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S. Hrg. 111–1058 

TRANSFORMING GOVERNMENT THROUGH 

INNOVATIVE TOOLS AND TECHNOLOGIES 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

AUGUST 3, 2010 

Available via the World Wide Web: http://www.fdsys.gov/ 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Prepared statements: 

Senator Carper ................................................................................................. 41 

Senator McCain ................................................................................................ 43 

WITNESSES 

TUESDAY, AUGUST 3, 2010 

Daniel I. Werfel, Controller, Office of Federal Financial Management, Office 

of Management and Budget ................................................................................ 3 

The Honorable Earl E. Devaney, Chairman, Recovery Accountability and 

Transparency Board ............................................................................................. 5 

Alexander Karp, Ph.D., Co-Founder and Chief Executive Officer, Palantir 

Technologies ......................................................................................................... 27 

Robert R. McEwen, Chairman and Chief Executive Officer, U.S. Goldcorp, 

Inc. ......................................................................................................................... 29 

Riley Crane, Ph.D., Human Dynamics Group, Media Lab, Massachusetts Institute of Technology ............................................................................................ 31 

ALPHABETICAL LIST OF WITNESSES

Crane, Riley, Ph.D.: 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 69 

Devaney Hon. Earl E.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 53 

Karp, Alexander, Ph.D.: 

Testimony .......................................................................................................... 27 

Prepared statement .......................................................................................... 58 

McEwen, Robert R.: 

Testimony .......................................................................................................... 29 

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

Werfel, Daniel I.: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 45 

APPENDIX 

Questions and responses for the Record from: 

Mr. Devaney ...................................................................................................... 73 

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TRANSFORMING GOVERNMENT THROUGH 

INNOVATIVE TOOLS AND TECHNOLOGY 

TUESDAY, AUGUST 3, 2010 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:32 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Pryor, and McCain. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The hearing will come to order. Welcome to our 

first panel, and I look forward to introducing each of you in just 

a couple of minutes. We are delighted that you are here. And thank 

you for not just your presence and thanks for your testimony, but 

thanks very much for your good work over a period of a number 

of years. 

Mr. Devaney, you might have Mr. Werfel by a year or two, but 

he has done a lot in a relatively few years, and you have done a 

whole lot more than probably the rest of us combined, so welcome. 

Over the last couple of years, everybody knows we have faced a 

set of economic challenges that are almost unparalleled since going 

back to the Great Depression. These challenges have disrupted the 

lives of millions of American workers and their families. They have 

slowed our Nation’s economic growth, and they have brought greater attention to the fiscal stability of our government. 

In the face of this uncertainty and fear, the American people demanded a new sense of urgency and an attention to these problems 

and called on us to act. That is why over a year ago, President 

Obama proposed and this Congress passed the American Recovery 

and Reinvestment Act (ARRA) to help put Americans back to work 

and to install a renewed sense of confidence in our economy. The 

plan totaled some $787 billion over a couple of years, much of it 

in the form of tax cuts for working Americans, which citizens saw 

in clear dollars and cents right on their weekly paychecks. 

The other piece of the Recovery Act (RA) was direct Federal 

spending for projects to help rebuild our physical and economic infrastructure while at the same time preserving jobs and beginning 

the process of getting unemployed Americans back to work. And 

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2 

when the President and this Congress put together this plan, we 

wanted to make sure that not one dime was wasted. 

The Recovery Accountability and Transparency Board (RATB) 

was created to give Americans a window into how their government was spending their money. The steps the Board and the Administration have taken in this area are, I think, unprecedented. 

Through Recovery.gov, citizens of this country for the first time 

could see or can see where projects were happening, how much was 

being spent on them, and how many jobs were created or saved because of those outlays. 

With any pot of money this big, however, there will be scam artists and criminals who want to take advantage and defraud the 

American people. The Recovery Board (RB) was tasked to go after 

these individuals proactively and make sure that every penny or at 

least every dollar was being spent to put Americans back to work 

and not to line the pockets of crooks. Working with Inspector Generals (IGs) from 29 Federal agencies, the Recovery Board has successfully provided both transparency and accountability for these 

funds. In fact, they have done such a good job, the President has 

asked them, maybe even told them, to take their show on the road. 

Last month, the Office of Management and Budget (OMB) Director Peter Orszag and Vice President Joe Biden announced that the 

tools and techniques successfully used at the Recovery Board will 

be expanded to the Centers for Medicare & Medicaid Services 

(CMS). I have said before, we need to do a better job of bringing 

the highest levels of health care to Americans for less money, and 

it is clear that there is a lot more that we can do to cut fraud and 

waste from our public health care system. Medicare and Medicaid have made about $65 billion in improper 

payments, I am told, in 2009, and it’s safe to assume that at least 

some of those monies can be attributed to fraud. Now, if we can 

use the Recovery Board’s work as a model for Medicare and Medicaid and quickly, more quickly detect and stop those payments, 

then we can start to put that money back to work for the American 

people. 

I look forward to hearing from our first two witnesses, Chairman 

Devaney from the Recovery Board and Mr. Werfel from the Office 

of Management and Budget, about the Recovery Board’s successes 

and its challenges, as well as the President’s plan to expand these 

efforts to make all of our government work better and more efficiently. 

As we look at the averted economic collapse in the rearview mirror, we face our Nation’s mind-boggling budget deficits barreling 

straight toward us. I hope to have a broader discussion with members of our second panel about how they think government can perform better and more efficiently at a time when those of us in government are thinking about how we can do more with less. 

These are well-respected visionaries in their fields, and I look 

forward to hearing their thoughts on how government might be 

able to solve problems and do more with less by leveraging novel 

approaches and innovative technologies. If we do not start doing a 

better job of managing our Federal expenses and begin to close our 

deficits, we are going to pass on a legacy of crippling debt to our 

children and to their children. We need to use every tool in our 

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3 

1The prepared statement of Mr. Werfel appears in the Appendix on page 45. 

toolbox that is available to bring our fiscal house back to order and 

give the American people the government that they deserve. 

And with that, I have the opportunity, pleasure really, of introducing our first two witnesses. Our first witness today is Mr. Daniel Werfel, the Controller of the Office of Federal Financial Management (OFFM) within the Office of Management and Budget. 

I would just say to Chairman Devaney, if we paid Mr. Werfel for 

every time he has testified before this Subcommittee in the years 

that I have been in the Senate, we could probably come close to 

paying off the budget deficit. He has been here a lot, and it is always good to see him. He brings a lot to the table, as I know you 

do, too. 

But as Controller, Mr. Werfel is responsible for coordinating the 

Office of Management and Budget’s efforts to initiate governmentwide improvements and all areas of financial management, including financial reporting, improper payments, and real property management. Those are all issues and areas of concern to this Committee and this Subcommittee. Previously, Mr. Werfel served in 

multiple capacities within OMB, including Deputy Controller and 

Chief of the Financial Integrity and Analysis Branch. I think he 

had quite a successful career in football, college football, that we 

all remember fondly. For those of you in the audience who know 

football, I am just pulling your leg. But he is probably a much better witness than the other guy. 

Our second witness is Mr. Earl Devaney, Chairman of the Recovery Accountability and Transparency Board. I am sure there is an 

acronym for that, too, but hopefully we will not learn too much 

about that. Mr. Devaney is charged with overseeing spending 

under the $787 billion recovery program. Previously, Mr. Devaney 

served as Inspector General of the Department of the Interior and 

a whole lot of other things. Weren’t you in the Secret Service for 

a number of years? 

Mr. DEVANEY. I was, sir. 

Senator CARPER. You have done a lot of things in your life, and 

we are grateful literally for your decades of service. 

We would invite you to proceed. My clock here in front of me 

says 5 minutes. If you stay fairly close to that, that would be good. 

If you go a little bit over, that is all right. But, Mr. Werfel, why 

don’t you proceed? Your entire statement will be made part of the 

record. Thank you. 

TESTIMONY OF DANIEL I. WERFEL,1 CONTROLLER, OFFICE OF 

FEDERAL FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. WERFEL. Thank you. Good afternoon, Chairman Carper, 

Ranking Member McCain, and other distinguished Members of the 

Subcommittee. Thank you for inviting me to discuss how the government is using technology to prevent and reduce payment errors. 

It is an honor to be here and, of course, to sit alongside my esteemed colleague Earl Devaney. 

As part of its Accountable Government Initiative, the Administration has moved to cut programs that do not work, streamline 

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what does work, modernize how government operates to save 

money and improve performance, and make government more open 

and responsive to the needs of the American people. 

One of the ways we will accomplish these goals is through improving the government’s use of technology to enhance citizen services, improve the productivity of government operations, and identify and prevent fraud, waste, and error in government programs. 

One of the biggest sources of waste and inefficiency is the nearly $110 billion in improper payments that were made in fiscal year 

(FY) 2009 to individuals, organizations, and contractors. These errors are unacceptable, and the Administration is committed to reducing payment errors and eliminating fraud, waste, and abuse 

through aggressive and comprehensive efforts. 

Accordingly, I am pleased that the President has charged his Administration with the aggressive goal to reduce the current government-wide amount of improper payments by $50 billion and to recapture through payment recapture audits at least $2 billion in improper payments to vendors—all of this to occur by fiscal year 

2012. 

Our partnership with Congress is vital to achieving these goals. 

The recently enacted Improper Payments Elimination and Recovery Act (IPERA) and the Affordable Care Act provide agencies such 

as the Department of Health and Human Services (HHS) numerous new authorities and tools to prevent, identify, and recover improper payments. Effective execution of these new laws is a top priority for the Administration. Our actions on this front build on an 

already aggressive set of administrative priorities in place to attack 

and eliminate payment errors. 

I would like to briefly highlight a few such activities, each of 

which leverage technology as a primary driver of success. 

First, on November 20, 2009, the President issued Executive 

Order (EO) 13520. Under this EO we have identified the highest 

priority programs that account for the majority of error, established 

supplemental measures to provide more frequent data to guide our 

efforts, and selected accountable officials that are responsible for 

getting results. In addition, we launched PaymentAccuracy.gov, a 

new dashboard that significantly increases the transparency of our 

payment errors and our progress in remediating them. 

Second, the President recently issued a memorandum creating a 

Do Not Pay List. This list will serve as a single source to link agencies to relevant eligibility databases such as Social Security’s Death 

Master File and General Services Administration’s (GSA’s) Excluded Parties List. 

Third, in March of this year, the President directed agencies to 

expand their efforts to recapture improper payments from government contractors using payment recapture audits where specialized 

auditors use sophisticated technologies to identify errors and are 

paid a portion of what they recover. The President directed agencies to recover at least $2 billion in improper payments over the 

next 3 years, a significant acceleration from the previous several 

years. 

Fourth, we are spreading best practices on the use of data mining tools that are proving effective in preventing error. For example, the Department of Defense (DOD) has prevented more than 

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1The prepared statement of Mr. Devaney appears in the Appendix on page 53. 

$700 million in improper payments to vendors over the past 2 

years through the deployment of their business activity monitoring 

tool. Also, as you just referenced, we announced in June that we 

were rolling out the Recovery Board’s innovative fraud detection 

tool for use across government beginning with Medicare and Medicaid. 

Last, I would like to highlight the Partnership Fund for Program 

Integrity Innovation. This is a new program enacted in the fiscal 

year 2010 Consolidated Appropriations Act. Under this program we 

are working with State governments and other stakeholders to 

identify innovative practices and program integrity. We are testing 

them for broader application and providing a forum to share these 

innovations across programs and levels of government. 

Looking ahead, there is still important work to be done on both 

the legislative and administrative front. Of particular note, I am 

hopeful that Congress will act on the important provisions contained in the President’s 2011 budget that would enable critical 

program integrity improvements in such areas as Medicare, Unemployment Insurance (UI), and Social Security. In total, the President’s budget proposals, if enacted, would save more than $150 billion over 10 years. 

Moreover, significant work remains to carry out our new legislative authorities and to meet the aggressive goals for error reduction 

and recovery the President has set for us. I look forward to keeping 

you up to date on our progress. 

Thank you again for inviting me to testify. I look forward to answering your questions. 

Senator CARPER. Thanks, Mr. Werfel. 

Chairman Devaney, please proceed. 

TESTIMONY OF THE HON. EARL E. DEVANEY,1 CHAIRMAN, 

RECOVERY ACCOUNTABILITY AND TRANSPARENCY BOARD 

Mr. DEVANEY. Thank you, Mr. Chairman and Members of this 

Subcommittee. I want to thank you for the opportunity to appear 

before you today to discuss the accomplishments of the Recovery 

Board, with particular emphasis on the use of technology in both 

the accountability and transparency arenas. And after my opening 

remarks, I will be glad to answer any questions you have for me. 

In the year and a half since the enactment of the Recovery Act, 

the Recovery Board has faced many challenges. From its inception 

in February 2009, the Board began striving to meet extreme deadlines in establishing two complex and innovative Internet sites: An 

inbound reporting site for recipients of contracts, grants, and a 

loans; and an outbound, public-facing site to make the recipient 

data transparent. 

Now, under normal circumstances, such a project would proceed 

in sequence. Specific requirements would be determined according 

to the needs of the client and prospective users. A prototype would 

be developed and then tested, then readjusted, tested again and so 

forth until a final product meeting the client approval would be delivered. 

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In government, this would normally take about 2 years. However, the time constraints upon the Board permitted no such luxury. Things had to happen simultaneously. We did it in about 6 

months. And as one contractor would later say, ‘‘Basically we were 

building the ship as we were leaving the port.’’ 

Initially, the Board considered joining together existing legacy 

computer systems within Federal agencies to collect and house the 

data from recipients. But that course was ultimately rejected because of data, timing, and linkages issues that probably would have 

led to failure. So instead of having each Federal agency collect data 

from its own recipients, the Board and OMB opted to create a single, centralized reporting system called FederalReporting.gov. 

As it turned out, the new inbound reporting side would resemble 

no other existing government system. FederalReporting.gov would 

also be the first to handle government contracts, grants, and loans 

all in one system—convenient for data trackers but a potential 

nightmare for IT system builders. 

For instance, Federal contracts and grants each involve different 

user communities as well as rules and policies. This entailed different coding, prototypes, testing, and approvals regarding data for 

each type of award. 

The first big test for the Board came nearly a year ago on August 

17, 2009, when FederalReporting.gov was launched, enabling recipients of Recovery Act contracts, grants, and loans to begin registering for data reporting. Overall, registration went quite smoothly, largely because OMB and the Board had educated recipients 

about the system and its functions. The biggest test, however, was 

yet to come. 

On October 1, 2009, recipients began filing what turned out to 

be more than 130,000 separate data reports. As reporting periods 

have come and gone, recipients have become more comfortable with 

FederalReporting.gov, leading to fewer recipient filing and data errors in each successive reporting period. 

The Board has done its part as well in working to prevent errors. 

FederalReporting.gov now contains a number of internal logic 

checks to keep recipients from entering inconsistent data. For example, one logic check notifies recipients who have entered a congressional district that does not match up with the ZIP code they 

entered. 

The Board’s outbound reporting website, Recovery.gov, has likewise gone through a number of modifications over the past year 

and a half. When the Board was first established, we were presented with what I have termed Version 1.0 of Recovery.gov. This 

website had been created hurriedly out of necessity by GSA and 

OMB. After employing many technical advancements and obtaining 

public input through a round of focus groups and usability studies, 

the Board launched Recovery.gov Version 2.0 on September 28, 

2009. And on October 30, 2009, 30 days after the end of the first 

reporting period began, Recovery.gov displayed an enormous 

amount of data that had been transferred smoothly from 

FederalReporting.gov. Both new Web-based reporting systems have 

continued to run smoothly for all four reporting periods so far. 

In looking back on these extraordinary achievements, the Board’s 

IT team members universally say that they learned two valuable 

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lessons from the strategy of developing components of both 

websites simultaneously instead of serially. 

First, developing a typical monolithic, one-size-fits-all technology 

to solve a problem is not necessary. Quickly and imaginatively integrating existing technologies can work as well, or even better. 

Second, deploying individual tools and components as soon as 

they are ready and integrating others as they become available can 

work just as well as waiting until all the pieces have been completed. 

Now that Americans have become more familiar with Recovery.gov and the transparency that it offers, the Board is beginning 

to get more questions relating to our accountability mission. Reporters have begun asking, ‘‘When can the public expect to see 

criminal indictments in the recovery program? ’’ My answer is that 

prosecutions will emerge eventually, but there is much more to 

safeguarding taxpayers’ dollars than bringing high-profile indictments. Indeed, the Board’s most critical challenge is preventing 

fraud and waste before they occur. While transparency is harder to 

practice than it is to talk about, I have come to believe that transparency is the friend of the enforcer and the enemy of the 

fraudster. 

Early on, the Board decided that we need to build a state-of-theart command center that would allow us to keep a close eye on the 

flow of recovery money and ensure that all contracts, grants, and 

loans could be subjected to a comprehensive scrutiny. To accomplish our goal, we built a Recovery Operations Center. The operations center combines traditional law enforcement analysis with 

sophisticated software tools, government databases, and opensource information to track the money. 

It is helpful to visualize fraud occurring on a continuum as opposed to a finite point in time. In doing so, we realize that there 

are an indeterminate number of points between one end of the continuum—when the would-be lawbreaker first decides to commit the 

fraud—and the other—when the fraud has been fully completed 

and the money is out the door. The analytical tools used in our operations center have been designed to intercept fraud closer to the 

front end of that continuum rather than to detect it only after the 

monies have been lost. Simply put, the Board’s skilled analysts 

look for early-warning signs of trouble. They use the software to 

search colossal amounts of data, looking for potential problems 

such as criminal convictions, lawsuits, tax liens, bankruptcies, 

risky financial deals, and suspension and debarment proceedings. 

Once a concern has been identified, the analysts then perform an 

in-depth analysis of the award and forward their report to the appropriate agency Inspector General for further inquiry. 

This past May, we announced Recovery.gov had moved to a cloud 

computing infrastructure, a technology that allows for more efficient computer operations, improved security, and reduced costs. 

Recovery.gov became the first government-wide system to move to 

the cloud. 

The Board is now engaging in our second round of focus group 

and usability testing, visiting cities across America with the ultimate goal of increasing the usability of Recovery.gov and further 

enabling detailed tracking of Recovery Act monies. 

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Mr. Chairman, I would be remiss if I did not mention what we 

have determined is the single biggest impediment to the kind of 

transparency that the Recovery Act envisions. It is the lack of a 

single consistent governmentwide award numbering system. All 29 

recovery agencies—in fact, all government agencies—have unique 

alphanumerical coding systems for their awards. While this may 

not sound like a big deal, it is. Disparate, inconsistent coding systems make the task of reviewing and checking award data unnecessarily arduous and ineffective for those with oversight responsibility. This problem needs to be fixed before we can achieve true 

spending transparency. 

Finally, Mr. Chairman, I believe that even after the Board sunsets in 2013, the legacy of the Board will continue. I know I am 

not alone in touting the future good that this transparency and accountability model can continue to bring. William LeoGrande, dean 

of the School of Public Affairs at American University, was recently 

quoted in the Federal Times as saying of Recovery.gov, ‘‘I think 

this will be a model for the future on how the Federal Government 

can, if it is willing, provide incredible public access to the inner 

workings of legislation as it is implemented.’’ 

And Vice President Biden, speaking about Recovery.gov, said, ‘‘I 

expect it to be a template from this point on for how Federal Government deals with taxpayers’ money.’’ 

I believe the Vice President and Dean LeoGrande are correct that 

this historic experiment in transparency will continue. I expect it 

has to, and I cannot imagine the American public would meekly accept a retreat back to the old non-transparent ways. 

Mr. Chairman, Members of this Subcommittee, that concludes 

my prepared testimony. Thank you for the opportunity, and I will 

be glad to answer any questions. 

Senator CARPER. Good. Thanks so much, Mr. Devaney. 

We have been joined by Senator Mark Pryor. Senator Pryor and 

I have been involved for almost 6 years now in trying to nurture 

and bring along a centrist think tank called Third Way, and a big 

part of what we are trying to do here today is to put a spotlight 

on some of the parts of our government, some of the players in our 

government that have sought out a third way—a third way to 

make sure that we are spending our money in a more cost-effective 

ways, or taxpayers’ money in a more effective way. 

Usually when Senator Pryor comes to these hearings, he takes 

about half an hour for an opening statement, and then I go right 

to him for the questions. I do not know if you would like to make 

an opening statement at this time or not, but anything you would 

like to add or take away, please do. 

Senator PRYOR. I would prefer just to let you ask your questions, 

and I will ask mine. 

Senator CARPER. All right. Fair enough. Thank you. Glad you 

could be here. 

I want to just ask you, Mr. Devaney, some folks might be watching us on C–SPAN. I do not know if they are or not. But let us 

just say we have a poultry farmer in Delaware or maybe one in Arkansas—we have a lot of those in our two States. But they happen 

to be channel surfing, and they come across this hearing, maybe 

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9 

ery Accountability and Transparency Board. Can you make that 

concept real or meaningful in their lives, just in the lives of ordinary people? 

Mr. DEVANEY. Well, Mr. Chairman, I think that—— 

Senator CARPER. Can you hear him? No? Just check your mic. 

Mr. DEVANEY. I think the ability for the American public to finally see how their government is spending money is an incredible 

new thing that I think there is a big appetite for. They can literally 

go on this website, Recovery.gov, and drill down into their communities and see how the money is being spent in their own neighborhoods. They can look at it across the country or by State—as a 

matter of fact, in a variety of ways. 

What we do is we make the data available. We hope to become 

the authoritative source so others can take that data and do what 

they call mash-ups and use that data in ways that we cannot even 

contemplate in the Federal Government. So this is really new, and 

it is a big piece of the transparency effort going on in government 

right now. 

Senator CARPER. Thank you. 

Mr. Werfel, do you want to answer the same question? 

Mr. WERFEL. I think to explain it to Mom and Dad back home, 

I would say the Board was created by Congress and by the President to have a very strong set of leaders and individuals come from 

around government and monitor the funds that are moving out into 

the public sphere in a way that has not been done before. I would 

say that there was a recognition when this law was passed that 

there were certain risks associated with this amount of money 

going out through the normal standard channels that we have for 

payment processes and the way we administer government. And 

with these types of risks, we wanted to make sure as a government 

that we had put the necessary people in place to watch those funds 

closely and to report and help report on exactly where they were 

going. 

And so the vision, I think, really is a great example of a vision 

of Congress and the President coming to fruition effectively, because the Board is a gathering of very talented and dedicated professionals that are singularly focused on making sure the money 

goes out correctly and wisely and judiciously and it is reported effectively. 

And so we have a very good track record in terms of the lack of 

identification of major instances of fraud and error in the Recovery 

Act, in large measure because of the scrutiny that the Board places 

on the overall process. And we have Recovery.gov, which provides 

an unprecedented view and enormous quantities of data, just as 

Congress and the President envisioned. 

So I think the process has really worked effectively, and I think 

the Board has had a big deal to do with it. 

Senator CARPER. Mr. Devaney, Mr. Werfel just said this kind of 

activity had not been done before, and let me just ask of you a twopart question. Why not? And why are we able to do it now? 

Mr. DEVANEY. I do not know why not. I really cannot answer 

that question. But I can tell you that I have come to believe—with 

my background in law enforcement, I will be candid and tell you 

that transparency has not always been my favorite thing, but—— 

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Senator CARPER. I can remember a day not that long ago when 

someone would accuse you of being transparent, it was not a compliment. 

Mr. DEVANEY. Right. But I have come to believe that transparency actually drives accountability. I think as Mr. Werfel mentioned, we have had, relatively speaking with this amount of 

money, very few large fraud events so far. There are active cases 

ongoing but, quite frankly, less than I would have presumed a year 

and a half ago. And I think a large part of that answer is the 

transparency piece, the fact that citizens get up every morning and 

look at this website, reporters get up every morning and look at 

this website. Those citizens call us and tell us about things they 

see that they do not think are right, and we follow that up. 

Senator CARPER. How many people comprise the Board or the 

staff of the Board? 

Mr. DEVANEY. The Board is 12 Inspector Generals and myself, 

and the 12 Inspector Generals were named in the legislation, and 

I was selected by the President. The Board meets typically once a 

month. We have Subcommittees that meet more regularly. And we 

also have a presidential panel that provides advice to the Board 

that was named recently. 

Senator CARPER. All right. In your testimony, Mr. Devaney—I 

think it is the last page of your testimony—there is a paragraph 

that ends, ‘‘I have, therefore, decided to dedicate a considerable 

portion of my remaining time in government to fixing this problem.’’ 

Explain this problem. I have read your paragraph a couple of 

times and listened to your testimony. Explain this problem and 

why is it something—you have had a distinguished career working 

for the people of this country. But why is it a promise of such importance that you would decide to dedicate a considerable portion 

of your remaining 30 years in government? 

Mr. DEVANEY. Well, Mr. Chairman, first of all—— 

Senator CARPER. OK, maybe it is not 30 years. 

Mr. DEVANEY. It is actually 40, and my remaining time is very 

small, so maybe I am not really committing to much there. I did 

not know this problem existed, quite frankly, before—— 

Senator CARPER. I did not either. Why don’t you tell us about it? 

Mr. DEVANEY. And as I mentioned in my testimony, each agency—and they have for years—has its own unique numbering system for awards, grants, contracts that they give out. None of them 

are harmonized or look like each other unlike, for instance, credit 

cards which are, a certain length and without dashes, without letters in them. And each agency does it their own way and have been 

doing it that way for years. 

So along comes Recovery and we try and collect all the data and 

make sense of it. We have tried to make sure that the agency tells 

us what they have given out as money, and when we look at what 

comes in, we try to match that. And when we try to do that, the 

lack of a common single awarding report system really is problematic. And we have what we call mismatches where we have to literally almost hand search these awards to make sure that they 

match up. 

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11 

So I think if that problem was fixed—and I do not know that it 

would be very practical to fix it on awards in the past. I think we 

would have to do something going forward. And the Board wants 

to provide a solution. We want to try to work with OMB to not only 

identify the problem but find a way forward. And Mr. Werfel and 

I are going to work together on that. 

Senator CARPER. Well, good. It sounds like this is a problem that 

could take years to finish out, so it looks like we will have you 

around for a little while. At least we hope so. 

I have some more questions, and I look forward to asking them. 

Right now I am going to yield to Senator Pryor for however much 

time he wishes to take. 

Senator PRYOR. Thank you, Mr. Chairman, and thank you for 

your tenacious focus on this and your leadership on this issue. 

Mr. Werfel, let me start with you, if I may. As I understand it, 

OMB has decided to take some of the tools that the Recovery Board 

has been successful with and are going to start to apply them to 

other government agencies and maybe even across government 

generally. My understanding is that CMS is going to be maybe the 

first or one of the first to see a pilot program. 

Could you tell us a little more about that in terms of when that 

starts and what you hope to accomplish there? 

Mr. WERFEL. Certainly, Senator. Very early in the life of the Recovery Act, we started to recognize that the Recovery Board was 

developing some cutting-edge best practices: The way in which 

FederalReporting.gov was deployed, the way in which Recovery.gov 

was constructed. And then we became aware of this fraud detection 

tool that the Recovery Board was working on, and we quickly saw 

that there was potential benefit to this type of technology and innovation outside of the Recovery Act. 

In particular, the tool takes publicly available information and 

combines it with information that the government may have about 

a particular set of individuals or corporations and how the money 

is spent. And it essentially shines a light on new risk factors for 

where there might be fraud or prohibited activity taking place. 

And so it created more of a multi-dimensional view into the picture that we had in front of us for finding problems. So when we 

look at our current suite of information that we have in today’s 

world, before this tool came along, it lacks certain dimensions and 

lacks certain information that allows us to see risks and red flags, 

and the Recovery Board’s tool kind of turns the information and 

combines it with other things on its axis a little bit, and suddenly 

things come to light that otherwise would not have. 

And this is general. There is nothing specific or unique about the 

Recovery Act. We have risks of improper payments, fraud, and 

error in all programs. And because we started to see the power of 

this tool—in particular, one of the major benefits of the tool is that 

it is resource smart. You do not have to send a field of investigators 

out locally to look at things. You can see things from a central location, almost in real time in terms of the information flow. And in 

a world of scarce resources, we need every tool we can get that 

would allow the agencies to do more oversight and more scrutiny 

with limited budgets and limited field trips and the like. 

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12 

We started the process and we approached Mr. Devaney and said 

we are very excited about this. We are in the business at OMB of 

identifying best practices and sharing them. And we think there 

are too many—Senator Carper mentioned $65 billion in improper 

payments just in Medicare and Medicaid. That is too big of a number to say, ‘‘Hey, we will pilot this at some other small agencies 

and see how it is going.’’ We wanted to move a tool like this right 

into the sweet spot of where we are having problems with fraud 

and error in government programs. 

Senator PRYOR. So you will try to apply the tool in the payment 

system of CMS, not just the contracting and some of the other 

things they do, but actually where you think most of the fraud is? 

Mr. WERFEL. I think the key with CMS has to do with the medical providers that enroll in those programs, some of which have 

been previously excluded and are coming back under new names, 

some of which are involved in fraud and are billing for treatments 

that never took place or have medical practices but have a history 

of overbilling, double billing for systems advertently. And so CMS 

may have been blind to some of this activity before a tool like this 

comes along. 

You asked earlier about the timing. CMS has already started to 

review their data through the Recovery Board’s tool and is already 

seeing some potential important impacts of having information earlier in the process about fraud and error than they would have otherwise had. 

Senator PRYOR. So, in other words, they are starting pretty much 

now? Is that what you mean? 

Mr. WERFEL. They are in the process right now. 

Senator PRYOR. And how close to real time can they look at the 

numbers? In other words, one of the problems with Medicare fraud 

and Medicaid fraud is usually either the U.S. Attorney or the State 

Attorney General, they do these fancy searches and algorithms but 

it may take months or even a year or more before they really detect 

what has happened in the past, and sometimes by that time, it is 

just way too late. 

So how close to real time do you think CMS can look at their 

numbers? 

Mr. WERFEL. I think it can be essentially as real time as we need 

it to be to stop a payment before it goes out, which is real enough 

for us—— 

Senator PRYOR. I think that is critical to really go after this, because you are always going to have the people who—have been ripping the system off for a long time, but as soon as, they get the 

sense that they are about to be caught, they seem to go away and 

you cannot find them. They change names. They come back under 

another name. 

Do you think that you are going to be able to track those kind 

of repeat offenders down, the folks that do change names or change 

a few things so they make it look like they are different folks in 

the system but it is really the same people? Do you think this system can—— 

Mr. WERFEL. I used the term before. I think that is the sweet 

spot of whether this tool comes into play, and it has been an area 

of problem for us in government in the past, tracking these types 

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13 

of corporations, companies, partnerships, or providers that get convicted or targeted and then come back in a different incarnation. 

Senator PRYOR. I think that is huge. 

Do you have a sense of how much this will save the taxpayer? I know you mentioned there is $65 billion worth of fraud there. Realistically, how effective do you think this will be? 

Mr. WERFEL. I do not know. I wish I could tell you the exact impact of the tool. I do know that in early June the President drew 

a line in the sand for HHS and, quite frankly, for the rest of the 

Administration to cut errors in Medicare fee-for-service in half. And 

that is a pretty substantial drop in improper payments because the 

Medicare fee-for-service errors are very high. 

This will be an important part of that, as well as other tools. I 

do not know what proportion of it, but some of it is we are going 

to stop payments before they go out, and some of it I think will 

have a deterrent effect, because as we start bringing to bear more 

important tools—and, in particular, I mentioned the Affordable 

Care Act provides us and DOJ in particular stronger enforcement 

tools and penalties to attack fraud and error. 

So, taken as a whole, we think this tool combined with other new 

authorities in both the bill that Senator Carper helped pass recently, the Improper Payments Elimination and Recovery Act, and 

the health care bill, we think we can meet the President’s charge 

for cutting Medicare errors in half within 3 years. 

Senator PRYOR. I think the deterrent effect is very important because I think most people who commit Medicare fraud, know that 

there is a pretty small chance that they will get caught. And if you 

can increase that percentage, and dramatically increase it like you 

are talking about, I think you will see fewer people trying to rip 

off the system. I think that is great news. 

Let me ask you one more question, Mr. Werfel, and that is about 

the PaymentAccuracy.gov that you have. Can you tell us, first, 

about the website and, second, how it is working? 

Mr. WERFEL. I would be happy to. When the President issued an 

Executive Order in November, this was in large part in response 

to the fiscal year 2009 numbers that had just come out and shown 

a significant spike in improper payments over the past several 

years, that we were trending in the wrong direction dating back, 

2005, 2006, 2007, 2008, and 2009. We decided to take as strong a 

step as we could, and one of the things that the Executive Order 

did was require that we publish a dashboard that would have some 

key ingredients both for transparency and accountability. 

In particular on the accountability side, we named a senior accountable official for the major programs with the highest errors, 

such as at Medicare and Medicaid, and put their name on this 

website. We published all the information in a way that the public 

can go see which agencies have the highest improper payments. We 

list on this website, as an example, the highest dollar improper 

payments that were found, whether there was a $2 million error, 

an $8 million error, or a $40,000 error. Whatever the top 10 are 

listed in a very transparent way on the website and which agency 

is responsible for it. 

So there is a sense, that we are owning the problem, showing 

where the issues are, which agencies and which officials are reH605-41331-79W7 with DISTILLER

14 

sponsible for them, and we also on that website have our targets 

going forward. Where do we think we can be going forward? So the 

first thing you see when you go on PaymentAccuracy.gov is a bar 

chart that shows where we are today in terms of our error rate and 

where we want to be 3 years from now, which would correlate to 

our goal of a $50 billion reduction in terms of dropping that error 

rate down. 

I will mention we are somewhat proud of the fact that 

PaymentAccuracy.gov had about 50,000 hits in the first 2 days and 

close to 300,000 hits in the first 2 weeks, which for us, in my world, 

that is pretty good foot traffic on a website of this kind. So we are 

excited about the type of attention we are getting to it. 

Senator PRYOR. Good. 

Mr. Chairman, can I have just one more minute to ask Mr. 

Devaney another question? 

Senator CARPER. The gentleman’s time has expired. [Laughter.] 

No, go ahead. 

Senator PRYOR. Thank you. 

Mr. Devaney, I am excited about what you are doing. I think you 

are getting good results. I think that as Mr. Werfel said, there is 

really some good news here. I know you have a lot more work to 

do, but I am curious about the feedback you have received from 

other departments, and the IG community and if those folks are 

coming to you and asking, ‘‘Tell us what we can do to be better? 

Are you helping to make other agencies and departments better? ’’ 

Mr. DEVANEY. That is an excellent question, Senator. I think the 

fact is the IG community has never had these tools before as a 

community, and now that we do, what we see is certainly the 29 

IGs that have recovery responsibilities are, in fact, not only receiving information about this, Senator, but they are bringing it to us. 

And as a result, we have interaction we have never had before. 

They tell me that the material we are giving them is value-added 

to their investigations; it is saving them an awful lot of leg work. 

It is very cost-effective for them to use the information the center 

gives them. 

So I would say that from that perspective I think this tool is 

going to be something the IG community uses in the future. 

Senator PRYOR. Let me ask one last question, and that is, I know 

you are using some great tools there, and obviously the private sector in most circumstances has a lot of incentive to get rid of fraud 

and waste and, different types of things that bleed them financially 

where they are just not getting a good return on what they are 

spending. 

Do you feel like your tools today are as good as the private sector 

users for their various endeavors, whatever they may be? Or is this 

an example where, the government has found one or two good 

things, but there is a set of other things that we could be doing 

that we are not yet doing? 

Mr. DEVANEY. I think it is—I would not want to say that we are 

better than the private sector. I will say we are using tools that 

I think the private sector has used before, the banking industry, 

the credit card industry. Quite frankly, some of the tools we are 

using, some of the software we are using has been used before in 

the law enforcement setting, in the terrorism setting. And we are 

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15 

using these tools for the very first time, I think it is fair to say, 

in the government spending arena, and that is the newness of it. 

We are taking tools that others have used successfully in the last 

few years, and other tools are coming along. And as we see those 

tools, we plug them in. 

So what we are doing is taking a new approach and using tools 

that, quite frankly, have never been used in government spending 

before. 

Senator PRYOR. Thank you, Mr. Chairman. 

Senator CARPER. Thanks very much for joining us. Thanks for 

those questions as well. 

We have been joined by our Ranking Republican, Senator 

McCain. Senator McCain, you are recognized for as long as you 

wish. 

Senator MCCAIN. Thank you, Mr. Chairman, and I apologize for 

being a little late. 

Senator CARPER. I am just glad you are here. 

Senator MCCAIN. There was a nomination hearing in the Armed 

Services Committee, and so I thank you for your patience. I thank 

the witnesses. 

Mr. Devaney, is it an accurate statement that a 7-percent loss of 

funds to fraud is considered the normal course of doing business? 

Mr. DEVANEY. Senator, I think that figure was last year’s figure. 

I am told it has gone down to 5 percent. But even at that, that is 

a totally unacceptable figure, percent rather, when you apply it to 

$787 billion. The 7 percent would be $55 billion and the 5 percent 

I think is around $40 billion. That is totally unacceptable. I have 

never imagined that it could get that bad, and I do not think it 

will, quite frankly, ever come near that figure. 

So as I mentioned in my testimony, I think the value in what we 

are doing is trying to prevent fraud and waste before it occurs as 

opposed to waiting, as Senator Pryor indicated in his comments, 

long after the money is out the door. So I think that we have been 

able—I think the transparency is a big help here to keeping fraud 

at a minimum. 

Senator MCCAIN. So you want to head off the fraud and abuse 

before it takes place. Now, exactly how do you go about that? 

Mr. DEVANEY. Well, the IG community as a whole took a very 

proactive approach to preventing fraud. There was an enormous 

amount of training that went on, both in the government and the 

private sector, to train folks that were not only recipients of the 

money but those that were giving it out in the government. 

Senator MCCAIN. So far, what have you done? Could you give us 

an example? 

Mr. DEVANEY. Of training? 

Senator MCCAIN. No. Of fraud and abuse that you have prevented. 

Mr. DEVANEY. Well, that is a difficult metric to talk about, but 

I think it is fair to say we simply have not seen the kind of fraud 

that we would have imagined as professional law enforcement we 

would have seen by now. So I think some of the things we are 

doing are working. I think that the whole concept that we have 

with our Recovery Operations Center (ROC) is to identify fraud before it occurs or at least intercept it as it is occurring. And there 

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16 

have been times when we have notified agencies that you seem to 

be—— 

Senator MCCAIN. Well, can you give me an example of fraud you 

have detected while it is occurring? 

Mr. DEVANEY. Yes. I think there are several cases where we—— 

Senator MCCAIN. Could you name one? 

Mr. DEVANEY. Well, most of these cases are active criminal investigations, Senator, but in general, we have identified money that 

has gone to—— 

Senator MCCAIN. The program has been going on for a year and 

a half, and all these are still ongoing, you have not completed one? 

Mr. DEVANEY. The Inspector Generals are—normally, it is about 

a 2-year cycle for a criminal investigation, so no, there have not 

been any significant criminal investigations completed. There are 

over 350 ongoing right now. 

Senator MCCAIN. But not one completed? 

Mr. DEVANEY. None of any significance. 

Senator MCCAIN. That does not inspire confidence in me. 

Mr. Werfel, do you have any comment on that? 

Mr. WERFEL. Only that I think it is—a couple of things. First of 

all, I think that the fact that there are ongoing investigations establishes a sense among the Recovery Act recipients that there are 

watchdogs and close scrutiny looking at the funds as they are going 

out the door. The tools that the Recovery Board has put in place, 

we have promoted them and had the agencies talking to their recipients about the nature of their activities and that they are being 

looked at in unprecedented and closer ways than have been done 

before by both the public and government watchdogs. And I think 

the overall metrics that we are seeing in terms of, as Mr. Devaney 

referenced, a much lower rate of error and problem than one would 

have anticipated for a program of this size is an indicator to us 

that the measures that we are taking, whether the investigation is 

ongoing or otherwise, are working effectively. 

Senator MCCAIN. So of the potential cases of fraud, those you 

were talking about, are those that have been referred to the corresponding Inspector Generals’ office, the Department of Justice 

(DOJ) or the appropriate State and local stimulus oversight authorities? 

Mr. DEVANEY. Yes, sir. 

Senator MCCAIN. And how many is that? 

Mr. DEVANEY. It is a little over 350. 

Senator MCCAIN. Have been referred to all of the above or some 

of the above or one of the above? 

Mr. DEVANEY. I would say all of the above. 

Senator MCCAIN. So you find a case of fraud and abuse, and you 

refer it to the IG’s office, the Department of Justice, and the appropriate State or local stimulus oversight authorities? 

Mr. DEVANEY. Exactly. 

Senator MCCAIN. And there are three hundred and—— 

Mr. DEVANEY. Fifty or so. 

Senator MCCAIN. How many of these have been dropped? 

Mr. DEVANEY. By dropped, do you mean declined for prosecution? 

Senator MCCAIN. Yes. 

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Mr. DEVANEY. I think there are over 100—not of those 350, but 

an additional 100 have been looked at and prosecution has been declined. 

Senator MCCAIN. And so far there has not been any case that 

has been brought to court? 

Mr. DEVANEY. There have been some in the Social Security 

arena, people getting small checks that have pled guilty to those 

kinds of crimes. It is only $250 per check, so I would not consider 

that a significant fraud. So the answer, I think, to your question 

is no, there have not been any significant plea agreements or convictions in what I would consider major fraud? 

Senator MCCAIN. And when would you expect some of these 

things to happen? 

Mr. DEVANEY. I would think we could expect to see some indictments in the near future, and I think that starts the process, and 

we go to court and we go to trial. 

Senator MCCAIN. ‘‘Near future’’ meaning? 

Mr. DEVANEY. Well, we are about 18 months into it, and the normal cyclical cycle for a criminal case is about 2 years, so within the 

next 6 months. 

Senator MCCAIN. Thank you very much. I thank the witnesses. 

Thank you, Mr. Chairman. 

Senator CARPER. Thank you, Senator McCain. 

On page 3 of your testimony, Mr. Devaney, you actually cite a 

number of examples that I think could be responsive to Senator 

McCain’s question. You cite four examples. Do you want to just 

mention those? 

Mr. DEVANEY. Sure, I would be glad to. In one case, a Federal 

agency has canceled a research grant after our staff discovered that 

the recipient had previously been debarred from receiving Federal 

funds. 

A $1 million award was revoked by a Federal agency after we 

discovered that the recipient was not eligible for the award under 

Federal guidelines. 

A Federal agency canceled a company’s contracts worth more 

than $7 million after our analysis showed that the recipient had 

been debarred. 

And another company with multiple awards of over $10 million 

was debarred from doing government business after we uncovered 

information showing the company was not eligible to receive contract awards. 

These are not exactly—these did not turn into a full-fledged 

criminal investigation, but are examples of what I talked about 

earlier in trying to intercept fraud at the front end to prevent it 

from happening in the first instance. 

Senator CARPER. Part of what we tried to do in the improper payments legislation that Senator McCain and I, Senator Collins and 

others, Senator Coburn, Senator McCaskill, had worked on is we 

said basically there are three things we wanted to be done with respect to improper payments: 

First, make sure all Federal agencies, including Medicare, all 

parts of Medicare, Medicaid, are reporting improper payments. 

Number one. Not just some. All across the government. 

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18 

The second piece is we want you to stop making them. We want 

to stop making them. 

The third part of it is we want you to go out and use private recovery contractors to go out and recover as much of the money that 

has been improperly paid, overpaid, as you can. 

We got the idea from the work that was begun, I want to say 

about 4 years ago, in Medicare. I think just initially in three 

States—California, Florida, and New York—we said let us use 

some recovery audit contractors and go out and recover money as 

best we can that has been really stolen, almost stolen from the 

Medicare trust funds. And then we added a couple of other States, 

I think a total of five, and then worked on it for about 3 years and 

recovered about $1 billion. We recovered about $1 billion. We spent 

the last year kind of standing down and doing a lessons learned 

from that experience, and we are starting to extend that recovery 

work to all 50 States. 

I have heard estimates for improper payments for Medicare and 

Medicaid combined on an annual basis, estimates that go up as 

high as $60 billion a year, maybe even more. But let us just say 

it is $50 billion a year. I think in our testimony today, maybe it 

was you, Mr. Werfel, who said we hope to capture at least $2 billion by 2012. As I understood it, you were saying from all Federal 

agencies, from all Federal programs. And I am encouraged that we 

are going to use this approach that Mr. Devaney has been leading 

along with the Vice President for the last year and a half. And $2 

billion is a lot of money, but if we are talking about just in Medicare and Medicaid as much as maybe $100 billion in 2 years in improper payments, a lot of it fraud, $2 billion captured governmentwide, Medicare and Medicaid and everything else, does not seem 

like a lot or certainly does not seem like enough. 

Mr. WERFEL. It is a good question, Senator. Let me start by saying when we established the $2 billion goal, there were essentially 

two places where we had the ability to recover improper payments 

using this concept of payment recapture audit where you are hiring 

a specialized auditor to go out and get the money and they are paid 

based on the amount of error they recover. The two places were 

Medicare and Federal contracting. 

So that left off the table Medicaid and all the other programs 

that make up the brunt of these $110 billion figures that we have 

been discussing, including food stamps and Social Security and all 

these other programs and, in particular, Medicaid. 

Since that time, with the passage of the Improper Payments 

Elimination and Recovery Act and the Affordable Care Act, our authorities to use these tools have expanded, and so we are relooking 

at our $2 billion goal in light of these new expanded authorities to 

see if we should be raising it and how significantly we should be 

raising it to set a new bar. 

When you look just at Federal contracting in Medicare, we looked 

at our experience over the last several years in terms of what we 

could achieve, and the $2 billion ends up being more than double 

the recoveries in that universe of Federal contracts and Medicare 

than we were able to recover, and for that reason we thought it 

was the right aggressive goal to set. 

H605-41331-79W7 with DISTILLER

19 

But I agree with you that given new authorities and the fact that 

we now have this ability for a broader set of programs, that is a 

goal worth revisiting. 

Senator CARPER. Good. As I understand it, during this last year 

we stood down the recovery audit contracting activities in these 

five States and did a lessons learned. One of the lessons we tried 

to learn is to hear from the private contractors that have been retained to ask them, ‘‘What have you learned that can inform the 

Federal Government, particularly Medicare, to enable us to stop 

making improper payments? ’’ And we have tried to spread that 

word. So the idea there is to benefit from the lessons learned from 

these private contractors. 

In the testimony we had, oh, gosh, a week or two ago here, the 

folks from CMS indicated that I think they said about 40 percent 

of the recommendations have actually been done, maybe close to 

half, but there is a bunch of them that have not been, and we 

asked for a timetable of when we are going to do the rest. And it 

is not clear when we are going to do the rest. 

Do you have any thoughts on that? 

Mr. WERFEL. By the rest, you mean Medicaid and other parts of 

Medicare? 

Senator CARPER. Yes. 

Mr. WERFEL. Well, the—— 

Senator CARPER. Let me say this: About roughly half—of the 

ideas of what we need to do to stop making these improper payments, about half of them, maybe half of them, have been acted on, 

but the rest have not. And I think the savings for those are potentially $300 million a year, and it could be year after year after 

year, so it turns into a lot of money. And the question I asked is— 

and this may not be something you are even aware of, but in terms 

of turning out attention to the other ideas from the contractors, 

making sure we use those ideas to stop making improper payments, what are we going to be doing about that? My hope is that 

OMB is going to be at least from afar riding herd on this. 

Mr. WERFEL. Absolutely, and, I think it is—when you look at the 

improper payments terrain and HHS is half the balance sheet, so 

it is very critical that OMB is applying the appropriate oversight 

and partnership with HHS going forward. I will reflect on a couple 

of observations just to respond to your question. 

Some of the lessons learned coming from HHS is that when they 

have run their pilots before, sometimes—and, God bless the contractors. They are trying to go out and get those recovered dollars. 

Sometimes you can almost go too aggressive and identify errors 

that are not really errors and end up with a lot of appeals and litigation and a lot of administrative activities that are not having 

value added to the process. And so, really, the challenge that HHS 

has—and I think what you are seeing is some tentativeness on 

some of the recommendations and then full steam ahead on some. 

The recommendations, where I think they are being more tentative is where they are concerned that going out and collecting errors before certain things are checked and due process elements 

are put in place and certain due diligence is done is going to create 

a lot of false positives. And so what they are trying to do is find 

the right equilibrium. And we learned a lot during that five-State 

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20 

pilot that you mentioned, and the numbers are probably somewhat 

inflated, only because a lot of those recoveries ended up being litigated, appealed, and created a lot of administrative activity that 

we want to try to avoid and some equity issues that we want to 

try to avoid. 

But from my standpoint, my guiding principle is to make sure 

that HHS is as aggressive on the spectrum as they can be without 

crossing into lines of inequity or administrative problem. I do not 

think they are there yet. I think we need to work with HHS to 

push them down that continuum into a more aggressive posture on 

their error reduction efforts in general, but in particular on payment recapture. And so I will be working with them on the remaining recommendations. 

I am excited by the fact that they have embraced the ones that 

they believe they can embrace because I think that will have an 

impact. To the extent they are not embracing, I think it is incumbent upon us to make sure that they are doing those reviews quickly and landing on a good place so they can move forward. 

Senator CARPER. All right. Thank you. 

Mr. Devaney, I understand that the Recovery Board and OMB 

worked closely on the ramp-up of Recovery.gov and the Board’s various activities. I often say right here in this hearing room, if it is 

not perfect, make it better; everything I do I know I can do better. 

I think that is true for all of us. But I know there are a number 

of challenges that the Board faced early in its mission. 

Let me just ask, in your view, what was maybe the most significant or perplexing problem that you faced as it relates to the Recovery Act? And how did you go about solving it? 

Mr. DEVANEY. I think as I mentioned in my testimony, Mr. 

Chairman, the biggest problem was time. We had time constraints 

that were, quite frankly, almost insurmountable. We had to build 

two separate websites in less than 6 months. I think it is fair to 

say that the government would normally take a couple years to do 

that. 

So we had to pull together a team of folks. The staff I pulled together were outstanding, from all parts of the government. We got 

the backing, the full backing of OMB in that endeavor, and we 

were able to do it. We probably did not do it the way the government usually does it, but that is probably what made it work. And 

we did a lot of things simultaneously, and we got it up and running 

and it worked. So it was the time constraints that we faced when 

we took over. 

Senator CARPER. OK. Let me just follow up with a related question. As I said earlier, the task that was set out for you was not 

an easy one, and in your testimony you talk a little bit about—I 

think you talk about extreme deadlines that you had to meet. As 

you just said, our government is not exactly known for the speed 

in which we operate. In fact, a lot of big entities are not. But how 

were you able to establish the Recovery Operations Center in such 

a short period of time and find specific cases of fraud and waste 

as quickly as you did? 

Mr. DEVANEY. Well, we are doing that simultaneously. We are 

building the two websites. We also have half of the staff is dedicated to accountability, so that portion of my staff was working to 

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pull together all of those special tools, and the recipient data had 

not come in yet until October, so we had a little time to plan that 

out a little, quite frankly, more than we had time to play in the 

two websites. 

So it took a lot of thought, and once again, we pulled folks together from different parts of the government, from different IGs. 

We brought in some folks with unique software, one of whom, at 

least, is going to testify later this afternoon, and pulled all that together probably just about the time the data started to roll in and 

we had our first look at it. 

Senator CARPER. OK. Mr. Werfel, in your testimony you say that 

the fraud and abuse of the Recovery Act funds has been much 

lower than a lot of people had anticipated. From your vantage 

point, what have been some of the Board’s secrets, if you will, to 

success in protecting those funds? And what sort of lessons has 

your office taken away from what you have seen at the Recovery 

Board and which might be extended to other parts of our government? 

Mr. WERFEL. Well, I would like to answer that, if I could, a little 

bit broader than the Board. I think the Board was a key part of 

it, but I have been asked this question a lot and given it a lot of 

thought, because I do often say I want to bottle some of the success 

that we have had. 

It might sound somewhat trite, but it really is not—the leadership involvement and emphasis is so critical. And from day one 

there has been such a strong message from the President and the 

Vice President regarding the scrutiny that they expected Federal 

agencies to place on watching these dollars, making sure they were 

being spent judiciously yet quickly and wisely, and that there was 

no poor judgment used in the type of projects or activities that 

would be funded. 

And this message did not come across just once. It came across 

repeatedly. And the Vice President has played an extremely active 

role, bringing the Cabinet together and senior recovery officials, 

often calling Governors on a rolling basis and, pounding the table 

if he needs to regarding the importance of making sure that every 

dollar is watched and that there is a tremendous amount of what 

I call healthy stress or healthy pressure placed on the system to 

watch every single dollar that is going out the door and making 

sure that it is spent wisely. 

And this type of scrutiny and attention and engagement has really established an accountability structure where if dollars go out in 

error or for poorly defined or thought of projects, there is a strong 

sense that this is unacceptable throughout government. 

I think the Board’s presence has been critical to these efforts because, in any activity that you undertake where you are looking at 

these payments and these activities through a close eye, the Inspector General is always standing there on the side making sure 

that eye is keen and that it is diligent and that it is taken seriously 

and that it is thorough. And here what you have is a very interesting development, and that is, the IGs coming together across 

government in a common purpose for a common program and talking amongst each other and sharing practices and approaches and 

evaluating agencies together around these activities. And I think 

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the entire government has advanced because of it, because of the 

lack of silos and the cross-cutting nature by which the Vice President drives and his cross-cutting meetings about doing things better, where it is not, the low-level employee talking about what they 

are doing; it is the Secretary or the Deputy Secretary talking about 

how seriously they are taking these activities. And the Inspector 

General community is there in unison as well looking across programs. 

This is certainly, I think, a best practice and an exciting development that we need to leverage going forward. 

Senator CARPER. Good. Thank you. 

Mr. Werfel, is it true that Mr. Devaney is the supervisor of the 

Vice President? Is that the way it works? [Laughter.] 

Mr. WERFEL. I will say if Mr. Devaney is coming by for a meeting, we take that very seriously, and we want to make sure that 

we are ready, because Mr. Devaney asks tough questions, as he 

should, but they are always fair. And I think one of the best practices coming out of this is the partnership that OMB in particular, 

the Vice President’s office, and the Recovery Board have forged 

here. Mr. Devaney mentioned tight deadlines and an overwhelming 

challenge that we had on our hands that was delivered to us, and 

the challenge was the right challenge, and we took it on together. 

But we would not have been successful, I do not think, if we did 

not immediately find a way to bring both of our comparative advantages to the table. And Mr. Devaney and I would sit down and 

talk to each other. At the beginning I remember there were all 

these questions: What is your role, what is my role in terms of 

OMB and the Recovery Board? And ultimately I think we made the 

decision that our roles should be who can do the best work in the 

quickest time and where your expertise comes to bear. 

And so we tried at OMB to throw our expertise on the table in 

certain areas. The Recovery Board did the same, and the results 

were we met our deadlines, and I think we met them pretty effectively. 

Senator CARPER. Good. Thanks. 

I do not know which one of you mentioned this, but one of you 

mentioned earlier in this back-and-forth a Do Not Pay List. I am 

not sure who did. But I want to go back to that for a moment. I 

think it was maybe last month that the President issued a memorandum issuing the establishment of a single Do Not Pay List. I 

suspect that a lot of Americans might be surprised that there was 

not already a single list of people or companies that the government should not be sending money to. 

We have all heard the stories of deceased people receiving checks 

or debarred contractors continuing to receive new business from 

the Federal Government. I am just wondering if one or both of you 

could just shine a little more light on what the system looked like 

say before this announcement of a month ago and what the new 

Do Not Pay List means for our taxpayers. 

Mr. WERFEL. Well, this is kind of an OMB-generated initiative, 

so I will take the lead on it. 

Senator CARPER. OK. 

Mr. WERFEL. It was inspired by some of the Recovery Act activities. In particular, I will start by saying, when we look at improper 

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payments and the $110 billion, there is certainly a spectrum of how 

challenging or less challenging it is to get out in front of these payments and deal with them. On the more challenging end of the 

spectrum, you might find a Medicare reimbursement which, after 

evaluation and audit, looks like it was not a necessary medical procedure, and knowing that up front can be extremely difficult. And 

so that is the type of error that I would put at the more difficult 

end of the spectrum. 

But more at the less difficult, certainly less difficult end of the 

spectrum is when the government makes payments to individuals 

or entities where we have clear information sitting in either a public or a government database that we know would nullify that payment, whether the individual is deceased or on the Excluded Parties List or owes an outstanding tax or other form of debt to the 

government. 

And, unfortunately, we continue to make both kinds of errors, 

and Mr. Devaney testified earlier that there were instances in the 

Recovery Act where individuals or entities on the Excluded Parties 

List, which is right there on GSA’s website for the whole world to 

see, were continuing to get payments. I think the Do Not Pay List 

is recognizing that we have to at a minimum, if we are going to 

be successful in improper payments, get rid of all the improper 

payments that exist at this less challenging end of the spectrum. 

So what we have today, and before the Do Not Pay List was 

issued, is a set of disparate databases held by different agencies. 

GSA maintains the Excluded Parties List. Social Security maintains the Death File. Treasury maintains our debt files on who 

owes outstanding or delinquent debts. And when we started talking 

to agencies about this problem of not being able to get at the basic 

errors that we should be able to get at, one of the things we 

learned was that there were challenges, administrative challenges 

that they were facing in terms of accessing these databases and 

building that into their prepayment processes in a more seamless 

way, in a way that, when this Excluded Parties List is refreshed, 

I am automatically in tune with that refreshed list, or that I have 

the right technology set-up between myself and the Social Security 

administration to do that bump-up with the data. And we also 

learned that the agencies were not being as thorough as they needed to be in their prepayment processes to make sure that these 

data sets were being checked. 

So as a result of the Do Not Pay List, what we are charged with 

doing and what we have already started is bringing these data sets 

together for the single entry point. So if I am an agency, no longer 

do I have to establish multiple agreements and data-sharing arrangements and technology interfaces with agencies. I just have to 

do it once. And through that one interface, I can start to see what 

the spectrum of potential ineligibility factors are raising. 

We have started the process already at GSA. They have started 

to bring this data together on contractors where we now have in 

one place, for example, information on whether a contract has been 

excluded, a contractor has been excluded, or whether they owe a 

debt. So just picture the kind of coming together in various pieces 

as we go over time to bring these data sets in to—we could not do 

it overnight, but I am happy to report that we have already started 

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the process. And in the coming months, our goal is to continuously 

add to this unified data structure and have agencies more and 

more tap into it. So that is how the world will be changing. 

Senator CARPER. Good. Before I excuse you from the testimony, 

do either of you have something you would like to add in conclusion, just a concluding thought, something—and taking in mind 

one of the questions I often ask is—we are forever asking more of 

you, and one of the questions I ask is what can we do to be of further support and help. 

Mr. Werfel and I have had this conversation before, but one of 

the responsibilities of this Subcommittee and this Subcommittee is 

to kind of look throughout Federal Government and try to figure 

out how we can save money and how we can spend money more 

effectively, more cost-effectively. And from time to time we get actually very good feedback, helpful feedback, but our job is in part 

to do oversight, the good oversight, constructive oversight; on the 

one hand, when agencies are misbehaving, to put a spotlight on 

that; on the other hand, when an agency is doing a particularly 

good job, as we have an example here today, to put a spotlight on 

that as well, try to reinforce and reward the good behavior. 

We learned earlier in my tenure here in the Senate that if it is 

just this Committee or just this Subcommittee that is trying to do 

this, we are not going to get very far. If we can somehow partner 

with OMB, if we can somehow partner with the Government Accountability Office, if we can somehow partner with all the Inspector Generals, and, frankly, outside of government there are a number of entities that are interested in eliminating waste and abuse— 

if we could somehow partner with all of those, we might actually 

get something done here. And my sense is that we are starting to 

partner pretty well together, and I think we are on the verge of 

getting a whole lot done in terms of stopping, for example, improper payments and beginning to recover significant amounts of 

money. 

But just a concluding thought about what maybe we can be doing 

more of or less of that would be supportive to you in your efforts. 

Mr. Devaney, I will go to you first, and then I will ask Mr. Werfel, 

if you will, to conclude. Thank you. 

Mr. DEVANEY. Well, Mr. Chairman, I think as has been said earlier today, I think the specter of all of those folks getting together 

and finally working together is a first in my career. 

Senator CARPER. Is that right? 

Mr. DEVANEY. I think so. I think there have been examples in 

the past perhaps of—— 

Senator CARPER. How long is your career? 

Mr. DEVANEY. About 40 years. 

Senator CARPER. That is a long time. 

Mr. DEVANEY. It is a long time. So as Mr. Werfel testified, we 

could not have done this if we had decided to fight those old parochial battles that we inevitably get into sometimes in government. 

So that all went away because I think we were all faced with the 

same problem set in trying to do this under the constraint of the 

time. And I think we now all see the value of getting together and 

working harmoniously. It is very apparent in this effort. 

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And so I think that—I hope it will live on long after I am gone 

or, for that matter, the Recovery Board sunsets in 2013. My hope 

is that what we have started here will serve as a platform or a 

template for the future, and that others will come along later and 

make it better, with your help. 

Senator CARPER. All right. Thank you. 

Mr. Werfel, a closing thought? 

Mr. WERFEL. Yes, a couple. 

First of all, I want to thank you for your leadership and this Subcommittee’s leadership in this area. It is very important for us to 

be able to—when we are talking with members of the community 

and stakeholders about this effort and try to drive momentum and 

accountability and energy and passion, that we can point to activities and hearings and Senate statements, in particular your message on the Senate floor where you thanked OMB for our efforts 

was extremely energizing. 

Senator CARPER. We do not hear that every day, do we? 

Mr. WERFEL. No, we do not. And it is extremely energizing not 

just for me and my small staff sitting behind me, but the whole of 

OMB was made aware of your statement, and it was a good moment for us that our efforts were recognized. 

But your continuing championing this issue is helpful for me, I 

think for my boss, Jeff Zients, and our incoming Director-to-be, 

Jack Lew, to be able to champion it as well and have this kind of 

combined legislative and Executive Branch voice around this challenge. So on that, I think more of the same is appreciated. 

I do want to re-highlight something I said earlier because, I say 

it and it sounds impressive—and it is, and I do not know that it 

gets much attention. But the President’s budget in 2011 contains 

a series of program integrity provisions, both discretionary and 

mandatory, that all totaled would save $150 billion over 10 years 

if enacted. That is the way our budget experts score these important provisions. And I think that is an important reminder that, 

our legislative work in this area is probably never done, and this 

is a challenge that is going to elude us unless we stay ahead of it. 

One of the things I am excited about, in addition to my hope that 

the President’s budget proposals are looked at and acted upon, is 

the new IPERA legislation sets up an important structure, I think, 

where if programs are noncompliant or are falling behind, that we 

are required to come up with legislative proposals to make sure 

that they are not falling behind any more. If that is a vibrant and 

active terrain for us, working with you, I think we are going to stay 

ahead of this problem over time. And so that is another area I look 

forward to working with you on. 

Senator CARPER. Good enough. 

Going back to the President’s proposals in the 2011 budget that 

would actually, in the view of the Administration and maybe the 

Congressional Budget Office (CBO), save as much as $150 billion 

over 10 years, we are looking for—in the Legislative Branch, we 

are always looking for pay-fors, the way to pay for program expansion in some cases, the way to provide offsets to either tax cuts or 

spending increases. We are always looking for that stuff, even 

today. 

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You may be well advised to have your folks just come back to our 

Committee staff, our Subcommittee staff and say, ‘‘By the way, as 

you look for those pay-fors, remember in our budget we had all 

these different ideas that add up to $150 billion, because especially 

right now we could use some of them.’’ 

The last question I ask is tongue in cheek, but you mentioned 

your small staff, and I know they are not all here, but I think they 

would fit easily into this room, if I am not mistaken. But I noticed 

as you spoke and testified, Mr. Werfel, that there is a young man 

sitting directly behind you in the front row. And as I watch carefully, I see his lips move when you speak, and he looks very familiar. What is his name? Do you recall what his name is? 

Mr. WERFEL. He has a nickname. We call him the Pika guy at 

OMB. 

Senator CARPER. The Pika guy. 

Mr. WERFEL. But his name is Joe Pika. 

Senator CARPER. I wonder where he is from. 

Mr. WERFEL. I do not know. Joe, where are you from? 

Mr. PIKA. Delaware. 

Senator CARPER. Delaware. 

Mr. WERFEL. And he knows that he is under oath when he says 

anything in the Senate chamber. He is truly from Delaware. 

Senator CARPER. He was once a member of—as a young man, he 

was a member of our staff, and I think maybe even an intern at 

one point in time, and later became a member of our staff. His father was someone I had the privilege as Governor to nominate to 

serve on the Delaware State Board of Education. He is a legendary 

professor at the University of Delaware, and the apple in this case 

did not fall far from the tree. I heard recently from another senior 

member of my staff that Joe Pika’s Dad, also known as Dr. Joseph 

Pika, has had some kind of health impediment impairing his 

speech, as I recall. And I would just ask if that is indeed the case, 

convey our best to your Dad, Joe, and say we hope he is well on 

his way to a complete recovery, and when I come across him again 

in Delaware that he will be at full voice once again. 

Our thanks to both of you for joining us today. Thank you for 

your good work, and we look forward to continuing to partner with 

you. Mr. Devaney, I will convey to the Vice President when I see 

him that he is earning high marks for his good work, too. All right. 

Thanks very much. 

I would ask our second panel to go ahead and come to the front 

of the room. Welcome. It is nice to see some of you again and to 

be able to welcome others before this panel for the first time. I am 

going to go ahead and introduce our witnesses starting with Dr. 

Karp. I will just telegraph this one ahead. The question is: What 

happened to the last two letters of your name? 

Dr. KARP. I think it was Ellis Island. 

Senator CARPER. OK, fair enough. I always wondered that when 

I saw that name. We are glad that you are here, abbreviated name 

or not. Just a real quick introduction, if I could. 

Dr. Alex Karp, Co-founder and Chief Executive Officer (CEO), 

Palantir Technologies. Palantir Technologies develops tools to assist groups in analyzing and integrating and visualizing various 

types of data. I understand that Dr. Karp earned his law degree 

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1The prepared statement of Dr. Karp appears in the Appendix on page 58. 

from Stanford University, his Ph.D. from the University of Frankfurt in Germany, and he is fluent in English, in German, and 

maybe even in French. Which language will you be testifying in 

today? 

Dr. KARP. In a pidgin version of English that will be hard to understand. 

Senator CARPER. We will do our best. We will do our best. Thank 

you for joining us today. I used to live in Palo Alto and Menlo Park 

when I was a naval flight officer, Moffett Field, and spent a little 

bit of time at Stanford. It is a great part of the world. Great part 

of the world. A lot of good, smart people come out of there. 

Our next witness is Dr. Robert McEwen. Mr. McEwen, welcome. 

Mr. McEwen is the CEO and chairman of U.S. Gold Corporation, 

among other companies. In March 2000, Mr. McEwen, I understand that you launched the Goldcorp Challenge, a Web-based context which successfully used what is called incentivized crowd 

sourcing to renew an underperforming gold mine. We have read 

about that with a fair amount of interest and want to see what we 

have to learn here in the Federal Government from some of what 

you all were doing back then and in the years since. 

Our final witness is Dr. Riley Crane, the senior post doctoral fellow in the Human Dynamics Group at the Massachusetts Institute 

of Technology (MIT). Dr. Crane’s research focuses on understanding the hidden patterns behind collective behavior on social 

media networks such as YouTube. In addition to his scientific 

work, Dr. Crane consults for business and government and has 

built virtual media campaigns for the United Nations, among others. We thank you for joining us today. One of our two sons spent 

some time—4 years—on your campus and just wrapped up his undergraduate work there. We have a huge amount of respect for the 

work that you all do at MIT on a whole wide range of fronts. So 

thank you. 

Dr. Karp, please proceed. Again, thank you for joining us today. 

TESTIMONY OF ALEXANDER KARP,1 PH.D., CO–FOUNDER AND 

CHIEF EXECUTIVE OFFICER, PALANTIR TECHNOLOGIES 

Dr. KARP. I would like to thank you, the Chairman, for hosting 

this hearing and commend you on the outstanding work you have 

done in this field, and also the Ranking Member McCain and the 

Subcommittee in general for inviting us. Likewise, obviously, thank 

Chairman Devaney whose leadership made the Recovery Board 

possible and many of the successes that have been already discussed. 

By way of introduction, we are a Silicon Valley company, essentially specialized in perhaps the least glamorous aspect of finding 

fraud, which is getting the data to the analysts so that they can 

find fraud in real time. 

A couple words about our company. We self-finance our company 

based on a methodology, developed by PayPal that reduced fraud 

by 90, in some cases 98 percent, wanted to turn that methodology 

into an off-the-shelf, fully deployable, and extensible software platform. We did this and brought it to the government market and to 

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large institutions with a hope of making data integration something that can take thousands of hours and often unsuccessful into 

something that can be done in real time. And currently we employ 

300 people, 80 percent of whom are engineers—we do not deploy 

a sales force. We essentially work in one environment to the next. 

We are honored to be invited to take part in extending Chairman 

Devaney’s mission of reducing fraud, waste, and abuse, which was 

an extension of the work that you have done, Mr. Chairman. And 

our piece basically involves detection and prevention. We allow analysts to perceive latent patterns hidden in large data stores across 

different siloed environments so that fraud becomes apparent to 

the non-technical analyst, something which is very difficult to do 

and which costs a lot of money usually in the commercial and in 

private sector. And by doing that and uncovering these latent patterns, which is very similar to what we have done across government and at PayPal, we are able to empower analysts to find a 

highly adaptive adversary. As was mentioned in the previous testimony and by you, one of the challenges is not just finding a static 

adversary but finding someone who obviously is a professional in 

many cases in attempting to adapt their behavior based on what 

they think the latest methodology is. 

When successful, this not only cuts fraud and detects fraud, as 

in the case of the Recovery Board, but it also provides a preventative methodology so that fraudsters prevent or are not eager to engage in the kind of fraud that they have been engaged in. 

The second part that we have been involved in, also under the 

leadership of the Recovery Board, is extending this so that once the 

fraud is detected, that it can be prevented going forward, as essentially a second piece. So, obviously, finding fraud and preventing 

fraud at the early part of the spectrum, as both of your guests mentioned, is crucial. But then preventing those fraudsters from reappearing under other names, which is a common practice, or using 

latent networks which obfuscate their identity or the kind of behavior they are doing is crucial to reducing fraud, waste, and abuse 

across government. 

We are delighted that this approach is being extended into other 

parts of government and humbled to be a part of this. We see our 

part of it as basically being one technology among many, providing 

an open architecture so that other technology and other expertises 

can be integrated, which is pretty important, in our view; but really doing the kind of heavy engineering lifting under the leadership 

of technical experts. We are not the investigators. We are the people that provide an extensible platform so the investigators can do 

their work across large data stores and without being engineers. 

We are delighted that this came about. 

One thing that should be noted before I close, the idea of using 

technology which has been broadly deployed in commercial space 

and in other parts of government in the context of fraud, waste, 

and abuse took essentially an entrepreneurial mind in the form of 

Chairman Devaney. It was not—usually people do not take the 

leap of using one form of technology that has been successful for 

finding latent networks and providing civil liberties protections. At 

the same time in another context, it was the leadership of the Recovery Board which really led to deploying our technology, which 

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

is quite well known in law enforcement, the civil liberties area, security-level collaboration, and in counterterror and cyber work, 

again pernicious fraud and finding latent networks there, while, of 

course, maintain civil liberties norms. 

So thank you again for having us, and thank you to Chairman 

Devaney and the Chairman especially. Delighted to be here. 

Senator CARPER. Thanks so much, Dr. Karp. Mr. McEwen. 

TESTIMONY OF ROBERT R. MCEWEN,1 CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, U.S. GOLDCORP INC. 

Mr. MCEWEN. Chairman Carper, Ranking Member McCain, distinguished Members of the Subcommittee, thank you for the opportunity of testifying today concerning innovative technologies and 

approaches to solving problems and making the government run 

more effectively. 

I have been asked to share with you a story of innovation that 

I believe has vast application and benefit to the government. 

In 2000, my company, Goldcorp, made a $1 million investment 

in website development, database assembly, and cash prizes. The 

result was stunning. We reaped the benefit in excess of $3 billion 

in new found gold. My business is gold mining, definitely not an 

area that you would look to for inspiration for innovation However, 

what we did astounded both the mining and the high-tech community. It was one of the first examples of incentivized crowd sourcing 

used to solve problems. The successful utilization of the Web was 

well documented in such best-selling business books as 

‘‘Wikinomics,’’ ‘‘The World Is Flat,’’ ‘‘Mavericks at Work.’’ 

When we put the Goldcorp Challenge up on the Web, we ‘‘broke 

the mold’’. We defied industry standards by sharing proprietary 

data about our orebody that everyone knew was never shared without confidentiality agreements. We provided free, comprehensive, 

and unrestricted access to an extremely valuable database about 

the most exciting gold discovery of the decade. In effect, we started 

a worldwide brainstorming session via the Internet where we offered half a million dollars in prize money to exploration experts 

to help us find the next 6 million ounces of gold at our mine. And 

this was a mine that had already been going for 50 years. 

Our strategy was to make available to anyone anywhere in the 

world an extremely valuable, proprietary geological database via 

the Internet as well as software that allowed one to analyze and 

depict this data graphically in two and three dimensions, plus an 

economic incentive to have the participants share their geological 

insights. 

The response was immediate and remarkable. Within a week we 

had 120,000 hits on our website. The mining industry on every continent knew about the company. And within 4 months there were 

a quarter million hits, and more than 1,300 individuals, corporations, domestic and foreign, governmental, geological agencies, and 

universities representing 50 countries had registered for the Challenge. 

In addition, the rest of the Web was looking at Goldcorp and concluding it was not your typical mining company, and they were 

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right. The Challenge served as a powerful catalyst to improve the 

careers and financial independence of our employees and propelled 

Goldcorp’s future growth. The Challenge provided much more than 

an immense exploration success. It changed the attitude of our employees. They became proud of their work and their company. They 

became more confident and comfortable with accepting change and 

new technologies. They became eager to share and test their ideas 

about how to innovate and improve the way we worked. 

Given the time constraints to my oral testimony, I have attached 

an appendix to my written version, and it outlines how we came 

to develop the Challenge, and I would recommend it for your review. 

So how might the concept of crowd sourcing have a positive impact on government efforts to become a more effective, more efficient provider of services to all Americans? I would like you to consider these thoughts. 

First, there is a vast pool of experience, knowledge, and insights 

within the ranks of the government. This pool could and should be 

engaged in brainstorming to define questions to be asked to provide 

alternatives for improvements to current practices. 

Two, initiate brainstorming on a departmental or interdepartmental level. Too often all of us get very close to an issue to see 

it objectively and are thus unable to see the alternatives. By introducing another perspective, a new problem statement may be formulated that can generate surprising and effective alternatives. 

Three, look to bring in individuals from the outside into a department, into the government and importantly give them the authority to introduce unconventional change. 

Four, look for the unquestioned underlying assumptions in your 

department, in the government. These are the ones that most people never question, because they are so fundamental. Once identified, question and challenge these assumptions. 

Remember, nobody is as smart as everybody, and that you need 

to share knowledge freely to gain their insights and answers. 

The incentives for crowd-sourcing projects can be much more 

than cash. The range of prizes available to you are limitless because people engaged in problem solving have a wide range of 

needs and motivations. In our Challenge, individuals participated 

for a variety of reasons: Intellectual curiosity, access to otherwise 

unobtainable data, peer recognition, an opportunity to profile and 

market their services, and more. 

I believe to achieve major change in an organization, one must 

be, first, unconventional, change the rules, and I emphasize keep 

selling the opposition on the benefits to them on a personal basis. 

An area of opportunity for innovation by the government. The 

government is good at making laws, rules, regulations. The Securities and Exchange Commission (SEC) was created to protect investors. It has more rules today than when it was established in 1933, 

but the losses suffered by investors recently have been enormous. 

Consider this thought: Does the creation of additional laws create 

more or less opportunity for criminals? 

One last observation. The biggest gold mine in the world exists 

between everyone’s ears. So tap into the minds of your fellow 

Americans and the citizens of the world to achieve your CommitH605-41331-79W7 with DISTILLER

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1The prepared statement of Dr. Crane appears in the Appendix on page 69. 

tee’s objectives. I applaud your quest to innovate. I thank you for 

your invitation to testify today, and I would be pleased and honored to answer any questions from the Members of the Subcommittee. 

Senator CARPER. Good. Thank you. When I read your testimony, 

a couple things jumped off the page at me. One of them was your 

comment, ‘‘Nobody is as smart as everybody.’’ I thought that was 

terrific. And I thought, Is that original? Is that something that—— 

Mr. MCEWEN. Someone else scribed those words. 

Senator CARPER. All right. And the other one was the one you 

just used. You said the biggest gold mine in the world is between 

our ears. 

Mr. MCEWEN. That is mine. 

Senator CARPER. Good stuff. All right. You might have a future 

around here writing our material. You never know. Thank you. 

Mr. MCEWEN. You are welcome. 

Senator CARPER. We will borrow from it, but always try to give 

you credit, or somebody. 

Riley Crane, how long have you been at MIT? 

Dr. CRANE. Almost a year. 

Senator CARPER. What did you do before that? 

Dr. CRANE. I was a post doc in Switzerland at ETH, and then 

before that I did my Ph.D. at the University of California, Los Angeles (UCLA). 

Senator CARPER. OK. Boy, you have been getting around. Welcome. Please proceed. 

TESTIMONY OF RILEY CRANE,1 PH.D., HUMAN DYNAMICS 

GROUP, MEDIA LAB, MASSACHUSETTS INSTITUTE OF TECHNOLOGY 

Dr. CRANE. Mr. Chairman and Members of the Subcommittee, 

thank you for this opportunity to testify before you today. My name 

is Riley Crane, and I am post doc at MIT in the Human Dynamics 

Group at the Media Lab. In December 2009, I led the team from 

MIT that won the DARPA Network Challenge using crowd 

sourcing, social networking, and social media to mobilize thousands 

of individuals around the world in under 9 hours. I would like to 

share with you this story in the hope that we can take away some 

of the insights that might be applied to government. 

On December 5, 2009, the Defense Advanced Research Projects 

Agency (DARPA), unveiled 10 moored, red weather balloons at undisclosed locations around the continental U.S. and offered $40,000 

to the first person to correctly locate all of the coordinates of these 

balloons. DARPA is the agency credited with the creation of the 

Internet, and this Challenge, considered to be impossible to solve 

by those within the intelligence community, was designed to celebrate the 40th anniversary of the creation of the Internet. 

Over these 40 years, we have seen incredible advances both in 

the Internet linking together all the world’s computers, followed by 

the Web, which now links together all of the world’s publicly available documents. But recently there has been a transformation driven by the convergence of new networked and mobile and social 

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technologies that is for the first time allowing us to bridge the gap 

between online and real worlds and create virtual connections between people, places, and things. 

Many wonder whether this new social and global infrastructure 

can be used to solve important challenges, and so it was DARPA 

that wanted to challenge and to test this question to explore the 

role that crowd sourcing, social networking, and social media play 

in timely communication, wide-area team building, and urgent mobilization required to solve a broad range of problems. 

To tackle this challenge, our team built a platform that used incentives, referrals, and social media to effectively construct a network of human sensors throughout the world. Our platform was designed to track the chain of referrals as individuals signed up and 

spread the information through their social network in order to account for who was responsible for recruiting whom. 

In addition, we created an incentive system that divided the 

$40,000 equally over the 10 balloons. In this way, for example, Mr. 

Chairman, if you signed up and found a balloon, we would give you 

$2,000 and give the remaining $2,000 to charity. If instead you had 

signed up and referred Mr. McCain, and if he found the balloon, 

we would have given him the $2,000, we would have given you 

$1,000 for referring him, and given the remaining $1,000 to charity. 

Senator CARPER. So I would still get more money than Senator 

McCain. 

Dr. CRANE. No, It always starts with who found the actual balloon, and then it goes backwards, halving at each level. So you can 

have these chains as long as you would like. 

In total, over 4,000 teams competed, many of which were very 

well organized. Using our strategy, the MIT Red Balloon Challenge 

Team found all 10 balloons in 8 hours and 52 minutes. One of the 

most—— 

Senator CARPER. Did you say this was an assignment or an undertaking that was deemed to be impossible by the intelligence 

community? Did you say that? 

Dr. CRANE. Yes. And it took us 8 hours and 52 minutes. And 

there were estimates all over the place. Some people thought it 

would be finished in minutes, and some people thought it was 

never be finished. 

Senator CARPER. So the intelligence community said we cannot 

do this or this cannot be done. You did it in less than 9 hours? 

Dr. CRANE. The intelligence community said it could not be done 

using traditional techniques. 

Senator CARPER. OK. 

Dr. CRANE. One of the more interesting facts of the story is that 

I had only heard about the Challenge 4 days before the competition 

began. In 2 days, we built a platform and in just 36 hours recruited 

nearly 5,000 participants. According to the official results released 

by DARPA our approach found four balloons before any other team, 

and of the 10 individuals that were the first to report to us the locations, we recruited half of them before the competition began. So 

this I think illustrates the power of social media to rapidly spread 

information. 

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One of the questions we often receive is ‘‘What did we do differently from these other teams that were more well organized? ’’ 

While some teams spent months preparing, organizing, and designing systems to solve the problem, our approach, which was conceived of, built, and executed in 4 days, relied on continuous feedback from the spontaneous network and evolved throughout the 

Challenge. And rather than coming up with the best solution, we 

built a platform that leveraged the problem-solving capabilities of 

the participants. This platform encouraged individuals to innovate 

and to spread the message to their own audience in the most contextually relevant way, whether this was ‘‘help science’’, ‘‘help charity’’, ‘‘win money’’, or something else. 

Our system provided a solution that aligned the goals of each 

participant acting in their own self-interest with the broader goals 

of our organization. And really at the end of the day, we built the 

infrastructure that allowed others, even some of our competitors, to 

solve the problem for us. 

In the interest of time, I am going to skip over some of the examples I had prepared. While I think that our example nicely encapsulates some of the disruptive innovation that is being driven by 

the democratization of technology and its convergence with many 

other factors that are changing the way that we communicate, collaborate, and coordinate, there are many other examples of crowd 

sourcing that I would like to focus on one in particular that I believe addresses the Subcommittee’s concerns here today. 

Last year, the Guardian, a British newspaper, created a crowdsourcing platform that digitized the expense reports for Members 

of Parliament and encouraged citizens to investigate and to bring 

attention to the charges that they believed required further investigation. Looking at the site last week, the program had resulted 

in the review of over 200,000 pages of documents by more than 

27,000 people and had brought to light many examples of extravagant spending. 

There have been many other great examples of new platforms 

that have enabled government to more effectively mobilize citizens. 

Another great one happened in the aftermath of the Haitian earthquake in which the U.S. State Department teamed up with great 

organizations like Ushahidi and Open Street Maps. One of the sort 

of success stories of this was highlight by Secretary Clinton when 

she emphasized the plight of a little girl who was ‘‘pulled from the 

rubble in Port-au-Prince. She was alive. She was reunited with her 

family, and she will have the chance to grow up because these networks took a voice that was buried and spread it to the world.’’ 

I think the lessons that can be applied from these examples to 

government is that in each of the cases that I have mentioned, the 

organizations created a platform that enabled citizens acting in 

their own interests to solve problems. And my recommendation to 

the Subcommittee is that government should embrace the ideas espoused by Tim O’Reilly and others around government 2.0, which 

is a sort of catch-all term that means everything and nothing, but 

whose emphasis is that government should become a platform that 

provides the foundation for citizens to solve the problems that they 

care about most. 

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Thank you very much for your time, and I look forward to answering your questions. 

Senator CARPER. You bet. Thanks so much, Dr. Crane, for your 

testimony. 

This Subcommittee has fairly broad jurisdiction across a lot of 

different parts of our Federal Government. In fact, our full Committee is called Homeland Security and Governmental Affairs. It 

used to be just Governmental Affairs, but it has very wide jurisdiction to drill down to examine what is going on in different agencies 

of our Federal Government. 

One of the entities over which the Subcommittee has jurisdiction 

is the Census Bureau, and another one is the Postal Service. And 

I want to ask you to focus with me, if you will for a little bit, on 

the Census Bureau, the Bureau of the Census. We are just completing our decennial census. We do it every 10 years. We do a 

number of intermediate censuses almost on an annual basis, but 

we try to count everybody every 10 years. We are just about wrapping that up. 

Part of the census involves figuring out what are all the residences where people could live in this country from coast to coast, 

from north to south; and then once we have done that, to figure 

out who lives in those places. And as time goes by, it gets actually 

harder to count them all, count all the places where people can 

live, all the places here folks are living, and then actually get people to respond to the census. We had really troubling reports this 

year of the enumerators, the people actually going out and doing 

the counting, being harassed just trying to do their job, in some 

cases chased off, chased, and berated and worse. 

The cost of the census is measured in billions and billions of dollars, and it is going up. In fact, the census this year cost way more 

than the census just 10 years ago. I think we counted about 75 percent of the people. We got about 75 percent of the people to respond 

to the mailings that we sent out. 

Here is my question: I think it is for every extra percentage of 

people who responds to the mailings that go out in the census, asking people to respond from where they live, I think it saves the— 

reduces expenditures by—I do not know, $80, $90, $100 million. So 

if we go from 70 percent response to an 80 percent response, we 

save roughly 10 times, we will say, ‘‘ $80 million, which would be 

like $800 million. A lot of money.’’ 

Here is my question. I do not know if you can see where I am 

going with this. But is there anything that you all have been doing, 

in particular, Dr. Crane and Mr. McEwen, and certainly Dr. Karp, 

anything that you all have been doing that you think might be applicable for our work on the census? One of the things that I was 

troubled by, Dr. Coburn, who sat here where Senator McCain sat 

for many years, and also right here as either the Chair or the 

Ranking Member of this Subcommittee, he and I were very unhappy that, again this year, the Census Bureau did not make very 

extensive use of technology, at least not the kind we had hoped for, 

using the Internet like some other countries do to actually reach 

out to people and help count them. 

But I would be interested if you think some of what you have 

done might be applicable to help us to do a better job counting peoH605-41331-79W7 with DISTILLER

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ple and do a more effective job counting people. I do not care who 

goes first. 

Dr. CRANE. I have a sort of very quick answer, which is that 

while there are many implications or privacy implications that 

would have to be thought out very carefully, I think most Americans carry a phone. And there have been recent mobility studies 

showing that people are quite predictable, that if you think about 

where you go throughout your day, you spend most of your time 

going between home and work with maybe a few deviations to go 

to the market or other outings. 

I think there is the possibility to use phones as sensors to detect, 

at least to get a broad-scale scope, sort of count of the number of 

people in the country, although this data is typically owned by the 

cellular phone carriers, and they are quite rightfully protective of 

that data. 

Senator CARPER. All right. Thank you. 

Mr. McEwen, think outside the box for us for a little bit. Do a 

little bit of blue skying for me? 

Mr. MCEWEN. You may want to offer an incentive for the people 

to give that information. Right now it is viewed as an intrusion. 

Given the fact that his information is very important to the country, and that the higher the response rate, the bigger the savings, 

for the government. To encourage participation consider sharing 

some of the potential savings in some way, with the respondents. 

Possible areas to discount are on State tax, income tax, municipal 

tax, tuition or Medicare, etc. 

I found in our Challenge there was all sorts of opposition 

amongst our management team. To overcome it, I had to first understand the basis of their opposition and then show them the potential for personal benefit. Once they saw the benefit, then they 

embraced the concept. 

Senator CARPER. Good. Right here in this hearing room we had 

the folks from the Bureau of the Census before us a year or two 

ago, and we were trying to get them to think outside the box to 

see how they could use technology, whether it was too late to use 

the Internet or cell phones or whatever. And I suggested to the fellow who—I think it was either the Acting Director of the Bureau 

of the Census or about to become the Director. And I said to him 

maybe we should consider like offering a reward to people who participate in the census, but for those who did maybe their name 

would be entered into something to make them eligible for the lottery, a lottery, and then so many people from every State would 

have the chance of participating in some prize money. I did not 

know at the time if it was a good idea or a bad idea. I just wanted 

to think outside the box. And they were crazy about the idea, but 

did not do a whole lot of thinking outside the box. 

I want to make sure—if I will be around here in this chair 10 

years from now when we do the census again, but I want to make 

sure that the way we do the census then will be a good deal different than the way we have done it this year and 10 years ago 

and 20 years ago and so forth. 

Dr. Karp, anything you want to add to this before I move on to 

another question? 

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Dr. KARP. I think you get the smartest people and you have them 

brainstorm. I do think you would have to use incentives. I would 

be a little careful about using data for civil liberties reasons. It 

would clearly have to be something that people buy into. So there 

is essentially the challenge of how can you do it, which might be 

very different than the challenge of how can you do it in a way that 

society believes in. And I think that would be the dichotomy that 

is being outlined here, and I would be very focused on getting a 

consensus around how it is done as opposed to just doing it. 

Senator CARPER. All right. We have a somewhat different situation with the Postal Service. The Postal Service is sort of a quasiFederal private operation with hundreds of thousands of employees. Six days a week, they deliver to every door, every mailbox in 

America. And before we had the Internet, before we had electronic 

bill paying and the ability to send email messages or text messages 

like that, folks used mail a lot. I recall when I was a naval flight 

officer out at Moffett Field, and we would go overseas during the 

Southeast Asia and Vietnam War, we always looked forward to the 

mail call, and we did not have the ability to send email messages, 

text messages, or any of that stuff. We were just lucky to be able 

to get a MARS call with ham radio operators and be able to talk 

to our loved ones every several months. 

But the Postal Service is operating in a very different world 

today, and part of what they need to do is be able to not just find 

ways to save money—and they are, I think, doing an admirable job 

there, but also to help them use their business model to deliver 

more revenues. And somewhere along the line, we might want to 

reach out to you and to the folks that you work with to see if you 

could help us think outside the box there as well. 

Dr. Karp, for you please. Palantir instituted the fraud mapping 

tool at the Recovery Board and is now bringing that same technology, as we talked earlier, to a pilot over at the Centers for Medicare & Medicaid Services. And your company’s maybe best known 

work for government has been, I think, in the intelligence community, which is just a far cry from recovery contracts and from Medicare claims. 

What are the similarities, if you will, that your company has encountered when it comes to analyzing secret intelligence or finding 

fraudulent or wasteful activity of government funds? 

Dr. KARP. Well, obviously at a very general level, we are particularly interested in uncovering latent networks so that—there is a 

big difference between—— 

Senator CARPER. When you say uncovering latent networks, I 

think I know what that means, but maybe not everybody does. 

Dr. KARP. Uncovering networks that are not visible and essentially conspiracies. So you can think of the difference between ordinary criminality and a conspiracy of the kind that creates a terrorist attack as being something that requires multiple people 

working together or some kind of very sophisticated methodology. 

What makes that kind of behavior particularly difficult to find is 

it may be in very different data stores, each of which has different 

data that you need to be able to see the conspiracy. 

So, in fact, the fact that I am sitting here and you are sitting 

here is very hard to find sometimes in a data store if one data store 

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has you and one data store has me. And what we are specialized 

in is allowing analysts to perceive the data in every data store so 

that they can uncover hard-to-find or latent networks. 

So if you take that to the fraud, waste, and abuse case, what you 

have are different kinds of criminals. Some criminals are very simple. They are just doing something that—they are a Mom-and-Pop 

shop essentially. They are just trying to perpetrate very simple 

fraud. But the most productive criminals tend to have methodologies that include switching their name, switching their LSE, 

switching their location. These are actually very, very hard to find 

in large data sets. And it is also hard to find while simultaneously 

maintaining privacy and civil liberties protections, which, of course, 

one has to do in the intelligence community. That is something we 

have been very passionate about. 

And so what we did—or under the leadership of Chairman 

Devaney, what was done was taking the ability to find latent networks or difficult-to-find networks and using that in the fraud, 

waste, and abuse context so that we not only find the simple criminal but the criminal that is essentially a professional, someone that 

is changing their identity, changing their LSE, but has been caught 

perhaps in the past, knows they have been caught in the past, but 

has a network of people that allow them to shift their identity, 

shift the kind of methodology they are doing. This kind of person 

has heretofore actually been very, very hard to catch, but using 

some of these techniques and especially the knowledge that Chairman Devaney and others had, combined with our ability to integrate data, it has been very effective. 

Senator CARPER. OK, thanks. And one last question, if I could, 

for the entire panel. And, Dr. Crane, I will ask you to kind of lead 

it off, and we will move from your right to your right, and then we 

will wrap this up. But one theme which has been repeated often 

in your testimonies for today is the necessary link between innovative technology and human intelligence. And computers do a lot of 

things very well, as we know, but they can only get us, if you will, 

part of the way there. 

I think the Recovery Board’s work has shown us or provided for 

us a great example of how we can leverage both of these assets to 

produce real results. And I would like for each of you really from 

your own unique experience to take a moment and explore with us 

that idea. And what does each of those assets bring to the table? 

How can government foster the right ratio to make it most effective? Dr. Crane. 

Dr. CRANE. If I understand the question, it is about how do we 

combine innovative technologies with human intelligence? 

Senator CARPER. Yes. 

Dr. CRANE. I think that in all of our cases here, we have all been 

involved in some way with augmenting human intelligence with 

communication networks and other exchange networks. I think 

that in some way there is the sort of catch-all term of crowd 

sourcing that means a lot of things to a lot of people. 

I think in my experience the most effective way of doing crowd 

sourcing and bringing these technologies of communication and 

human intelligence together is about finding the right incentives, 

finding the way that you involve the largest number of people that 

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are acting in their own interest, but that you have designed or 

shaped their behavior through the right incentive mechanisms that 

are not always financial, that can sometimes be reputational in the 

case of the United Nations project that I had the pleasure to work 

on. 

And I think that while many people have thought about just applying crowd sourcing or going in the crowd-sourcing direction, it 

is not always effective. And one has to think very carefully about 

what the objectives are and what the goals are of the actual program so that you can—for example, in some cases, crowd sourcing 

means simply asking everyone in this room what your weight is, 

and you probably will get it on average. And this is a type of averaging of the crowd or the wisdom of the crowd; whereas, other 

types of crowd sourcing are thought of in terms of Wikipedia, 

where it is a sort of social production crowd, where there the incentives are very different for participation. 

So, again, it is hard to address these things so generally, but 

what I would suggest is that whatever problems are being thought 

of, to think very carefully about what types of crowd one would like 

and how to properly incentivize their participation. 

Senator CARPER. OK. Thank you. Mr. McEwen. 

Mr. MCEWEN. Chairman Carper, I believe it is about communication—— 

Senator CARPER. Say that again? You believe what? 

Mr. MCEWEN. It is about communication, and when people are 

talking between different industries, different organizations, they 

each have their own vocabulary, and often there is not an interpreter to do that. 

There is a great benefit to be realized by getting different organizations talking, different departments talking. My wife and I set up 

a Center for Regenerative Medicine. Once a month our researchers 

come together to share what they are doing. It is always surprising 

to me by how much surprise is in the room as each of these researchers hear what the others are doing, and how it relates to 

what they are doing. So the more you encourage communication between the departments, the greater the benefits. 

I have found in my own business, the mining industry, if you can 

translate mining language into the words understood by investors, 

then they can understand why you are getting excited and why 

your company’s share be bought. It is this linkage that is very important. 

And the other aspect is only 5 or 10 percent of the audience you 

are talking to are going to be lateral thinkers. It is this group that 

are able to look across a broad spectrum of information and make 

connections between what appear to be disparate facts or observations. So you are not going to get everybody doing it. You will get 

a small percentage that do the innovation. The others will follow 

once they see the benefit. 

Senator CARPER. OK. Thank you. Dr. Karp. 

Dr. KARP. First of all, thank you for hosting us. 

Senator CARPER. It was my pleasure. Thank you. 

Dr. KARP. Some of the comments about crowd sourcing come 

down to how does one augment intelligence. We are very passionate about augmenting human intelligence and in this case alH605-41331-79W7 with DISTILLER

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lowing non-technical investigators to do the work of essentially 

technical engineers. So for us the question is: How can you take 

someone who is not technical but has deep insight into a problem, 

like Chairman Devaney, and allow them to extend their knowledge 

into a technical area? This is something that all of society will face, 

all of government will face, and doing that simultaneously and protecting civil liberties I think will be one of the core challenges of 

our time. We are very passionate about it. We are delighted to be 

a part of the Recovery Board and its efforts and would like to do 

more of this. 

Senator CARPER. Good. Well, my guess is you will have that opportunity, and we look forward to partnering with you. 

Let me just close, if I can, by saying if we keep on doing things 

the way we have always done them, we will keep on getting the 

same result. And what is insanity? Insanity is described as doing 

the same thing over and over and over again expecting a different 

result and not getting it. 

Obviously, with the kind of budget deficits that we face—and we 

have literally doubled our Nation’s deficit between 2001 and 2008. 

We are on track to maybe double it again over the next 10 years 

if we are not careful. I am pleased with the initiatives of this Administration to try to turn the—get the boat on a better course. But 

we need to really be thinking outside the box. The three of you and 

the folks that you work with really do a pretty good job—a very 

good job of thinking outside the box, and we appreciate your working with us and particularly with the Board, Dr. Karp, in other 

ways here to help us provide, one, better service, do so more effectively, to spend less money, and the money that we do spend to better ensure that we are getting our money’s worth, the taxpayers’ 

money’s worth for that. 

I really do want to have a chance to maybe follow up with maybe 

a couple of you with respect to the Census Bureau and do some 

thinking outside the box. One of the things the Census Bureau 

does is they partner with all kinds of organizations across the 

country who are invested and interested in making sure that their 

constituents turn out and are counted. These organizations are not 

paid anything. They are just part of a very broad partnership. They 

are incentivized because they want to—for reasons I will not get 

into now, they want to make sure that their constituents are counted and represented in the surveys. 

So I am one who thinks a lot about how to incentivize good public policy and how do we use market forces and other forces to do 

that, and we would like to have an opportunity to drill down with 

you on that. 

There may be some way that you all can help us think more 

smartly about the Postal Service and find ways that they can—I 

want them to be around for another 200, 300 years or more. We 

want them to be able to function and compete in a world that continues to change. 

Thanks again for joining us. It is great to see you, each of you, 

and we will look forward to crossing paths with you again. You 

may get some follow-up questions from some of our Members that 

were here or maybe not here. If you do get those questions, would 

you please respond to them as promptly as you can. 

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And with that, this hearing is concluded. Thanks very much. 

Dr. KARP. Thank you. 

Mr. MCEWEN. Thank you. 

Dr. CRANE. Thank you. 

[Whereupon, at 4:37 p.m., the Subcommittee was adjourned.] 

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