look to see how well youre doing.
I think, if the Congress was to decide on a block grant for Medic-
aid, which is one of the issues that you’re debating, why it will be
awfully important to go out and Took at how the States are imple-
menting that and what are the results, not only on an overall pro-
gram, but in some of the very specific areas, like for the disabled,


65

perhaps adding to this legislation a requirement that Congress, as
a part of their appropriations process or authorization process, be
required to set out their own goals.

First of all, do you think that my concern is a valid one or over-
blown? Second, do you think we're going to need that additional in-
ducement to Congress to do its part?

Mr. Ket. I think that’s absolutely the central question, Sen-
ator. My experience, in talking to Federal executives around the
Government here, both in Washington and elsewhere, is that, al-
though the Office of Management and Budget holds the purse
strings within the executive branch, most administrators I know
look much more closely, much more directly, much more quickly to
Congress for cues on what it is that they ought to be doing than
to OMB.

So they are going to be looking to Congress for important clues
about how seriously to take this legislation. If those cues are not
coming back from Capitol Hill, that will tell them immediately that
they don’t need to take that seriously at all. They will, on the other
hand, if Congress takes it seriously, because they are, just like the
city workers in Phoenix and the State workers in Virginia, inter-
ested in doing their jobs well. So it is absolutely essential for Con-
gress to send out the right signals.

The question is, how can Congress go about doing that? Asking
Congress to be crystal clear on its objectives is, of course, obviousl:
the easy but, in the end, probably impossible answer. It’s very dif-
ficult to try to write legislation that you get everybody to agree and
that has crystal clear goals.

But if you can at least establish the basis for a conversation back
and forth, Congress makes the goals as clear as possible, asks
agencies to determine what it is that they think they mean by that,
to allow them to get strategic plans that take those broad goals ani
specify actions that come from that, have Congress have oversight
over that, you can have the conversation back and forth.

So it’s not just a one-time process but a continual effort to try
to further refine what it is that Congress wants agencies to do and
what agencies think they mean by that.

Senator THOMPSON. Yes. And there’s not just a Congress. There
are however many subcommittees we've got, how many committees
we've got, and individuals on that. I mean, it requires everybody
kind of doing the right thing. What do you think the odds of that
are? And I get back to my question, are we going to need legisla-
tion to maybe ensure that that comes about, that really outcome-
based performance is required?

Mr. KeTTL. I think that there’s no doubt that legislation askin
Congress to specify more clearly its goals and Gbjectives woul
surely help this process, but we've also seen that, if Members of
Congress don’t see this in their own self-interest, they will find
ways of avoiding at least the intent if not the letter of the law.

In_a way, my most hopeful view on all this is the experience that
my friends in Australia have had, which is that they have been at
this for a long time and have discovered that it gives them answers
to questions that they need and to which they can get the answers
in no other way.


67

improved, and talk to Members of Congress about that? They first
would be in the position of having to organize themselves more ef-
fectively to do what has to be done. Congress is in a better position
to know which kinds of regulatory strategies are most likely to
work, which, in the end, is hkely to tell Congress about what kind
of regulatory laws to pass to begin with.

It’s a cycle that, with luck, will provide, I think, far better infor-
mation than even cost-benefit regulation about how best to regu-
late in this society.

Senator THOMPSON. Thank you, Mr. Chairman.

Mr. CLINGER. The gentleman from California, Mr. Horn.

Mr. Horn. Thank you, Mr. Chairman. I have two basic ques-
tions. I’m going to ask the first one. I hope I can get a fast answer
and then ask the next one. We have to leave for a vote.

What is the one basic goal measurement unit that you can apply
to most departments? I would like to start with Mr. Fairbanks,
Have you found one basic unit that you ought to apply and is pret-
ty relevant across the board, in terms of achievement of goals?

Mr. FAIRBANKS. I think, from years of having worked with this,
it is fairly difficult to come up with a single measure to evaluate
anything, and that it’s more sensible to look at three or four or five
measures that together describe the situation. You also get into a
practical situation of, you’ve got to have a measure that you can
keep data on, that you have access to data, and that you physically
can keep accurate.

I would say that virtually everywhere we do create cost meas-
ures, and we try to make those cost measures relate to service de-
livery, so cost per transaction. Our financial system doesn’t support
that everywhere yet, but it will in the future. You also need out-
come-based measures which get at the outcome that you're trying
to achieve in that area, and that gets very specific to that area.

Mr. Horn. OK. Mr. Holmes.

Mr. HoLMeEs. If Mr. Fairbanks can’t give you a single answer to
that, then, at the national Government level, it’s even more dif-
ficult. But I think the key point is clarity of objective; what are we
trying to achieve here? 7 think this is related to what Don Kettl
was talking about. This is not something that you can just leave
up to agencies. I mean, this is something that is shared between
the executive, between the legislature, and agencies. And I think
that’s where the strategic planning process maybe really does have
potential.

Mr. Horn. OK. Mr. Lauterberg.

Mr. LAUTERBERG. Our approach in Virginia was to try to limit
the number of measures, particularly as we get started with the
performance measurement process, to limit the number of meas-
ures to those that are most meaningful. I think to try to come up
with a single measure and apply it across the board is somewhat
dangerous because you may end up with measures that don’t mean
very much, and can’t be used to drive program or budget decisions.

Instead, I think the best approach is to have the legislative
branch work with the executive to develop the most meaningful
measures and design them to meet the needs of specific programs.

Mr. Horn. I’m going to have to ask you, Dr. Kettl, if you don’t
mind answering that for the record. My last question—you can an-


68

swer it for the record—is, what is the agency, department, or unit
that has been most difficult to develop a qualitative measure in ac-
complishing the goals, and why has that been the most difficult?
If you had any difficulty beyond the realm with any type of agency
doing certain types of services, I’m fishing for.

If you don’t mind answering that for the record. I don’t want to
miss this vote, so I’ve got to leave, and I apologize.

|The information referred to follows:]

Under Governor Allen's Executive Order, Virginia is now implementing a per-
formance measurement system all across state government. Our system draws from
the experience gained in a pilot program which was begun in 1993. Twenty-four pro-
grams from 21 different agencies participated in the performance measures pilot
program, including such programs as grievance resolution services, offender day re-
porting, and environmental permitting. All eight secretarial areas were represented,

and six of the programs involved inter-agency efforts. Eighteen of the programs.
were new initiatives, and six were ongoing programs.

Most agencies in the pilot did a good job of sctting out their program objectives,
and many measures that were developed addressed the objectives and were appro-
priate. In the first year of the pilot, a total of 376 measures were developed by 22
of the participating programs.

A difficulty encountered during the pilot program was measuring the outcomes of
a program when a number of other variables‘came into play. For example, one of
the pilot programs was responsible for providing planning assistance to rural com-
munities to further their development. Measuring the success of this program was
difficult because there were many variables beyond the control of the program that
also influence development.

One way to deal with this obstacle may be to compare results in communities that
participate in the program to development activilica and results in a control group
of communities not receiving assistance. Such an analysis must be carefully con-
ducted, but would likely provide a clearer idea of the effectiveness of the program.

Mr. CLINGER. I thank the gentleman.

One of the questions that had been raised earlier with Comptrol-
ler General Bowsher was, how does the system work, or how could
it work where we have block grants; in other words, where we are
now talking about devolving things back to the States and, hope-
fully, to the local level? There’s a need, obviously, to have some sort.
of control over the resources and the results, How do we achieve
the kind of outcome, performance-based situation in a block grant?

Dr. Kettl.

Mr. KETTL. One of the things that I think this raises is a ques-
tion that in the block grant debate has not surfaced yet, which is,
we've talked about devolving responsibility to the States, but what
will the Federal role be in block grants? And we have yet to have
a very serious discussion or careful examination of that.

Ideally, what we would like to have is States like Virginia and
cities like Phoenix doing precisely what they are doing, then having
the Federal Government consider, review, summarize, learn from
what it is that the States are doing. But the more that we devolve
responsibility out to State and local government for the implemen-
tation of programs, the more central it is that that be based on a
foundation of the measurement of performance.

One of the things that the Australian Government and the New
Zealand Government have discovered, as they have devolved re-
sponsibility out, not only to the private sector, but also to their
local governments, is the centrality of performance measurement
as the sinews that hold the whole system together. It simply has
to be crucial.


26

Mr. BowSHER. Well, first let me address the one big issue that
you asked, and that is—or the big fear you have—and that is that
it stays up at this level and doesn’t really get down to the organiza-
tion. That is a big part of any failure. When we've seen organiza-
tions—when we go out and look at organizations and find that they
didn’t really make a lot of progress, I think that’s as much a factor
as any.

In other words, people would do the big thinking up here. They
would get a mission statement. They would get a set of goals and
that, but they don’t change the processes down in the organization,
and that takes training. Just as you say, the emphasis has to be
on training, and you've got to go through that to achieve it. And
if you don’t, why then you don’t have a successful program.

I think, as far as the Congress, again, it’s how you review how
well this program is working, as part of your oversight function as
well as the authorizing, on the program reviews and that, and
you've got to make it real. It becomes real to the agencies if the
Congress is asking the question, how well is this working that
you're now trying to put in this new system?

Mrs. MEEK. Thank you. You didn’t answer the latter part of my
question regarding—Mr. Chairman, if I may have this oppor-
tunity—how does this work in or does it work in with the Clinton
administration’s plan?

Mr. BowsHeER. Oh, yes. The NPR efforts and the Clinton people—
the OMB people are trying to—in other words, they are doing the
pilot programs here, so there is that interrelationship.

What I don’t think there has been enough of is, really, Congress
asking enough of the questions about how well is this all working.

And I think this will be especially important as you go through
either an administration change or a second 4 years of the Clinton
administration. Whichever it turns out, you're going to have a lot
of new people, probably, in the executive branch, and it’s awfully
important for the Congress and those new members of the team in
the executive branch to be working together here. Because if you
don’t work together on this kind of an effort, it probably won’t be
successful.

Mrs. MEEK. Thank you.

Thank you, Mr. Chairman.

Mr. CLINGER. Thank you, Mrs. Meek.

Mr. BowsHER. Mr. Chairman, if I could just take 1 minute. Chris
has reminded me, too, that lots of times, if you can do this success-
fully, you end up with less cost. in other words, you have the in-
vestment that you have to make in the training and maybe some
new systems and everything like that, but many times one of the
things you’re hoping to achieve is to produce the Government pro-
grams at less cost.

Mr. CLINGER. Thank you.

Mrs. Maloney.

Mrs. MALONEY. First of all, I'd like to ask if my opening state-
ment could be put in the record.

Mr. CLINGER. Without objection.

[The prepared statement of Hon. Carolyn B. Maloney follows:]


3

Congress and the American people are justified in their concerns that Government
is inefficient and wasteful. Citizens have a right to expect a good return on their
tax dollar investments—but it is difficult for Congress to assure those taxpayers of
good returns on their money when we don’t have the tools to measure performance
and there are sometimes hundreds of programs doing the same thing.

T hope we can eventually use GPRA to compare parallel, similar or duplicate pro-
grams in different departments. Congress could then emphasize the good programs
and focus attention on the non-performers. Special interests or civil servants will
probably be concerned that cross-program comparisons cannot be done due to the
unique provisions of each authorizing statute. There are some limitations in com-
parison, but it seems to me that there ought to be some way to compare similar
programs—and I hope that GPRA will help us examine that.

‘oday’s hearing is a conceptual overview of the act. We hope to arrange future
hearings to examine the Office of Management and Budget’s (OMB) role in the act’s
implementation—and to examine the progress made by specific agencies.

fe thank our witnesses for joining us today and hope that they will give us in-
sight into the special Problems they have had and the lessons learned in perform-
ance measurement and management.

Mr. CLINGER. Now, I am very delighted to welcome and turn the
microphone over to our colleague from the Senate, Senator Thomp-
son.

Senator THompson. Thank you very much, Mr. Chairman. I wel-
come this opportunity to join with you in co-chairing this important
joint hearing of the Senate Governmental Affairs Committee and
the House Government Reform and Oversight Committee concern-
ing the Government Performance and Results Act of 1993.

As you know, this Act is a major reform of the way the executive
branch of the Federal Government does business, and it is crucial
that Congress fully understand its value, particularly to the legisla-
tive process. As those who are already familiar with GPRA know,
Senator Roth authored the legislation in the Governmental Affairs
Committee, and Congressman Clinger played a vital role in moving
it through the House.

Despite GPRA’s approval by wide margins in both houses, I
doubt that most members of either body fully understand what a
powerful tool it gives us as we try to improve Government perform-
ance, reduce its cost, and hold it accountable. That is why I am
pleased that Speaker Gingrich suggested this hearing. It gives all
of us an opportunity to develop a better understanding of how the
Government Performance and Results Act can assist us in legislat-
ing, developing the Federal budget, as well as performing our over-
sight responsibilities.

Up until the passage of GPRA, both Congress and the executive
branch have focused on the programs and activities of an agency,
as well as the costs involved, rather than the results of those ac-
tivities. When Members of Congress debate the funding for these
Federal programs each year, the discussion always seems to focus
on whether something is a Federal responsibility or not, or whether
or not we can afford the program.

While these questions are important, GPRA will force us to ask
other questions, such as, if we are going to spend this amount of
money on this particular program, what should we expect it to ac-
complish in the way of results? And, what objective measures
should we set for determining the success of this program? And,
what goals should we establish to mark the effectiveness of this
agency?


2

must be closely involved in the oversight function of the GPRA.
Like any management program based on measurements and statis-
tics, the GP. also has the potential to be improperly imple-
mented. We have a responsibility to make certain that the informa-
tion we obtain from agencies can be validated and that we get all
the information we need in order to evaluate the programs in a
proper manner.

‘PRA can provide Congress with the information on which to
base sound policy and budgeting decisions. Our commitment to bal-
ancing the budget compels us to scrutinize Federal programs and
examine inefficient and nonperforming programs against efficient
and productive ones.

Congress and the American people are justified in their concerns
that Government is inefficient and wasteful. Citizens have a right
to expect a good return on their tax dollar investments, but it is
difficult for Congress to assure those taxpayer of good returns on
their money when we don’t have the tools to measure performance
and there are sometimes hundreds of programs doing the same
thing.

I hope that we can eventually use the GPRA to compare parallel,
similar, or duplicate programs in different departments. Congress
could then emphasize the good programs and focus attention on the
nonperformers. Special interests or civil servants will probably be
concerned that cross-program comparisons cannot be done due to
the unique provisions of each authorizing statute. There are some
limitations in comparison, but it does seem to me that there ought
to be some way to compare similar programs, and I hope that
GPRA will help us to examine that.

Today’s hearing is a conceptual overview of the Act. We hope to
arrange future hearings to examine the Office of Management
Budget’s role in the Act’s implementation and to examine the
progress made by specific agencies.

'e thank all of our witnesses for joining us today and hope that
they will give us insight into the special problems they have had
and the lessons learned in performance measurement and manage-
ment.

[The prepared statement of Hon. William F. Clinger, Jr. follows:]

PREPARED STATEMENT OF Hon. WILLIAM F. CLINGER, JR., A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA

We are here to receive testimony on the importance of performance measurement
in Government and status of the Government Performance and Results Act of 1993
(GPRA). I am delighted that the Vice President highlighted Government perform.
ance in his speech, Monday at the National Press Club, and I hope that it will
translate into an interest in the implementation and enforcement of this statute
which was passed by the Cor 38 and enacted into law in 1993. We look forward
to working with the Vice President on this issue. .

GPRA has the potential to be an extremely powerful tool, for use in managing
Federal programs and policies. However, Congress must be closely involved in over-
sight of PRA. Like any management program based on measurements and statis-
tics, GPRA also has the potential to be improperly implemented.

‘We have a responsibility to make certain that the information we obtain from
agencies can be validated and that we get all the information we need to evaluate
programs properly. ;

GPRA can provide Congress with the information upon which to base sound policy
and budgeting decisions. Our commitment to balancing the budget compels us to
scrutinize federal programs and examine inefficient and non-performing programs
against efficient and productive ones.


15

Senator THOMPSON. You mentioned the problem of overlapping
programs, job training, for example, over 100.

Mr. BowsHER. 160.

Senator THOMPSON. 160 job training programs, I think, over
about 15 different agencies.

Mr. BowsuHer. Right.

Senator THOMPSON. Now, this new approach surely can have
something to do with determining the effectiveness of each individ-
ual job program. How will it help the overlapping programs? Will
this, in some way, facilitate the consolidation of these?

Mr. BowsHER. If OMB and some central organization steps in
and play the role that they should play, which they are presently,
I think, trying to do, why then you should get to the overlapping
issues.

In other words, if you leave it just to each individual agency,
without some effort to get rid of the overlap and the duplication,
a lot of times it won’t happen. But if you have that kind of a
central effort, or if Congress takes an interest, as many of the
members have in this one area because of the GAO reports, report-
ing to Senator Nancy Kassebaum’s committee, why they have
taken a real interest in trying to do it.

So I think this process can be a big help in doing it. But if you
don’t have that focus and don’t have the reporting so that you now
have 160—one of the problems was, for a long time people didn’t
know that they had 160 problems. They didn’t know what kind of
results they were getting from those program either. And we went
out and did those audits and came up with this huge problem.

Senator THompson. Thank you, Mr. Chairman.

Mr. CLINGER. Thank you, Senator.

I now recognize the gentleman from Pennsylvania, Mr. Fox.

Mr. Fox. Nothing at this time.

Mr. CLINGeR. Mr. Bass.

Mr. Bass. No questions at this time, Mr. Chairman.

Mr. CLINGER. Then let me ask a couple.

General, I think, as you know, one of the problems we have had
with the Chief Financial Officers Act is that we didn’t feel that the
last administration or, indeed, in the early part of this administra-
tion, that they were really serious about getting top flight people
into those positions. I think that the effectiveness of this Act is
going to be equally dependent upon a commitment by top manage-
Ment in all these agencies to pursue it. Have you got a feel br
whether there is that kind of a commitment?

Mr. BOWSHER. Yes. It’s very important because none of these
new management processes really ever work unless you get good
leadership and talented people implementing them. I think the
CFO Act, if I could go back to that for 1 second, was a good illus-
tration. When the Congress passed it, we were in the middle of the
Bush administration. They had a lot of the people in place; a lot
of them didn’t have the right background. They didn’t move them
out, which is what you would normally see in a situation like that.
But when the new administration came in, the Congress spoke to
them and they really have put in qualified CFO’s. So I think we’re
making a lot of progress in the CFO Act in the various agencies.


5

financial report. And in 1997, we will be issuing a consolidated re-
port to the American taxpayers, with a GAO audit being performed
on that consolidated report.

I think equally important to these audits and to the financial re-
ports at the end of the year is program cost information. One of the
things that we have done in setting the new standards is to insist
that the cost information of our programs be developed in an orga-
nized fashion, much better than we have in the past.

RA, of course, is the other very key legislation that has been
passed to focus on the outcomes of Federal programs and to deter-
mine what is the real difference that these Federal programs have
made in people’s lives, such as the increase in real wages earned
by graduates of an employment fraining program or a reduction in
the fatality and injury rates in the workplaces or on the highways.

Now, again, the legislation called for a specific set of dates and
accomplishments. One is, by 1997, every agency is supposed to
have a 5-year plan. By 1999, they are supposed to convert that into
an annual plan and, in the year 2000, actually issue reports that
summarize what the results are, and to issue those reports to the
President, to the Congress, including the authorizing and appro-
priation committees, and to make those reports available to the
public.

GAO's role, as the auditor, is to review how well this is working.
You also included in the GPRA legislation that we would issue a
formal report on June 1, 1997, on the progress of GPRA. Mean-
while, as we work with both committees, it is our agreement that
we would try to work here, not wait for that deadline, and try to
report to you on a progressive or concurrent basis, and that is one
of the reasons we can be here today to report on how well things
are going.

It ink one thing that is encouraging is that a growing number
of the Federal agencies are seeing that a focus on outcomes can
lead to dramatic improvements in effectiveness.

For example, the goal of the Coast Guard’s Marine Safety Pro-
gram is to protect the public, the environment, and the U.S. eco-
nomic interests through the prevention and the reduction of marine
incidents. When the Coast Guard began to focus on the outcomes
that it was really trying to achieve in that program, such as fewer
injuries and fatalities, rather than activities such as the number of
physical inspections of ships, it fundamentally shifted its program
efforts.

The Coast Guard found that, although it traditionally con-
centrated on inspections, two-thirds or more of all the reported cas-
ualties were caused by human error. As a result, the Coast Guard
began to work in partnership with the towing industry to build the
knowledge and the skills of towing industry employees. The Coast
Guard’s redirected efforts contributed to a significant decline in the
towing industry fatality rate, which went from 91 per 100,000 in-
dustry employees, in 1990, to 36 per 100,000, in 1994.

Now, if you look at job training, it’s just kind of the opposite. In
other words, when GAO was asked to do a series of audits and
studies there, we eventually found there were 160 programs, cost-
ing the American taxpayer about $20 billion, and you really didn't
have any goals or reporting on how much was being accomplished


21

I don’t know if we have any idea as to how to test it, because
a lot of it is—and more and more is going to be—on the prevention
side, which is a long-lead item, at best. And over here on the side
you've got constantly changing factors, demographics, for example.
The teen population is dipping now. The teen population, the trou-
bled population, is going to be heavier. So the programs may be
working very well, and you have even more and more crime.

know this is a load all at once, but they are just scattered
thoughts of problems that I see that are going to be extremely dif-
ficult if O) and these congressional committees, at the lowest.
levels, are not constantly on these things. What are your insights
into that?

Mr. BOWSHER. Well, I think you raise a very important point,
and that is that a lot of the Federal Government money goes out
to State and local governments or to the private sector; the pro-
gram is not totally run by the Federal Government agency. I think
what you have to do is, you have to get the Federal agencies think-
ing more along the lines of what are the results that they want,
including the actions of the people that they are sending money out
to.
In other words, one’ of the great problems we have fallen into in
the Federal Government was that, if you go back 50 years, the Fed-
eral Government pretty much ran whatever they were doing, and
all our focus was on that. I think the S&L crisis was a great exam-
ple of where legislation and oversight got us into trouble or was a
contributing factor to getting us into trouble, and then it cost the
taxpayer $200 billion. And the Federal Government's role, they
didn’t play it very well, some of the regulatory agencies and that.

So I think—like I just received an annual report here from the
Arizona Department of Economic Security, which is a little bit like
our Labor Department and our HHS. d the person who is in
charge of this, Linda Blessing, sent me the annual report that’s got
the financial reports and everything, but also it’s got the results-
oriented Programs; in other words, for their Dislocated Worker Pro-

‘am, their Family Investment Initiative, the Child Support En-

forcement, the Healthy Families.

Now, a fot of this, as you point out, Senator, is funded by Federal
money. So the big thing is to get our HHS people and our OMB
people, and eventually our congressional people, thinking, how does
that money flow out of the Federal Government down to Arizona,
out there to service these people, and are we really accomplishin;
something for the people out there that need this help. We haven't
had that focus, generally, in the past. It was really, did we get the
check out there to the State of Arizona, or did we get the Social
Security checks out to the agent there.

So it is, a much broader thinking, but it’s more in line with what
the people that are sending their tax money in here are really rely-
ing upon the Government to do. So it’s a big change. It’s going to
take a lot of change, as far as talent and training in the OMB staff,
in the congressional staffs, and the congressional oversight. No
question about it.

Senator THOMPSON. Right.

Mr. BowsHer. Yes. I might point out, too, that when the United
Kingdom went at this, they went after the areas that they thought


PERFORMANCE-BASED GOVERNMENT: EXAMINING
THE GOVERNMENT PERFORMANCE AND RE-
SULTS ACT OF 1993

JOINT HEARING

BEFORE THE

COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES

AND THE,

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION

MARCH 6, 1996

Printed for the use of the Committee on Government Reform and Oversight and
the Committee on Governmental Affairs

oe

U.S. GOVERNMENT PRINTING OFFICE
23-946 CC WASHINGTON : 1996

For sale by the U.S. Goverment Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

> ISBN 0-16-052757-0
SPO,



44

ber of important roles for the legislative branch to play in a per-
formance measurement system. At the Federal level, you could
probably identify at least seven areas where the Congress should
be involved.

First, Congress should help select the key program performance
indicators that will be tracked. This is a fundamental policy issue,
and it will be critical to your oversight that the agencies are mon-
itoring performance measures that measure the success of pro-
grams that you consider to be most important.

You should review the design of how performance data will be
collected, as well, to make sure that the data is meaningful, verifi-
able, and objective.

Third, the congressional committees should monitor actual per-
formance measures at regular intervals to identify problem areas,
unusual successes, and trends.

Fourth, performance data should be compared to benchmarks.
You can compare the program results of Federal agencies, and the
results of Programs in those agencies, with programs in other agen-
cies or with other subprograms at various levels of government and
in the private sector.

Fifth, you should compare the efficiency and effectiveness of al-
ternative programs that have substantially similar missions. In
Virginia, when we prepared our budget, the Governor included a
proposal for dealing with juvenile crime that had three different
approaches. One was to establish boot camps. Another was the es-
tablishment of wilderness work camps. And then, third, we are im-
plementing military school style discipline in some of the tradi-
tional youth detention facilities.

Now, these are three different approaches. They have different
costs on a per-bed basis. The length of incarceration in each of
those will be also different. So the real issue that we have to ad-
dress is, which is most effective in terms of avoiding recidivism and
will present the best combination of cost and effectiveness? Only
through objective data collection will we be able to answer this
question, and that will take several years to answer.

Sixth, your program funding decisions should be based, whenever
possible, on historical relationships between funding and perform-
ance. In Virginia, when we budget for economic development pro-
grams, we are able to look at these historical relationships in terms
of the amount of funding that is spent for economic development
and the number of new jobs that are created and the millions of
dollars in new investment that are generated by businesses at-
tracted to our State.

Last, performance measures at the Federal level may be used to
support the turning back of responsibilities to States. As Congress
is looking to transfer more programs to the States, State govern-
ments are looking for more flexibility in administering the pro-
grams. Performance measures can be used to maintain accountabil-
ity in those programs, even as strict mandates are being rolled
back.

With that, 1 appreciate the opportunity to address the committee
and look forward to your questions.

(The prepared statement of Mr. Lauterberg follows:]


8

Strong and sustained congressional attention to GPRA is needed now because
some agency officials have qpestioned Congress’ commitment to GPRA. Officials in
some pilot agencies have told us that Congress seldom asked about the implementa-
tion of GPRA in their agencies, how their agencies’ services and products were di-
rected at achieving outcome-oriented goals, and their agencies’ progress toward
achieving those goals. Agency officials said that evidence of rea] involvement and
interest on the part of congressional committees in using performance goals and in-
formation to help in congressional decisionmaking would Belp to build and sustain
support for GPRA within ther agencies.

BETTER DEFINING AGENCIES’ MISSIONS AND GOALS THROUGH THE GPRA STRATEGIC
PLANNING PROCESS

A comprehensive reassessment of agencies’ roles and responsibilities is central to
any congressional and executive branch strategy that. seeks to bring about, a govern-
ment that is not only smaller but also more efficient and effective. GPRA provides
a legislatively based mechanism for Congress and the executive branch to jointly en-
gage in that reassessment. In crafting GPRA, Congress recognized the vital role that
consultations with stakeholders should have in defining agencies’ missions and es-
tablishing their goals, Therefore, GPRA requires agencies to consult with Congress
and other stakeholders in the preparation of their strategic plans. These consulta-
tions are an important opportunity for Congress and the executive branch to work
together in reassessing and clarifying the missions of federal agencies and the out-
comes of agencies’ programs.

Unclear Missions and Goals and Poorly Targeted Programs Hamper Agencies’ Effec-
tiveness

Many federal agencies today are the product of years of accumulated responsibil-
ities and roles as new social and economic problems have arisen. While adding the

articular roles and responsibilities may have made sense at the time, the cumu-
Jative effect has been to create a government in which all too frequently individual
agencies lack clear missions and goals and related agencies’ efforts are not com-
plementary. Moreover, legislative mandates may be unclear and Congress, the ex:
utive branch, and other stakeholders may not agree on the goals an agency and its
programs should be trying to achieve, the strategies for achieving those goals, and
the ways to measure their success.

For example, we reported that the Environmental Protection Agency (EPA), had
not been able to target its resources as efficiently as possible to address the nation’s
highest environmental priorities because it did not have an overarching legislative
mission and its environmental responsibilities had not been integrated.‘ As a result
of these problems, EPA could not ensure that its efforts were directed at addressing
the environmental problems that posed the greatest risk to the health of the U.S.
population or the environment. To respond to these shortcomings, EPA is beginning
to sharpen its mission and goals through its National Environmental Goals Project,
a long-range planning and goal-setting initiative that, as part of EPA’s efforts under
GPRA, is seeking to develop a set of measurable, stakeholder-validated goals for im-
proving the nation’s environmental quality.

‘The situation at EPA is by no means unique. Our work has shown that the effec-
tiveness of other agencies, such as the Department of Energy and the Economic De-
velopment Administration, also has been hampered by the absence of clear missions
and strategic goals.

‘The federal government’s adaptive response over time to new needs and problems
also has contributed to fragmentation and overlap in a host of program areas, such
as food safety, employment training, early childhood development, and rural devel-
opment.6 Overlapping and fragmented programs waste scarce funds, confuse and
frustrate program customers, and limit the overall effectiveness of the federal effort.
For example, the $20 billion appropriated for employment assistance and training
activities in fiscal year 1995 covered 163 programs that were spread over 15 agen-

3See Addressing the Deficit: Budgetary Implications of Selected GAO Work for Fiscal Year
1996 (GAO/OCG-95-2, Mar. 15, 1995) and Deficit Reduction: Opportunities to Address Long-
Standing Government Performance Issues (GAO|T-OCG-95-6, Sept. 13, 1995).

“Environmental Protection: Current Environmental Challenges Require New Approaches
(GAO/T-RCED-95-190, May 17, 1995).

Sco, for example, Department of Energy: Need To Reevaluate Its Role and. Missions (GAO!
‘T-RCED-95-85, Jan. 18, 1995) and EDA’s Management Challenges (GAO/GGD-95-62R, Feb.
17, 1995).

§Sco, for example, Food Safety: A Unified, Risk-Based Food Safety System Needed (GAQ/T-
RCED-94-223, May'25, 1994) and Early Childhood Programs: Multiple Programs and Overlap-
ping Target Groups (GAO/HEHS-95-4F8, Oct. 31, 1994).


7

Congress already has established a legislative framework for fenerating improve-
ments in the kinds of information needed by decisionmakers. The Chief Financial
Officers (CFO) Act and GPRA—passed under the joint leadership of the Senate
Committee on Governmental Affairs and the House Committee on Government Re-
form and Oversight—represent the cornerstones of that legislative framework. I
have discussed the firat of these two cornerstones in previous appearances before
these committees.! | observed that, through the implementation of the CFO Act,
agencies have made steady progress in overcoming decades of neglect in fundamen-
tal financial management operations and reporting. However, 1 also noted that
much more progress was essential if agencies were to produce audited financial
statements under the required timetable and to provide decisionmakers with needed
reliable financial and program cost information.

The second of the legislative cornerstones, GPRA, requires agencies to set strate-
ric goals, measure formance, and report to the President and Congress on the
legree to which goals were met. Congress intended for GPRA to fundamentally shift

the focus of federal management an: secountability from a preoccupation with staff-
ing and activity levels to a focus on “outcomes” of federal programs. Outcomes are
reaults expressed in terms of the real difference federal programs make in people's
lives, such as the increase in real wages earned by graduates of an employment
training program or a reduction in the fatality and injury rates in workplaces or
on highways. GPRA is being implemented initially through 71 pilot projects during
fiscal years 1994 through 1996 to provide agencies with experience in meeting its
requirements before governmentwide implementation in the fall of 1997.

8 you know, I have supported the intent of GPRA and believe that it offers sig-
nificant potential for enhancing decisionmaking and improving the management of
federal programe. My comments today are based on our completed and ongoing re-
views of efforts to implement GPRA in the pilot and nonpilot agencies. re-
quires that we report to Congress by June 1, 1997, on the implementation of GPRA,
including the prospects for compliance by nonpilot agencies. As .d with the com-
mittees, our strategy has been to report regularly on GPRA and related initiatives
throughout the pilot phase.? These products will form the basis for our more com-
prehensive assessment in 1997.

‘A growing number of federal agencies are beginning to see that a focus on out-
comes can lead to dramatic improvements in effectiveness. For example, the goal of
the Coast Guard’s marine safety program is to protect the public, the environment,
and U.S. economic interests through the prevention and mitigation of marine inci-
dents. When the Coast Guard began to focus on the outcomes it was trying to
achieve, such as fewer injuries and fatalities, rather than on activities, such as the
physical inspections of ships, it fundamentally shifted its program efforts. The Coast

uard found that, although it traditionally concentrated on inspections, two-thirds
or more of all reported casualties were caused by human error. As a result, the
Coast Guard began to work in partnership with the towing industry to build the
knowledge and skills of towing industry employees. The Coast Guard’s redirected ef-
forts contributed to a significant decline in the towing industry fatality rate, which
went from 91 per 100,000 industry employees in 1990 to 36 per 100,000 in 1994.

However, our work also has shown that a fundamental shift in focus to include
outcomes does not come quickly or easily. The experiences of states and forei lo
ernments that are leaders in implementing management reforms similar to ciara
and the early experiences of many GPRA pilots—show that outcomes can be very
difficult to define and measure. These organizations also found that a focus on out-
comes can require major changes in the services that agencies provide and the proc-
esses they use to provide those services, as the experience of the Coast Guard dem:
onstrates.

Given that the changes envisioned by GPRA do not come quickly or easily, my
central theme today is that strong and sustained congressional attention to. CPRA
implementation is critical. Without it, congressional and executive branch
decisionmakers may not obtain the information they need as they seek to create a
government that is more effective, efficient, and streamlined. Authorization, appro-
Biiati n, budget, and oversight committees all have key interests in ensuring that

PRA is successful, because once fully implemented, it should provide valuable data
to help inform the decisions that each committee must make.

Financial Management: Continued Momentum Essential to Achieve CFO Act Goals (GAO/T-
AIMD-96-10, Dec. 14, 1995) and Financial Management: Must Be Sustained to Achieve the Re-
form Goals of the Chief Financial Officers Act (GAO/T-AIMD~-95-204, July 25, 1995).

2These producta, along with other relevant GAO work, are listed in the “Related GAO Prod-
ucts” section of this statement.



57

out with the bath water. Equally naive is the view that performance measure-
ment is impossible or merely attempting to “quantify” the unquantifiable. Our
contention is that performance measurement and its wider use in performance
management is a worthwhile exercise, as long as it is done in full knowledge
of its limitations. At the very least it can provide improved information relevant
to decision-making. It can usefully inform the budget process without a pretense
that there can be a direct link between the budget anc performance. Tt may also
provide useful accountability information for public debate. Indeed, a major
spin-off from the reforms has been stantial increase in the amount of infor-
mation of impacts of government policies and programs as reflected in budget
documents, annual reports, etc. Despite the limitations of this information, we
can say that, in most countries, there has never been so much available infor-
mation. This has, for the most part, contributed to much greater transparency
in government, ‘a major factor in improving performance. ; .
fe would emphasize that a performance orientation is only marginally influ-
enced by the existence of performance information. The need for much greater
attention to be given to changing the incentives in the institutional frame-
work—the budget and personnel systems, the approach to control and risk man-
agement, etc., so that performance is encouraged, rewarded and required.
I will provide separately to the committee staff copies of the following documents
from Australia: *
Performance Information and the Management Cycle
* Resource ments
* The: Use of Evaluation in the 1993-94 Budget
I would be happy to elaborate on the above in response to questions, either with
specific illustrations of an enabling environment and/or of specific uses of perform-
ance information.

[* Epitor’s Note: The information referred to can be found in
the Committee on Government Reform and Oversight’s files.]

Mr. CLINGER. Thank you very much, Mr. Holmes. We do look for-
ward to asking you some questions, because the experiences that
you have had are very, very helpful to us as we look at this.

Now I would like to call upon the gentleman from Arizona for an
introduction.

Mr. SHADEGG. Thank you, Mr. Chairman. It is a privilege for me
today to introduce a friend and a distinguished administrator.

Frank Fairbanks received his master’s in business administra-
tion from UCLA in 1970, his bachelor of finance from Loyola Uni-
versity of Los Angeles in 1969. He joined the city of Phoenix in
1972, and was appointed city manager in April 1990. Since doing
so, he has had a distinguished career. He has been cited by the
American City and County Magazine, which named him, in 1994,
its Municipal Leader of the Year. Governing Magazine named him
Public Official of the Year in. 1994.

He has been a fellow in the National Academy of Public Adminis-
tration. In 1983, under his leadership, the city of Phoenix won the
Carl Bertelsmann Prize as the best-run city in the world. It was
jointly awarded, as we know, to Phoenix and to Christchurch, New
Zealand.

Phoenix has been named one of the top-ranked cities for financial
management in the United States by Financial World Magazine in
March 1995. It has been cited in a number of books and magazines
including Reinventing Government, by David Osborne and Ted
Gaebler, as being innovative in improving service quality, reducing
costs, speeding processes, and developing new approaches to deliv-
ering services.

It is my privilege to introduce the city of Phoenix city manager,
who flew all night last night to get here and flies all night tonight
to get back to Phoenix, Frank Fairbanks.



40

better than any input data. Advocates of the crime bill several years ago declared
success by putting 100,000 more cops on the street. What really matters, of course,
is whether the cops actually got to the street and what they did. when the got there.

More experienced nations have developed different approaches to these tough
questions. New Zealand officials are quite explicit in arguing that the system should
be limited to output measures. That, they say, keeps the system firmly grounded
and allows clear analysis of who does what. The British government, likewise, has
focused on outputs. In Canada and Australia, however, the government has broad-
ened the focus to assessing outcomes, although output measurement remained the
basic building block.

We quite simply will not know what works best in the American system until we
get more experience. But any output/outcome-based system will be vastly su
to our current non-system, which too often judges performance based on tax dollars
spent. GPRA requires agencies to measure outputs; it asks them to move toward
outcome assessment. It is thus the first step toward the more sophisticated perform-
ance measurement system the nation needs.

The output/outcome question is not an either/or choice. Output measurement is
the building block for everything that follows. Moreover, it yields information far su-
perior to input-based judgments. We ought to move aggressively through better stra-
tegic planning to output measures.

* GPRA builds an important foundation for better policy making by making man-
agers identify and measure outputs.

6. Performance Measurement Can Improve the Authorization Process

Members of Congress face tough questions in authorizing programs: What is the
best way to attack a problem? ‘How much money should we spend on trying to do
so? What works? Given impossibly competing demands, where should we spend
extra money—and which programs should be cut? There are no easy answers to
what inevitably requires tough political judgments. But performance measurement
can provide some clues.

First, performance measurement generates real information beyond the usual
round of claims made by program advocates. What does an agency do and how well
does it do it? The experiences of other nations, as well as of state and local govern-
ments who have experimented with this system, is that performance measurement
greatly informs political judgments. Hard data, moreover, can help counter strong
political pressure.

Second, performance measurement provides a way to allocate scarce tax money.
Economists talk about the marginal productivity of an extra dollar: Where can we
invest the next dollar so that it produces the greatest impact? Performance meas-
urement can identify which programs work best so that members of Congress can
tell where money will be best spent.

Third, performance measurement suggests which policy strategies are likely to be
most effective. The more agencies describe what they are trying to do, how they are
trying to do it, and what they accomplish, the more members of Congress will know
about what works. Should federally funded job training rely on federal grant. pro-
grams to state governments or vouchers to those who need training? private
companies provide better payroll services than the government's own operations?
Performance measurement can never provide foolproof answers to hard problems.
But it can shine a searchlight into the dark recesses of government programs and
provide valuable clues about what works best—and why.

‘* By focusing conversations on outputs instead of inputs, on results instead of
dollars, GPRA can help members of Congress make better decisions about which
programs to authorize and how much money they ought to receive.

7. Performance Measurement Can Improve the Appropriations Process

The Appropriations Committees face even tougher problems: comparing the value
of competing programs, and weighing how much to spend overall with the tax dol-
fare aveilabler The stra gle revolves around how to create a picture of the whole
how to talk about critical tradeoffs, and how to move the debate from particularize:
claims to the big policy issues.

‘As long as the debate centers on how much to spend—that is, on inputs—it will
be impossible to jump the gap to the big questions. The United States has spent
a decade devising and debating procedural fixes to these questions. Results
proven modest because it is fundamentally impossible to join the symbol of a bal-
anced budget (supported by everyone in theory) with the detailed decisions needed
to reach it (contested by everyone in practice). This is a fundamentally unbridgeable
gull.



28

front that “Gee, GPRA won’t change a lot here. We’ve been doing
it for years.”

That tells us or gives us an initial indication that an organiza-
tion probably just doesn’t get it, that they are thinking that what
they have traditionally measured, what they have traditionally
held themselves accountable for, and what they traditionally have
reported to the Congress, things like activities, are going to cut it
in the new environment. That's not what GPRA is about, and we
spend some time trying to convince them on that.

What organizations typically find, and it takes some time, and
this is why it took Australia and some other countries 10 or more
years to get there, is, as you begin to start focusing on outcomes,
the real results that you get from your program, it can really
change over what you do on a day-to-day basis. The Coast Guard
has found that, and other organizations all across the Government
are beginning to see, once they focus on outcomes, it really changes
what they do.

At this point, we don’t see the need for any broad changes other
than just to continue, on the part of the Congress, to press agencies
and insist that they think in terms of outcomes, that they report
to you in terms of outcomes, and that you hold them accountable
for those outcomes. That’s the advantage of the pilot period for all
of us to test out how that works.

Mrs. MALONEY. Do you think, with Congress watching more
closely, agencies would set their performance targets more accu-
rately or not? Wouldn’t there be the temptation to low-ball their ex-
pectations so that performance would look better in the end, so
that they would be reported because they have done better than
what they projected they would do? How do we guard against that?

Mr. BowsHEr. I think there’s always that temptation, but I
think, also, what I’ve noticed in organizations that fet into this,
they generally want to do it right. In other words, if you’re going
to try to figure out what your results-oriented efforts ought to be,
1 think there has generally been good motivation, myself. Now, I
think one of the roles of OMB and of the Congress is do some
checking; in other words, to make sure that people aren’t falling
into those traps of low-balling the targets.

Mrs. MALONEY. There has been testimony about the need to
adopt new ways to measure performance, but there is not nec-
essarily agreement among experts and Government administration
about how best to do this. Can you outline for us what some of the
basic concepts are which we can expect Government agencies to
consider? How can we help ensure that there is some degree of con-
sistency?

Mr. Min. Ma’am, in the work that we’ve been doing in the
GPRA pilots, and work that we did in leading States that are im-
plementing programs like GPRA, and in leading countries that are
implementing programs like GPRA, there are a number of charac-
teristics that we've seen that are common to successful perform-
ance measurement efforts.

First, they are very careful about linking what they do, linking
their measurement systems to the goals that they are trying to
achieve. All too often we find, in Federal agencies, they can be
measuring literally dozens or more things, and then when you go


45

PREPARED STATEMENT OF RoBERT W. LAUTERBERG, DIRECTOR OF PLANNING AND.
BUDGET, COMMONWEALTH OF VIRGINIA

Chairman Stevens, Chairman Clinger, and Members of the Committees, I am
pleased to be here today to discuss our efforts in Virginia to meet our citizens’ de-
mands for a more responsive and cost effective state government. The management
structures and processes that were satisfactory in years past are no longer effective
in an environment of rapid change and intense competition for resources. The need
to prioritize programs and spending and to ensure high performance and account-
ability has never been greater.

Until recently, strategic planning and performance measurement were employed
only sporadically and to varying degrees by Virginia state agencies. Even in the

incies where these management tools were being used, there was little or no ex-
plicit linkage between strategic planning, performance measurement, and budget-

Ing.
"Beginning in the summer of 1995, Governor George Allen instituted a perform-
ance accountability system, known as the Goal Setting and Performance Budgeting
process, throughout all executive branch agencies. Our system fully integrates the
concepts of strategic planning and Performance measurement with nudge decision-
making. While we reco; that this approach is not a panacea to address all of
the challenges facing irginia state government, we have begun to see positive re-
sults, even in the short time that the system has been in effect. We anticipate a
still greater payoff will occur in future years, as objective performance data becomes
available to policy makers in programs and agencies all across state government.

I hope my comments here today will help you understand the approach we are
using to create increased accountability and a more results-oriented state govern-
ment—and to identify the potential benefits of such a system for the federal govern-
ment.

1. AN OVERVIEW OF VIRGINIA’S PERFORMANCE BUDGETING PROCESS

During the past ten years, state government in Virginia has been impacted by an
economy in transition from boom times, to recession, to the current period of slower,
more stable growth. The economic climate of the past decade at first produced auto-
matic, double-digit increases in state revenues and rapid increases in state spend-

ing.
Today's economy, in contrast, has had a sobering effect on revenue growth. The
biennial budget that Governor Allen introduced to the current session of the Vir-
ginia General Assembly calls for the third smallest increase in state spending at any
time in the past 25 years. Only the budgets of the recent recession yeara grew more
slowly.

But even as state resources become more constrained, a consensus is emerging
among Virginia residents that state government must aggressively work to
strengthen our system of public education, make our streets and communities safe
from crime, and encourage sound economic growth. What is needed is a way to set
budget priorities that focus scarce state resources on the programs that demonstrate
the best results.

Goal setting and performance budgeting

Under the leadership of Governor George Allen, his Cabinet Secretaries, and
agency management teams, the new budget process was implemented in 1995 to set
priorities and ensure accountability in state government. The new budget process
incorporates strategic planning and performance measurement practices, which
have been successfully implemented in the private sector and are increasingly being
used in the public sector. In state government, these toola are enabling policy male
ers to make informed decisions based on a thorough examination of the role, cost,
and performance of programs and activities.

As a precursor to budget development, the new process guided each state agency
through an exercise to evaluate which programs and services are an appropriate
role for state government, and whether they are being delivered in the most effec-
tive and efficient way. Performance budgeting has enabled us to identify opportuni-

ies for eliminating wasteful spending and prioritize programs and services. It pro-
vides a mechanism for measuring performance, while erhancing the level of infor.
mation available to the Governor and the General Assembly br formulating the
udget.

State government is being increasingly challenged to effectively allocate resources
to meet the needs of its citizens. An assessment of Virginia state government must
therefore be an ongoing process. Past priorities and missions must be critically eval-
uated in today’s context. Every agency must examine these factors to identify ways



27

PREPARED STATEMENT OF HON. CAROLYN B. MALONEY, A REPRESENTATIVE IN
ConGRESS FROM THE STATE OF New YORK

Thank you, Mr. Chairman, for holding this important hearing on the Government
Performance and Results Act of 1993. There is always room for improvement in gov-
ernment management techniques. Setting goals and priorities and ensuring satisfac-
tion for the public is a major priority. Government Performance and Results
Act (GPRA) was one of the first major steps taken by the 103rd Congress to re-in-
vent government: Currently in the process of implementation, GPRA has strong sup-
port from both sides of the aisle in Congress and in the Administration, as one of
the key elements of the National Performance Review.

Federal managers today are impaired in their attempts to improve efficiency and
effectiveness because they lack the program goals and performance measurements
which GPRA requires. And as they work to provide public services, they are increas-
ingly expected to perform with fewer resources. The implementation of GPRA will
provide incentives for new ways of getting things done. Implementing it will not be
easy, but its benefits will be great.

By the beginning of the next century, GPRA will hopefully have a dramatic effect
on the way the Federal budget is prepared, ‘and how agency performance is meas-
ured. This will Produce profound change, both in the mechanics and in the culture
of government. The Act is currently in its infancy, with only a small number of pilot
programs being run. Nevertheless, oversight is very important—the best way to en-
sure that the plans of Congress are correctly implemented is to start early. GPRA
will provide Congress with improved sources of information on government perform-
ance. We need to learn to absorb that data and act on it intelligently. So, I'm espe-
cially pleased that the Comptroller General is addressing this in his testimony.

Mr. Chairman, I hope that our colleagues consider carefully the information gath-
ered at this hearing as they ponder the issues of government management and
budget policy in the second session of the 104th Congress. It could prove invaluable
in setting priorities as we look ahead to the next century. While these issues do not
often generate excited public interest, they are essential to the proper functioning
of government.

ank you Mr. Chairman.

Mrs. MALONEY. I'd like to ask the Comptroller, you just made the
statement and the point. that Congress needs to encourage the
agencies in the efforts to do better, but is there anything more spe-
cific that we can do?

Mr. BowsHER. Well, I’ve always thought that Congress could do
a better job of rewarding programs that are having success and
maybe holding back some money from programs that aren’t doing
so well. I've always thought that Congress maybe fell into a trap
of continuing to give as much money to lots of programs that
weren’t working very well. And I think this should focus a lot bet-
ter as to what programs really are worthwhile and which ones are
being run efficiently and effectively. Then I think Congress has got
to use the money decisionmaking a little more effectively than
maybe they have in the past.

Mrs. MALONEY. In your testimony, you discuss problems which
appeared in evaluating the various GPRA pilot programs, such as
the difficulty in shifting agency focus to outcomes. Are there spe-
cific patterns in these problems or errors which GAO has observed
throughout these agencies in testing GPRA, and do these suggest
any broadly applicable solutions?

Mr. BowsHER. Yes. Let me ask Chris to answer that question,
because he has been working directly with many of these agencies.

Mr. MinM. The single greatest problem that we’ve seen—at this
point, it’s still a challenge rather than a problem—is shifting the
orientation to begin to start focusing on those outcomes. One of the
things, when we go into the pilots, and we’re in a number of them
now, that really sets off a red light for us is when we are told up


64

mented a quality program that centers on citizen satisfaction. It emphasizes that
it is the public that ultimately judges our work. Many of our measurement devices—
such as the citizen surveys and “How Are We Doing Cards"—are seen by our em-
ployees not as measurements but as part of our quality program. They see them as
a natural way to determine if we are meeting our joint quality goals.

We were one of the first cities in the United States lo competitively bid City serv-
ices, over 25 years ago. We continue to contract out more services than most other
cities our size. However, we don’t simply privatize by turning over City work to the
private sector. We pull competition into the governmental environment by allowing
our staff to bid against the private sector. Through this system, we have saved over
$35 million through competitive bidding. We have also increased our competitive-
ness. When we started, we lost almost all our bids. Today we win—we out compete
the private sector 60% of the time. This system has also forged new cooperation be-
tween operating level employees and management because they realized they had
to share ideas and work together to create the most competitive tid.

We have also worked to decentralize decision making and encourage employees
to take responsibility for cost savings. We have implemented flexible budgeting with
our departments. Once the City Council scts the budget, we allow departments
broad discretion in how they spend the budget to meet the City Council goals. If
they can find savings they have discretion to meet service needs.

'¢ also have several programs ‘aimed at increasing employee commitment to or-
ganizational goals. For the last 14 years in a row, we have won the award from the
merican Association of Suggestion Systems, as the unit of local government with
the highest per capita participation in suggestions. This program saves money and
improves City processes but it also shows employees we care about their ideas.
c have an extensive employee recognition program which rewards employces
ublicly when they are innovative, dedicated and committed to serving the public.
We celebrate these successes and we share them with the public. The public needs
to know about our dedicated, competent employees.

We have recently been working on improving communications throughout the
City. Problems are more and more complex these days and no one person has the
answer. We are working to make communication easier and freer across depart-
mental lines and between different levels of employees. Every City employee needs
to be a part of a team that is working creatively with the public to make our City
better.

‘A part of enhancing communications and building a stronger team is building
common visions and values. And so we are implementing a Vision and Values pro-
‘am. As we involve employees more in direction setting, we need to move awa
from tight rules, procedures and regulations that stifle action and creativity, We
need lo move towards Visions and Values that give employees general guidance on
the big picture and what we want to be. We started this program in a bottom up
process by asking over 600 employces al all levels what are we today and what do
we want to become. We are now moving to top down process to communicate our

Visions and Values.

We believe that there is no single program that will alone guarantee excellent
performance in government. But government can be excellent. Good systems of
measurement provide a foundation for building that excellence Together with other
programs measurement systems can help government employees to—as the Army
says—Be all you can be.

Mr. CiLiNGER. Thank you very much, Mr. Fairbanks.

Senator Thompson.

Senator THOMPSON. Thank you very much, Mr Chairman.

Dr. Kettl, let me ask you, it seems like we are focusing a lot on
the agencies and what they are going to have to do, but I get back
to Congress. It seems to me like there’s a good question as to
whether or not congressional committees, individuals really are
going to look at an outcome-based program as in their own self-in-
terest. I mean, we’ve been in the habit, it seems to me like, a lon
time, of measuring our compassion in terms of the number of dol-
lars we put into a program,

For that reason, I’m wondering whether or not, with these agen-
cies being required to come up with goals and plans and so forth,
so much is going to depend on Congress requiring them to do the
right thing. I know there was some discussion at one time about



4

GPRA requires several Federal agencies to implement the re-
quirements of the Act through pilot programs, now numbering over
70. Next year, though, every program in every agency will be sub-
ject to the Act’s requirements. It is my understanding that Federal
agencies are becoming more and more informed about this new law
and how it might affect their operations. It is the subject of an in-
creasing amount of planning and discussion among Federal man-
agers. Unfortunately, up until now, this law has received little at-
tention in Congress. Hopefully, after today’s hearing, that will
change.

I look forward to the testimony of our witnesses and welcome
their insights as to how this law can be used most effectively.

Thank you, Mr. Chairman.

Mr. CLINGER. Thank you, Senator, very much.

We now are pleased to welcome, as our first witness, a gen-
tleman who has been of inestimable assistance to the work of this
committee over the years and continues to provide us with very
valuable insights and information, the Comptroller General, Mr.
Bowsher.

In view of the fact that this is strictly a legislative hearing, we
are not going to swear in witnesses today. This is basically not an
oversight hearing.

So, General, you can proceed to give us your testimony, if you
will, in full or summarize, as you choose.

STATEMENT OF CHARLES A. BOWSHER, COMPTROLLER GEN-
ERAL OF THE UNITED STATES, ACCOMPANIED BY L. NYE
STEVENS, DIRECTOR, AND J. CHRISTOPHER MIHM, ASSIST-
ANT DIRECTOR, FEDERAL MANAGEMENT AND WORK FORCE
ISSUES, GENERAL ACCOUNTING OFFICE

Mr. BowSHER. Thank you very much, Mr. Chairman and Senator
Thompson.

We are pleased to be here today. I thought I would summarize
my testimony and, if you could put the statement in the record, I
would appreciate that, Mr. Chairman. I am accompanied today by
Nye Stevens, who heads up our work in this overall area, and
Chris Mihm, who has done much of the work that we have done
in this area.

First, let me start off by saying that, in the effort to reduce the
size of Government, to make a smaller Government, it is also im-
portant, as everyone recognizes, to have one that is more effective
and more efficient than what we have previously had. This is some-
times very difficult when the agencies themselves do not have clear
results-oriented goals and when they do not have reliable, accurate,
and timely program and financial information.

Now, the two committees represented here today, one in the Sen-
ate, one in the House, are the committees that passed both the
CFO Act and GPRA Act. I think that does give you the legislative
framework to really change the way Government works and to
evaluate how well agencies are delivering their programs and how
effective their organizational structures are.

The CFO Act, as we are all aware of here now, has some real
deadlines. In other words, in 1996, the 24 largest agencies of the
Federal Government are going to be required to have an audited


18

[The prepared statement of Hon. Constance A. Morella follows:]

PREPARED STATEMENT OF HON. CONSTANCE A. MORELLA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MARYLAND

Mr. Clinger and Senator Stevens, I thank you for calling today’s joint hearing of
the House Committee on Government Reform and Oversight and the Senate Com-
mittee on Governmental Affairs. It will help us focus our attention on a process that
has the potential to be a key element in fundamental changes going on in the way
Government manages itself.

This process, set up by the Government Performance and Results Act of 1993 (or
GPRA) and to be phased in over a number of years, requires agencies to develop
long-range strategic Plans, develop annual performance plans, measure their per-
formance against goals, and, as a last step, report to Congress on how well goals
were met. Ultimately, GPRA envisions that agency budgets would be tied closely to
this performance-oriented process.

GPRA, together with the Government Management Reform Act and the Chief Fi-
nancial Officers Act should help both Congress and the Executive Branch carry out
their responsibilities in a manner acceptable to the American people. I believe that
the GPRA process, by concentrating on the results or outcomes of agencies’ business,
puts the emphasis in the right place.

Tam concerned, however, that this process might be viewed as “just another exer-
cise” or the “latest fad” and thus not get the attention and support that it deserves.
To help dispel these notions, I am looking forward to hearing from the witnesses
scheduled to eppear today in order to gain additional insights into the GPRA proc-
ess and about how it is actually being implemented—what’s working, what’s not
working, and why.

Here, Mr. Bowsher’s close attention to what's happening across the government
will be particularly instructive. Some witnesses will be sharing their experiences
with performance-based management in other governments, including state and
local governments. The lessons learned from those experiences should help us evalu-
ate the Federal process.

Another of my concerns is that the GPRA process itself might be viewed as an-
other drain on already scarce resources. One of the things I'll want to hear today
is your thoughts on how that potential problem can he avoided or remedied.

I hope that today marks the beginning of a working partnership between the Con-
gress and Federal agencies in carrying out GPRA. I believe that GPRA affords us
@ unique opportunity to work together to provide the most efficient and productive
government possible.

Mr. BowsHER. Sure. OK. I'd be pleased to, Mrs. Morella.

First, I think you brought up a very important point on the budg-
et. In other words, I think one of your problems in oversight today
and in doing the budget process is, you've Bot a budget chart of ac-
counts in the Government that has no relationship to results. So
I think, at some point in time, the budget, including may be capital
budgeting, Mr. Clinger, could be considered, because to get a much
better reporting, financially speaking, is needed.

Now, another issue that you raised, will this become just another
paperwork exercise or another management exercise? It’s a real
danger. That’s why the role of Congress is so important. In other
words, if you don’t use it as part of the oversight and get yourself
organized to ask the right questions—and one of the things I’ve
been advocating for some time is an annual oversight hearing, by
this committee and the comparable Senate committee, for the larg-
er agencies in the Federal Government, to just find out what hap-
pened during the past year. _

Did you get your annual audit? Did you get a clean opinion?
Where do you stand with your GPRA? Have you set the goals?
Have you reported on how well you did? And everything like that.
In other words, the authorizing committees are going to be much
more interested in how well are the individual programs working.


55

through the net who would be a risk. The result was that the pass
rate for pilots entering that program was 30 percent.

Someone at the head of the Air Force decided this was not a good
way to go about this; we should actually be in the business of train-
ing pilots to fly planes. So they completely shifted the focus of the
training program and the nature of the people involved in this,
which was to say, “Your job is not to weed out the people who are
going to fail, but it is to take these people to turn them into pilots
who would be able to fly planes.” There is now a pass rate of 70
percent. The quality of the pilots has gone up.

And just one of the fundamental reasons for this, what people
have said, is, if there is a risk here with people not turning into

ilots, we should eliminate that before they get into the program.
8 you are looking for prevention. You are looking for getting it
right the first time, rather than as so often happens in the public
sector, we will solve the problem as we go on. So that attitude, I
think, captures very much what this is all about.
have much more to say. I will stop there and look forward to
responding to any questions you may have.
[The prepared statement of Mr. Holmes follows:]

PREPARED STATEMENT OF MALCOLM HOLMES, SENIOR PUBLIC SECTOR MANAGEMENT
SPECIALIST, WORLD BANK, AND FORMER SENIOR OFFICIAL, MINISTRY OF FINANCE,
GOVERNMENT OF AUSTRALIA

PUBLIC SECTOR PERFORMANCE

Thank you for the opportunity to make this submission. What I will say rep-
resents my own views ant should not be attributed to either the Australian govern-
ment or the World Bank (although I am hoping that they will increasingly influence
Bank thinking!).

Excellent performance in the public sector requires that the environment, rules,
systems and processes are working together to support and require such perform-
ance. The why, what and how must be fully integrated

This means that decision-making, budget and personnel management systems and
processes must be performance oriented.

These systems and processes provide much of the environment and embody many
of the rules which confront those developing and implementing policies and pro-
grams. An enabling environment is as important for the public sector as it is for

Ne private sector and the community.

is is reflected in my view that we should ask not what performance can do for
the budget, but what the budget can do for performance.

I would like to highlight the role of the budget in part because it is often the only
mechanism available to regularly discipline decision-making by government,

Another dimension is that the budget affects the three key levels of performance
which governments influence, namely;

‘© macro-economic stability via fiscal policy

* the allocation of resources to reflect the strategic priorities of government

© the implementation of government policies and programs cost effectively

A key point is that budget decision-making impinges on all three levels simulta-
neously. For these reasons it is crucial that policy making, management and budget-
ing be effectively integrated.

e challenge is to sign institutional mechanisms which support and require at-
tention be given to these three levels, particularly the way that they interact.

In this context, an important lesson from reform efforts is that if you change the
rules of the game, it is crucial that the players play by the new rules.

_ Performance, in terms of cost effective outcomes, also requires effective coordina-
tion mechanisms. One of the number of factors which distinguishes the public sector
is the extent to which the wide variety of its policies impact on ‘icular economic
and social objectives. Coordination is essential if policies are to be harnessed in the
public interest.

Within this environment, performance on the ground depends on organizations
and the people in them. What is required is that organizations have:



62

of other issues need to be dealt with. There is the need for strategic
planning. In Phoenix, we have done strategic planning. We also
ave a strong quality program that focuses on citizen satisfaction.

We have worked a great deal with communications, because we
think part of empowerment, part of pushing decisionmaking lower
in the organization is increasing the communication flow upwards
and downwards, and also communication flow sideways. Increas-
ingly, our problems are complex, and a single department can’t
solve them. So we need to build the connections between depart-
ments and agencies so they can pool their resources, so they can
pool their brain power.

We are working now on a vision and values effort, because we
are finding that some of our regulations and procedures and rules
get in the way. We know, if we are going to be more flexible, if we
are going to respond more quickly to the community, we need to
cut the rules and Procedures, the bureaucracy that we inflict on
ourselves. We need to build vision and values, broad schemes of
where we want to go, in the employees’ minds, so that, as employ-
ees make decisions and take actions, they have a sense of where
the council wants to go in the community.

We are working in flexible budgets where the city council decides
what the budget 1s, and then we dele ate authority into the depart-
ment to make changes, as long as those changes accomplish the
goals and the results that the council has dictated.

Even with all of these efforts, I would have to close by saying
that measurement is a crucial foundation for improving erform-
ance, because measurement creates that bottom line. It threes all
of us to deal with the services we are really delivering, and it is
critical to becoming the best.

Thank you very much.

(The prepared statement of Mr. Fairbanks follows:]

PREPARED STATEMENT OF FRANK FAIRBANKS, CITY MANAGER, PHOENIX, AZ
MEASURING SUCCESS

In Phoenix, we are determined to be the best. We must offer quality services at
the lowest cost. It is not good enough to be the best among cities or even among

vernmental units. Citizens daily conduct their business in banks and stores, then
they walk across the street or telephone their city. If we then perform in an inferior
or slower or less-friendly manner, our public judges us to be incompetent and bu-
reaucratic. If we are to win the respect and support of the public, we must win this
daily competition with excellent service.

Me ring performance is a fundamental tool in this process. It serves as the
foundation or our drive for excellence. In the limited time I have here today, I
would like to focus on what we have learned in using measurement systems for over
25 years.

Measurement systems are fundamental because they focus the attention of em-

loyees on results. Many things go on in the work environment and it is easy to
Forget why we are at work—unless we have measurements. Measurements can di-
rect the attention of everyone in the work unit to what is necessary to be successful.

But this isn't easy. n we started using measurements, we often counted the
wrong thing and used the measurements in the wrong way. We created our first
system of performance measurements and standards in the 1960's. These systems
helped us to improve, but they also brought problems. The most common problem
was confusion between the measurement system and the service goal. We often fo-
cused on activity and intermediate steps in processes. We didn’t focus on measurin,
the output we desired. We improved our ability to handle measurement paperwork
but initially we did not see large improvement in producing results.

We also erred in using measures in a negative manner. Management, supervisors
and employees came to see measures only as a contro! system with negative con-



35

Government Performance and Results Act mandates. But it is
clearly, it seems to me, the direction in which we need to head.

We need to have a strong Office of Management and Budget that
asks Federal agencies to think about. what they do in terms of what
they produce, to think about that in performance terms, to use that

erformance language to communicate to Congress what it is that
it is requesting, and therefore to allow Congress to focus more
clearly on the questions that matter the most. This is a long step
down the road, but it is a journey that we ought to be taking.

What does this all add up to? There are many more points in m
testimony, but I just want to focus on one important issue, whic
is that this is not really a matter of measurement. It is too easy,
deceptively easy, in the business of the Government Performance
and Results Act, to think of it purely as a measurement exercise.
And if we do, we will surely fail.

What it really is is a matter of political communication. It is a
way of changing the way that we think and that we talk and com-
municate and ask questions about the issues that are most central
to the political process. Nothing could be more central to Congress
than the Congress’ needs, and Congress needs to improve the way
that it has leverage over what the executive branch does and over
what the executive branch spends, and makes the Government Per-
formance and Results Act a central strategy, inevitably for Con-
gress, in doing what Congress has to do.

Congressional leadership, in short, is essential to making it
work, and without it, it will go the way of a lot of other Govern-
ment reforms that have been introduced in the past.

The other thing that is absolutely critical in all of this is a re-
formed civil service. We, at Brookings, are now in the process of
sketching out an idea of what it is that civil service reform, if prop-
erly considered in this context, might look like. What would a per-
formance-oriented civil service consist of for the future? We expect
to have that report available within the next month or two.

But more than anything else, what that underlines and circles
back around to is the central question that the symbols of a bal-
anced budget get Congress part way but not all the way down the
line to where it needs to go. In the end, what we need to do is to
transform the conversation about what it is that we want to have
happen, and the Government Performance and Results Act pro-
vides an invaluable way of doing just that.

[The prepared statement of Mr. Kettl follows:]

PREPARED STATEMENT OF DONALD F. KETTL, PROFESSOR OF PUBLIC AFFAIRS AND
PoLrricaL Science, UNIVERSITY OF WISCONSIN AT MADISON, AND NONRESIDENT
SENIOR FELLOw, THE BROOKINGS INSTITUTION, WASHINGTON,

Few issues could be of freater importance to the work of these committees than
the implementation of the Government Performance and Results Act of 1993
(GPRA). It is a great pleasure, therefore, to appear before you to discusa the critical
stakes for Congress in effective implementation of this act.

1 am a Professor of Public Affairs and Political Science at the University of Wis-
consin-Madison. I am also a Nonresident Senior Fellow in the Brookings Institu-
tion’s Center for Public Management, where we have been closely following GPRA
and the broader issues of improving government performance.

What I want to share with you today are ten reasons why GPRA can help Con-
gress solve problems that must be solved. My argument, in summary, is thie:

Citizens and public officials alike are all too correct in criticizing the way the
federal government works. Performance is not what it could be—and the per-


36

formance measurement required by the act is the keystone for solving this prob-
lem, But Congress is critical to making performance-based management work.
Without strong congressional leadership, GPRA’s impact will fade away. For
members of Congress to play that leadership role, GPRA will have to provide
them with answers to questions they need to solve. GPRA can in fact do just
that: It can provide the missing link between authorizations and appropriations,
on the one hand, the worries about government performance on the other.
The ten points are these:
1, We must tackle both the performance and budget deficits.
2. Performance measurement is the keystone to reducing both deficits.
3. Performance measurement provides Congress with critical information about
agencies’ strategic decisions
4. Strategic plans provide a road map to achieving results.
5. Performance measurement connects plans with results.
6. Performance management can improve the authorization process.
T. Performance measurement can improve the appropriations process.
8. Performance measurement is no magic bullet—but it helps Congress do what
has to be done.
9. Performance measurement can transform the President's budget submission to
Congress.
10. Performance measurement can vastly improve Congressional policy making.
Let me explore these points in turn.

1. We Must Tackle Both the Performance and Budget Deficits

Too often, debate on cutting the federal deficit proceeds on the assumption that,
should we ever truly succeed in eliminating the deficit, the nation’s problems woul
end. Eliminating the deficit would demonstrate great political will, and that would
be a huge accomplishment. Citizens worry that government doesn’t work and can’t
make tough choices. A serious deficit reduction plan would show that government
solve such problems.

Even balancing the budget, however, would not solve all the critical questions.
Eliminating the deficit, whether by cutting programs or increasing taxes, would nec-
essarily not ensure that government would work any better. Indeed, some programs
might work even worse. Many of the downsizing and budget cutting decisions have
been made with a blunt instrument. Government offices have often come out of the
process ill-configured, with the wrong collections of people and technology to pro-
mote efficiency. (That has too often been the result of downsizing in the private sec-
tor as well.) Inefficient offices could frustrate citizens doing business with govern-
ment; they could allow fraud, waste, and abuse to grow; and they could generate
fresh news reports about a government that can’t shoot straight.

Citizens are not likely to react warmly if, after having been promised a govern-
ment that works better and costs less, they get a government that works worse and
costs more. Applicants for social security benefits expect gquick and friendly service,
along with predictable and accurate checks. Midwest residents want timely tornado
warnings, while coastal residents need good hurricane predictions. Workers expect
their pensions to be safe; flyers, the air traffic control system to guide them safely
to the ground; citizens, their drinking water to be free of toxins. The symbol of a
balanced budget will have little meaning if citizens are angry that the services on
which they rely are poor and unreliable.

That is not an inevitable outcome. But it is a likely result unless government's

licy makers realize that shrinking government's size is not one problem but two:

first, eliminating what can and should be cut; and second, ensuring that what is
left_what policy makers determine is the core that government can and should
manage—works well. So far, public debate has focused on the first problem. Sooner
or later, we will have to turn to the second. And unless we solve it, public anger
at government, its institutions, and its elected officials is likely to grow even bigger.
‘have argued elsewhere that American government has not one deficit but two:
a budget deficit, and a performance deficit. Unless we solve both deficits, citizens
rightly will be unforgiving. :

‘° GPRA frames a coherent attack on both the budget and performance deficits by
allowing a serious discussion, for the first time in American government, on what
we get for the money we spend. It provides members of Congress a way to bridge
the gap between the budget and performance deficits.

2. Performance Measurement is the Keystone to Reducing Both Deficits

We are not alone in struggling with the twin deficits. Some nations have been
working for well over a decade on cutting both deficits, while the American federal
government has been single-mindedly focused on the budget deficit. Other nations



51

Introduction

By virtue of the authority vested in me as Governor under Article V of the Con-
stitution of Virginia and the laws of the Commonwealth, including but not limited
to Chapter 5 of Title 2.1 of the Code of Virginia, and subject to my continuing and
ultimate authority and responsibility to act in such matters, I hereby establish
initiative for goal setting and performance budgeting, which will examine the ability
of the state agencies to respond effectively to the changes facing state government.
The guidelines and responsibilities set out in this Executive Memorandum will gov-
ern this initiative.

Virginia has a longstanding tradition of excellence in the area of financial man-
agement. Virginians demand that public spending be undertaken to achieve the
greatest value for each tax dollar spent. As state government conscientiously strives
to meet this objective, it is increasingly, challenged to improve its skills in allocating
scarce resources to meet the needs of Virginia's citizens in the most effective way.
This requires reexamining the role and structure of state government to discover
ways to better serve Virginians.

e complexities of modern-day society challenge any organization or institution.
The way in which an entity responds to change is critical to both its short- and long-
term viability. Agencies must be willing to examine opportunities, build on
strengths, foster innovation and creativity, and stress continual improvement if they
are to meet the needs of Virginia’s citizens, the realities of shrinking resources, and
the necessity to do more with less.

‘An assessment of Virginia state government is an ongoing process. Past priorities
and missions must be reexamined not only in the context of today’s needs, but also
in light of tomorrow's expectations. Agencies must be customer-focused, results-o1
ented, and mission-driven. Today’s well-i

informed citizens demand greater choice,
creased customization, and quality. We must look toward relying more heavily on
market mechanisms for resolving problems. Each agency must examine these fac-
tors to identify ways in which Virginia state government can become more creative,
flexible, and entrepreneurial in responding to our citizens’ needs.

The process outlined herein integrates planning and performance measurement
with budgeting. This provides a framework for performance-based budgeting in
which allocation of resources is based on agency achievement of established goals.
The process of developing the 1998 budget will involve five major steps as follows:

Slope General Tine Frame

Governor issues general guidelines to agencies for the goal setting and performance Early June
budgeting process and specific guidance on policy and budget issues to Secretanes,
‘who will communicate as needed to agencies.

Agencies conduct assessments and meet with Governor's Office and Secretaries... June-September

Agencies develop budget decision packages including goals, objectives, strategies, and August-September
performance measures and.

‘Submit draft packages to Cabinet Secretary By October 2
‘Submit final packages to DPB homens a vous By November 10
Secretaries and DPB review and analyze budget submissions om eggs October-November
Governor makes final budget decisions ...... ccetnrsesenen semsnose ‘By December 1
And submits recommended budget to General Assembly 7 a . December 20
Requirements
Governor's Office

1. The Governor will issue guidelines (attached) for use in implementing this proc-
ess within the applicable Executive Branch agencies.

2. The Governor's Office and the responsible Secretary will meet with each agency
to review the outcomes of the process and provide individual guidance.

Responsibilities of the Governor's Secretaries

1. Work with the Governor in developing any supplemental guidance for their re-
spective agencies in carrying out their assessments.

2. Identify any specific issues that cross Secretarial lines and determine how these
will be addressed.

3. Meet with agency management to disseminate and clarify guidelines and re-
quirements.

4. Oversee and monitor implementation of the assessment process by all the appli-
cable agencies within the Secretariat.

5. Review and approve all agency submissions generated through these activities.


24

When they really went into that, they discovered that, indeed,
human error was the most common cause, and that caused them
to completely revamp their approach to work much more closely
with the industry and develop an approach to that, and it was very
successful.

I think the whole regulatory problem is going to be to determine
more, what are these agencies really trying to accomplish, and to
define their activities to accomplis! those results, and then to
measure them by how well they do that. That’s going to mean that
regulations are simpler and, I should think, therefore easier for
Congress to review than the very prescriptive details of whether
the railing needs to be 18 inches or 20 inches.

Mr. Bowsuer. If I could give you one more illustration, too. We
did a review a couple of years ago on EPA and how they were try-
ing to work with industry on changing it. We went down to an oil
refinery here in Virginia, and that was a case where they kept get-
ting these different regulations and rules, and sometimes they
thought it made sense; sometimes they didn’t. Sometimes they
thought it was too costly to make that fix, and everything like that.

Finally, the Government people and the industry people, the
company people, got together and said, “What are we trying to do?
We're trying to have an oil refinery here in a neighborhood that
people will feel the environment is being protected;” in other words
the air, the water, and everything like that. So they worked to-
gether and came up with a much more results-oriented outcome,
and they are now pursuing that as part of this.

So I think, if that kind of effort starts to take place more often,
then it would seem like the results would be better, and maybe a
lot less frustration, and maybe less cost.

Mrs. THURMAN. Just a follow-up on the example that you used
with EPA. Part of my concern with this coming back to Congress
is that, if we don’t allow that leeway between those agencies once
some of this has been in place, are we going to put ourselves into
a situation where we've actually slowed down the very thing that
we're trying to make more efficient?

Mr. BowsHER. Yes, I think you could fall into that trap, and Con-
gress has historically done some of that.

Mrs, THURMAN. Thank you very much.

Thank you, Mr. Chairman.

Mr. CLINGER. General, it seems to me that what we're looking at
here is Boing to have to be a very dynamic process. And the concern
I have is that Government doesn’t tend to respond rapidly to
changing situations. As Senator Thompson pointed out, the results
that we may want may change over time, and that we possibly
could be behind the curve all the way along unless we have some
way to ensure that the process can be responsive to changing cir-
cumstances, whether demographic or whatever may be involved.

I can see that we could get into a position where the results we
achieve are not the results we should be achieving, given changed
circumstances.

Mr. Bowsuer. I think it’s a very good point. And I think, with
technology moving as fast as it is, it is a good example of what you
could achieve, say, 10 years ago was much more limited than what
you could achieve today in some of these areas. So what you want


54

istry of Finance, the equivalent of OMB, had attempted to suggest
to government that these subsidies were not a good use of public
money.

For 20 years, the Minister for Agriculture had said, “They are
absolutely crucial to the future of Australia.” As soon as the Min-
ister for Agriculture was given a large envelope, a tight envelope,
consistent with, in our case, moving toward a surplus on the budg-
et, the minister suddenly found that these subsidies were no longer
high priority, and they were eliminated, because the incentives
were there for the minister to reallocate resources. So I just want
to emphasize that issue of incentives.

So I guess I am saying that, for GPRA to deliver, it is going to
require a supportive environment. Let me just say somethin;
quickly about some examples of performance measurement an
how it has been used, and I obviously look forward to responding
to any questions on that later.

One of the things that I think has been particularly powerful and
impressive in reforming countries has been the outward orientation
of the public sector. There is no doubt that, certainly in the case
of the British Commonwealth countries, 10 years ago the public
service was very inward-looking, concerned with process, concerned
with inputs. There has been a revolution in the extent to which
now the public service looks outward to the people, the community,
to the citizens.

That leads to questions being asked about what is it that citizens
need. It leads to a whole new approach to performance measure-
ment through the use of such things as surveys of clients of govern-
ment activities. I might say that, even in the case of our own equiv-
alent of the Internal Revenue Service, it has led to a mission state-
ment which says that “Our mission is to assist the citizens of Aus-
tralia to meet their legal obligation.” There is no actual reference
to collecting revenue. And it’s that sort of state of mind that we are
about shifting to.

One of the key elements of the Australian reform package has
been a big focus on evaluation, a very comprehensive evaluation
system. I will provide the committee with a paper which reviews
the link between evaluation and budget decisions. I will just. men-
tion that the most recent one of those studies has found that at
least 50 percent of the submissions to government to change policy
were underpinned by evaluation results, which is a significant
move forward and an important of improving decisionmaking.

Another document I have there looks very closely at how there
have been resource agreements between the funders and the pro-
viders of services to focus attention on linking resources to outputs
and outcomes. I would be happy to elaborate on those, but I think
these are an interesting dimension, particularly when one thinks
about intergovernmental relations. Australia, as the United States,
is a Federal system. :

If I could finish just on one example of what I think captures the
spirit of what reforms of this nature are about. Within the Air
Force in Australia, we have a program, obviously, for training Air
Force pilots. And the people who are involved in that training pro-
gram essentially saw their job as to make sure that no one got


63

sequences. When the data was good, nothing happened. When the data was bad,
management sent a jolt of retribution to the people in the work unit. Everyone
began to hate the system. And soon everyone was working hard to learn how to con-
trol and even falsify the data. Little or no energy was focused on improving perform-
ance,

We have made two major changes to utilize measurement more effectively. The
first was to measure the outcomes we desire rather than activities and intermediate
steps. The second change is to make measurement a part of our learning process.
Basically, we turned ofthe jolts. We built a reward system which recognized man-
agement and employees when good results were achieved. We also took action when
there was poor perlormance. However, instead of sending a jolt to the employees,
we buill a strategy of focusing promptly on developing team action which could be
taken to resolve the problem and improve performance.

As we improved our measurement systems, we have acted to make them a part
of all of our systems. The City of Phoenix reports performance trend information in
our financial and budget reports. As part of the City’s annual budget development
process, the Budget & Research Department monitors the budgeted service levels
against actual performance of all 24 Phoenix departments to assure that tax dollars
are being expended properly. Service level results for the prior fiscal year as well
as expected results for the coming fiscal year are published for each City depart:
ment in the budget document. This document is an easy-to-read publication targeted
to our citizenry.

Each of the 24 City departments track their own scries of objective, quantified
service result standards. The data is transmitted through our local area network to
be included in our monthly report. The monthly summary includes each depart-
ment’s results and is reviewed by the Mayor and City Council, and by senior city
management. It is also distributed throughout the organization. The measures in-
clude cost statistics and service outcomes.

We also use bench marking methods. Phoenix has adopted a ten-city list of U. S.
Cities of similar size which are known for their excellent performance. We benc!
mark our performance against these well managed cities. We are participating in

ilot project sponsored by the International City/County Management Association
(ICMA), in which 37 cities are developing comparable measures for output for key
Police, Fire, Neighborhood, and Support Services.

Phoenix also reaches out to benchmark private companies for better ideas for
service to the public. Unfortunately, in a number of areas the public sector Jags the
private sector in performance. To develop good performance standards, we have had
to benchmark the private sector. We have modeled our water billing system afer
the American Express Company. Our Development Services Department is
partnering with Motorola Corporation to take advantage of Motorola’s process im-
provement practices.

In addition to our objective, quantified measures, we also measure citizen satisfac-
tion. (In the end, citizen satisfaction is the ultimate test of our services.) Since 1985,
we have conducted a bi-annual statistically valid community attitude surveys that
measure the public's satisfaction with each of our major services. These surveys ask
our citizens to rate our service quality. We also ask them where they prefer to have
their tax dollars spent to improve services.

In addition to surveying our customers, we bring them in to talk about their per-
ceptions of the quality they're receiving from city departments. We use the “focus
group” technique to field test new programs and to improve old ones.

We also ask our customers to evaluate us immediately, where we deliver service.
At each customer service counter in the City, you'll find a card in a display box that
reads: “You Are Our Customer: How Are We Doing?” Our customers are asked
about the quality of the service they've just received—on the spot, during the “mo-
ment of truth” they've et experienced with City personnel. Some of the citizen
comments are critical. The customers at our Water Department were angry about
having to spend so much time standing in line. So we redesigned our syatem to
shorten their wait by cross-training all employces to serve as cashiers when needed,
and by sending employees into the queue to accept payment checks. Most of the rat-
ing cards, however, come back with positive comments about exemplary service—
these remarks then are forwarded to the deserving employces. Recognizing employ-
ees’ good work is crucial in improving morale and boosting employee productivity.

Measurements create priorities. Measurement systems influence results. When we
decided customer satisfaction must be a key goal, we knew we must measure gatis-
faction. We had to convince employees that it is important and we must reward em-
ployces when they deliver it.

Let me make it clear that as important as measurement is, it is not the whole
story. A variety of other issues must be dealt with. In Phoenix, we have imple-





43

cent rate of increase over the next 3 years, this wu L. about one-
half of the rate of increase that we have seen throughout the 1980’s
and even the 1970’s. Revenue growth has only been slower during
recession times.

So budgeting has become much more difficult at the State. Even
though revenue growth has slowed, the public is still demanding
costly improvements, particularly in public safety and in public
education.

Since a business-as-usual approach was not an option for us in
developing our budget, Governor Allen implemented a process in
Virginia that requires each agency to set priorities and to dem-
onstrate, through the performance of programs, that current activi-
ties deserve to be continued. The process is called “Goal-Setting
and Performance Budgeting.”

It has three parts. The first part is that agencies develop strate-
gic plans. We have modeled our strategic planning after a private
sector approach where you ask, “who are my customers,” “what are
their requirements,” and “what are the strengths, the weaknesses,
opportunities, and threats that may impair our ability to meet
these customer needs?” This fundamental examination of agency
missions has led us to identify the critical issues and the cor-
responding strategies to be addressed during the next biennium.

The next step in the process is to have the agencies submit their
budget requests. For ongoing activities in State government, we
discarded the baseline budgeting approach that we have used in
past years. Instead, we used an exercise to move beyond the status
quo. Each agency examined the activities it performs and was re-
quired to answer this question: If this agency didn’t exist today,
would our customers and the taxpayers be best served if this activ-
ity were privatized, eliminated altogether, or transferred to another
agency in State government?

As a result of this, we incorporated in the budget recommenda-
tions of 30 agencies to privatize 53 different programs. The annual
value of those programs is $627 million. Thirty-one agencies rec-
ommended reorganizing or downsizing 46 other programs. For new
activities, we required that agencies justify the new activities based
on the strategic plans that they had already implemented.

The third element of our Performance budgeting process is per-
formance measurement itself. Each agency was required to submit,
as part of its budget request, a minimum of three to five perform-
ance measures. One was to be a broad outcome measure, with the
other measures relating to the highest priorities of the agency.

So let me conclude by saying a few words about performance
measurement. In Virginia, the design and collection of performance
measures is primarily the responsibility of the executive branch.
Yet we believe it is very important to have the involvement of the
legislative branch to ensure that there is continuity, as Governors
change, and that the legislative branch has access to the data that
will also help them to make better budget decisions.

Currently, we are working with the Joint Legislative Audit and
Review Commission in Virginia, which is similar to your GAO, to
review agency performance measures and to make recommenda-
tions for improvement. Later, we will be involving the House and
Senate appropriations committees, as well. Now, there are a num-


4l

It makes far more sense to debate what to spend in the context of what results
the federal government produces. First, the search for a balanced budget has pro-
duced some leverage in making hard appropriations decisions, but it cannot drive
all of the tough decisions. Second, a balanced budget might some day be reached,
but members of Congress will then need a new instrument to enforce spending dis-
cipline. Third, members of Congress are likely to discover that, despite widespread
rhetorical support for the idea of a balanced budget, voters might provide little polit-
ical payoff unless they are also convinced that a smaller government also works bet-
ter.

Quite simply, Congress in general and the Appropriations Committees in particu-
lar need a far more sophisticated tool to make the decisions that lie ahead. The ex-

rience of other nations suggests that focusing on results helps provide that tool.
Whelps crack the door for more competition, and hence more efficiency, in providing
government goods and services. It helps build a base for the badly needed restruc-
turing of government agencies and processes. And most important, it changes the
very language of the debate.

Information about results has changed the fundamental dynamics wherever per-
formance measurement has been tried. One Phoenix city official told me that it is
hard for politically well-connected contractors to push for expensive contracts if the
data show that they are twice as expensive as the alternatives. Collecting the infor-
mation cannot make hard decisions easy. It can, however, fundamentally alter the
nature and language of the debate: about what the real issues are, and what the
effects are likely to be. I like to think about performance measurement, therefore,
as a system of political communication: how we think and talk about the fundamen-
tal issues of government.

* GPRA can assist the Appropriations Committees by providing a subtle tool to
bridge the gap between deficit reduction goals and the decisions needed to reach
them. More important, its performance focus can fundamentally alter the terms and
language of the debate.

8. Performance Measurement is No Mogic Bullet—But It Helps Congress Do What
Has to Be Done

It would be easy to overpromise on what GPRA can do and then to be dis-
appointed by what it actually produces. That, after all, has been the track record
of previous reforms, like Planning-Program-Budgeting in the 1960s, Zero-Based
Budgeting in the 1970s, and Total Guality Management in the 1980s, Frankness de-
mands that we admit two things about GPRA: It is very hard to do; and even if
done well it eannot possibly solve all of our problems.

Indeed, as Australian officials have frankly admitted to me, they have been at the
process for a decade and still don’t have it right. But they have also had more than
a decade to abandon the process, and they have not. That is because it gives them
leverage over important problems that they can get no other way.

Performance measurement will never prove a panacea. It imposes huge technical
problems. Quite frankly, it produces few immediate rewards. Doing it well requires
time, patience, and investment in new technology and training for the workers de-
veloping it. It might well be, moreover, that voters will take excellence for granted
and see anything less as a failure. ‘The immediate political payoffs are likely to be
modest.

But performance measurement is an inescapable step toward tackling decisions
that cannot be ducked. It is, in a sense, the price of admission to the next set of
decisions that will face members of Congress: what to do if the balanced budget
campaign runs out of gas, and members of Congress need a new tool for gaining
leverage over the budget; or what to do if it succeeds, and tough new questions sur-
face—as they surely will. GPRA might be a low-visibility project, but like a strong
foundation under a skyscraper, the government's work is likely to sink and sag even
more without it.

* GPRA provides no magic bullet for solving government's problems. But it does
provide the foundation for doing what must be done.

9. Performance Measurement Can Transform the President's Budget Submission to
Congress

Because the congressional budget review builds on the president’s submission, the
form of that budget can greatly affect Congress's ability to make critical decisions.
If the president's budget were to be submitted in a performance-based format, it
would greatly increase Congress's ability to ask the important questions. It would
also focus the debate between Congress and the president on the issues that matter
most.



66

I go back to the point I make in my testimony about the balanced
pude t. What if, on the one hand, we don’t succeed, or, on the other
hand, we, in fact, do manage to balance the budget? One way or
another, we will surely discover that that’s not going to answer all
of our problems.

And Members of Congress are still going to be struggling with
the question of how to get leverage over executive branch action
and how to deliver better value to taxpayers, because my guess is
that the dirty secret in all of this is that most citizens don’t give
a hoot about balancing the budget. What they really care about is
making Government work better.

Senator THOMPSON. Let me ask you one more small line of ques-
tions here as to whether or not this Act and this approach really
adequately takes into account the question of costs. You can have
a program and set. up @ proper goal, set up a proper way of analyz-
ing it, and come back and report you’ve met your goal and do very
well on your outcome. But if it costs three times more than it
should, that’s not good either. Is that taken into consideration in
this approach, do you think?

Mr. KETTL. What the program itself requires is for agency offi-
cials to specify outputs and then move to outcomes. There is noth-
ing that explicitly, at this point, ties it back to the budget. It is in-
conceivable to me, however, that the questions that you're asking
won't be raised, that, OK, you’ve done a good job, or you've done
a poor job, or you’ve done a so-so job. We've got an extra dollar to
spend; should you get it or not?

It’s inconceivable to me that those links won’t be made. In the
long run, the potential for tying it to the executive budget and the
executive budget submission to Congress is, I think, inescapable, as
well,

Senator THOMPSON, Let me throw you one really from left field,
then I will stop. But it just occurs to me, there’s a big debate goin,
on right now in the regulatory reform area about cost-benefit anal-
ysis, and that has to do with regulations. Here, under this Act,
agencies are having to address programs. They are having to ad-
dress programs, whether or not they are getting the right result.
The cost-benefit analysis basically compares costs and benefits with
regard to a particular regulation.

Do we have a bit of overlap here? Can this Act, in some way,
serve the same Purpose, perhaps, as cost-benefit analysis in the
regulatory framework?

Mr. KETTL. I think these are, as you point out, separate ques-
tions that are linked. There’s the one question of what kind of reg-
ulatory policy we ought to have, but the second question is how it
would implement it.

Consider the case of OSHA, for example. We right now have
enough OSHA inspectors to inspect every business in the country
about once a century. So if businesses think that on the average
of once a century an inspector will show up, then it’s an invitation
to everyone to pay no attention whatsoever to the regulatory re-

gime.

Tf, on the other hand, OSHA thinks about, “what is it that we
want to try to accomplish?” How would we know that we accom-
plished it? How do we know whether or not workplace safety has


ll

tion Centers. Such information is important to SBA in managing and tracking its
activities. However, to realize the full potential of outcome-oriented management,
SBA needs to take the next step of assessing, for example, the difference the addi-
tional Centers make, if any, to the success of small businesses. SBA also needs to
assess whether the Centers and the services they provide are the most cost-effective
way to achieve SBA’s goals.

imilarly, the goals in the Occupational Health and Safety Administration's
(OSHA) GPRA’ pefformance plan are’not being used to set the direction for OSHA
and the measurable outcomes it needs to pursue. For example, one of OSHA's goals
is to “focus resources on achieving workplace hazard abatement through strong en-
forcement and innovative incentive programs.” Focusing resources may help OSHA
meet its mission, but this represents a strategy rather than a measurable goal. Offi-
cials leading OSHA’s performance measurement efforts recognize that OSHA’s goals
are not sufficiently outcome-oriented and that OSHA needs to make significant
progress in this area to provide a better link between its efforts and the establish-
ment of safer and healthier workplaces.

How Are GPRA Performance Goals and Information Being Used to Drive the Agen-
cy’s Daily Operations?

We also are finding instances where pilot agencies could better ensure that their
GPRA performance goals include all of their major mission areas and responsibil-
ities. It is important that agencies supply information on all of their mission areas
in order to provide congressional and executive branch decisionmakers with a com-
plete picture of the agency’s overall efforts and effectiveness.

For example, the Bureau of Engraving and Printing’s GPRA performance plans
contain a goal for the efficient production of stamps and currency. However, these
performance plans do not address an area that the Bureau cites as an important
part of its mission—security. The Bureau has primary responsibility for designing
and printing U.S. currency, which includes incorporating security features into the
currency to combat counterfeiting. The importance of security issues has been grow-
ing recently because of heightened concern over currency counterfeiting. Foreign
counterfeiters especially are becoming very sophisticated and are producing very
high-quality counterfeit notes, some of which are more difficult to detect than pre-
vious counterfeits,

How Is the Agency Using Performance Information to Improve Its Effectiveness?

‘The value of an agency's performance information arises from the use of that in-
formation to improve the efficiency and effectiveness of program efforts. By using
performance information, an agency can set more ambitious goals in areas where
goals are being met and identify actions needed to meet those goals that have not

en achieved.

Our recent review of selected fiscal year 1994 performance reports submitted to
OMB by GPRA pilots suggests that agencies are missing an important opportunity
to show how they are using performance information in cases where goals are not
met. In the pilot reports we reviewed, 109 of the 246 annual performance goals,
or about 38 percent, were reported as not met.

GPRA requires that agencies explain why goals were not met and provide plans
and schedules for achieving those goals. However, for the 109 unmet goals we exam-
ined, the pilot reports explained the reason the goal was not met in only 41 of these
cases. Overall, the pilet reports described actions that pilots were taking to achieve
the goal for 27, or fewer than 25 percent, of the unmet goals. Moreover, none of the
reports included plans and schedules for achieving unmet goals.

iscussions of how performance information is being used are important because
GPRA performance reports are to be one of Congress’ major accountability docu-
ments. As such, these reports are to help Congress assess agencies’ progress in
meeting goals and determine whether planned actions will be sufficient to achieve
unmet goals, or, alternatively, whether the goals should be modified.

What Progress Is the Agency Making in Building the Capacity Necessary to Imple-
ment GPRA?

As you are aware, I have long been concerned about the state of the federal gov-
ernment’s basic financial and information management systems and the knowledge,
skills, and abilities of the staff responsible for those systems. Simply put, GPRA
cannot be fully successful unless and until these systems are able to ‘provide
decisionmakers with the program cost and performance information needed to make
decisions. Because these financial systems are old and do not meet users’ needs,

"9 GPRA Performance Reports (GAO/GGD-96-66R, Feb. 14, 1996).


53

In a sense, picking up on a point of Don Kettl’s that this is not
about performance measurement, he says about political commu-
nication, I actually think it’s about incentives, this issue. From
where I sit and observe the Congress, I see the Congress as being
very centrally located in the determination of those incentives.

I think the lesson from successful reform of national govern-
ments—and I think it is important to recognize a distinction be-
tween national governments, State governments, and local govern-
ments—is that their success has built fundamentally on changing
the environment within which the public sector operates. And that
certainly is the case in Australia and New Zealand.

Changing the rules of the game by which the budget is made,
changing the rules of the game by which decisions are made,
changing the personnel management rules have been much the
most important factors in improving the performance of the public
sectors in those countries. So I would certainly encourage attention
to be given to the role of the Congress in that regard.

1 am going to say something about performance information. I
don’t think there is any question that the increase in the availabil-
ity of performance information, at all levels of government activity,
has been a significant player in that improvement in performance,
and I certainly will come back to that.

I would like to emphasize that it is very much, I would argue,
at the management level where the greatest benefit is flowing from
performance information. It is also very clear, in its use in report-
ing on government and agency activity, at this stage—and someone
talked about Australia only getting there after 10 years—Australia
has now been doing this for 12 years and still hasn’t made it. This
is, I think, as I say in my testimony, a pilgrimage, not a destina-
tion.

So one of the lessons that we are still finding out is that the use
of performance measurement in high-level budget and decisionmak-
ing has got a long way to go. It is very difficult, because of the in-
centive questions, to make that link very positively, but I will give
some illustrations of how, in fact, that might be done, in a moment.

Perhaps I could characterize it by saying that I believe that what
we have done in Australia, essentially, is to ask not what perform-
ance can do for the budget but what the budget can do for perform-
ance. I think that captures a lot of what you, in the Congress,
might think about as you look at how GPRA is going to improve
public sector performance.

One of the key elements, at the managerial level in Australia,
has been providing considerably more autonomy in the use of budg-
et resources to agencies. That itself, I believe, has been the most
powerful force to encourage them to develop strategic plans, goals,
performance measurement, to undertake assessments.

At the next level up, what has happened is that, within a tight
top-down budget constraint, individual ministers, in our case, in a
parliamentary system, have been given the responsibility to decide

ow to allocate resources. That shift in the nature of decisionmak-
ing has led to the elimination of programs.

if I could use an illustration of one that I know is quite a sen-
sitive issue in the Congress at this time, one is the area of sub-
sidies to agriculture. For 20 years, my colleagues and I in the Min-


59

of everyone at work to what is necessary to be successful. But
measurements aren’t easy, and we've heard a lot of good questions
today about problems and obstacles to be overcome.

When the city of Phoenix started using measurements, we often
counted the wrong thing and used the measurements in the wrong
way. We created our first system of performance measurements in
the 1960’s. These systems helped us to improve at first, but then
they became a barrier and they brought some real problems.

The most common problem was confusion between the measure-
ment system itself and the service goal. We often focused on activ-
ity and. intermediate steps in the process rather than on the out-
come that we wanted, rather than what the council was trying to
achieve through the program. All too often, we didn’t focus on
measuring the outcomes. We improved our ability to handle the
measurement paperwork, and we got to be very good at the paper-
work, but initially we did not see large improvements in producing
results.

Another big mistake we made was in using measures in a nega-
tive way. Management, supervisors, and employees came to see the
measures as a control system with negative consequences. When
the data was good, nothing seemed to happen. When the data was
bad, management sent a jolt of retribution to the people in the
work unit. Everyone began to hate the system, and soon everyone
was working hard to learn how to control and even falsify the data.
Little or no energy was put at focusing on improving performance.

Over the years, we have made three major changes that have
made measurement systems a very important part of our success.
The first was to make sure we were measuring outcomes that we
desired, the outcomes the council desired, in creating programs at
the city, rather than focusing on activities and intermediate steps.

The second change was to make measurement a part of our
learning process. Basically, what we did is to try to turn off the
jolts. We built a reward system that recognized management and
employees when results were achieved, but we also took action
when there was poor performance. However, instead of sending a
jolt to the employees, we built a strategy of focusing promptly on
Jointly developing action which could be taken to resolve the prob-
lem and improve performance.

The third key change was to involve employees in the process.
We had to find ways that the employees saw that the outcomes
were important to them, that the measures were important in their
work, that the measures gave them something and gave them some
meaning in the work they did.

we improved our measurement systems, we acted to make
them a part of everything we did. The city of Phoenix now reports
performance trend information in our financial and budget reports.
As a part of our annual budget process, the budget research de-
partment monitors the budget service levels against actual per-
formance in every department.

Service level results for the prior year, as well as the expected
results for the upcoming year, are published in the budgetary docu-
ments and are reviewe yy the council as the council makes their
budgetary decisions. This document is designed to be an easy-to-


13

Managing for Results: Status of the Government Performance and Results Act
(GAO/T-GGD-95-193, June 27, 1995).

Managing for Results: Critical Actions for Measuring Performance (GAO/T-GGD/
AIMD-95-187, June 20, 1995).

Managing for Results: The Department of Justice's Initial Efforts to Implement
GPRA (GAQ/IGGD-95-167FS, June 20, 1995).

Government Restructuring: Identifying Potential Duplication in Federal Missions
and Approaches (GAO/T-AIMD-95-161, June 7, 1995).

Government Reorganization: Issues and Principles (GAO/T-GGD/AIMD-95-166,
May 17, 1995).

Managing for Results: Steps for Strengthening Federal Management (GAO/T-
GGDVAIMB-95"158, May 8, 1998).

Managing for Results: Experiences Abroad Suggest Insights for Federal Manage-
ment Reforms (GAO/GGD-95~120, May 2, 1995).

Government Reform: Goal-Setting and Performance (GAO/AIMD/GGD-95-130R,
Mar. 27, 1995).

Block’ Grants: Characteristics, Experience, and Lessons Learned (GAO/HEHS-95~
74, Feb. 9, 1995).

rogram Evaluation: Improving the Flow of Information to the Congress (GAO/
PEMD-95-1, Jan, 30, 1998),

Managing for Results: State Experiences Provide Insights for Federal Management
Reforms (GAO/GGD-95-22, Dec. 21, 1994).
ptecngineering Organizations: Results of « GAO Symposium (GAQINSIAD-95-34,

ec. 13, 1994).

Management Reform: Implementation of the National Performance Review's Rec-
ommendations (GAO/OCG-95-1, Dec. 5, 1994).

Management Reforms: Examples of Public and Private Innovations to Improve
Service Delivery (GAO/AIMD/GGD-94-90BR, Feb. 11, 1994).

Performance Budgeting: State Experiences and Implications for the Federal Gov-
ernment (GAO/AFMD-93-41, Feb. 17, 1993).

Mr. CLINGER. Thank you very much, General Bowsher.

Senator Thompson.

Senator THOMPSON. Thank you very much.

I certainly appreciate your being here with us today. Hopefully,
as we said earlier, this will be one of the first steps toward direct-
ing a little more attention toward the fact that this law is on the
books, No. 1, and then getting us to talk to these agencies about
getting prepared to do what they have to do in terms of more ac-
countability.

In reading the materials, it does seem to me like it’s going to be
a long process and take a while. It’s difficult around here to get
much enthusiasm for something that doesn’t show immediate out-
comes, but I suppose it is going to be a while before we get the re-
sults of what we’re doing here.

Apparently, we're lagging somewhat behind other countries. I
think other panels will have some people address that, but you
mentioned briefly that you have taken a look. From an overview
standpoint, where do we stand with regard to our outcome-based
efforts vis-a-vis other countries?

Mr. BowsuHER. I think there are three countries that are defi-
nitely in the leadership arena, you might say, on this type of effort:
New Zealand, Australia, and the U.K. They started some years ago.
In Australia and New Zealand, of course, you have smaller coun-
tries, and therefore, in some respects, it’s always easier to turn a
smaller organization around than sometimes the larger organiza-
tion.

But in the U.K. today, 60 percent of their government operations
have now been turned around, you might say, and put more on an
outcome-oriented basis. And they have changed the relationship of


CONTENTS

Hearing held on March 6, 1996 ....
Statement of:

Bowsher, Charles A., Comptroller General of the United States, accom-
panied by L. Nye Stevens, Director, and J. Christopher Mihm, Assist-
ant Director, Federal Management and Work Force Issues, General
Accounting Office .

Kettl, Donald F., pro of _
sity of Wisconsin at Madison, and nonresident senior fellow, The Brook-
ings Institution, Washington, DC; Robert W. Lauterberg, director of
Planning and budget, Commonwealth. of Virginia; Malcolm Holmes,
senior public sector management gpecialist, orld Bank, and former
senior official, ministry of finance, Government of Australia;

Fairbanks, city manager, Phoenix, AZ ...
Letters, statements, etc., submitted for the record:

Bowsher, Charles A., Comptroller General of the United States, prepared
statement of ...

Clinger, Hon. Willi ., Jr., a Representative in
State of Pennsylvania, prepared statement of o

Collins, Hon. Cardiss, a Representative in Congress from the State of
Illinois, prepared statement of ..

Fairbanks, Frank, city manager, Phoenix, AZ, prepared statement of

Holmes, Malcolm, senior public sector’ management specialist, World

jank, and former senior official, Ministry of Finance, Government of
Australia, prepared statement of 5

Kettl, Donald F., professor of public affairs and political science, Univer-
sity of Wisconsin at Madison, and nonresident senior fellow, The Brook-
ings Institution, Washington, DC, prepared statement of .. a

Lauterberg, Robert W., director of planning and budget, Commonwealth
of Virginia, prepared statement of .. .

Maloney, Hon. Carolyn B., a Representative in Congress from the State
of New York, prepared statement of .. "

Morella, Hon. Constance A., a Representative in Congress from the State
of Maryland, prepared statement of

am



34

We need, in authorizations, to ask ourselves: which strategies
work best and, if we have an extra tax dollar to spend, where
should we spend it? Again, it won’t solve the problem but it will
allow us, at least, to ask the questions that we need to ask to be
able to get to the questions that, in the end, matter the most. So
those, I think, are the stakes for authorization.

On appropriations, the real key is to get leverage over the big
questions, the overall levels of taxing and spending, the question
of providing discipline, and how to get real payoff in the process.
What happens if in our current search for a balanced budget, the
balanced budget amendment and other things, in fact, fall short?
We need, in any event, to secure some kind of discipline over Fed-
eral spending. I think that the Government Performance and Re-
sults Act provides a way of getting, that discipline.

In talking with public officials in Phoenix, AZ, which has
a fair way down this road, they told me the story about what hap-
pens with city contracts. I asked, “Explain the politics of this to
me.” And they said, “Well, what happens is, if someone comes be-
fore the city council with a proposal for a contract for garbage col-
lection that is demonstrably more expensive than some alternative,
no matter how well wired it is, it makes it very hard for someone
to sit there and make the case for something that, while it makes
political sense, is economic nonsense.”

Simply having the ability to ask the questions makes it possible
to get much better leverage over the truly important fiscal issues.
When resources are scarce, we need smarter ways of asking the
right questions. We need some way, on top of that, to provide some
information about the payoffs.

Suppose that, in fact, we did manage to balance the budget. Sup-
pose, in fact, that my dog managed to catch the squirrel. What
would we then do? at would supply the further leverage over
the budget? What would happen if it turns out, as I suspect and
fear would be the case, that balancin the budget only becomes a
proximate success and citizens are still looking for a Government
that works better?

Balancing the budget will not, cannot, in itself, solve all the prob-
lems, and we need to establish the foundation for talking about
what citizens, I suspect, in the end, really care about most, which
is making Government work better. That, in many ways, is the key
question that the appropriations process has to deal with.

In addition to authorizations and appropriations, there is a third
point which is the relationship between Congress and the Office of
Management and Budget on the question of the Federal budget it-
self. It seems to me very clear, over the last few years, that we
have demonstrated that we need to transform the conversation be-
tween the President and the Congress about what the budget is
and how it ought to work.

In particular, having debates over how much money to spend
doesn’t tell us what results the money produces. We need a much
better piece of leverage to try to get to the question of what prior-
ities should we focus on, what strategies should we use? What
strategies, in fact, are likely to work best? We need, in short, to
focus the conversation on what matters. This is a long way down
the road; in fact, considerably past the requirements of what the


22

they could get the biggest payoff first. And I think that makes a
lot of sense in applying some of these new techniques.

Senator THOMPSON. What was that, do you recall, what they
went after first?

1 Mr. BowsHER. Chris, you are probably more expert on this than

Mr. MIMM. Their big initiative now is called the Next Steps ini-
tiative, and what it seeks to do is look at the more direct-service-
providing functions of Government and spin them off—still keep
them within Government, but have very direct output-oriented per-
formance agreements between the head of the agency and political
leadership.

So, in the case of a Next Step agency, for example, that deals
with visas and passports, or their social security administration, or
even traffic Ticensing— that's nationalized over in the United King-
dom—those types of things that can be easily separated out, in
which you can have clear agreements on levels of performance, are
where they are starting.

As Mr. Bowsher mentioned in his opening comments, they have
about 60 percent of the United Kingdom civil service now working
in these Next Step agencies.

Senator THOMPSON. I see. Well, talking about spin-offs, this will
help in the whole devolution debate also, I would assume.

Mr. BowsHER. Yes. What properly belongs where.

Senator THOMPSON. What properly—what’s working here and
what's net working '-ee, and what might work better at another
level of Governm:.1,

Mr. BOWSHER. Exactly. Yes.

Senator THOMPSON. Thank you, Mr. Chairman.

Mr. BowsHeER. If I could just point out one thing, too, and that
is, our Government, you know, is just a little more complicated
than most other governments. Most other governments have a na-
tional government and a local government. So achieving this here,
I think, is even more difficult, and also the size of our organiza-
tions.

Mr. CLINGER. Thank you.

I am now pleased to recognize the gentlelady from Florida, Mrs.
Thurman.

Mrs. THURMAN. And I thank the Chairman.

T just have one question. You spend some time on the issue of
better defining agencies’ missions and goals, and then go through
a series of areas where you feel that there have been some achieve-
ments through their outcome.

How do we best, as Congress and the agencies, work together to
pull this information, so that when we do go in—for example, you
mentioned the job training programs with disadvantaged, and it
sounds like there has been some conversation or communication.
But it really doesn’t do any good—and I’m afraid that what hap-
pens is, sometimes these things will sit on a shelf and never get
to the committees or to the congresspeople. What can we do to fa-
cilitate that happening?

Mr. BOWSHER. You can best hold oversight hearings and ask the
questions—where are your reports? In other words, the law now re-
quires those reports in the year 2000. They are doing pilots. So


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, JR., Pennsylvania, Chairman

BENJAMIN A. GILMAN, New York

DAN BURTON, Indiana

J. DENNIS HASTERT, Mlinois

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

STEVEN SCHIFF, New Mexico

ILEANA ROS-LEHTINEN, Florida

WILLIAM H. ZELIFF, JR., New Hampshire

JOHN M. MCHUGH, New York

STEPHEN HORN,

JOHN L. MICA, Flori

PETER BLUTE, Massachusetts

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

JON D. FOX, Pennsylvania

RANDY TATE, Washington

DICK CHRYSLER, Michigan

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

WILLIAM J. MARTINI, New Jersey

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

MICHAEL PATRICK FLANAGAN, Illinois

CHARLES F. BASS, New Hampshire

STEVEN C. LATOURETTE, Ohio

MARSHALL “MARK” SANFORD, South
Carolina

ROBERT L. EHRLICH, JR., Maryland

CARDISS COLLINS, Minois
HENRY A. WAXMAN, California
TOM LANTOS, California
ROBERT E. WISE, JR., West Virginia
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York

JOHN M. SPRATT, JR., South Carvlina
LOUISE McINTOSH SLAUGHTER, New

York
PAUL E. KANJORSKI, Pennsylvania
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
KAREN L. THURMAN, Florida
CAROLYN B. MALONEY, New York
THOMAS M. BARRETT, Wisconsin
BARBARA-ROSE COLLINS, Michigan
ELEANOR HOLMES NORTON, District of
Columbia
JAMES P. MORAN, Virginia
GENE GREEN, Texas
CARRIE P. MEEK, Florida
CHAKA FATTAH, Penneylvanii
BILL BREWSTER, Oklahoma
TIM HOLDEN, Pennsylvania

BERNARD SANDERS, Vermont
(Independent)

JAMES L. CLARKE, Sta/f Director
KEVIN SABO, General Counsel
JupiTH McCoy, Chief Clerk

BUD MYERS, Minority Staff Director

COMMITTEE ON GOVERNMENTAL AFFAIRS
TED STEVENS, Alaska, Chairman

WILLIAM V. ROTH, JR., Delaware
WILLIAM S. COHEN, Maine
FRED THOMPSON, Tennessee
THAD COCHRAN, Mississippi
JOHN MCCAIN, Arizona

BOB SMITH, New Hampshire
HANK BROWN, Colorado

JOHN GLENN, Ohio

SAM NUNN, Georgia

‘CARL LEVIN, Michigan

DAVID PRYOR, Arkansas:

JOSEPH I. LIEBERMAN, Connecticut
DANIEL K. AKAKA, Hawaii

BYRON L. DORGAN, North Dakota

ALBERT L. MCDERMOTT, Staff Director
CLAUDIA McMuRRaY, General Counsel
JOHN MERCER, Counsel
LEONARD WEISS, Minority Staff Director
MICHAL SUE PROSSER, Chief Clerk

ab


46

in which state government can become more creative, flexible, and entrepreneurial
in responding to the needs of Virginians.

Integrating strategic planning, performance measurement, and budgeting

In developing their budget aubmissions for 1996-98, state agencies applied a zero-
based, bottoms-up approach. The steps entailed: (1) identifying the critical issues
facing the agency, (2) developing strategies that address these issues, (3) preparing
a budget submission, and (4) establishing the quantifiable measures of performance
to be monitored in the upcoming biennium. This is how it worked:

1. Issues assessments. In the private sector, strategic planning seeks to answer
the questions:

. 10 are my customers?”

« “What is important to them?”

¢ “What are the strengths that may be exploited, and the weaknesses, opportuni-
ties, and threats that must be addressed, to serve my customers better?”

In the competitive business world, those questions must be answered constantly.
Entrepreneurs make adjustments based on their customers’ priorities, or risk losing
their business. Though not always facing external competitors, state governments
can still behave like competitive enterprises to better serve their own “customers.”

‘The identification of an agency's customers and their expectations was intended
to meet the Governor's requirement that agencies fundamentally examine what they
do. To encourage managers to look at their agencies in new ways, the strategic plan-
ning exercise posed the question, “If this agency did not exist today, would our cus-
tomers and the taxpayer be best served if our activities were privatized, transferred
to another agency, or eliminated?” Maintenance of the status quo was not an option.

Once an agency had identified its customers and defined its mission, it then
turned to identifying the critical issues that must be addressed during a four-year
planning horizon. The critical issues were derived directly from the listing of inter-
nal weaknesses and external opportunities and threats that were found to impede
the Agency in fulfilling its mission.

Although some 60 executive branch agencies in state government (out of a total
of 91) have used strategic planning in the past, no formal mechanism existed to
communicate the strategies to bu: decision makers. The lack of linkage between
strategic planning and budget development was a critical weakness of the old base-
line budgeting process. Agencies would submit their budgets and hope for the best.
If an agency received different funding than it requested, it was forced to arbitrarily
readjust its priorities and goals. The flaw in the system was obvious.

The new process relied on strong lines of communication and understanding be-
tween the Governor, his Cabinet Secretaries, the gency heads, and the Department
of Planning and Budget (“Planning & Budget”). Before an agency even began to de-
velop its budget submission, its leadership had an opportunity to formally present
a discussion of the critical issues that it proposed to address in the 1996-98 bien-
nium. As a result, decision makers acquired more and better information upon
which to develop later funding recommendations.

2. Strategy development. Having received feedback from the Governor's Cabi-
net, the agencies completed the development of their strategic plans by identifying
goals, objectives, and strategies for the biennium. Virginia is now one of the few
states in the U.S. in which strategic planning is conducted within every executive
branch agency.

‘The strategies developed by the agencies serve a vital purpose beyond laying a
foundation for budget development. Strategies typically include the entire range of
issues that must be addressed by agency management teams, from such thin,
incorporating technology into agency activities, to providing for professional staff de-
velopment. Accordingly, agency strategic plans outline the course of action an agen-
cy should follow, even when additional resources are not required.

3. Budget submissions. Strategies that entail additional resources were identi-
fied in the agency’s budget submission, thus ensuring a direct linkage between the
agency's strategic plans and. its request for funding. The submissions included a
breakdown of resources required for each activity the agency proposed to perform
during the biennium.

Agency activities also were prioritized. Those identified as the lowest priorities
were considered for elimination, in order to direct resources to more effective uses.
The budget submissions contained decision packages that detailed the costs and
benefits of undertaking each proposed strategic action. Again, this provided a criti-
cal link to the strategic planning process.

4. Performance measurement. The Goal Setting and Performance Budgeting
process did not conclude with the introduction of the Executive Budget. Another
major outcome of the process was the identification of objective performance meas-



30

for the elderly that are in the nursing homes, and, in addition, for
the poor who are needing medical and hospital care.

I think some of the audits that we’ve done—like we’ve done au-
dits on Tennessee’s program and Arizona’s program and Hawaii on
that—each State implements it differently, But you can make judg-
ments as to how well the program is doing and where are the prol
lem areas, and things like that. So it’s doable.

Mrs. MALONEY. So, in other words, we will be dependent on the
States to develop their own measures, but then we will oversee the
measures that they develop; is that what you're saying, that we are
dependent on them to develop the measures?

Mr. BowsHER. Yes, but also I think you can go out and take a
look-see of how well is it happening. In other words, it’s a partner-
ship, really, that you've got to work out.

Mrs. MALONEY. What. happens if a State isn’t providing a serv-
ice? What if they get a block grant for child care and they decide
they need it for infrastructure, or something happens to it, what.
then is the Federal role?

Mr. BowsHER. Well, then, at that point, you have a decision to
make, either in the executive branch or in the Congress, if you find
that to be the situation, whether you want that to continue or not.

Mrs. MALONEY. OK. Is Dr. Kettl here?

Mr. BowsHER. He’s coming later.

Mrs. MALONEY. He’s coming later.

Mr. BowSHER. Yes.

Mrs. MALONEY. He’s coming later. OK. I got here late, so I didn’t
get to hear all of it.

Some activities, like the census, which occurs every 10 years,
have a time horizon that makes performance measurement very
difficult. How should an agency deal with planning activities when
the results are years down the road?

Mr. BowSHER. My census expert is right with me here today, so
T'll let Nye answer that question.

Mr. STEVENS. Well, the census really is a quintessential planning
exercise, and one of the points we made in examining it is that, un-
less you are investing right now in planning for the census in the
year 2000, there’s a very good chance that the decisions that need
to be made in advance, so they can be carried out in time to meas-
ure those millions of people, won’t be made.

In terms of the GPRA-specific planning process, it is difficult, be-
cause their cycle is such a long one. I would say, however, that the
current budget environment, for all agencies including the census,
which has got the agencies thinking in terms of a horizon that
takes them all the way out to 2002, has actually had a beneficial
effect on the GPRA kind of thinking, because no longer are agen-
cies only thinking about what their budget is this year, their activi-
ties this year, their budget next year, but they are forced to think
about a 5-year timeframe, by congressional action, which they real-
ly haven’t had to do before.

The census is more used to that than most, and their problem
is really something like the one we're talking about today, getting
congressional attention early on to decisions they have to make, be-
fore anybody else is really thinking about the census. And they are
having a little trouble doing that right now.


39

© what mission IRS seeks to accomplish.
* how IRS plans to meet its mission.
« what success IRS has had in achieving its mission.
+ who has been responsible for successes and failures. . .
More than any other tool at Congress's disposal, strategic planning provides a
road map to what agencies are trying to do and how well they are doing it.
« More than any other tool at Congress's disposal, the strategic Planning that
GPRA requires of government agencies will provide an important roa
agencies are trying to do and how well they are doing it.

5. Performance Measurement Connects Plans with Results

What agencies do, in the end, matters much less than whether what they do
solves the problems for which they were created. It is one thing to forecast the
weather, it is another to provide timely information that minimizes the loss of life
in a hurricane. The Customs Service can inspect passports and luggage, but that
doesn’t necessarily reduce drug smuggling. When we worry about performance, what
we really want is to solve problems, not count how much activity agencies have.

This puzzle moves us directly into the arcane distinction between outputs and out-
comes, Such talk immediately produces the MEGO (my eyes glaze over) phenome-
non. But this distinction matters critically to Congress’s ability to solve the prob-
lems for which it legislates, for this reason: Most federal agencies and most federal
managers do not directly produce goods and services. Important exceptions include
agencies like the State Department, the Social Security Administration, the Depart-
ment of Veterans Affairs, and the National Weather Service. But most managers
spend their time in partnership with other managers—in other federal agencies, at
other levels of government, in nonprofit organizations, and in the private sector. It
is this partnership that in the end actually produces the goods and services that
the government pays for.

For example, the Department of Education actually provides little education; it
makes grants to others who educate. The Department of Defense does not build mis-
siles or fighters; private contractors do. [A does not make workplaces safe; it
regulates and inspects workplaces to ensure that private companies keep their fa-
cilities safe. The Health Care Financing Administration does not provide Medicare
services; it funds and manages a vast array of nonprofit and for-profit organizations
who do so.

This creates a dilemma for measuring results. What matters most is what results
federal programs produce. This leads logically ‘to measuring program results, But
most of these results depend on how well the partnerships work and therefore are
out of the direct control of federal managers. Federal managers understandably are
nervous about being measured and held accountable for results they cannot directly
control. Instead, th argue that performance measurement ought to focus on their
activity, Should GPRA focus on holding managers responsible for results they can
control but risk losing sight of the bigger picture, or should it measure the broader
impact of government program but risk losing a clear sense of who is responsible

for what?

In the language of performance measurement, the question resolves itself to this:
Should government measure outputs, the services produced? Or should government
measure outcomes, the results achieved?

On the most basic level, the answer is simple. Government must seek to do both.
We need information about the specific activities of government managers and about
the broader results they produce. But we also need to be very frank: This is very
hard to do, The measurement issues at play rank among the toughest technical
challenges in public management. The degree of difficulty, however, should not pre-
vent us from trying as hard as we can to do it right. If the solutions are hard, the
questions are critical.

On a deeper level, moreover, the return even from basic information can be so

at that we ought not be hindered in developing a system just because we cannot
fully implement it immediately. The experiences of other nations demonstrate quite
clearly that performance measurement emerges only from a very long—probably
decades-long—process. In the meantime, however, getting better information about
who is doing what, even if that information is rudimentary, can so substantially im-
prove public debate that we ought not be hindered by the scope of the total task.

Does a federal job training program work? It makes much more sense to gauge
how many people are trained, what their characteristics are, what kind of jobs they
get, and how long they keep them, than simply to declare a program a success be-
cause it spends a certain amount of money. Does the air traffic control system work?
Comparing delays with on-time arrivals makes far more sense than simply counting
outlays, None of these measures gives a full picture. But basic output data is always

map to what



25

is the Government to keep moving, and they have traditionally not
been doing as well in that area as what the private sector has in
recent years.

But I think that’s where Government has got to pick up and
catch up because you can’t keep doing it the old way.

Mr. CLINGER. I think you pointed out, and it’s been stressed here
throughout, that the authorizing committees definitely have a role
to play to make sure this works.

Mr. BowsHeEr. They have a big role, yes.

Mr. CLINGER. And I think, from our vantage point, we have to
encourage the authorizing committees to become very deeply in-
volved in this.

Mr. BowsHER. Yes.

Mr. CLINGER. But, clearly, Senator Thompson’s committee and
this committee have an equally important role, because we're the
only committees that really have an oversight over the whole pano-
ply of what's going on here.

Mr. BowsueER. That’s correct. That’s exactly right,

Mr. CLINGER. So we have to have a closer relationship with our
authorizing committees as well as with the agencies themselves.

The gentlelad from Florida, Mrs. Meek.

Mrs. MEEK. Thank you, Mr. Chairman.

I have a question and a concern. My background has been in
higher education pretty much all my life, and we did a lot of strate-
gic planning—goals, objectives, rationale, and all those kinds of
things—for many, many years. Many times this never got enacted.
It never got. used, because you must have people who are supposed
to make this happen and must be sure that everyone else becomes
a part of this. Otherwise, it just becomes another well done paper
or well done document that ends up in File 13.

Also, the Florida legislature did something very similar to this,
and it was effective to a point. But there has to be a way that we
can keep this going and have it flexible enough so that new admin-
istrations and new congresspeople can react to it based on the
needs of the people they represent as well as the Government agen-
cies that serve all the Nation. So I hope you keep that in mind in

our planning, that it does need flexibility. It does need some very
ong-range things that you can look forward to.

Also, now that I’m in Congress, I’m just wondering what kinds
of safeguards or kinds of measures you put in that 435
congresspeople who sit on these committees can be made aware of
this kind of process. It’s a very important process, and it does help.
But I see two things:

It’s going to be very costly, because in order to do these kinds of
performance reviews and kinds of things that are necessary, you
need trained people to train the people to carry this out. I'm sure
that’s in your plan, and I’m asking you to be sure that it’s there
and to be sure that it’s implemented. Because there may be a bad
trainer training the people who are in the agencies as well as the
congresspeople, and you need that kind of performance review.

I would also like to know, how does your implementation of this
law interact with President Clinton’s reinventing Government ini-
tiative?


9

cies. Our work showed that these programs were badly fragmented-and in need of
‘a major overhaul.”

Moreover, in reviewing 62 programs that provided employment assistance and
training to the economically disadvantaged, we found that most programs lacked
very basic information needed to manage. Fewer than 50 percent of the programs
collected data on whether program participants obtained jobs after they received
services, and only 26 percent collected data on wages that participants earned.®
Both houses of Congress in recent months have undertaken actions to address the
serious shortcomings in the federal government’s employment assistance and train-
ing programs, although agreement has not been reached on the best approach to
consolidation.

In another example, we identified 8 agencies that are administering 17 different
programs assisting rural areas in constructing, expanding, or repairing water and
wastewater facilities.* These overlapping programs often delayed rural construction
projects because of differences in the federal agencies’ timetables for grants and
Joans. Also, the programs experienced increased project costs because rural govern-
ments had to participate in several essentially similar federal grant and loan pro-
grams with differing requirements and processes. We found that, because of the
number and complexity of programs available, many rural areas needed to use a
consultant to apply for and administer federal grants or loans.

The examples I have cited today of agencies with unclear missions and other
agencies that are duplicating each other’s efforts are not isolated cases. Our work
that has looked at agencies’ spending patterns has identified other federal agencies
whose missions deserve careful review to ensure against inappropriate duplication
of effort.1°

GPRA Provides Opportunity to Clarify Agencies’ Missions and Better Focus Pro-
grams

As I noted in an appearance before the Senate Committee on Governmental Af-
fairs last May, in large measure, problems arising from unclear agency missions and
goals and overlap and fragmentation among programs can best be solved through
an integrated approach to federal efforts.1! Such an approach looks across the ac-
tivities of individual Programs to the overall goals that the federal government is
trying to achieve. The GPRA requirement that agencies consult with Congress in
developing their strategic plans presents an important opportunity for congressional
committees and the executive branch to work together to address the problem of
agencies whose missions are not well-defined, whose goals are unclear or nonexist-
ent, and whose programs are not properly targeted. Such consultations will be help-
ful to Congress in modifying agencies’ missions, setting better priorities, and re-
structuring or terminating programs.

The agencies’ consultations with Congress on strategic plans will begin in earnest
in the coming weeks and months. The Office of Management and Budget's (OMB)
guidance to agencies on GPRA requirements for strategic planning said that agen-
cies would be asked to provide OMB with selected parts of their strategic plans this
year. Some departments, such as the Department of the Treasury, are scheduling
meetings on their strategic plans with the appropriate authorization, appropriation,
and oversight committees.

As congressional committees work with agencies on developing their strategic
plans, they should ask each agency to clearly articulate its mission and strategic
goals and to show how program efforts are linked to the agency’s mission and goals.

aking this linkage would help agencies and Congress identify program efforts that
may be neither mission-related nor contribute to an agencies’ desired outcomes. It
would also help Congress to identify agencies whose efforts are not coordinated. As
strategic planning efforts proceed, Congress eventually could ask OMB to identify
programs with similar or conflicting goals.

7 Multiple Employment Training Programs: Major Overhaul Needed to Create a More Efficient
Customer Brive § ‘System (GAOPTHEHS 98-10, Feb. 6, 1995). Miclent,

® Multiple Employment Training Programs: Most Federal Agencies Do Not Know If Their Pro-
&rams Are Working Fffectively (GAO/T-HEHS-94-88, Mar. 2, 1994).

®Rural Development: Patchwork of Federal Water and Sewer Programs Is Difficult to Use
(GAO/RCED-95-160BR, Apr. 13, 1995).

1° Government Restructuring: Identifying Potential Duplication in Federal Missions and Ap-
proaches (GAO/T-AIMD-95-161, June 7, 1995).
rooegouernment Reorganization: Issues and Principles (GAO/T-GGD/AIMD-95-166, May 17,


61

We were forced to reduce our emplayment by about 5 pereent. In
some departments, because we saved the police and the fire depart-
ments and didn’t cut them, in some departments that cut amount-
ed to 10 or 15 percent of their employees. After all of those cuts
were completed, about 6 months later, we swallowed hard and did
a citizen attitude survey. We asked the citizens, “What is your sat-
isfaction with our service level?”

During that time, instead of crying or worrying about how we
couldn’t deliver services, or focusing on how bad it was to lose all
of these employees, our managers, our supervisor, our employees
did everything in their power to deliver services as best they could.

When we asked the citizens, the citizens told us, on 25 services,
the citizens gave us the highest rating we ever received on 24 of
them, and on the 25th, we tied the highest rating we ever received.
By our employees focusing on the results, even after losing staff,
in the public’s eye we were able to do a better job of delivering
services than we did before we lost the staff.

In addition to surveying our customers, we bring them in to talk
about their perceptions of the quality they are receiving from city
departments. We use the focus up technique to field test new
programs and improve old ones. We ask our customers to evaluate
us immediately where they receive services.

At each customer service counter in the city you will find a card
in a display box that reads, “You are our customer. How are we
doing?” Our customers are asked about the quality of service they
just received at that counter, on the spot, during the moment of
truth, when that citizen was facing a city employee.

Some of the citizen comments are critical. Customers at our
water department, for example, were angry about having to wait
in line too long. So we pulled our crew together. We pulled our
management, supervision, and employees together, and we rede-
signed our system to shorten their wait by cross-training all of our
employees so that our clerical staff could serve as cashiers when
needed, and we sent some of our paper employees, some of the ad-
ministrative employees into the queue to accept payment checks, so
that people wouldn’t have to wait in line. We solved this problem
without adding a single staff.

Most of the rating cards we get from the public, however, come
back with positive comments about exemplary service. These re-
marks are then forwarded to deserving employees. Recognizing em-
ployees’ good work is crucial in improving morale and in boostin;
employee productivity. When employees hear they have done good
work, they want to do it again. They are willing to take that extra
step, provide that extra energy, take that risk, make that change,
be flexible, work harder, because they were rewarded when they
performed.

Measurements do create priorities. Measurement systems them-
selves influence results. When we decided customer satisfaction
must be a key goal for the city, we knew we must measure that
satisfaction. We knew we had to convince the employees that it was
important and that we cared, and we knew we had to reward the
employees when they delivered.

As I close, I want to make it clear that, as important as measure-
ment system is to us, it is clearly not the whole story. A variety


AT

ures that each agency will use in the coming biennium to monitor the fulfillment
of its mission and the effectiveness of particular activities.

Performance measures provide an invaluable internal management tool for agen-
cies to use in monitoring Program performance and taking corrective action to im-

rove service to “customers.” The measures will also enable the Governor and the
Beneral Assembly to make future funding decisions based on hard evidence of pro-
gram effectiveness. . ;

Agency activities may be benchmarked against similar activities in other agencies,
or even contrasted with activities conducted by other state governments, other levels
of government, and the private sector. Benchmarking will support future budget de-
cisions to increase or decrease funding; consolidate programs within sel agen-
cies; privatize functions where appropriate; or eliminate programs entirely.

¢ Governor has assigned Planning & Budget to oversee the collection and anal-

sis of performance measures throughout state government. In turn, Planning &
Bi dget Ras enlisted the cooperation of the Joint Legislative Audit and Review Com-
mission (JLARC) in carrying out its role. JLARC issued a study in 1995 calling {
the implementation of a planning and performance measurement system in Virgini
state government. This joint effort between the executive and legislative branches
of povernment will strengthen the process.

e 1996-98 Executive Budget thus builds on the strategic planning conducted

in every executive branch agency. It incorporates many of the proposed savings and
efficiencies that were identified to result from privatization, reorganization, and
downsizing. More than 30 agencies targeted 53 programs for privatization, which
could result in major savings over the next two years. The estimated annual dollar
value of the activities to be privatized is approximately $627 million. In addition,
some 46 programs in 31 agencies have been identified for reorganization or

izing in the coming biennium.
Virginia is thus beginnii ng to realize the benefits of integrating strategic planning
into its budgeting system. ite budgets in the future will more fully integrate per-
formance measurement, as well. The integration of strategic planning and perform-
ance measurement into the budget process will better enable state government to
eliminate waste, prioritize resources and ensure accountability to the taxpayers.

Il, VIRGINIA’S EXPERIENCE IN PERFORMANCE MEASUREMENT

Performance-based government us. the previous system

As Virginia implements ita performance budgeting aystem across state govern-
ment, it is becoming clear that there will be significant benefits in terms of agency
performance and accountability. In comparison with a budgeting system that does
not incorporate objective performance measurement, the performance budgeting sys-
tem will have several important advantages:

1) Changing the status quo. The Virginia Goal Setting and Performance Budg-
eting process guides agencies in establishing long-term strategies as a precursor to
budget development. Performance measures then monitor the achievement of the
strategies. Since strategies nearly always entail doing things differently in order to
reach a long-term goal, performance measurement focuses on changing the way gov-
ernment operates. Performance measurement, therefore, ensures continued manage-
ment focus on bringing about long-term change, rather than on day-to-day oper-
ational issues.

2) Furthering top-level policies. Policy makers in the executive and legislative
branches can greatly influence an agency’s policy direction through the selection of
specific performance measures. Since agency management is likely to give priority
to measures that will be publicly disseminated, policy makers may want to ensure
that their policy priorities are among those being measured. Selected measurements
should also be made widely available. Virginia intends to publish key performance
measures in its budget document for the next millennium.

3) Providing more balance in budget debates. Constituencies and grantees
seeking additional funding in the state budget frequently argue that more dollars
are needed to achieve some level of spending on a per recipient or per capita basis,
or to achieve a certain perventage rate of growth, or to achieve a national or re-
gional average rate of spending. Such spending goals ignore actual or potential effi-
ciencies that could be achieved in administering programs, and lessen the incentives
to operate programs more cost effectively. Performance measurement will bring
more substance to budget deliberations by focusing on services to be provided, rath-
er than on budget baselines.

4) Reducing mandates on grant recipients. State government can facilitate
a loosening of mandates on localities and other grant recipients by requiring per-
formance measures. In this way a balance can be achieved between ‘granting recipi-



49

Lessons Learned

Planning and performance information can assist in budget development in a
number of different ways. It can help to develop appropriate state policies and goals,
monitor the implementation of these policies by state agencies or others, commu-
nicate with constituents and the broader public about state programs and their re-
sults, and make budget decisions. In short, high-quality performance information
can help in virtually all aspects of managing. ;

Age icy officials can and already do use performance information in many aspects
of daily management, not just to allocate funds internally or to justify budget re-
quests. They may use this information to choose among competing contractors, or
to choose among various approaches for accomplishing a goal. Performance informa-
tion helps agencies to evaluate existing goals and priorities and to set new ones. An
agency may use this information to compare the effectiveness of its regional offices
or operating divisions.

ile the use of performance information in budget decision making is an impor-
tant tool, the relationship between funding and outcomes is indirect or not well-doc-
umented for many government services. Numerous variables can affect outcomes,
some beyond the control of agencies. Also, it is often very appropriate to consider
factors such as caseloads or workloads when settin, agency udgets, even though
these are not measures of outcomes. Ultimately, we think decisions about appropria-
ions require the best judgment based on a variety of considerations—including, but
to, planning and performance information.
irginia is undertaking specific steps to improve the development and use of per-
formance information. We recommend that public sector organizations interested i

in
embarking on a performance accountability system consider some of the following:

« Ensure that central and line agencies have sufficient training in strategic plan-
ning, performance measurement and performance budgeting, as well as opportuni-
ties to exchange information on these topics.

* Publish a consolidated state performance report that highlights key perform-
ance measures from agency performance reports.

* Consider ways to streamline agency budget narratives, highlight performance
measures and link them to planning objectives, and present budget recommenda-
tions or options in terms of their expected outcomes.

Create an ongoing dialogue between the legislative and executive branches for
the purpose of refining measures and data used in the agency performance reports
or the budget document.

* Find ways to more effectively link information on planning and performance
with corresponding information on spending.

* Periodically review and discuss agency gertormance with individual agency
heads, either in meetings related to budget development or in separate meetings.

III. HOW CONGRESS CAN USE PERFORMANCE MEASUREMENT DATA.

There are a number of parallels between the states and the federal government
in their potential uses of performance measurement data. While executive branch
agencies should have primary responsibility for designing and collecting perform-
ance measures, the legislative branch will likely be a major user of the data. The
legislative branch should also participate in the selection of performance measures
and in reviewing their design.

Following are some ways in which congressional authorization and appropriations
committees can, and should, participate in the development and use of agency per-
roa Provide Input on the selection of key indie

1, Provide input on the selection of program performance indicators.
The identification of key performance indicators requires fundamental questions to
be addressed concerning program abjectives. Committees should express to agencies
what they consider to be the key indicators to ensure the agency prioritizes the pro-
gram elements considered most important by Congress.

2. Review and recommend design modifications to formance measures
identified by agencies. Congressional committees should review the performance
measures designed by the agencies to ensure that the data to be collected is mean-
ingful, verifiable, and will address the concerns of Congress.

3. Monitor actual performance measurement data at regular intervals.
Once actual formance measurement data becomes available, congressional com-
mittees should regularly review the data. Emphasis should be placed on empirical
data points outside of the expected. By focusing on exceptional data, the committee
can identify problem areas, unusual successes, and trends.

4. Compare performance gata to benchmarks. Committees can judge the ef-
fectiveness of programs by comparing performance data to benchmarks in the pri-


12

they have become the single greatest barrier to timely and meaningful financial re-
porting. Self-assessments by the 24 CFO Act agencies showed that most agency sys-
tems are not capable of readily producing annual financial statements and do not
comply with current system standards. The CFO Council has designated financial
management systems as its number one priority.

In addition to problems with the federal government’s financial and information
management systems, we also have expressed concern about the absence of strate-
gies in agencies for GPRA training and staff capacity-building.! Leading states and
foreign countries that had implemented management reforms similar to those under
GPRA made substantial investments in training managers and staff throughout
their organizations and said that such training was critical to the success of their
reform efforts. We are concerned that most federal agencies have not made progress
in developing plans to provide this essential training in the creative and low-cost
ways that the current budget environment demands,

T fully appreciate that, in this environment, maintaining existing budgets devoted
to management systems and training is a formidable challen; lowever, contin-
ued—and in some cases, augmented—investment in these areas is important to en-
sure that managers have the information and skills needed to run downsized federal
organizations efficiently.

What Steps Is the Agency Taking to Align Its Core Business Processes to Support
Mission-Related Outcomes?

In passing GPRA, Congress recognized that, in exchange for shifting the focus of
accountability to outcomes, managers must be given the authority and flexibility to
achieve those outcomes. GPRA therefore includes provisions to allow agencies to
seek relief from certain administrative procedural requirements and controls. Agen-
cies’ efforts to focus on achieving results are leading a number of them to recognize
the need to change their core business processes to better support the goals they
are trying to achieve. For example, the U.S. Army Corps of Engineers’ Civil Works
Directorate, Operation and Maintenance program, changed its core processes by
means of several initiatives, including decentralizing its organizational structure
and delegating decisionmaking authority to project managers in the field. In e:
change for this delegated decisionmaking, managers at the Corps of Engineers in-
creasingly are being held accountable for achieving results. The ‘Corps hag estimated
that, by changing its core processes, it has saved about $6 million annually includ-
ing 175 staff years.

fn summary, GPRA, along with the CFO Act, can be an important tool for con-
gressional and executive branch decisionmakers as they grapple with the formidable

icy, program, and resource challenges of reducing the deficit and managing the
federal government. Now is the time for Congress to fuel the momentum established
by the GPRA pilots by reinforcing to agencies the importance that it places in the
successful and thorough implementation of GPRA. Congress can, for instance, sup-
port GPRA by using the performance information that agencies provide to help
guide decisionmaking and by asking about the status of agencies’ implementation
of GPRA during congressional hearings. Your continued leadership and the leader-
ship of your colleagues on authorization, appropriation, budget, and oversight com-
mittees across Congress is critical to continuing the momentum needed to ensure
the aggressive implementation of GPRA.

‘This concludes my prepared statement. I would be pleased to respond to any ques-
tions.

RELATED GAO PRODUCTS:

GPRA Performance Reports (GAO/GGD-96-66R, Feb. 14, 1996).

Office of Management and Budget: Changes Resulting From the OMB 2000 Reor-
ganization (GAO/GGD/AIMD-96-50, Dec. 29, 1995).

Transforming the Civil Service: Building The Workforce of The Future, Results Of
A GAO-Sponsored Symposium (GAO/GGD-96-35, Dec. 20, 1995). _

Financial Management: Continued Momentum Essential to Achieve CFO Act Goals
(GAO/T-AIMD-96-10, Dec. 14, 1995).

Block Grants: Issues in Designing Accountability Provisions (GAQ/AIMD-95-226,
Sept. 1, 1995).

‘inancial Management: Momentum Must Be Sustained to Achieve the Reform

Goals of the Chief Financial Officers Act (GAO/T-AIMD-95-204, July 25, 1995).

14 Managing for Results: Status of the Government Performance and Results Act (GAO/T—
GGD-95-193, June 27, 1995).