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20–174 PDF 2005

S. Hrg. 109–42

PROGRAMS IN PERIL: AN OVERVIEW OF THE

GAO HIGH-RISK LIST

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE, AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

FEBRUARY 17, 2005

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

AMY B. NEWHOUSE, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Akaka .................................................................................................. 3

Senator Lautenberg .......................................................................................... 5

Senator Stevens ................................................................................................ 17

WITNESSES 

THURSDAY, FEBRUARY 17, 2005

Hon. David M. Walker, Comptroller General, U.S. Government Accountability 

Office ..................................................................................................................... 7

Hon. Clay Johnson III, Deputy Director for Management, Office of Management and Budget .................................................................................................. 10

ALPHABETICAL LIST OF WITNESSES

Johnson, Hon. Clay III: 

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 61

Walker, Hon. David M.: 

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 27

APPENDIX

Charts submitted for the record from Mr. Walker ............................................... 57

Questions and responses for the record from Senator Akaka for: 

Mr. Walker ........................................................................................................ 63

Mr. Johnson ...................................................................................................... 67

(1)

PROGRAMS IN PERIL: AN OVERVIEW OF THE 

GAO HIGH-RISK LIST 

THURSDAY, FEBRUARY 17, 2005

U.S. SENATE, OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE, OF THE COMMITTEE ON HOMELAND SECURITY AND

GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:07 a.m., in 

room SD–342 Dirksen Senate Office Building, Hon. George V. 

Voinovich, Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich, Stevens, Akaka, and Lautenberg. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. The Committee will please come to order. I 

want to thank you all for coming. 

Today, the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia meets 

to discuss the Government Accountability Office’s 2005 high-risk 

series, and I am very pleased that Comptroller General David 

Walker and the Office of Management and Budget’s Deputy Director for Management Clay Johnson are with us today. Thank you 

for being here. They are both leaders in improving the management and efficiency of Federal Government operations. 

Just yesterday, the Comptroller General testified before the Committee on Homeland Security and Governmental Affairs to discuss 

GAO’s comprehensive examination of the Federal Government’s 

structural base, including programs, policies and long-term financial outlook. This review dovetails well with GAO’s work on the 

High-Risk List, and I commend Comptroller General Walker for 

initiating this report. 

Fifteen years ago, GAO first issued its High-Risk Series to examine Federal programs that are especially vulnerable to waste, 

fraud, abuse and mismanagement. Over time, GAO expanded their 

biannual High-Risk Series to include areas of broad transformation 

in the hopes of improving the effectiveness, accountability and sustainability of government programs and operations. 

Each of the 25 programs listed in this year’s High-Risk Series 

impact the daily lives of citizens across the country. Many programs are dysfunctional and fail to deliver the intended services to 

the taxpayer; for example, last year, I chaired a field hearing in 

Cleveland to examine the Social Security disability process, which 

has been on the High-Risk List since 2003. I was impressed with 

2

Social Security Commissioner Joanne Barnhart’s commitment to 

resolving this issue; however, based on the letters I receive from 

my constituents in Ohio, it appears that progress has been slow if 

not at all. 

In other instances, high-risk programs are wasting billions of dollars that could be better used for higher-priority programs or cutting the deficit. Needless to say, the High-Risk Series provides a 

road map for oversight and reform, and it should be taken seriously 

by Federal agencies, the Administration and Congress. For instance, in 2001, GAO designated strategic human capital management as high risk. Senator Akaka and I are very familiar with the 

Comptroller General’s expertise on this issue, and together, we 

have dedicated time and energy in order to facilitate governmentwide human capital improvements. 

In fact, during my tenure of this Subcommittee, we have held 16 

hearings to examine the Federal Government’s human capital challenges. Furthermore, over the past 2 years, seven human capital 

reform bills in whole or part have become law. This significant accomplishment does not include the human capital reforms enacted 

specifically for the Departments of Defense and Homeland Security. 

Clearly, the interest of the Congress and the GAO designation of 

human capital management coupled with the prominence of this 

issue in the President’s management agenda, and I want to underscore this, the prominence of human capital in the President’s management agenda, created a confluence of ideas and synergy which 

led to the most dramatic civil service reform since 1978. 

I believe strongly that this level of scrutiny should be focused on 

each of the high-risk areas. Unfortunately, this Subcommittee cannot do it alone. We would need the help of the authorization and 

appropriations committees in other areas. I would also suggest that 

human capital oversight on the legislative model could be replicated for other high-risk areas. Understanding that this Subcommittee cannot focus on each high-risk area, we are going to 

urge our colleagues on the authorizing and appropriations committees to examine ways to improve the performance of these programs and activities within their jurisdictions. 

Of course, the problem around this place is that we spend all our 

time on the budget and on appropriations, about 60 percent of it, 

and we do not have 2-year budgets, so there is very little Congressional oversight. Too often, people come in to talk with Members 

of Congress about a problem area. They make a pledge to fix it and 

walk out of the room knowing that little follow-up will be conducted. So there is no serious real oversight here, and it bothers 

me substantially. In addition, this Subcommittee will focus on a 

few additional high-risk areas during the next couple of years. 

Looking more closely at this year’s report, we find that GAO designated four new high-risk areas. One, establishing appropriate 

and effective information sharing mechanisms to improve homeland security, and we know how important that is, because we saw 

after September 11 how that kind of information was not being 

shared; two, DOD’s approach to business transformation; three, 

DOD’s personnel security clearance program, and four, management of interagency contracting. 

3

While it is troubling when GAO adds new programs to the list, 

it does not mean that high-risk designation lasts indefinitely. Fortunately, this year, GAO found sufficient progress to remove the 

high-risk designation for three specific programs, including the 

Student Financial Aid program, FAA financial management, and 

the Forest Service Financial Management System. Mr. Johnson, I 

applaud the Administration’s work on this effort, because if you 

had not done it, they would not have gone off the list. 

However, some programs simply cannot break free from their 

high-risk albatross. In fact, six high-risk areas in this report have 

been on the list for 15 years. Clearly, this is not an anniversary 

worth celebrating. These programs are DOD’s supply chain management, DOD’s weapons system acquisition, DOE’s contract management, NASA’s contract management, the Medicare program and 

collection of unpaid taxes. 

And fixing the ones at the Department of Defense could save billions and billions of dollars by instituting the change mechanisms 

that have been suggested by GAO. I am extremely interested in 

hearing from Mr. Walker why these programs have been on the list 

so long and even more importantly learning from Mr. Johnson 

what steps has the Administration taken in improving them? 

And one of the benefits of having the President reelected is you 

got started with a whole bunch of reforms in the first term, and 

now, you have an opportunity to spend the next 4 years really 

making necessary changes. And I know, Mr. Johnson, that you are 

as concerned about that as I am, maybe even more concerned, and 

the real issue here is to pick the ones that we can make the biggest 

impact and then just zero in on it and stay on it so that 4 years 

from now, you can say we really did make a big difference, and 

that would be one of the most significant contributions that this 

administration could make to the American people. 

Effective Congressional oversight and a commitment from the 

Administration are imperative to enhance the performance of and 

instill accountability in the areas designated. As Chairman of the 

Government Management Subcommittee, I want our witnesses to 

know that this is the first of a series of high-risk hearings that I 

will be chairing with the Congress. I have talked this over with the 

Chairman of the Committee, Senator Collins, and we are going to 

have the opportunity to add a couple more staff people, and we are 

going to stay on top of this and try to work harder and smarter, 

to make a difference on these issues. 

I thank our witnesses, David Walker and Clay Johnson. I look 

forward to an in-depth discussion about this year’s High-Risk List. 

I now yield to the Ranking Member of the Subcommittee, my good 

friend, Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. 

As you mentioned, today’s hearing will review the GAO’s HighRisk List with our friend Comptroller General Walker and the 

OMB Deputy Director for Management, Mr. Johnson. Mr. Chairman, I cannot think of two more fitting witnesses than the ones we 

have before us today to discuss how we can strengthen critical Federal programs. The oversight of government programs is the legacy 

4

of this Subcommittee, and as such, we have tremendous latitude to 

investigate a wide range of issues relating to government efficiency 

and accountability of taxpayers’ dollars. 

Since 1990, the Government Accountability Office has identified 

high-risk programs in need of urgent attention either through 

transformation, as with the Postal Service, or significant modernization, such as the business systems at the Department of Defense. Transparency and accountability are the underpinnings of 

good government. Too often, the focus is on funding levels and policy decisions without considering the internal structure of an agency. 

The attention by GAO on high-risk areas sharpens the debate by 

highlighting fundamental management weaknesses such as inadequate financial and contract management. Unfortunately, it has 

become routine for agencies to make decisions without having 

sound business cases for change or without taking into account 

agency mission. I believe the high-risk list provides all agencies 

with an opportunity to undertake a critical review of their operations and implement best practices. 

I am disappointed that so many areas within the Department of 

Defense remain on the updated High-Risk List. As the Ranking 

Member and former Chairman of the Armed Services Readiness 

Subcommittee, I have worked hard to improve the efficiency of 

DOD programs and operations. We built on our past efforts to require improved management of the $50 billion DOD spends annually on services by establishing specific goals for the use of competitive contracts and performance-based contracting. We also have 

required DOD to develop a comprehensive financial management 

enterprise architecture because DOD has been unable to produce 

reliable financial information or clean financial statements. 

However, as the GAO update shows, there continues to be fundamental deficiencies within DOD despite our longstanding efforts. 

Take, for example, human capital management within the Department of Defense. It is hard to think of any one function that cuts 

across all of DOD more than human capital management. Despite 

the issuance of proposed regulations for its new personnel system, 

DOD does not have in place a strategic human capital plan. No 

document identifies DOD recruitment and retention strategy or 

goes for its future workforce. 

For some time, the Comptroller General has recommended that 

DOD have a chief management officer who would be accountable 

for agency-wide management just as the Deputy Director for Management at OMB is responsible for government-wide management. 

I plan to use my position as Ranking Member on the Readiness 

Subcommittee to work towards this objective. 

Chairman Voinovich, your willingness to take on some of the 

very issues that we confront on the Armed Services Committee is 

welcomed, and I look forward to working with you on this effort. 

The bottom line is we need sound management practices in place 

so that Federal agencies can spend taxpayer money wisely. We 

need sound financial systems in place so that taxpayer dollars can 

be tracked, and we need the right people and the right skills in 

place so that agencies can carry out their missions successfully. 

5

I look forward to the testimony of our distinguished panelists 

today, Comptroller General Walker and OMB Deputy Director 

Johnson. Mr. Chairman, I look forward, as I always do, to working 

with you and tackling the inefficiencies spotlighted by GAO. I look 

forward to the months ahead as we continue hearings like this 

issue. 

Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you very much, Senator Akaka. 

Senator Lautenberg.

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Yes, thank you very much Mr. Chairman. 

It looks like Comptroller General Walker is a regular visitor to our 

hearing room, and we welcome him, and we will keep on giving 

him challenges to respond to, and we do look forward to hearing 

from him today. 

And we are going to be looking at 25 specific programs identified 

by GAO at high-risk waste, fraud, abuse, or mismanagement. And 

I noted with interest that you had relieved—if I can call it that—

a bit of a stigma from several areas—three of them specifically, and 

I will make reference to them when we have a chance after we 

hear your statement to talk about them. 

I want to focus on a couple of things. One of them is DOD and 

their contract management—I have had a continuing interest in 

the area—and the modernization of FAA and its air traffic control 

operation. Now, I see that they were commended somewhat for 

their financial management side of things, and for $11.7 billion in 

property accounting. These are mindblowing numbers, and the fact 

that they got better at it is really encouraging, and I hope that will 

enable us to examine the possibility of privatization of air traffic 

controllers more clearly, more deeply. 

DOD is the largest government purchaser, with $200 billion 

spent on goods and services each year, but GAO is critical of DOD’s 

contracting procedures, especially with regard to contracts being 

awarded in Iraq, and we continue to stumble across information 

that is discouraging, Mr. Chairman, about funds that were appropriated, delivered, but not appropriately used. And I quote GAO’s 

report here: ‘‘DOD’s extensive use of military logistical support contracts in Iraq and elsewhere require strengthened oversight.’’

That is terrible news to hear, because when we see the effort of 

our service people—beyond description in many cases—if we do not 

make sure that everything they need is properly delivered, it is a 

worrisome thing. And I think DOD has been negligent in several 

instances. The personnel waive competition requirements for nearly half of the task orders reviewed in your report, Mr. Walker. 

DOD lacks safeguards to ensure that waivers were granted only 

under appropriate circumstances. 

Each one of these things, nowhere were they encouraging, Mr. 

Chairman, to see as we try to finance this; we want to provide 

whatever support we can for our troops and our mission, but any 

waste or abuse, and I hesitate to call it fraud, because it is still 

under examination, is unacceptable. Over the past couple of years, 

on four separate occasions, I have made written requests to the full 

Committee to hold hearings on DOD contracting abuses. Now, we 

6

are not able to hold such hearings, and now that GAO bolsters the 

case, it seems to me that we are seriously abdicating our oversight 

responsibility and putting our men and women in uniform in some 

greater danger. 

Another thing, Mr. Chairman, that I want to focus on is the air 

traffic control system. Since 1995, GAO has designated FAA’s air 

traffic control modernization project at high risk. Now, I come out 

of the computer business, and I sat in my years in the Senate looking at failed plans that were initiated and dropped, paid for, by the 

way, to some of the best companies in America. I know one thing 

from my personal experience, and that is when you have an assignment of the magnitude like this one that you cannot do the whole 

thing in one exercise, that it has to be segmented; it has to be 

brought down to bite-sized pieces, to use the expression, and we 

have seen it with plans for Medicare and other things as well. You 

have to work on those things where you can see the change taking 

place. 

Another thing, and I will not get into much of a discussion about 

this, but, Mr. Chairman, you have got a very respectable record in 

public service, and I commend you for it, and you continue the 

service that you brought to Ohio into the Senate, and it is excellent. But we know that when you have turnover at the highest 

level of a department or an organization, that it is always tough 

to recapture the starting place where you left off, and I am convinced that the FAA Chairman ought to not be simply a political 

appointment, but it ought to be a term of office and given a chance 

to be there to see programs through instead of turned over as the 

political mainstream changes as well. And this is Republican or 

Democrat; I do not care. I think it is the kind of assignment that 

needs a chairperson to do this and to be able to follow through on 

the details, but we will save that lecture for another day. 

FAA’s failures are largely technical. They bring into question the 

agency’s ability to simultaneously undertake a risky plan to privatize certain ATC functions. Because of their poor record on overseeing contract work on ATC modernization, I think it is clear that 

privatizing other ATC operations poses an unacceptable safety risk 

to all travelers. And I use as the classic example what happened 

with the screeners at the airports. When they were in private 

hands, they did a terrible job. When they were in government 

hands, work improved immeasurably, and now, we want to go back 

there to the old way of doing it. 

As usual, Mr. Walker, GAO has done an outstanding job identifying problems that we should address, and we look forward to 

your testimony once again and yours, Mr. Johnson, as well. 

Thank you, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Lautenberg. 

As is the custom here in this Subcommittee, if you would both 

rise so we can swear you in. 

[Witnesses sworn.] 

Senator VOINOVICH. Let the record show that the witnesses answered in the affirmative. Mr. Walker. 

7

1The prepared statement of Mr. Walker appears in the Appendix on page 27. 

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER GENERAL OF THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WALKER. Thank you, Mr. Chairman, Senator Akaka, and 

Senator Lautenberg. I appreciate the opportunity to be back before 

this very important Subcommittee of the Senate to address our 

2005 High-Risk List. I also appreciate the opportunity to be here 

with my friend Clay Johnson from the Office of Management and 

Budget who I can say at the outset takes this subject very seriously. 

I would respectfully request that my entire statement be included in the record, Mr. Chairman, so I can just summarize the 

highlights for you. 

Senator VOINOVICH. It will be taken into the record along with 

yours, Mr. Johnson. 

Mr. WALKER. Thank you very much. 

With regard to the highlights, first, as you know, GAO started 

the High-Risk List under the tenure of my predecessor, Chuck 

Bowser, in 1990. Every 2 years commencing in 1993, we have published a new High-Risk List at the beginning of each Congress. In 

our view, these are not policy issues as much as they are just 

sound management issues that need to have continuous focus over 

time. 

In doing that, there has been progress made over the years. It 

is possible to come off the High-Risk List, and it is important to 

note that we have clearly defined criteria that were circulated for 

comment by the various agencies early in my tenure as Comptroller General as to what it takes to get on the High-Risk List and 

what it takes to get off the High-Risk List, and that is very important. In fact, one of the things that Deputy Director Clay Johnson 

did early in his tenure was to assign particular individuals within 

the Executive Branch responsibility for every high-risk area as we 

did at GAO with the idea that you want to make sure there is effective communication about what is it going to take to get off the 

high-risk list in order to make progress and ultimately achieve that 

objective. He has recently recommitted to me that he intends to do 

the same thing based on this new High-Risk List to try to make 

as much progress over the next 4 years as possible, and I am absolutely confident that he is serious about that. 

As you know, the purpose of the High-Risk List is to bring light 

to areas, because with light comes heat, and with heat normally 

comes action. And while the High-Risk List started out primarily 

as a list dealing with areas susceptible to higher degrees of fraud, 

waste, abuse and mismanagement, and yes, there are a number of 

those items still on the list. During my tenure, we have modified 

the High-Risk List to not just focus on areas of higher risk of fraud, 

waste, abuse and mismanagement but also to recognize areas that 

are in need of fundamental transformation. The human capital 

issue was the first in January 2001. At that time, we also began 

to note issues that might require concerted effort not only by the 

Executive Branch but also by the Congress, such as authorizing 

legislation. 

8

1The charts referred to appears in the Appendix on page 57. 

I would like to commend this Subcommittee and full Committee 

for the tremendous work that has been done in the area of human 

capital, because I agree that more has been done in the last 3 years 

than the last 30 years, and yet, I am confident that more will be 

accomplished in the next 3 years than has been accomplished in 

the last 3 years. 

If I can, let me summarize what the results of the latest HighRisk List are. As you noted, there are three areas that have been 

removed from the High-Risk List as a result of the latest update. 

Senator VOINOVICH. Could you take those charts and bring them 

around just a little bit so I can see them better? 1

Mr. WALKER. Face the Senators? 

Senator VOINOVICH. Thank you. 

Mr. WALKER. Student Financial Aid programs, FAA financial 

management, and Forest Service financial management made sufficient progress according to our criteria to be removed from the 

High-Risk List, and I would like to commend the departments and 

agencies and personnel involved in achieving that objective. That 

does not mean that these areas are perfect. Nobody is ever perfect, 

nor will anybody ever be, but they have made significant progress 

and enough to be able to come off the list, and we commend them 

for that. 

There are four new areas that have been added to the High-Risk 

List as a result of our January 2005 update: Establishing appropriate and effective information sharing mechanisms to improve 

homeland security, the Department of Defense’s approach to business transformation, the Department of Defense’s personnel security clearance program; and the management of interagency contracting. 

If I can, let me touch briefly on DOD’s business transformation 

item, and I would imagine that we will get into that in a little more 

detail in the Q and A session. Unfortunately, the Department of 

Defense now has 14 of 25 high-risk areas, when you count the fact 

that they have 8 on their own, and they also share 6 governmentwide. That is up 2 from 2 years ago. The numbers are moving in 

the wrong direction. 

Our military is unparalleled in its capabilities, but the Department of Defense is a D, poor graded on a curve, on economy, efficiency, transparency and accountability. We have become convinced 

at GAO that DOD will not be successful in their business transformation effort unless they have a person with a proven track 

record at the right level focused full-time and over a sustained period of time for making business transformation happen. 

If you go to the Defense Department right now, there is no one 

person that you could point to to say who is responsible and accountable for making the business transformation effort happen. 

Now, some would say Secretary Rumsfeld. With all due respect, 

while he is ultimately responsible and accountable because he is 

Secretary, he does not have enough time to work on this. Some 

would say Deputy Secretary Wolfowitz. Quite frankly, he has got 

his hands full as well. 

9

And there are a lot of players below that level that are very involved and very dedicated and are trying to do their best, but there 

is not a comprehensive plan and there is not a point person. We 

do not have the appropriate milestones and accountability mechanisms in place. And this is nothing to do with politics, partisanship 

or policy. This is basic good government, basic management that is 

necessary irrespective of who the President of the United States is, 

who the Secretary of Defense is, or otherwise. 

So it is absolutely critical, because I can assure you: Billions and 

billions are wasted every year, and it is getting worse, not better. 

I will be happy to answer questions on that. 

We revised four high-risk areas by consolidating four into two 

dealing with the Internal Revenue Service. The two new areas are 

enforcement of tax laws. It is much broader than Earned Income 

Tax Credit and overdue taxes. There is also a need to focus more 

time, attention and resources on enforcement, and I note within 

the President’s budget, he is proposing additional resources for enforcement. We also consolidated the financial management with the 

business systems modernization, because significant progress has 

been made on the financial management area at the IRS. The biggest remaining challenge has to do with the business systems modernization, including the financial elements of that. 

And last, as noted in the report, while this area did not rise to 

the level of being deemed to be high risk yet, it is noteworthy. Specifically, there is a need, not only in the Department of Defense but 

also in the Department of Homeland Security as well as other departments to take a more strategic, a more comprehensive threat 

and risk-based approach in determining how best to allocate their 

resources to generate maximum results with whatever level of resources might be available, which level of resources are going to 

come under increasing constraints based upon our long range fiscal 

imbalances. 

Next chart, please. As you can see, since the beginning in 1990, 

our original list had 14. 

Senator LAUTENBERG. Mr. Chairman, if you could give me a moment, is there a distribution of these charts? 

Mr. WALKER. I believe it is in my testimony, Senator, and we will 

get you copies of these boards as well. 

Fourteen was the original list in 1990. During the past 15 years, 

we have added 29. We have removed 18 and consolidated some 

such that the balance is 25. 

And last, on my left, is the current list, the entire list, which is 

in the testimony. The last thing I would like to share with you, 

Senators, is something that came up yesterday in the hearing in 

which we released the new 21st Century Challenges report. As you 

know, the high-risk report looks like this, which came out at the 

end of January; I believe all of you have a copy of it. 

I would really commend this report to you, because this is a very 

strategic document. It is a document that among other things has 

three basic bottom line points: First, we face large and growing 

structural deficits in the future due primarily to known demographic trends, rising health care costs. Second, we are not going 

to grow our way out of this problem. It is going to require tough 

choices. Third, a significant majority of the Federal Government’s 

10

1The prepared statement of Mr. Johnson appears in the Appendix on page 61. 

policies, programs, functions, and activities are based upon conditions that existed in the 1950’s and 1960’s. Furthermore, they have 

not been subject to fundamental review or reexamination since 

then, whether it is discretionary spending, mandatory spending on 

entitlement programs, or tax policies. As a result, we are going to 

need to engage in such a fundamental review, reassessment, 

reprioritization, in some cases, reengineering of the base of the 

Federal Government that will take the balance of my tenure as 

Comptroller General, 8-plus years and beyond. 

There are over 200 questions raised in this report that illustrate 

areas that need to be reviewed and reconsidered, and we stand 

ready to help this Subcommittee, the full Committee, as well as 

others in trying to engage in this fundamental review and examination in the coming years. 

One of the compelling reasons we need to do so is illustrated on 

the next chart. Based on GAO’s latest budget simulation, if you 

take CBO’s baseline assumptions, if you assume that discretionary 

spending grows by the rate of the economy beyond the 10-year horizon, which includes national security, homeland security, the judicial system, transportation, education, etc., if you assume that the 

Social Security and Medicare trustees are correct in their good 

faith estimate of what the cost of those programs are going to be 

over the next 35 years and if you assume that all tax cuts are 

made permanent, this is our fiscal future. 

Under the scenario we will not be able to do much more than pay 

interest on the debt in 2040. Now, there are other simulations that 

we have run that obviously are not as bad as this, but even the 

ones that have optimistic assumptions show that we face large and 

growing structural deficits that are going to require tough choices. 

The High-Risk List is the place to start. There is no question 

about it. But I think we are also going to have to get into the questions raised in our 21st Century Challenges report, as well. Hopefully, we will have an opportunity to do that at some point. 

Thank you. 

Senator VOINOVICH. Thank you, Mr. Walker. Mr. Johnson. 

TESTIMONY OF HON. CLAY JOHNSON III,1 DEPUTY DIRECTOR 

FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. JOHNSON. Mr. Chairman, Senators, thank you for inviting 

me up here today to speak with David Walker. 

The GAO High-Risk List, like the President’s Management Agenda, brings very clear attention to the areas in the Federal Government that are not working like we want them to, where there is 

great opportunity for the taxpayers’ money being spent unwisely. 

Three areas this past year came off the High-Risk List: Federal 

Student Aid, Financial Management at the Federal Aviation Administration (FAA), and the Forest Service. They came off because 

top management was committed to solving those management deficiencies. They had a very detailed action plan. They had a clear 

definition of success, and they had clear accountability for who is 

supposed to do which one of those individual actions by when, with, 

or to whom. And they set their mind to it, and they did it. 

11

This is the key to any item coming off this high-risk list. It is 

the key to any change being realized in management in the Federal 

Government, and it is also the key to making sure that there is a 

continued focus on these high-risk areas and other areas of management opportunity as administration changes and as agency and 

department leadership changes. If there is a detailed action plan, 

a detailed definition of success, detailed dates, detailed accountability that you and the Executive Branch agree on, we should be 

held accountable for implementing that plan, no matter who the 

President is, no matter who the Secretary is, no matter who the 

relevant assistant secretary is. 

The big opportunity here is for the thing that we need to do better as a government and the things that OMB needs to do even 

better than it has been doing is that we need to make sure for each 

one of these 20-some-odd high-risk items, there is a very clear definition of success. We have a clearer definition of success with some 

of them than with others. We need to make sure that all of those 

definitions of success are equally acceptable to you. We need to 

make sure there are detailed action plans that are all equally acceptable to you. 

We need to make sure there is clear accountability for accomplishing those different milestones. My recommendation is that you 

charge us to come back to you and suggest a timetable, within 

months not years or weeks, to engage the agencies, develop those 

detailed action plans, detailed definitions of success and come back 

to you and tell you here is how we anticipate, how the agencies anticipate tackling the risks that GAO and others have identified as 

being unacceptable. 

This is a role that OMB can play. We can make sure that proper 

attention over and above what the High-Risk List itself brings to 

these matters, that the agencies understand that this is important. 

In addition to the items that they are focusing on through the 

President’s Management Agenda, they are focused on these highrisk areas, and they are giving it appropriate attention, and they 

are working to define with the proper level of clarity what we are 

trying to do, how we are trying to do it, and who is responsible for 

getting it done. Thank you. 

Senator VOINOVICH. Thank you, Mr. Johnson. 

I appreciate the testimony of the witnesses here today. The 

President has submitted his budget to the Congress, and I applaud 

the fact that he is looking at entitlement spending and is looking 

at the discretionary part of the budget. 

But when you look at the fact of that discretionary budget, half 

of it is going to defense, and the other half of it is going to domestic 

spending, and when you look at the flat funding in many programs 

that are so important to the American people, and then to be at 

this hearing and to hear Mr. Walker say there is no plan, no person, no milestone, no transparency, it is getting worse and not getting better in the Defense Department is outrageous. 

It is outrageous, and I want you to know that this Subcommittee 

is going to get on that, because that is where we can get the biggest bang for our effort, just as I did on human capital reform, we 

are going to keep monitoring that to make sure it gets done, but 

we are going to take this issue on. It is outrageous: Billions of dolVerDate 0ct 09 2002 09:20 Jun 15, 2005 Jkt 020174 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\20174.TXT SAFFAIRS PsN: PHOGAN
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lars being wasted, and you are cutting the CDBG program, billions 

of dollars being wasted, and cutting other programs. 

And I am a hawk, but I want to know, Mr. Johnson, what in the 

world is going on over there? What kind of plans have you received 

from Secretary Rumsfeld? Have they given you a written plan of 

what they are doing and who the people are who are going to implement it and what progress is being made on it? I would like you 

to answer that. 

Mr. JOHNSON. As I said a minute ago, sir, we will come back to 

you with detailed plans. Tina Jonas, the chief financial officer 

there, understands the problem, understands the opportunity. 

There is not the clear assignment of accountability that Mr. Walker 

talked about. I think they would be hard pressed to present these 

plans to address these high-risk areas at DOD to you now, but I 

will offer to you that we will come back to you in months with their 

recommended plans for how those will be attacked. 

Mr. WALKER. Senator, can I come back on that, please? 

Senator VOINOVICH. Yes, I would, because even though we have 

a separation of powers between the Legislative and Executive 

Branches of government. I would get Mr. Walker in and sit down 

with your people over in Defense, look at the plans, get the best 

information that you can out of what he has to say and then start 

to implement it. 

Now, look: I know we are at war. I understand that we have 

challenges. But somebody has to be at home working on management. Now, when I was governor, I had a chief of staff, and he had 

all kinds of issues to deal with. He was always putting out fires, 

but I put a team together where I had somebody who got up every 

morning and went to bed late at night and who worked on the 

management programs, and they ground away at it and ground 

away at it and held people responsible, and we got results. And it 

does not seem like that is happening in the Defense Department. 

Mr. WALKER. Senator, can I put this in context? I think it is important. 

First, there is no doubt in my mind that Secretary Rumsfeld and 

a lot of other top officials at the Defense Department are committed to business transformation. However, you have to have a 

plan. You have to have a point person. You have to have effective 

accountability mechanisms. The difficulty is, as you know, that on 

September 10, 2001, Rumsfeld gave a speech declaring war on the 

bureaucracy at DOD and announcing that he wanted to make great 

progress on business transformation. We all know what happened 

on September 11th. 

I come back to one of the things that I included in my testimony 

in the High-Risk Report: We need a pro at the top, a Deputy Secretary for Management with a proven track record of success, with 

some government experience and private sector experience, to get 

in there who is responsible and accountable for developing a plan, 

for making sure that we are taking an integrated approach, because many of these areas are interrelated, and you have to deal 

with business transformation in a comprehensive, strategic and integrated fashion over a sustained period of time. 

Ideally, that person should have a term appointment. Coming 

back to what Senator Lautenberg said, ideally, that person should 

13

not be a political person, although they may be a political appointee. They should be a professional person with a 7-year term 

appointment, because it is going to take longer than that to deal 

with these problems. But we need somebody who is going to be 

there long enough to achieve some sustainable progress. 

Senator VOINOVICH. I have run out of my time, but why do you 

not just follow up on that? 

Mr. JOHNSON. Just one comment on that: Dave and I have talked 

before about whether there should be a termed person at every 

agency, particularly at DOD, who focuses on management, and 

there are pros and cons with that. Personally, I do not believe that 

a termed person focused on management solves the problem. If the 

Secretary of Defense and the Deputy Secretary of Defense are not 

themselves committed in thought, word and deed to the management of the Department, no term, no level of competency in this 

management person is going to get the job done. 

So there is no way you can wall off the focus on management 

from the leadership of the Department. It is ultimately their responsibility to see that it has happened. Whether the person is 

termed or not, individual people with clear accountability need to 

be defined. Whether they are termed or not is a minor part of the 

opportunity to do it better, in my opinion. 

Senator VOINOVICH. OK; but we have a Secretary of Defense who 

has said that he is declaring war on inefficiency. The fact of the 

matter is that he does not have anybody there that has the clout 

and stature to get the job done. And what happens so often, it 

takes 7 or 8 years. I know this. I was a mayor for 10 years. I was 

a governor for 8 years. When I was mayor, I did not see some of 

the efficiencies take place until the sixth or seventh year. As governor, it was some of it in my last year, and some of it happened 

after I left office. 

And you must have some continuity there, especially if you have 

a situation that is as bad as it is in the Defense Department, and 

it is eating up billions of dollars that could either be directed toward reducing the deficit or putting the money in some other areas 

where we have great needs for the American people. 

Given all that is going on at the Defense Department, I don’t 

think the rigors of the Secretary’s position allow that individual to 

focus the needed attention on managing the Department. Somebody has to be back homeworking on managing the Department. 

Mr. JOHNSON. What needs to be brought forward to you and 

OMB and others are the plans of DOD and the other agencies on 

the High-Risk List to reduce the list to acceptable levels. What is 

the definition of success? What are the milestones, the actions test 

to be taken, and who is responsible for taking them and on what 

date? That is what is owed to you. 

Senator VOINOVICH. Well, I am glad that you believe that you 

owe it to us because we expect it, and we are going to start off with 

those hearings, and I am going to ask Mr. Walker to look at it so 

that the plan that we have in place is one everybody agrees on that 

really is going to make a difference, and the next issue is how do 

we get the people in there to get the job done? And it is tough. I 

understand from the grapevine this morning from my colleagues in 

14

the Senate that Ambassador Negroponte is rumored to be the head 

of the new national intelligence director. 

We need to get some more people in government, because if he 

gets the job, who is going to go over there to Iraq and be our ambassador? He seems to be doing a pretty good job in Iraq. So the 

American people have to understand that we are going to have 

some really good private sector employees who are going to have 

to step forward and come into government to help improve the Federal Government. We have to identify some brighter people in the 

mid level to move them up and take over managing agencies. 

Mr. WALKER. One quick point, Mr. Chairman, if I can: First, I 

agree with Deputy Director Johnson that if the Secretary is not 

committed, no matter who that person is, you are not going to be 

successful. So I agree with that. Second, I do not believe that term 

appointments are appropriate for every agency in government. I do 

believe you have to have somebody responsible and accountable for 

the basic management issues, and I believe the current Deputy 

Secretary can get that done in certain departments and agencies, 

and in many cases, they are focused on that. 

But I can tell you this: I would not bet a plug nickel on DOD 

solving its business transformation challenges unless you have 

somebody at the right level focused on this full-time for a sustained 

period of time. You don’t need it everywhere, but you absolutely, 

positively need it within DOD. 

Senator LAUTENBERG. Absolutely right. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

I do not think I can be as forceful as you are in the volume of 

your voice, but this is very serious. I just want to take the time 

to tell you what I tried to do when I was Chairman of the Readiness Committee to deal with this and to be specific, I will use 

names. We brought on Mr. Zakheim as the Comptroller, primarily 

to do what you are talking about in DOD. And before we confirmed 

him, I had a good chat with him about what needs to be done, 

which is what we are talking about now. And he said he would do 

it. 

After 2 years, Mr. Zakheim resigned. When he came in to say 

farewell to me, we talked again. And I asked him what happened? 

And he said, and I must tell you, he made some difference there, 

and he improved some. But the message he left with me was that 

there are so many systems in DOD and to try to work with these 

systems is impossible. And so, he was trying to bring this whole 

thing together. 

And so, as a result, Tina Jonas came in and was confirmed in 

his position. But that is an example of how difficult this job is. But 

I agree with you that this position must be on a higher level than 

it is. It should be on a Secretary level for it to make any difference. 

But we must do it, because as you pointed out, we are wasting billions of dollars. It is slipping by because people just do not know 

what is happening. And it is because there are so many systems 

in DOD, and it is very difficult to bring them together to get information that is needed. 

Mr. Johnson, as Senator Voinovich said, DOD spends almost $20 

billion annually on its business systems. However, these investVerDate 0ct 09 2002 09:20 Jun 15, 2005 Jkt 020174 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\20174.TXT SAFFAIRS PsN: PHOGAN
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ments have failed to resolve the serious problems that exist at 

DOD. The Readiness Subcommittee, as I said, did find problems 

there and tried to work on some of these systems. We found things 

stovepiped, and DOD has not made agency-wide improvements. 

Mr. Johnson, and this is a comment to you, I urge you to get 

back to us as soon as possible on this because we must make a 

dent in this problem. 

Mr. Walker, some programs have been on the High-Risk List 

since its inception, as you noted. A good example is contract management at DOE, the Department of Energy. DOE is the largest 

nondefense contracting agency in the Federal Government and approximately 90 percent of its annual budget is spent on contracts. 

In your opinion, General Walker, why has DOE been unable to 

establish more effective oversight in this area? 

Mr. WALKER. Well, DOE has a problem, Senator, as does DOD 

has and many other departments and agencies in the Federal Government to differing extents. While they do a lot of contracting, 

they do not necessarily have enough people within the respective 

departments with the requisite skills and knowledge in order to be 

able to effectively manage cost, quality and performance and to engage in effective oversight on an ongoing basis. 

There are a lot of things that you can, and in many cases should, 

contract out, because it might be more cost-effective or market 

forces may dictate that result. However, you should not contract 

out the ultimate responsibility and accountability for managing 

cost, quality and performance. We need to do more in that area. 

And if I can quickly come back to your comment, on DOD, there 

are good people there who are trying to do the right thing, and who 

are committed. 

But quite frankly, there are too many layers, too many players, 

too many systems, and too many hardened silos within DOD. In 

order to get this job done, you have to have somebody who rises 

above that, who reports directly to the Secretary, who can deal 

with the Under Secretaries and the Service Secretaries. 

No matter who the Comptroller is, they are not at the right level. 

Plus, as you properly pointed out, they are not there long enough. 

And by the way, that is a problem in the acquisitions area at DOD, 

too. They typically turn people over every 2 to 3 years on weapons 

systems that cost tens or hundreds of billions of dollars, and that 

is a major accountability problem, as well. 

Senator AKAKA. Well, I thank you for your statement and your 

comments. As I said earlier, we are here to discuss how we can 

strengthen critical Federal programs, and thanks for your message. 

I really appreciate it, Mr. Chairman. 

Senator VOINOVICH. Senator Lautenberg. 

Senator LAUTENBERG. Yes, Mr. Chairman, unfortunately, I have 

got another meeting to go to, but there are a couple of things that 

I would like to put out on the table; first of all, I thank Mr. Walker 

for your forthright statement of what you see, because I think in 

your commentary, you have hit the nail on the head as I see it. 

It is one thing to manage a military operation. It is another thing 

to manage and administer the business side of things. And I think 

that one day this whole thing is going to be looked at and divided 

in such a way that it is not simply another part of the military 

16

management. It is business management, pure and simple, and you 

can, in the military, tell someone to jump and not come down until 

you say so, but you cannot do that on the other side of things. 

And I look at, for instance, the question with Halliburton and the 

KBR subsidy, they were given full payment for cost-plus logcap 

task orders in Iraq, even though the Defense Department orders 

ruled that Halliburton had not provided the proper accounting. Are 

you aware of that? 

Mr. WALKER. I am aware of some of the problems with contracting in Iraq, Senator. 

Senator LAUTENBERG. We had an opportunity to talk to someone 

who was willing to speak out, a person named Bunny Greenhouse, 

and she was a top contracting officer for the Army Corps of Engineers. She came forward, because her conscience bothered her so 

much on abuses surrounding the no-bid contract awarded to Halliburton that cost the taxpayers $2.5 billion. And not to pay attention to that and say, listen, something was terribly wrong here, we 

tried to get hearings in the Committee to review that and were 

never able to do so, but I think that is an area that is just rife with 

mistakes and waste, and I think that we are not going to have that 

happen again. No big contracts should be awarded by the military. 

As a matter of fact, much of the contracting ought to be done outside of the periphery or the perimeter of the military operation. 

The military is a wonderful group. We have terrific people who 

are serving on the line. When I hear people who are severely 

wounded say they would want to go back and help further, it is a 

remarkable human endeavor. 

Last, Mr. Walker, the FAA performance on the modernization 

program, what kind of faith can we put in the FAA ability to effectively move some of the ATC operation, the private contractors, and 

still maintain safety standards? There is not a lot of encouragement there that that can happen. 

Mr. WALKER. Well, as you know, the FAA air traffic control modernization is on our High-Risk List. It is also illustrative of problems that many major systems efforts have in the Federal Government. Namely, if you do not adequately determine the system requirements up front and nail them down and make sure that you 

have an appropriate project plan with key milestones and accountability mechanisms, along with effective oversight, you will get into 

trouble over time. 

And so, the item that is on the High-Risk List, Senator Lautenberg, is really more the issue of the systems modernization rather 

than the safety issues that you are raising. I would be happy to get 

back with you and your staff on some of those issues, if you would 

like. 

Senator LAUTENBERG. Well, you have been assigned kind of the 

task of Paul Revere here of sounding the alarm, and you have done 

it appropriately. And for us to have been discussing the same problems for over so many years and knowing that the cost for these 

problems is so enormous; the Chairman described it as outrageous; 

it is outrageous. I mean, here, we sit, and we drum up the verbiage 

to go along with our indignation, but there we are: next year or 2 

years from now, we will be discussing the same problem unless we 

make fundamental changes to the system. 

17

Senator VOINOVICH. Thank you, Senator Lautenberg. We are 

joined by Senator Stevens. 

OPENING STATEMENT OF SENATOR STEVENS 

Senator STEVENS. Thank you, Mr. Chairman. I am sorry to be 

late. I have been in another committee. 

I am glad to see you here, Mr. Walker and Mr. Johnson. 

I want to ask questions probably beyond the scope of the hearing. 

You two have comparable jobs, but OMB has come up with a list 

now that the President has approved of 150 programs that ought 

to be terminated. You have come up with a list of programs that 

are at high risk. What is the difference? 

Mr. WALKER. Well, one, I can tell you, Senator, is with regard 

to our High-Risk List, we have certain criteria that have to be met 

in order to determine whether or not something is high risk, and 

one of those is it has to be something of national significance, and 

it has to involve large amounts of money. So there are many programs that the President may end up having on his proposed termination list that may not meet the criteria of being high risk, because they may not be national in scope, or they may not involve 

enough money. 

Senator STEVENS. But do you determine that they should be 

saved before you work on what the risks are? Are you sure the programs should continue when you make your study of what the 

risks are and how to save them? 

Mr. WALKER. Oh, absolutely not, Senator. In fact, one of the important points is since I have been Comptroller General, in addition to focusing on fraud, waste, abuse, and mismanagement and 

trying to fight that and minimize that, we have also noted on the 

High-Risk List that there are a number of items that are in fundamental need of transformation. You need to reexamine whether or 

not they should continue. 

Senator STEVENS. But you made a determination that they 

should be saved, if they should be transformed. Have you made any 

determination they should be terminated? 

Mr. WALKER. With regard to the High-Risk List itself, no. I 

would, however, respectfully suggest——

Senator STEVENS. No, I mean with regard to the programs you 

review. You must review a whole series of programs to determine 

which ones are high risk. 

Mr. WALKER. Senator, you should have a copy; I sent one to your 

office, we released this report, which is called 21st Century Challenges. It raises over 200 questions about existing Federal Government policies, programs and functions and activities that I think it 

is appropriate to review and determine whether or not they ought 

to be continued, and if so, in what size and in what manner. 

Senator STEVENS. Have you reviewed that, Mr. Johnson? 

Mr. JOHNSON. This report? No, I just got it this morning. 

Senator STEVENS. Do you do a similar function? How do you 

make a determination and recommend to the President what 150 

programs should be terminated? 

Mr. JOHNSON. OMB is 3 years into a 5-year process of evaluating 

all the 1,200 programs in the Federal Government, and our going 

in approach is we want programs to work. But you cannot figure 

18

out what you need to do to make them work the best unless you 

have assessed whether they are working or not, unless you have 

a very specific, measurable outcome; you have an efficiency goal, 

and you have an assessment of management and an assessment of 

what is keeping you from having the best-performing program possible. 

So our going in approach to your question is we want the program to work. The 150 programs that have been recommended for 

elimination or for significant reductions are programs that we assess are not high priority, have accomplished their stated purpose, 

or do not work. We have made attempts to fix them. There are 

other programs that deal with the same issue, and continued 

spending in these areas are not warranted. The return on that investment is less than the investment itself. 

Senator STEVENS. That was going to be my next question to Mr. 

Walker. 

As you go through these high risks, what we see in the private 

sector entities that both are going to fail, and they find a way to 

come together and merge, and they survive. Now, do you make 

such a suggestion to us as to how some of these high-risk things 

could be merged? 

Mr. WALKER. Senator, I am happy to take a look at that and get 

back to you on it. I do think that there are opportunities, to take 

a look, for example, at the budget categories and determine how 

many departments and agencies have similar programs and activities that they are engaging in in a particular area. 

For example, there are 44 programs dealing with job training 

that cross over 20 agencies. There are 22 agencies that are involved 

in financial literacy. And the question is why? The simple fact of 

understanding that and whether there is duplication of effort or redundancy or inefficiency is something that I think it is prudent to 

go forward on. 

Senator STEVENS. Well, they estimate that you have to have 79 

applications to various Federal agencies to drill a well for oil in 

Alaska. Have you ever looked into the redundancy of the programs 

that demand these studies and studies and studies and applications and applications? 

When I was in China this last summer, we literally saw a building go up in a week. And then, I said, well, how in the world can 

you do that? It would take 2 years to get one started in Alaska or 

anywhere else in the United States. And they said we only need 

one permit, one permit. We have never looked at trying to consolidate all these permit applications—at a tremendous cost, by the 

way, because all of these things have to be done. 

And I am serious. It is 79 different things you have to have before you drill wells in Alaska. I would think that rather than look 

at it high risk from the point of view of government function we 

would look at the question of what are they doing for the society? 

Do we need all those applications? Have you ever looked at that? 

Is that a function of the GAO? 

Mr. WALKER. That is something we could look at. To my knowledge, Senator, we have not looked at that specific example, but I 

think there are plenty of opportunities to do so. 

19

Senator STEVENS. I do not mean to be abrupt, but you are the 

one, your predecessor or you decided that you have the right to 

make these studies. They are not mandated by Congress. 

Mr. WALKER. You mean the high-risk list? 

Senator STEVENS. Yes. 

Mr. WALKER. That is correct; we have done it since 1990. 

Senator STEVENS. But you have never looked at the question of 

should they survive, nor should they merge, nor are they required 

in the beginning. 

Mr. WALKER. Well, Senator, I will tell you: I think this document, which I would really commend to you——

Senator STEVENS. I will take it with me on the trip that I am 

going on tomorrow. 

Mr. WALKER. It gets to some of those issues, because let me give 

you an example, Senator: Based upon our work, our high risk work 

and other work that we do for the Congress, which, as you know, 

90 percent of the work that we do is requested or mandated by 

Congress, so we are very focused on serving the Congress. But 

based upon that work——

Senator STEVENS. You are an arm of Congress. You are not independent of Congress. 

Mr. WALKER. I understand that we are in the Legislative Branch. 

I understand that, Senator. But my point to you is that I think this 

makes a pretty clear and compelling case that there is a need to 

look at the base of government. There is a need to look at potential 

redundancies, and there is also a need to be able to ask questions 

like: Why did we create this program? What were the conditions 

that existed then? Do they still exist today? Is this program successful? If so, on what basis? 

I think we need to do that, and we look forward to working with 

this Subcommittee and others in doing that, because we find a serious situation. 

Senator STEVENS. Well, I commend the Administration, because 

I think they are finally looking at the question of whether Federal 

lands should be used to try and find ways to really ameliorate the 

shortage of energy in this country, but I was just told the other day 

that even with the new policy of saying let us look at these Federal 

lands, those lands will not be available for really exploration for 4 

years, maybe 5 years, because of all the things a person has to do 

to get a permit to go into those lands and to explore for and drill 

for, if necessary, for oil or gas. 

I do think, Clay, you ought to take a look at that, too. These two 

agencies together ought to find some way to cut through the red 

tape is what I am really saying. 

Mr. JOHNSON. There are different ways to think about the Federal Government. One of them is as a huge service organization. 

Let us define all the different areas where we serve. We serve 

drillers; we serve retirees; we serve many others; and take the 

most important ones where the most money is involved or the most 

number of people involved and make sure we have a clear definition of success of high level service. 

And so, in the case of drillers, the definition of success would include whether they get their rigs out on the field in a reasonable 

period of time and start looking for oil. Whether they can build a 

20

building in a reasonable period of time. Let us define that and then 

hold those people accountable for achieving those levels of success. 

We tend to focus on the outcome we are producing, but looking at 

it from a service standpoint is probably something we should do at 

the same time. 

Senator STEVENS. Perhaps I am too impatient, because we obtained approval of Congress proceeding with the Alaska Gas Pipeline in the last Congress. I was told yesterday that the earliest we 

can expect the beginning of that construction is 2009. And it is because of the procedures that are in existing law, redundant procedures that have to be pursued between now and then and at the 

same time came the study that said by 2014, we will be importing 

40 percent of our natural gas. 

Why? Because we have this gap now in supply and demand, and 

the cost is going to go up and up and up. By the time that the price 

gets high enough, people are going to start to bring in LNG. But 

we have enough natural gas in this country in areas that are 

known to be valuable for oil and gas, and if we just had the right 

to drill, we could bring it in before 2014, but again, it would take 

4 or 5 years to start any one of those developments. 

And I think, in this process that you are in, I would encourage 

you to see if we could not set off on a task how to reduce the delay. 

We are not against environmental review. We are not against economic review. We are not against project analysis. But there ought 

to be a way to do them and to do them in a compatible way and 

move them forward so that—well, in engineering, I learned about 

a critical path? There is no critical path available to deal with the 

Federal Government in terms of development of energy in this 

country today. 

Mr. JOHNSON. Well, there is a general view, when you say the 

Federal Government, one image that comes to mind is a long line, 

a line to get into the country, a line to get a visa, a line to get a 

document, or a line to get a permit or whatever, and we need to 

get out of the long line business. 

Senator STEVENS. Potential litigation all the way. 

Mr. JOHNSON. Right. 

Senator STEVENS. Potential litigation all the way, and that is 

part of the delay. 

Well, I appreciate your time, Mr. Chairman. Glad to see you two 

here, and I am going to read that book on our trip coming up tomorrow. Thank you very much. 

Mr. WALKER. Thank you, Senator. 

Senator VOINOVICH. You ought to maybe get Senator Dominici 

involved in this right away. 

Senator STEVENS. Yes. [Laughter.] 

Senator VOINOVICH. There are several areas, Mr. Johnson, that 

I am concerned about in addition to the Defense Department. One 

of them is——

Mr. JOHNSON. I welcome your change of subject, sir. [Laughter.] 

Senator VOINOVICH. We are looking for revenue, and the Internal 

Revenue, in terms of collecting unpaid taxes, has been on the list 

since 1990. And I know that many States have incorporated programs and have enhanced their collections measurably. And it is 

21

frustrating that since 1990, it has been on the High-Risk List, and 

I wonder have you looked into that at all? 

Mr. JOHNSON. I have not personally, but again, Mark Iverson, 

my predecessor is over there and is a very talented fellow and has 

all the ability in the world to focus on things, and we need to get 

back to you with how we are going to tackle that. 

Senator VOINOVICH. You know, I would go back and talk to Mr. 

Bolton and say: We need more revenue, and here is an area that 

if we really get at it, we can bring some more money into the 

Treasury. 

Mr. JOHNSON. The specific areas that I know that are being 

looked at that have revenue implications are, related to improper 

payments. We think there is a net, our improper payments are net 

$35 billion higher than they need to be. If we are going to eliminate improper payments, we create $35 billion that does not exist 

now. 

Competitive sourcing addresses the incurred to commit to per- form commercial activities; we think those are $6 billion to $7 billion higher than they need to be. Overall, it does not increase revenue, but reduces costs, with an overall focus on efficiency. A one 

percent improvement in efficiency across the Federal Government 

is tens of billions of dollars a year. 

Those are basic mindset changes, procedural changes that we are 

effectively implementing today to create tens of billions of dollars 

in additional available revenue to be spent in the form of reduced 

costs. So there are a lot of things being looked at, and there are 

many more things still to be examined. 

Senator VOINOVICH. Well, I think the question is why has it not 

happened, and what are you going to do to fix the problems at the 

Internal Revenue Service. 

Last year, in April, I had CMS in here, and the title of the hearing was ‘‘Does CMS Have the Right Prescription in Implementing 

the Prescription Drug Program?’’ And we are going to have another 

hearing. I told Mark McClellan, who spent a lot of time in Ohio 

last year, that we are going to do it. But the Medicare program has 

been identified by the High-Risk Series since 1990. GAO identifies 

the recently-enacted Medicare Prescription Drug Improvement and 

Modernization Act as creating, ‘‘new challenges for administering 

the Medicare program.’’

The question is do we need legislative changes that will help deal 

with challenges faced by the Medicare Modernization Act, and the 

High-Risk Series identifies that only in some cases has GAO—or 

CMS is taking steps to do something. And the bottom line is this: 

We are going to implement this new prescription drug program 

next year. And I have to tell you as one who went to almost 40 

meetings last year on this issue of this program that the card 

issuance was a disaster. You can talk to anybody about it. I mean, 

the Department worked, they had the numbers, but the system 

that was in place did not work. 

And if we have the same problem with implementing the prescription drug program that we had with the card that was the 

transition to the new program, I think that this wonderful program 

that the President wanted and we wanted will be discredited and 

will cast a large shadow over anything that we intend to do in 

22

terms of Social Security, because people will say if they failed, they 

will fail this too. 

And so, I think somebody in the Administration ought to really 

get involved, look at what is going on over there, does he have 

enough people to get the job done, what is the system that we are 

going to use to cascade this out to the American people, are we 

going to let them make a choice, are we going to empower them 

to put them in a program and let them opt out? But unless that 

is looked at, this could be a disaster next year, and so, I bring that 

to your attention. 

The other issue that is on the high risk, an emerging high-risk 

area, and this is another one that is really important in terms of 

spending money: The need for a comprehensive national risk and 

threat assessment, OK? If I were Osama bin Laden, I would be the 

happiest person in the world. That one individual has wreaked 

more havoc on the United States than any person, in over 200-year 

history in terms of changing the way we do things to respond to 

terrorism. 

And one of the things that is of concern to me and I know of my 

colleagues, and you know, we are part of the Homeland Security 

Committee, is that everybody and his brother wants something 

done. If we do everything that everyone identifies that we must do, 

we will bankrupt the country. 

And somehow, we need to have in place, and Mr. Walker, I would 

like you to comment; maybe I am off on the wrong track on this, 

but we must have some system to do a threat assessment and say 

these are the priorities and where are we to make a difference. The 

No. 1 thing is if we had—that is why we have the new Director 

of National Intelligence is that we do a great job with that, and we 

keep these people out; we are in good shape. 

But last night, I watched on C–SPAN where they had a hearing—I think it was before one of the committees, and George 

Tenet—not Tenet, but who runs the FBI, Mueller? 

Mr. WALKER. Mueller. 

Senator VOINOVICH. Yes, Director Mueller was talking about all 

of the terrorist organizations that we have right now in the United 

States. Hamas is still in the United States and some other groups 

too. 

So we do have that problem, but in terms of how do we respond 

to that, is anybody over there putting a chart in place and saying 

this is where we should allocate our monies to make the difference 

in terms of securing the homeland? 

Mr. JOHNSON. You are asking me? 

Senator VOINOVICH. Yes, I am. 

Mr. JOHNSON. I do not know what form it takes, but I know they 

pay a lot of attention to where they think the vulnerabilities are 

where the bad guys think our vulnerabilities are; and therefore, 

where we should be most attentive to keep them from getting in 

the country or minimizing those vulnerabilities. But the exact form 

it takes, I do not know. 

Senator VOINOVICH. Mr. Walker, would you comment on that, 

and then, I will wrap it up, because Senator Akaka has a speech 

to give on the floor. 

23

Mr. WALKER. Sure, they need to develop a more comprehensive 

and integrated threat and risk assessment both within the Department of Homeland Security as well as other agencies, including the 

Department of Defense. I think it is important, as you pointed out, 

that there will never be such a thing as zero risk in today’s world, 

but we need to end up allocating our resources to try to mitigate 

as much risk as possible. 

Now, on that, Mr. Chairman, I would respectfully suggest that 

Congress is going to have a role to play, too, because one of the 

issues that is going to be there is after you end up conducting that 

comprehensive threat and risk assessment, and after the Congress 

ends up allocating resources, how much of those resources should 

be allocated on a per capita basis versus how much of those resources should be allocated in accordance with the comprehensive 

risk and threat assessment. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. Mr. Johnson, you recently announced the Administration’s goal of expanding 

the personnel flexibilities granted to the Department of Homeland 

Security and the Department of Defense to the rest of the Federal 

Government. 

My question to you is why do you believe it is appropriate to expand these flexibilities across government without Congress and 

the Administration having an opportunity to gauge the success or 

failure of these new personnel systems? 

Mr. JOHNSON. Well, I think most everybody would agree that expanded flexibilities will be adopted government-wide. I do not think 

anybody disagrees about whether they will be adopted; the only 

question is ‘‘when?’’ David had a conference a year ago or so that 

he co-chaired with Paul Volcker, and there was representatives 

from all the different interested parties and a lot of discussion 

about this. I think the group was unanimous in their belief that 

we would change the flexibilities that management has to manage 

its people, and there was a question of should we do it piecemeal, 

or should we do it all at once with the rest of the Federal Government. 

And the feeling was we should not do it piecemeal. The feeling 

was we should do it all at once, and so, the question was do we 

do it this next year or the year after that? We do not want to do 

anything that represents high risk, since that is the subject of today’s hearing. We do not want to jump into a swimming pool full 

of sharks. We do not want to go where there are a lot of unknowns, 

and we do not know how to deal with those unknowns. I contend 

that almost all the risk associated with spreading new human resource flexibilities government-wide are in implementation. 

The risks are not in what the regulations should be. The risks 

are on how are they implemented. How good are we at training 

managers? How good are we communicating and alleviating anxieties and fears with employees? For instance, the Department of 

Homeland Security has a 4-year plan for implementing their new 

system. The last group at Homeland Security that will adopt their 

new system in 2009. President Bush will not be President; I will 

not be here; a lot of us will not be here. So it is a very long system 

for the very purpose of managing risk to acceptable levels. 

24

DOD has a long plan also to implement theirs. I do not know 

what the time frame is, but it is all about managing risk. So I believe that, one, we will not do this without Congress. I believe you 

all are still involved in this unless someone changed the Constitution. What I propose is that we commit to extend these government-wide and to deal with the most important ones, initially, 

which are the ones that do not involve labor relations, which are 

the most controversial, but with the least amount of value added 

to the improvement of the system. 

Let us focus on the ones that are the least controversial, that 

have the greatest value added capability. Let us agree that we are 

going to do that, and let us agree on a reasonably long period of 

time for implementation that will allow us to manage the risks of 

implementation to you all’s satisfaction and to ours and to the 

unions’ and to the employees’ satisfaction. 

Senator AKAKA. Yes, well thank you for that statement. I know 

that the Chairman and I, and the Subcommittee have been very 

concerned about expanding these regulations immediately to the 

whole government. 

Mr. JOHNSON. This is not a rush out there. No, we have to be 

prudent, because this is going to be and must be with great certainty very successful. 

Senator AKAKA. And of course we have been concerned about the 

flexibilities. 

Mr. JOHNSON. Yes. 

Senator AKAKA. And we do not know what they are at this time. 

Mr. JOHNSON. Excuse me; one of the things I talked to Senator 

Voinovich about was coming back to him and to Susan Collins and 

you, sir, and Congressman Davis about talking through where we 

think, and let us make sure we understand where the risks are, 

where the opportunities are. We hope to do this with you all, obviously, and seek your input on this. I think the opportunity is to 

commit now, so we can all get in the business of doing it and making these benefits available to the entire Federal Government. 

Mr. WALKER. Senator, may I comment on this? I think it is important that certain concepts ultimately be applied governmentwide. For example, right now, you have a circumstance where individuals who are not performing at an acceptable level, or, stated 

differently, unacceptable performers are guaranteed the across-theboard pay increase that Congress passes every year, and for many 

Executive Branch agencies, 85 percent of the pay increases that 

occur every year are directly tied to that and to length of service, 

neither of which have anything to do with performance. 

Our current system for determining market-based compensation 

is fundamentally flawed. So I think over time, we need to move to 

a market-based and performance-oriented compensation system. At 

the same point in time, it is critically important to have adequate 

safeguards in place to prevent abuse of employees, and those safeguards need to be in place before you operationalize the authorities. So I think there is an opportunity to expand this, but you 

have to have certain principles that go across government, certain 

safeguards that should be in place before you operationalize the authority to maximize the chance of success and to minimize the possibility of problems. 

25

Senator AKAKA. Thank you, Mr. Walker. My time has expired. I 

just want to say I certainly appreciate your statements, and for me 

they have been helpful. 

Senator VOINOVICH. Yes, thank you, Senator Akaka. 

On that issue, we are concerned that we must start to see some 

examples of how this is going to happen, and I think that there is 

a reluctance to make government-wide personnel reforms until we 

see how it works in several areas. Now, you have it working in the 

GAO, but we would like to see just how is this going to be cascaded 

throughout the government, and I think how that is done initially 

will have a lot to do with whether or not we are going to agree to 

do it on a government-wide basis. What is your plan, the plan of 

the agencies, what training will be provided to managers for filling 

out performance evaluations which is much easier said than done. 

I have done it, and I suspect you have. It is tough stuff. It takes 

time. 

And I think also that we need to look at the concerns of the 

unions regarding collective bargaining. I think they are raising 

some legitimate issues. I think we need to look at them in terms 

of responding to some of their concerns, because their cooperation 

in all of this is very important. If they decide that they are just 

going to throw up roadblocks and discourage people from doing 

this, they can really bring this thing almost to a halt. Now I have 

made it very clear that they cannot afford to do that, because this 

is too important, particularly in the Department of Homeland Security, to the security of the United States of America, so the unions 

have to put aside some of those things. 

On the other hand, I think that they have some legitimate complaints. One of the witnesses discussed the job losses in the agriculture inspection function. We are looking into his concerns, but 

he said about a third of the people who were serving as agriculture 

inspectors have left, and I am pulling together anecdotal stories 

from very professional employees. Some feel like they have been 

demeaned, and are thus leaving the government, and so, we have 

to look at that also. 

We forget that this is, particularly in Homeland,—180,000 people 

that we are trying to bring together—is a very formidable management task. Sometimes, the public hears the government is going to 

do something, and you snap your fingers, and it is going to happen. 

Unfortunately, it does not work like that. It takes years to complete some of our tasks. So we need to work together on it, and we 

are open to it. 

In terms of the high-risk area, we are going to share with you, 

Mr. Johnson, where we are going to put our effort, and I want to 

publicly say to you we are going to get into the DOD thing. I am 

one of those guys who I set out early on, and I talked to Mr. Walker, and he was very helpful. We are going to do something about 

human capital, and we are like a bulldog, and we hung onto it, and 

we made some success there. 

Now, we must explore whether agencies are using the flexibilities that they have been given. But I will say this for both of you: 

It is working, because I have talked to one agency; I talked to Sean 

O’Keefe from NASA. He told me that NASA is already reaping the 

rewards of the personnel flexibilities granted by Congress. But the 

26

thing is, we need to open this up government-wide and make sure 

agencies are using the flexibilities. Some of the agencies still have 

not utilized the new hiring program and not moved away from the 

rule of three. 

So we are going to stay on top of that and kind of monitor that 

and do some oversight. But this Subcommittee is going to shift into 

oversight of the high-risk areas. I really believe that we can put 

our minds to it and spend the time, stay on top of this, we can help 

remove some DOD programs off the High-Risk List. It is important 

for efficient operation of the Department of Defense, and it is so 

very important now with the growing deficits, and we are trying to 

find money, and we have to do something to make a difference. 

As I mentioned to you, Mr. Johnson, I find it difficult to tell certain programs, like health care, education, or childcare, that they 

are receiving funding cuts when the DOD wastes $22 billion because of poor management practices. This simply is not fair. 

So I thank you for being here, and I really appreciate the work 

both of you are doing for our Nation. You have been wonderful. You 

are friends, and I look forward to working with both of you. 

Mr. JOHNSON. Thank you, sir. 

Senator VOINOVICH. The Committee is adjourned. 

[Whereupon, at 11:38 a.m., the Subcommittee adjourned.] 

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