```

[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

 
BUILDING AN EXECUTIVE-LEGISLATIVE PARTNERSHIP FOR PERFORMANCE BUDGETING

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, NOVEMBER 17, 2009

                               __________

                           Serial No. 111-17

                               __________

           Printed for the use of the Committee on the Budget

                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html

                  U.S. GOVERNMENT PRINTING OFFICE
54-237                    WASHINGTON : 2009
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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            CYNTHIA M. LUMMIS, Wyoming
CHARLIE MELANCON, Louisiana          STEVE AUSTRIA, Ohio
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        DEVIN NUNES, California
ROSA L. DeLAURO, Connecticut,        GREGG HARPER, Mississippi
CHET EDWARDS, Texas                  ROBERT E. LATTA, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director

                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, November 17, 2009................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, Committee on the Budget..     1
        Prepared statement of....................................     2
    Hon. Paul Ryan, ranking minority member, Committee on the 
      Budget.....................................................     3
        Questions for the record.................................    28
    Hon. Robert B. Aderholt, a Representative in Congress from 
      the State of Alabama, questions for the record.............    29
    Jeffrey D. Zients, Chief Performance Officer and Deputy 
      Director for Management, Office of Management and Budget...     4
        Prepared statement of....................................     7
        Responses to questions for the record....................    29

                   BUILDING AN EXECUTIVE-LEGISLATIVE

                      PARTNERSHIP FOR PERFORMANCE

                               BUDGETING

                              ----------                              

                       TUESDAY, NOVEMBER 17, 2009

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:03 a.m., in room 
210, Cannon House Office Building, Hon. John Spratt [chairman 
of the committee] presiding.
    Present: Representatives Spratt, Schwartz, Becerra, 
Doggett, Berry, Yarmuth, Scott, Bishop, Connolly, Schrader, 
Ryan, Lummis, Austria, and Latta.
    Chairman Spratt. Let me call the hearing to order and 
welcome our witness as well as the guest here today and the 
members on the committee.
    We continue today our discussion on performance budgeting 
and management improvements in the executive branch and, in 
particular, on ways we can make our government more cost 
effective. To ensure that tax dollars are spent wisely and 
well, among other things, we need to fix goals, we need to 
evaluate effectiveness, we need to purchase goods and services 
for a fair price.
    We are honored to have as our witness today Jeffrey Zients, 
OMB's Deputy Director for Management and chief performance 
officer. He is the guy who holds the job that I just described. 
It is a big job.
    I am sure your time is very precious, and we appreciate 
your finding the time to come and testify to us.
    I would also like to thank my colleagues on the Republican 
side for working out with our side on setting this hearing up. 
This is an ongoing dialogue between our committee and the 
administration on performance budgeting and management 
improvements in general.
    Above all, I want to thank and recognize Congressman Kurt 
Schrader of Oregon, whose commitment to this subject and 
experience in this field have been essential to us in 
developing this hearing. Before he came here, Congressman 
Schrader, as a member of the State legislature, played a major 
role in designing Oregon's initiatives in this realm. His State 
encourages State agencies to focus their efforts to achieve a 
better return on the State's investment.
    Congressman Schrader continues to work with Oregon 
Solutions, a public-private partnership which engages 
communities in solving public problems. Before turning to Mr. 
Ryan for his opening statement, I would like to yield the 
balance of my time to Congressman Schrader to say just a few 
words.
    [The prepared statement of Mr. Spratt follows:]

       Prepared Statement of Hon. John M. Spratt, Jr., Chairman,
                        Committee on the Budget

    Good Morning. I'd like to welcome all of you to our discussion of 
performance budgeting and ways Congress and the Administration can work 
together to make our government more effective and more cost-effective. 
The American public deserves to know that we are spending their tax 
dollars wisely, and that means setting clear goals, evaluating programs 
for effectiveness, and purchasing goods and services for a fair price. 
I thank my colleagues on the other side of the aisle for working with 
us, and I hope this bipartisan hearing will be the beginning of a 
constructive, ongoing dialogue between our Committee and the 
Administration about fiscal responsibility.
    I would also like to recognize Congressman Kurt Schrader of Oregon, 
whose persistence and thoughtfulness on this issue is a primary reason 
we're holding this hearing. Before he came to Washington, Congressman 
Schrader played a key role in helping Oregon's state agencies re-focus 
their efforts to meet clear, simple goals and deliver a better return 
on the state's investment, and he continues to work closely with Oregon 
Solutions, a public-private partnership which engages communities in 
solving public problems. We are grateful for his leadership on this 
important issue. Congressman Schrader, would you like to say a few 
words?

    Mr. Schrader. Thank you, Mr. Chairman. I appreciate your 
help in organizing the hearing and allowing me the opportunity 
to speak here today.
    Mr. Zients, thank you for agreeing to testify before the 
House Budget Committee. I was very pleased when President Obama 
set up the position earlier this year, and I am really glad to 
see you settling into your position at this time.
    Performance management has been a big issue for me for a 
long time. I spent most of my time in the Oregon legislature 
developing a culture of measurement and achieving outcomes. In 
most legislative bodies, there is a complete disconnect between 
the lofty goals of educating a workforce, ending hunger, 
stopping drugs, helping the homeless, and the actual budget 
process itself. There is an obvious need to link the budget 
outlays to intermediate outcomes that move us measurably 
towards achieving our goals.
    While much has been written on outcome- and performance-
based budgeting, implementation has often foundered in the 
public arena where buy-in by either the executive or 
legislative body is incomplete. Oregon has spent the last 
decade with its governor and legislature committed to 
developing culture performance outcomes, steering committees to 
develop the procedures involve both the executive and 
legislative branch. The agency would propose outcomes, but it 
would be modified by the legislature in the course of their 
deliberations.
    What has resulted has been an appreciation, I think, by the 
executive agencies and the legislature of how their actions do 
or do not achieve their desired goals and the ability to 
allocate resources more effectively and strategically.
    Oregon is not alone. States with diverse political 
environments have made performance measurement an important 
part of their budgeting process. Texas, the home of my 
colleagues Mr. Doggett, Mr. Edwards, and Mr. Hensarling on this 
committee, began instituting performance measurements nearly 
two decades ago.
    Here in Congress, there have been various efforts to 
improve Federal budgeting throughout this century. Most 
recently, these efforts were pursued by successive Congresses 
and two Presidents with different politics. President Clinton 
established a National Performance Review, and the 103rd 
Congress passed the Government Performance and Results Act of 
1993. Codifying performance plans and congressional 
involvement, they developed a development of these strategic 
plans.
    President George W. Bush continued these efforts with a 
Program Assessment Rating Tool, and in this Congress we have 
already passed the Weapons Systems Acquisition Reform Act of 
2009 to improve how our defense dollars are spent.
    Government performance is a bipartisan and interbranch 
issue supported by Democrats and Republicans, multiple 
Congresses, and Presidents. Those of us here today have the 
opportunity to work together on this issue again at a time when 
it is more important than ever for us to spend taxpayer money 
wisely.
    And I yield back.
    Chairman Spratt. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman. I also want to welcome 
our witness, OMB's Deputy Director for Management and the 
administration's chief performance officer, Jeffrey Zients.
    Welcome, Mr. Zients. Nice to have you here today.
    I think everyone here can agree: Ideally, government 
programs should function efficiently. And that means providing 
the maximum level of services for the lowest possible costs. 
But the common and entirely justifiable view is that the phrase 
``government efficiency'' is often a contradiction in terms.
    That view is not entirely fair. Over the years, Congresses 
and administrations have tried by various measures to 
systemically evaluate programs, weed out waste and duplication, 
and make the government work better. Of course, without any 
particular striking exception, the government always seems to 
come up well short of that goal. So progress is clearly in 
need.
    Medicare is a classic example. Medicare has a critically 
important mission to provide health care for the elderly, but 
it has a $38 trillion unfunded liability. That means, with all 
its good intentions, the Federal Government has overpromised 
benefits for future beneficiaries by $38 trillion more than the 
program can actually pay.
    And we just learned that Medicare last year had a whopping 
improper payment rate of 12.4 percent. That is $47 billion lost 
to fraud in a single year, in a single government program; and 
this comes after years of efforts to prevent fraud. The great 
goal of Medicare is to get the fraud rate down to 10 percent, 
and even that seems a bit lofty for this massive Federal 
entitlement spending program.
    Of course, to make matters worse, in the meantime Congress 
is about to add a $1 trillion new health care entitlement that 
is similar in design to Medicare, and we are significantly 
expanding Medicaid, which is already bankrupting the States. 
This is far from the first administration to propose such a 
program performance initiative, and frankly, this isn't the 
first such fiscally responsible sounding measure this 
administration has hailed even as it continues to pursue 
enormous expansions in size, scope, and cost to the Federal 
Government.
    Now, I do believe performance measures, such as those we 
will be discussing today, can help highlight which programs are 
failing or are in need of reform, but it cannot make the 
difficult political decisions to actually eliminate failing 
programs or, more important, restructure currently 
unsustainable entitlements.
    So my concern is that, despite Mr. Zients's best intentions 
and the genuine merits of performance-based budgeting, this 
initiative could be diminished to marginal tinkering to 
programs with major structural flaws, or it might simply cover 
Congress's failure to take real steps necessary to get control 
of the dangerous explosion of Federal spending, deficits, and 
debt. I truly hope that is not the case.
    Mr. Zients, I look forward to learning more about the 
administration's proposals at today's hearing.
    Chairman Spratt. Thank you, Mr. Ryan.
    By way of introduction I should tell everyone on the panel 
that the Deputy Director comes here well qualified. He 
graduated from Duke summa cum laude. The only problems with his 
education is that he did not have an opportunity to study under 
David Price while he was there. They overlapped, I believe.
    He has served as the CEO of a major business firm and as a 
management consultant. He brings huge talents and experience to 
this job, and he needs them for the task that is set out before 
him.
    We are glad you are here. We look forward to your 
testimony. We will, as practice, make your testimony in its 
entirety part of the record, but you can summarize it as you 
see fit. You are our only witness today, so you are welcome to 
take your time in explaining your position. We are eager to 
hear what OMB has in store in the way of management 
efficiencies and oversight systems.
    Thank you again for coming. The floor is yours.

 STATEMENT OF JEFFREY D. ZIENTS, CHIEF PERFORMANCE OFFICER AND 
DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Zients. Members of the committee, I appreciate the 
opportunity to come before you today to discuss the Obama 
administration's efforts to improve the performance of the 
Federal Government.
    The President believes that it is more important than ever 
to maximize the effectiveness of every tax dollar we spend. 
When programs work, we should support them; when programs do 
not work, we need to fix them or end them. To accomplish this, 
we need to measure the performance of programs and continually 
search for more effective and efficient ways to operate.
    During my 20 years in the private sector as a CEO and 
adviser to CEO, I found that leadership, measurement, and a 
motivated workforce creates the foundation for good 
performance. I am confident that the same is true in 
government.
    Congress and previous administrations laid some of the 
groundwork for government-wide performance management, 
including the Clinton administration's GPRA and the Bush 
administration's PART. The result is that today we have 
thousands of metrics and plans.
    I believe the test of a performance management system is 
whether it is used. Despite the extent and breadth of these 
historic efforts, the current system fails this test. Congress 
doesn't use it, agencies don't use it, and it doesn't produce 
meaningful information for the public. There is too much focus 
on process and not enough on outcomes. We do not track progress 
and goals which cut across agencies. Overall, too much emphasis 
has been placed on producing performance information to comply 
with a checklist of requirements.
    This must change. Federal managers and employees at all 
levels must use performance goals and measures to set 
priorities, monitor progress, and diagnose problems.
    The fundamental problem with the past performance 
improvements has been the lack of involvement of Congress. We 
would like to work with you to develop mechanisms to better use 
performance information to inform budget decisions. This 
committee has the ability to see the big picture, and I believe 
there are opportunities to leverage your unique perspective to 
look across programs that are trying to achieve similar goals 
and better understand which are working and which are not.
    Also, we plan to work with Congress to build on promising 
performance management developments in State and local 
governments and other countries. Several States, including 
Oregon, Virginia, Texas, and Ohio, show how government can 
clearly communicate State performance priorities, track 
progress against goals, and make results transparent to the 
public.
    Local governments, including New York City and Baltimore, 
have effectively used performance management practices to 
improve outcomes and drive down costs. Other countries, 
including the United Kingdom, offer instructive lessons.
    We are committed to taking the best of what works in other 
governments, in the private sector, and in recent Federal 
efforts to create a new performance management system. This 
system will be the foundation for our efforts to improve the 
efficiency and effectiveness of the Federal Government.
    As we develop this management system, there are five key 
principles we will follow.
    First, senior leader ownership: It is critical that senior 
agency leaders own the overall performance management process 
and their agency goals and measurements. Secretaries and deputy 
secretaries will be charged with setting of agency goals and 
will be held responsible for performance against those goals.
    Second, cascading goals: A clear line must link agency 
strategic goals and measurements to programs and to individual 
employees.
    Third, outcome-oriented cross-agency targets: Outcome-
oriented goals and measures connect government agencies to 
their missions. Similarly, achieving broad government outcomes 
often requires contributions from multiple actors across 
different agencies.
    Fourth, relentless review: Measurement has no value if it 
is not used. Clear communication of goals, progress against 
targets, and frequent reviews of performance against plans are 
essential. These reviews must be performed at all levels of 
government.
    Fifth, transparency: Achieving important government goals 
requires the active engagement of Congress, the public, and the 
overall government workforce. Transparency plays a critical 
role in creating accountability and stimulating idea flow.
    Using these five principles, the administration is 
committed to driving performance gains across the Federal 
Government.
    We have already begun to move forward on several fronts. In 
this year's spring budget guidance, OMB asked every major 
agency to identify a small number of outcome-oriented, high-
priority performance goals which they intend to achieve in the 
next 12 to 24 months. Senior leaders are actively involved in 
this effort, including secretaries and deputy secretaries. This 
level of involvement, I believe, is a significant break from 
the past. Agency leaders will review their progress against 
their goals on an ongoing basis. Agencies have also identified 
goals, such as climate change and homelessness, that are high 
priority for multiple agencies and require close collaboration.
    In June, we launched the IT Dashboard, which displays cost 
and schedule variance for every major Federal Government IT 
project. The IT Dashboard is already having an impact. The VA 
has put on hold 45 over-budget or behind-schedule projects 
until it decides which to continue and which to terminate. We 
plan to roll out similar dashboards for other government 
functions.
    In September, the United States Citizenship and Immigration 
Services set up a system that allows applicants to see their 
status via the Web or e-mail updates and the processing time of 
their case compared to other similar cases. This makes what has 
been a notoriously opaque process much more transparent. We are 
encouraging agencies to identify other service areas which can 
benefit from similar customer facing systems.
    For certain types of programs, ongoing measurement is not 
sufficient. These programs require periodic in-depth 
evaluations to determine their effectiveness. On October 7, OMB 
encouraged Federal agencies to request fiscal year 2011 funding 
to conduct significant pilot evaluations in strength and agency 
evaluation capacity.
    Among the Obama administration's Cabinet and sub-Cabinet 
appointments are several former governors and State officials 
who have experience using performance goals and measures to 
drive government performance. We are enlisting them and other 
leaders across Federal agencies to work together as a vanguard 
for Federal performance management with particular emphasis on 
adopting best practices from State and city performance 
management systems.
    As we move forward, we will also identify current 
measurement efforts that are not used and are burdensome. We 
will either eliminate them or streamline them. This will 
include making the performance and accountability reports more 
useful by scaling back their hundreds of pages per agency per 
year.
    OMB is using performance information to inform budget 
decisions. The President's fiscal year 2010 budget proposed 
reduced funding or the termination of 121 programs. Agency 
goals and relevant performance information are also informing 
our internal fiscal year 2011 budget discussions. Overall, 
across the last several months, we have made progress in 
setting up our new performance management system and have begun 
to pilot key parts of it.
    That said, we have a lot of work to do to put in place a 
system that is truly used by key decision-makers across 
government. As we undertake these efforts, we would like to 
work with the Budget Committee to make sure the information you 
receive from agencies serves you well. We look forward to 
partnering with you as we learn more about the committee's 
performance improvement priorities.
    We have already had productive conversations with members 
of this committee, including Representatives Schrader and 
Cuellar, and I want to thank the committee for holding this 
hearing and for your belief in improving Federal performance. I 
look forward to working with you to achieve this objective.
    Mr. Chairman and members of this committee, I would be 
pleased to answer any questions.
    [The prepared statement of Jeffrey Zients follows:]

Prepared Statement of Jeffrey D. Zients, Chief Performance Officer and 
    Deputy Director for Management, Office of Management and Budget

    Chairman Spratt, Ranking Member Ryan, and Members of the Committee: 
I appreciate the opportunity to come before you today to discuss the 
Obama Administration's efforts to improve the performance of the 
Federal government.
    The President believes that it more important than ever to maximize 
the effectiveness of every tax dollar we spend. We must be aggressive 
in identifying which programs work, and which do not. When programs 
work, we should support them and continue to push for improved 
performance. When they do not, we need to reform or terminate them. To 
accomplish this, we need to measure the performance of programs and 
continually search for more effective and efficient ways to operate.
    During my 20 years in the private sector as a CEO and advisor to 
CEOs, I found that leadership, measurement, and a motivated workforce 
create the foundation for good performance. I am confident that the 
same is true in government.
    Congress and previous Administrations laid some of the groundwork 
for government-wide performance management, starting with the Clinton 
Administration's implementation of the Government Performance and 
Results Act (GPRA). The Program Assessment Rating Tool (PART) developed 
by the Bush Administration tried to create metrics at the program 
level. The result is that today we have thousands of metrics and plans 
in a number of overlapping systems.
    The test of a performance management system is whether it is used. 
Despite the extent and breadth of these historic efforts, the current 
approach fails this test. Congress doesn't use it. Agencies don't use 
it. And it doesn't produce meaningful information for the public.
    Most metrics are process-oriented and not outcomes-based. We do not 
track progress on goals that cut across agencies. Overall, too much 
emphasis has been placed on producing performance information to comply 
with a checklist of requirements instead of using it to drive change.
    This must change. Federal managers and employees at all levels must 
use performance goals and measures to set priorities, monitor progress, 
and diagnose problems. They must learn from practices that work and 
those that do not. They need to learn how to use goals and measures to 
motivate the best from our workforce and our service delivery partners 
to achieve greater results and to allocate scarce resources wisely.
    A fundamental problem with past performance improvement efforts has 
been the lack of involvement with Congress. We would like to work with 
you to develop mechanisms to better use performance information to 
inform budget decisions. This Committee has the ability to see the big 
picture, and I believe there are opportunities to leverage your unique 
perspective to look across programs trying to achieve similar goals and 
better understand which are working and which are not.
    Also, we plan to work with Congress to build on promising 
performance management developments in State and local governments and 
other countries. Several State websites including in Oregon, Virginia, 
and Ohio, for example, show how government can clearly communicate 
state performance priorities, progress, problems, and strategies to the 
public. Washington's Government Management Accountability and 
Performance program and Maryland's StateStat illustrate the value of 
goal-focused, data-rich discussions to find the root causes of problems 
and to devise smarter strategies to tackle them. Local governments, 
including New York City; Baltimore, Maryland; and King County, 
Washington have effectively used performance management practices to 
improve outcomes, reducing crime and increasing housing starts for 
example, and drive down costs. Other countries, including the United 
Kingdom and New Zealand, offer instructive lessons.
    As the Administration develops this performance management system, 
we are committed to taking the best of what works--in other 
governments, the private sector and recent Federal efforts--to create a 
new performance management system. This system will at the foundation 
of our efforts to improve the efficiency and effectiveness of the 
Federal government. In developing this performance management system, 
there are five key principles we will follow:
    1. Senior leader ownership of performance management process. It is 
critical that senior agency leaders ``own'' the overall performance 
management process and their agency goals and measurements. Secretaries 
and Deputies will be charged with the setting of agency goals, will be 
held responsible for performance against those goals and their related 
measurements and will be expected to be actively engaged in all aspects 
of the performance management process.
    2. Cascading goals and measurements. A clear line must link agency 
strategic goals and measurements to programs and employees. 
Unfortunately, few agencies have historically had agency goals cascade 
down to unit or program targets or understood how performance against 
specific program and unit goals resulted in success--or failure--
against agency-wide objectives. Both linkages are critical to the 
functioning of a successful performance management system.
    3. Outcome-oriented, cross-agency goals and measurements. Outcome-
oriented goals and measures connect government agencies to their 
missions. Too often in the past targets have been internal and process 
oriented. Similarly, achieving broad government outcomes often requires 
contributions from multiple actors across different agencies and often 
inside and outside of government. Goals and measurements must support 
coordination across these organizational boundaries. These must also 
reflect clear delineation of lines of responsibility, explicitly 
identifying who a ``goal owner'' is and what other organizations are 
expected to contribute toward a common objective. Similarly, a given 
unit's measurements must reflect their differing contributions toward 
common goals.
    4. Relentless review and accountability. As has been noted above, 
measurement has no value if it is not used by decision makers. Clear 
communication of progress against targets and frequent reviews of 
performance against plans are essential. These reviews must be 
performed at all levels of government, including program, unit and 
agency level reviews, as well as reviews by OMB and other components of 
the White House of overall agency performance. These reviews must be 
done on a regular basis, probably at least quarterly. Only this kind of 
relentless review process will result in performance management 
becoming ingrained into the culture of government.
    5. Transparent process. Achieving important government goals 
requires the active engagement of the public, Congress, and the overall 
government workforce. Transparency plays a critical role in this 
engagement, promoting understanding of what we in the government are 
doing, stimulating idea flow and involvement of broader groups, 
communicating results and creating accountability for agency managers. 
Such transparency is therefore critical to the success of any Federal 
performance management system.
    Using these five principles, we are committed to driving 
performance gains across the Federal government. This is an ambitious 
undertaking. However, we have already begun to move forward on several 
fronts.
              priority performance goals for every agency
    In this year's spring budget guidance to agencies, OMB asked every 
major agency to identify a small number--three to eight--of ambitious, 
outcome-oriented high priority goals which they intend to achieve in 
the next 12 to 24 months. Senior leaders are actively involved in this 
effort, including Secretaries and Deputy Secretaries. This level of 
involvement is a significant break from the past. We expect agency 
leaders to review their progress against their goals on an ongoing 
basis and OMB will monitor progress here also. At the same time, 
agencies are identifying goals, such as climate change and 
homelessness, which are a high priority for multiple agencies and 
require close collaboration.
                         management dashboards
    Management dashboards have proven an effective means for succinctly 
conveying real time performance data in both the private and public 
sectors. In June, we launched the IT Dashboard, which covers all major 
IT projects across government. The IT Dashboard makes it possible to 
review cost and schedule variance for every major Federal government IT 
project. The dashboard also shows how each agency's Chief Information 
Officer has assessed performance. The IT Dashboard is already having an 
impact. As a result of this effort the VA, for example, put 45 over-
budget or over-schedule projects on hold until it decides which to 
continue and which to terminate. We plan similar dashboards for other 
common government functions, including procurement, financial 
management, and personnel management.
                customer-facing performance information
    We have begun using dashboards not just to improve our 
administrative functions, but to serve agency customers. In June, the 
President charged Secretary Napolitano and the team at the United 
States Citizenship and Immigration Services (USCIS) to set up, within 
90 days, a system that allows applicants to see their application 
status via web or email updates, how long each step in the process 
normally takes, and the speed of the applicant's case compared to other 
similar cases. The site went live on September 24, exactly 90 days 
after President's announcement and makes what had been a notoriously 
opaque process much more transparent. We are encouraging agencies to 
identify other service areas which can benefit from similar customer-
facing systems.
                          rigorous evaluations
    For certain types of programs, regular measurement is not 
sufficient. These programs require periodic in-depth evaluations to 
determine their effectiveness. On October 7th, OMB Director Orszag 
encouraged Federal agencies to request FY2011 funding to conduct 
significant evaluations in social, educational, and economic programs 
as well as begin to strengthen agency evaluation capacity. He also 
established an inter-agency evaluation working group and instructed all 
Federal agencies to make evaluations of program impacts readily 
available online.
                         performance leadership
    Dr. Shelley Metzenbaum, who joined our OMB team a month ago, is 
leading our performance measurement and management effort. Among the 
Obama Administration's Cabinet and sub-cabinet appointments are several 
former Governors, state officials, and local officials, who have 
experience using performance goals and measures to drive government 
change. We are enlisting them and other interested officials across 
Federal agencies to work together as a vanguard for Federal performance 
management. They are developing real-time systems for measuring their 
performance and managing their agencies.
    As we move forward, we are also identifying current performance 
management requirements and systems that do not meet these principles, 
and will either eliminate or streamline them. This will include making 
the Performance and Accountability Reports more useful by scaling back 
their hundreds of pages per agency per year.
    OMB is also using performance measures, evaluations, and other 
relevant data about need and program context to inform budget 
decisions. The President's FY 2010 Budget proposed reduced funding or 
the termination of 121 programs that that had not accomplished the 
goals set for them, that operated inefficiently, or that were 
unnecessary because the program objectives were being better addressed 
by another program. Agency goals and relevant performance information 
will also inform our FY2011 budget decisions.
    As we undertake these efforts, we would like to work with the 
Budget Committee to make sure the information you receive from agencies 
serves you well. We look forward to partnering with you as we learn 
more about the Committee's performance improvement priorities. We have 
already had productive conversations with members of this Committee, 
including Representatives Schrader and Cuellar.
    I thank the Committee for holding this hearing and for your belief 
in improving Federal performance. I look forward to working with you, 
with Federal employees across the nation, and with our service delivery 
partners to accomplish this objective. Mr. Chairman and Members of the 
Committee, I would be pleased to answer any questions you may have.

    Chairman Spratt. Thank you very much.
    I am going to yield my time now, my first 5 minutes, to Mr. 
Schrader, and I will come in and be the clean-up hitter at the 
end of everyone else's questions.
    Mr. Schrader.
    Mr. Schrader. Thank you again, Mr. Chairman. I appreciate 
that.
    Mr. Zients, given the work that has been done before under 
the Clinton and Bush administrations with PART and the 
Government Performance and Results Act, how do you see this 
management initiative for this administration, relating to 
them, replacing them? How is that all going to work together?
    Mr. Zients. Good question. Thank you.
    Well, first of all, I think we need to make sure that we 
don't sort of throw the baby out with the bath water. There are 
good aspects to GPRA, there are good aspects to PART. I think 
there is too much--there are too many metrics. We tend to 
measure in silos, which is how we are organized as a 
government--by agency, by program--when many of our issues--
homelessness, climate change, employment programs--tend to go 
across. So we need to have the ability to go across in 
identifying the issue or the opportunity rather than the silo.
    We need to be focused on outcomes-oriented measures. Too 
often, measures are input- or process-oriented. So outcomes-
based measures. We need to make sure that we don't have too 
many; I think the focus on too many things is ultimately the 
focus on nothing. So we need to prioritize.
    And then--do all of this and be transparent, and then make 
sure that people are using the system--you are using it, senior 
leaders across government are using it--and that that use, that 
attention, then trickles down or cascades through the 
organization, all the way to the individual employee.
    So I think there is a decent foundation here, but we need 
to take the pieces that fit with what I just described and also 
eliminate what doesn't, to remove the clutter, if you will.
    Mr. Schrader. Very good points. I totally agree. And if we 
can get that alone done, we will have gone a long way towards 
improving government efficiency and getting great bang for our 
buck with our taxpayer dollars.
    But to that end, how do you envision getting Congress 
involved? As I alluded to in my opening remarks, a lot of times 
that is the nub. I mean, the State to the north of me, Governor 
Locke had put a great program into potential effect, and it was 
largely somewhat, if you will, at least ignored by the 
legislative branch.
    How do you envision getting Congress involved in either the 
early stages of helping develop the management system; and 
then, more importantly perhaps, once the system is up and 
running, involve us in working with you on the outcomes that 
are desired?
    Mr. Zients. I think when you do do the retrospective on the 
prior efforts, there has not been enough involvement with 
Congress at the beginning in helping to create the system; and 
therefore, it is probably not surprising that there hasn't been 
a lot of use. So we are reaching out to you and your colleagues 
in the House and the Senate, and we want input as to what will 
serve you well, because you are an important part of making 
sure that this system is used and paid attention to.
    I think that this committee could play a particularly 
valuable role in that, looking across the silos and helping 
with some issues that do go across programs and helping us to 
think that way and organize that way. And the more that we can 
tie performance management to the budget, the more successful 
it will be in actually having the system be used and actually 
have it drive results.
    Mr. Schrader. If you could discuss just for a moment how 
you might shift resources using performance-based budgeting in 
light of a particular crisis or a policy objective that 
Congress is attempting to achieve in any given session, how 
would that impact the use of your outcome-based budgeting 
system?
    Mr. Zients. I think that if you were to take one of these 
issues that does cut across, and you would say, Okay, there are 
a dozen or two dozen programs that are attempting to accomplish 
the mission of that cross-cutting issue or opportunity--let's 
say, homelessness--and understand:
    What do we know about each one of those programs?
    What do we know in terms of how they are performing versus 
their outcomes-based measurements?
    Are they performing at the target, below the target, or 
above?
    Have there been any evaluations done of those programs as 
to how those programs perform on their own, and then in 
comparison to other programs?
    We can then say, Okay, that issue is important; now let's 
make sure we fund the programs that are working well and not 
fund or fix the programs that aren't working.
    Mr. Schrader. Excellent. That is great.
    You talked about already directing OMB to talk with the 
agencies about priorities in the next 12 to 24 months. 
Oftentimes it has been my experience that to achieve certain 
outcomes it takes several legislative or congressional sessions 
to get there. It can take years more than just a couple years.
    How do you envision the outcomes? There are intermediate 
outcomes, there are long-term outcomes; how do you see the 
relationship of what you are doing related to the long-term 
budgetary implications that this Congress would be involved in?
    Mr. Zients. I think that if targets are too far out in the 
future, people tend to discount them and they don't really 
drive performance. So in this effort where each agency has 
identified three, four, five--maybe as many as six, seven, 
eight, depending on the size of the agency--high-priority 
performance goals, we are looking for metrics across a year-to-
2 period of time.
    It doesn't mean in 24 months we are complete, but we want 
to see how agencies are tracking against those milestones. And 
if they are performing well, you know, we will obviously 
encourage continued strong performance. If people are missing 
targets, we will call that out and look for mid-course 
corrections and ultimately want to ensure that those targets 
are met.
    So I would think that that type of information, how are 
agencies doing against their targets, what does the trajectory 
look like, would inform future budget decisions.
    Mr. Schrader. I found that if you don't have intermediate 
outcomes, you lose focus entirely. But you have to have your 
eye on the big prize, and those intermediate outcomes hopefully 
get you on that trajectory.
    Mr. Zients. Exactly.
    Mr. Schrader. One more question if I may, Mr. Chair.
    You also referenced some rigorous in-depth evaluations 
periodically. Are you envisioning that like a zero-based 
budgeting exercise or something similar?
    Mr. Zients. It could play into a zero-based budgeting 
exercise, but it is actually a slightly different take, which 
is to say, there are programs where we have measured them and 
we are seeing how they are performing against their targets and 
goals as I just described.
    But at the same time, you need to step back and say, How is 
this program doing versus other programs serving the same goal? 
How is this program doing versus a control? And, therefore, you 
need a rigorous evaluation of those programs periodically to 
understand what kind of return the taxpayer is getting on the 
dollar.
    I don't think as a generalization we do enough evaluation 
across government. So the guidance encourages agencies to build 
their evaluation capabilities; to start to work in cross-agency 
groups to share best practices; to make all evaluations, 
historic and future, transparent because sometimes evaluations 
end up on a shelf somewhere; and also, to encourage agencies to 
put forward proposals for additional evaluations to be funded 
in the fiscal year 2011 budget.
    So I think evaluation dollars can have a very high return 
for all of us.
    Mr. Schrader. I appreciate that. If we can actually get 
Congress and the administration on the same page with 
performance measurement, we will have done yeoman's work and 
probably be one of the better achievements in this Congress, in 
my humble opinion.
    I yield back, Mr. Chairman.
    Chairman Spratt. Ms. Lummis.
    Ms. Lummis. Thank you, Mr. Chairman. And I applaud Mr. 
Schrader's attention to this project. I think it could be very 
worthwhile.
    Thank you for being here, Mr. Zients.
    Five months ago, Peter Orszag directed Federal agencies to 
identify high-priority goals. And you mentioned a couple of 
them, homelessness and climate change. Has there been a 
publication of those goals so we can see what your goals are 
and compare them to our goals? Or when do you expect that to 
become available?
    Mr. Zients. We are in the midst of the budget process at 
OMB, and I can tell you that those high-priority performance 
goals--I am impressed by the first round that were submitted.
    There is some variation across the agencies. Some of them 
still need some work. But we are starting each budget 
discussion with those high-priority performance goals and 
ensuring that they are the right goals, and then the budget 
discussion follows those goals. When the President releases the 
budget in February, we plan to release those high-priority 
performance goals with the budget.
    Ms. Lummis. And are those performance goals tied to 
specific budget items? In other words, can we expect to see a 
deficit reduction component associated with those goals or real 
savings associated with that?
    The reason I asked, and I think that Representative 
Schrader has hit on it, I have seen polls that show that the 
average Democrat believes that almost half of Federal dollars 
are wasted, and the average Independent and Republican believes 
that more than half of Federal dollars are wasted. So clearly, 
the American people are and have a right to be a bit cynical 
about how Federal dollars are spent. And it is incumbent upon 
all of us to set up manners in which a transparent system can 
be used by the public to evaluate whether their dollars are 
being used well.
    Is that going to be available to the public?
    Mr. Zients. Well, the high-priority performance goals are 
very much focused on management, so not on policy. And so it 
goes right to the issue you are talking about, which is how 
well do our government services perform?
    And I think there are two aspects to that. One is, how 
efficient are they? And the second is, how high is the quality 
of the service? How good is the citizen interaction with the 
service?
    And, yes, many of the high-priority performance goals 
address citizen facing services, both their efficiency and 
their effectiveness, meaning their service quality. And, yes, 
we do plan on making those goals, the broad goals and the 
supporting metrics and the milestones and the plans, available 
to the public.
    Ms. Lummis. And are there savings that will be tied to 
budget reductions associated with those goals?
    Mr. Zients. As I said, the goals themselves have to do with 
becoming more effective and more efficient. So, yes, there 
ultimately will be savings, a separate exercise as part of the 
OMB budgeting process, to identify taking all available 
evaluation and metrics and other knowledge we have, 
recommending programs that should either be terminated or 
funding should be reduced. So in fiscal year 2010, I think 
there were 121 of those programs presented as part of the 
budget, and we will do a similar exercise in fiscal year 2011.
    Ms. Lummis. Let me give you an example of an agency that, 
as the bill passed the House this year, received an over-35-
percent increase in their budget, which is a stunning number to 
me. I can't imagine a Federal agency being able to expend that 
big of a budget increase. And that was the EPA.
    How will you monitor one agency's massive expansion of 
dollars under these types of performance bills?
    Mr. Zients. Understanding the right outcomes-based measures 
and ensuring that the agencies are performing against those 
measures--and if they are not, that corrective actions are 
taken--and making those metrics available to the public and for 
all of you to monitor progress against.
    Ms. Lummis. Thank you, Mr. Zients.
    Thank you, Mr. Chairman.
    Chairman Spratt. Thank you, Ms. Lummis.
    Mr. Doggett.
    Mr. Doggett. Thank you very much.
    And thank you, Mr. Schrader, for your interest in this.
    I was involved in some of these performance evaluations 
back in my days in the Texas State legislature, and I think 
this is really important. And I appreciate your service at OMB, 
but as you know, my concern is about the half of the budget 
that OMB is doing nothing on, and that is the tax expenditure 
side. In fact, it probably is more than half of the budget 
according to the determinations that the Government 
Accountability Office has made.
    By ``tax expenditures,'' I am referring to the special tax 
breaks, known as tax expenditures, that are designed to reward 
particular activities or to advantage specific groups of 
taxpayers that are often described as spending programs hidden 
within the Tax Code. As best I can determine, OMB has done 
nothing about the tax expenditure portion of the budget with 
the notable exception of taking the appendix A on performance 
measures and economic effects of tax expenditures that the Bush 
administration OMB put into its budget year after year, and 
copying it--I think verbatim; you may have changed a word or 
two--and putting it into the budget that the President 
submitted in February.
    Is there anything else that OMB has done, other than 
copying those words from the Bush budget and giving us appendix 
A in the same form we have seen it year after year?
    Mr. Schrader. I agree with you that there we are talking 
mostly, or this morning has been focused on spending programs, 
and there is a whole other side of this which is the tax side. 
And the President is committed to maximizing that the impact of 
every dollar we collect and every dollar, I suppose, that we 
don't collect. And it is--those types of programs oftentimes 
are part of the collection of programs to serve different 
purposes like homelessness or other cross-cutting issues. It 
has not been the first area that we have focused on in the 
first few months.
    Mr. Doggett. Have you done anything on it?
    Mr. Zients. It has not been an area of focus for us. It 
will be going forward.
    Mr. Doggett. Is it correct that to this point all you have 
done is to reprint appendix A out of the Bush administration 
budget and put it in your budget?
    Mr. Zients. I don't have specific knowledge on that.
    Mr. Doggett. Well, if you compare them side by side, there 
may be a word or two change, but it looks to me like it is a 
reprint.
    Just to give you an example. And I was encouraged by the 
comments in the President's budget that programs will not be 
measured in isolation, but assessed in the context of other 
programs that are serving the same population and meeting the 
same goals.
    Instead of picking on somebody else's tax expenditure, I 
will talk about one that I authored, which is the higher 
education tax credit that is part of the stimulus program.
    I don't see how you can evaluate--as Mr. Schrader has 
suggested we need to do, and I agree with him--Pell grants, 
Perkins loans, work-study without evaluating and comparing them 
with a rather substantial tax reduction--$14 billion was the 
score, approximately, on the higher education tax credit that I 
authored--and comparing all three.
    But I don't see OMB doing anything on that, and I am 
concerned that when we get the budget next February, it will 
have the same appendix reprinted.
    To be more specific, I know that GAO called on OMB long 
before this administration, and you were there, asking them to 
implement some specific recommendations. As best I can 
determine, not a single recommendation GAO made back in 2005 
has been implemented by OMB, and I don't even see any plans to 
implement it.
    In the fiscal 2002 budget, OMB announced that IRS had a 10-
year panel sample that would facilitate the evaluation of tax 
expenditures; and as recently as 2006, OMB described this data 
set as permitting, quote, ``more extensive and better analysis 
of many tax provisions than can be performed using only annual 
data.''
    2008, just before you came on board, marked the tenth year 
of that 10-year study. What are OMB's plan for that data 
system, data set, and what specific plans does OMB have, as you 
said, going forward, for gathering the data needed to perform 
the evaluation of tax expenditure programs? And how will the 
future be any different from the past years of neglect on this 
issue?
    Mr. Schrader. First of all, I totally agree with the 
horizontal approach, and that the tax expenditure side should 
be part of that, along with the programs that we are talking 
about. So 100 percent agreement there.
    I think a lot of these programs are actually more conducive 
to the evaluation than they are the measurement. So I think 
part of the evaluation push will coincide with looking at these 
types of programs.
    And there is a lot going on. As I said, there are a lot of 
current programs that we are evaluating in terms of 
measurement, what we should keep and what we should not keep. 
And I will lean in to the area you are talking about. It is not 
an area that I have spent much time on to date, but it is 
certainly a priority going forward.
    Mr. Doggett. Well, just in conclusion, Mr. Chairman, we are 
about to take up in coming weeks what are called the extenders 
tax provisions. This is an annual ritual where lobbyists come 
and talk to staff of the Ways and Means Committee and the 
Senate Finance Committee, and the extenders get extended with 
little or no evaluation or consideration of whether they serve 
any worthy purpose whatsoever.
    The last 14 budgets, well before your time, that have come 
out of the executive branch have bemoaned the fact that 
evaluating tax expenditures was a significant challenge. To 
date, no one has accepted that challenge. These are a huge part 
of the budget. At a minimum, the GAO's recommendation of 2005 
to place the tax expenditure for higher education next to the 
direct expenditure for higher education would help the public 
and the Congress in evaluating what resources we are allocating 
for good purpose or ill.
    But I would just urge you, as I will be urging in the 
strongest terms when we consider the President's budget this 
next year, that this needs attention and needs attention 
yesterday.
    And I appreciate your service and your attention to this 
matter.
    Mr. Zients. Thank you.
    Chairman Spratt. Thank you.
    Mr. Austria.
    Mr. Austria. Thank you, Mr. Chairman.
    And, Mr. Zients, thank you for your testimony today. I 
appreciate it very much, as this committee, I am sure, does. 
And I think the question again comes down to how we here in 
Congress and the administration can ensure that citizens, the 
taxpayers, get the most out of the tax dollars that they send 
to Washington, D.C.; and I want to bring up some of the things 
that you talked about as far as efficiency and effective.
    I think, unfortunately, all too often what is forgotten 
about government programs is that no matter how important or 
well intentioned they might be, they impose a cost on the 
economy. Every dollar spent by the government is a dollar taken 
away from someone else who might spend or invest it on growth-
producing activities. So when we decide what we want government 
to engage in, whether it be a large or small activity, we 
should consider the cost of collecting the taxes, increasing 
the debt compared to the value of the government's programs.
    Do you incorporate in your analysis the government's 
performance at all? That would be my first question.
    Mr. Zients. The performance?
    Mr. Austria. The performance as to how much money it is 
costing to collect the taxes, to run the plan efficiently, 
because again, every tax dollar that we are spending here in 
government is being taken out of the private sector.
    Mr. Zients. I think that is really at the heart of what I 
view my team's mission, which is to make sure that where we are 
spending dollars, we are spending them wisely; that programs 
that don't work we identify and we either fix or terminate, and 
programs that do work we continue to drive their performance 
and make them better.
    So, yes, I think the performance of government is front and 
center for what we do. I think it is important, as I said 
earlier, to understand how we best serve you and your needs as 
to which programs, which metrics, which cross-agency goals are 
most important, and make sure that we design a system that you 
find useful as you go about your important work.
    Mr. Austria. Mr. Zients, let me also just kind of follow up 
and again kind of throw in a little bit of my opinion.
    I think one of the fundamental problems with government 
programs is that they lack any natural incentive to promote 
efficiency. And that is why I think what you do is so 
important.
    So for a number of years now, we have been paying agencies 
more through cap adjustments--and I want to talk about that--
you know, to do what they should be doing in my opinion, 
anyway, and that is attacking waste, fraud, and abuse. With 
that in mind, I have got two questions.
    If we really want to promote greater efficiency in 
government agencies, don't we at some point have to simply just 
restrict their budgets and force them to get by with tighter 
limits and work more efficiently and more effectively with the 
dollars that they have?
    Mr. Zients. I think it is hard to generalize. But 
certainly, I think looking at how efficient they are and 
insisting we become more efficient, as has the private sector 
across time, is a very good discipline.
    I think--one of the observations I have from 20 years in 
the private sector is, a lot of the efficiency gains and 
service quality gains have been driven by information 
technology. And there are pockets of information technology 
sophistication and leading-edge use in the government. But for 
the most part, we are way behind. And I think that we need to 
understand how we leverage information technology and other 
breakthroughs in management and operations to drive better 
efficiency, which happens also to be correlated with better 
service.
    So I think a discipline of ``you should be getting better 
and better each year'' is a good discipline, whether that is 
through lower dollars or lower budgets or higher output; it can 
be a combination depending on the situation.
    Mr. Austria. Mr. Chairman, one follow-up to that.
    I think, in any case, the testimony you have given today--
the analysis, the metrics, I think, are useful; but I think, as 
a committee member, you know, when can we expect to see some 
results?
    And I want to follow up on what the Congresswoman from 
Wyoming, Ms. Lummis, was talking about as far as being able to 
see from a transparency standpoint that efficiency, that 
effectiveness, starting to see savings results from these 
efforts.
    Mr. Zients. I think it is extremely important that we get 
results fast.
    I think--Congressman Schrader and I were talking 
beforehand. And this is not an overnight effort; this is a 
complex system that we are going to put in place that is going 
to drive performance, hopefully for many, many years to come.
    That said, I think it is important that we have some fast 
results. I think I highlighted a few of those with the IT 
Dashboard as an example in the testimony. But there are also 
areas like contracting where we spend $530 billion a year. We 
have put a stake in the ground, the President put a stake in 
the ground on March 4 that we are going to save $40 billion by 
fiscal year 2011. So we are right now reviewing plans from each 
agency as to how they are going to bring forward their $40 
billion.
    So while we are building a system that is going to be built 
to last and serve, hopefully, many Congresses, I want to make 
it clear that we are very interested in having immediate 
results that save taxpayer dollars and improve the services 
that we provide.
    Mr. Austria. Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Scott.
    Mr. Scott. Thank you, Mr. Zients, for being with us today. 
One of the things that concerns me is the fact that CBO doesn't 
score prevention. In the health care bill there are some 
prevention activities that just aren't scored. I serve as Chair 
of the Crime Subcommittee, and prevention strategies are not 
scored; and, in fact, wasteful strategies aren't scored either.
    Pew Research Forum calculated that any incarceration rate 
over 500 per 100,000 was actually counterproductive. We are 
already at 700 per 100,000. Some communities lock up minorities 
at the rate 4,000 per 100,000, and still we are passing 
mandatory minimums and other things that just will make the 
situation worse.
    How would performance budgeting help us get out of this 
mess?
    Mr. Zients. I think that as to the health care piece of it 
is not a place where I have spent a lot of personal time. It is 
something that the President and Director Orszag are obviously 
deep in on.
    Other metrics that are performance based, like the ones you 
described should be part of what we measure--agency performance 
and how we measure it. So it is not a terrain that I have 
personally spent a lot of time on, but what you are describing 
are the types of outcome-based metrics that should be part of 
what we are doing.
    Mr. Scott. You mentioned saving money in contracting. 
Everybody knows that you can save money in contracting by 
bundling contracts and skipping the bid process and just 
going--letting people pick and choose and not going through the 
expense of a formal bid. You would give up, however, the 
opportunities of small businesses to participate in fairness, 
because if people can pick their friends, if you are not a 
friend, you don't get covered.
    How would you balance efficiency and cost effectiveness 
with making the contracting process fair and open to all, 
including small businesses?
    Mr. Zients. Right. I absolutely agree with the importance 
of small and minority-owned businesses in the contracting 
process. What you just described didn't strike me as efficient.
    Actually, I think there is not enough competition in 
contracting. Too often there is only one bid or there is no 
bid, and it goes to one contractor. So I think increasing 
competition is a good thing to contribute to increasing 
efficiency. Too often we rely on what are called high-risk 
contracting vehicles, so cost-reimbursement contracts or time-
and-material contracts, or as I said, contracts that aren't 
competed, are all high-risk vehicles.
    We have asked every agency to reduce the percent by 10 
percent.
    So I think the sort of loose network that you described--
returning of favors, if you will--I am not sure how much of 
that exists; but to the extent that exists, I would argue, that 
is inefficient. And that is the kind of--there is the kind of 
practice we want to change through increasing competition and 
moving more towards fixed-price contracts while at the same 
time absolutely understanding the importance of the small 
business minority communities.
    Mr. Scott. In my former work in the State senate in 
Virginia, we worked with trying to coordinate agencies with 
similar or overlapping missions and tried to coordinate those 
activities from a mission perspective.
    In the education area, you kick the kid out of school with 
no services that would save them money in the education 
service; but if someone from the criminal justice system is 
around the table, they might suggest that is not a good policy.
    How does the performance budgeting--how does the 
performance budgeting work across agencies in making sure they 
are properly coordinated?
    Mr. Zients. I think you are exactly right, and we can learn 
from States like Virginia. And I think today we don't do a good 
job. Today, it is really done in these silos at the level of 
over 1,000 different programs. So I think through the high-
priority performance goal exercise that I described, we have 
already identified several situations where agencies are coming 
to the table for the first time to coordinate on their share of 
high-priority performance goals. This is a start, but the 
system that we are envisioning, the system that we will 
develop, will absolutely not start at the level of how we are 
organized, but instead start at the level of serving, in your 
example, an individual student.
    Mr. Scott. You mentioned Virginia. Virginia has frequently 
been designated the best-managed State in the country. What is 
Virginia doing that we should learn from?
    Mr. Zients. Virginia has a handful of important goals, 
outcomes-based goals at the State level, that they make public. 
They benchmark their performance versus other States. They have 
performance agreements with the folks who are running those 
agencies, who are responsible for meeting those goals, regular 
reviews of performance against. And then those goals in turn 
cascade through the agencies down to individuals.
    So it is--I think it is Virginia is a leading State. The 
results have followed. As you said, they have been recognized 
by Pew and others over and over again as a well-managed State. 
So I think there is a lot we can learn from the States. And we 
want to build on the best of the States' efforts, Oregon, 
Texas, Virginia come to mind; cities, Baltimore, New York, and 
other cities; and then pockets of good performance through the 
Federal Government and take sort of a best-practice approach.
    We don't need to reinvent the wheel. But I think there is a 
lot to learn from Virginia and other States.
    Chairman Spratt. Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman. I do have a question 
that I want to get to in a minute, but I have to comment on a 
couple things that have been said here.
    The first--and I am sorry he has left--was Mr. Austria 
saying that every dollar that comes into the Federal Treasury 
is a dollar that we deprive the private sector of. And I would 
just like to remind Mr. Austria and those others who 
continually try to demonize government that last year, at the 
request of the Bush administration, we allocated $700 billion 
to bail out the private sector. And in fact, $300 billion or so 
of that is still out there in the private sector helping to 
alleviate their problems.
    We have about $290 billion from the American Recovery Act 
that went back into American citizens' pockets, which 
presumably is out there in the private sector being spent and/
or saved. And there are examples of that. There is example 
after example of Federal tax dollars actually going not only to 
support the private sector but to go into the private sector.
    The second comment I want to make is one you made, Mr. 
Zients, when you talked about the efficiency of the private 
sector. And certainly there are things that are done in the 
private sector that probably should be replicated in the 
Federal Government. But there are a lot of things, having spent 
most of my life in the private sector, that they are not always 
the most efficient way of operating. And all we have to look at 
is the number of eight-digit salaries that have gone to people 
who have run companies into the ground.
    Anyway, that being said, I do have a question.
    One of the inevitable things that we do here when we pass 
legislation is to create unintended consequences; and in fact, 
probably everything we do creates unintended consequences. Is 
there a way that the performance measures that you are setting 
up will catch unintended consequences of programs and agencies, 
or is that something that we need to leave in the oversight 
function of Congress?
    Mr. Zients. I think the rigorous review of how programs 
will do, are doing, versus what they set out to do, will 
inevitably uncover some of those. But I don't think it is the--
it is not the intention, it is not the primary objective of the 
programs. But I think that those reviews of how programs are 
doing versus their targets and goals, my experience so far in 
the Federal Government and in the private sector is oftentimes 
you will find those unintended consequences.
    I do want to comment in that having spent my whole career 
in the other Washington, if you will, in the local business 
community, I do think there are things we can learn from the 
private sector. But I do want to tell you that I bring a lot of 
humility to how different this sector is, how big it is, and 
how a lot of what happens here is unique to this sector, and 
how there are a lot of good things happening in the Federal 
Government. So I don't want you to misinterpret the private 
sector.
    Hopefully, there is some transference possible, but I don't 
think that is the lead by any stretch.
    Mr. Yarmuth. I take it and I agree with you absolutely.
    Kind of extending that question a little bit about 
unintended consequences, how is your system and your program 
going to relate to Inspectors General and the GAO in terms of 
how--what is the relationship going to be?
    Mr. Zients. Yes. One of my roles is to chair the inspector 
general counsels, I do spend a lot of time with IGs and I think 
they play a very important function. I think that we want them 
to continue to play the role they play so effectively. At the 
same time, I think they do have ideas about how we can prevent 
waste, fraud, and abuse. So I am encouraging that community to 
continue, obviously, the role it plays and to keep it very 
independent and strong.
    At the same time, start to bring forward, as I think the 
Recovery Act has shown, the ability to preempt rather than 
simply look backwards in a rearview mirror.
    So I think IGs are very important in their watchdog 
capacity and also the capacity of helping us identify how we 
can be better. I have worked with GAO now on several issues and 
have a lot of respect for the rigor of their analytics, and we 
are working together on several GAO high-risk-list issues, 
including security clearance, where I was here a few weeks ago 
to testify. And I found it very helpful to work closely with 
GAO to understand not only what is the problem, but how do we 
actually solve the problem. So I think both GAO and IGs have a 
very critical role in this moving-forward agenda.
    Mr. Yarmuth. One last comment. Having spent 25 years or so 
in the media before I came to this job, it is going to be 
interesting to see whether the good stories, the success 
stories that you have to tell are covered as well as the 
negative stories you have to tell.
    I am all for transparency, but I hope we get balanced 
coverage.
    Mr. Zients. I couldn't agree more. And I do think there are 
pockets of good performance, and hopefully we will create many 
more together.
    I think it is important to recognize those and to celebrate 
those, while at the same time where there are problems we are 
transparent and we uncover them and we do things to fix those 
problems.
    But I think recognition and reward and positive publicity 
is part of the package here.
    Mr. Yarmuth. Thank you very much.
    Chairman Spratt. Thank you. Mr. Becerra.
    Mr. Becerra. Mr. Chairman, can I pass?
    Chairman Spratt. Sure. Ms. Schwartz.
    Ms. Schwartz. Thank you. I appreciate weighing in on this 
hearing and hearing some of your comments.
    I wanted to follow up on a couple of things that you said 
in response to some of the questions. First, I did want to say 
I appreciate some of the goals that have already been set, and 
they are pretty demanding goals, I think, in terms of the way 
you do Federal contracting and making sure that those are 
Federal contracts to the private sector and making sure that, I 
think you have said--my notes say $40 billion in savings is the 
goal, and 7 percent savings by 2011 in baseline spending and 
reducing dollars obligated under high risks that are no-bid 
contracts by 10 percent. Those are all pretty ambitious goals 
and look forward to your meeting them.
    What I wanted to ask about is I think what is actually 
maybe more complicated because those goals can be met. The 
subcontracting to the private sector is very important, making 
sure we evaluate how those dollars are being spent. But the 
issue of program evaluation and how you actually do plan in a 
time-sensitive way to do the kind of evaluation of what is 
working and what isn't; not only each program by itself, but in 
the context of what our priorities and goals are for that 
department, for the Nation. You know, it is a program to be 
working, but if it is doing something nice over there but 
really doesn't meet our basic priorities in the kind of 
economy, the kind of revenue-sensitive situation we have for 
the budget for the government, it seems to me that you are 
looking at not only does the program work or not, but does it 
actually meet our overall goals that we have set for that 
department.
    So even if the program is functioning well but does not 
meet our overall goals, what kind of action are you going to 
take on that, is really my first question.
    And I did want to follow up on your question about health 
IT. You acknowledge that--not health IT, but information 
technology that you are using to monitor programs, again, I 
assume, in a time-sensitive way, and to create more efficiency 
within government.
    If you could also speak to--you acknowledge that it is a 
problem, but--two questions about that. One is it takes an 
investment to put in the kind of information technology--I am 
well aware of this because of the health information technology 
that I have worked on. But that takes some cost to us, spending 
money to get systems computerized, really make sure we have the 
right software, make sure it is interoperable, make sure that 
that information is shared publicly and used by managers to 
make decisions.
    Could you speak to not just acknowledging the importance of 
using technology, information technology, but then how are you 
going to, one, move it up to scale and then use it in a way to 
do the kind of timely evaluation of our programs that I talked 
about in the first part of my question?
    Mr. Zients. I think in the first part what matters, I 
think, we are uncovering through that high-priority performance 
goal exercise; so, which programs really fit with those handful 
of priorities. And that is the beginning of a prioritization 
exercise, so that things that matter less either are not funded 
at all or funding is reduced to those areas and funneled to 
those areas that matter more.
    The evaluation memo that went out from Director Orszag is, 
I think, has laid out the vector of what you are describing, 
which is, let's take everything that we have done historically 
on evaluation and make it transparent so nothing is on the back 
shelf anymore; let's build agency capabilities to do more 
evaluations; let's have agencies work together to evaluate 
programs or issues that run across agency. And then if we are 
going to make it part of the funding of the fiscal year 2011 
budget, is to fund more evaluations.
    I think we need more rigorous evaluation of what we are 
doing. And some of those evaluations do take time but others 
take less time. And I think when we spend those dollars on 
evaluation, we need to prioritize and do it in those areas that 
we believe are most--have the highest spend and where we 
believe that the evaluation will have insights to really drive 
future decisions. On IT----
    Ms. Schwartz. Just to finish up on that. So is the 
evaluation being done by the government agency, of are you 
building that into money that is being spent for a program to 
say they have to report back on their effectiveness and cost?
    Mr. Zients. Agencies will do rigorous third-party 
evaluations of how they are performing versus their own targets 
but also against alternatives and control samples, so it will 
be very rigorous and independent.
    The IT piece, it is a little bit--and again I am 
generalizing here because there are pockets of success--but it 
is a little bit lose/lose in that I do believe in many areas we 
are behind where we should be on IT, yet we spend a lot of 
money. We spend $76 billion a year on information technology 
and we have too many projects that are behind schedule or over 
budget or never are implemented or don't achieve their intended 
results.
    Now, this is not unique to our sector. It is hard in the 
private sector also to do large-scale IT. But we need to really 
think through how we have the project management capabilities 
to get this done. We move pretty slowly on IT, and as we all 
know, technology moves fast; so sometimes it takes several 
years just to begin a program, a project. And by the time we 
start it, sometimes the technology is a few generations behind.
    We also need to have technology driven and owned by senior 
leaders. When IT is done in a silo, it is inevitably 
unsuccessful. So we need to, I believe, improve IT project 
management from spec development through completion.
    Ms. Schwartz. But again, it is not just getting the 
information and posting it. Transparency is important but it is 
then the use of that information to help informed decisions.
    Mr. Zients. I absolutely agree. The information is only as 
good as how much it is used to drive the decisions.
    Ms. Schwartz. I think my time is up. Good luck.
    Mr. Zients. Thank you.
    Chairman Spratt. Mr. Becerra.
    Mr. Becerra. Mr. Chairman, thank you very much. Mr. Zients, 
thank you very much for your testimony.
    Let me--I believe other members may have asked this, and I 
apologize that I wasn't here for those questions. Any number of 
agencies can produce any number of dollars in savings depending 
on how efficient we can make them be in terms of their 
management. Some agencies are bigger than others. You can go 
after FEMA which is a small agency overall, with a very, very 
important mission when it is called upon to do it, versus, say, 
the Department of--or the Social Security Administration, which 
is a huge agency, or the Department of Defense, the largest of 
all our government departments. So you can get a different 
level of bang for the efficiency in the buck.
    I would like to focus on a couple of things. IRS. IRS 
probably is the largest producer of savings available out there 
for us in terms of its mission, what it does. It collects 
taxes. And if the studies are correct, some quarter of a 
trillion dollars in taxes go uncollected on an annual basis. 
Part of that is because we likely aren't focusing the personnel 
that we have at IRS in the best areas to gain the most 
efficiency, because there are some people who probably owe the 
government $1,000 in unpaid taxes and there are probably a lot 
of entities out there that owe the government millions in 
unpaid taxes. And unless they focus correctly, we may collect 
$1,000 from that one individual American and let lots of 
companies get away without paying the millions that they owe 
the government in taxes.
    And so when it comes to expenditure programs, would your 
agency be involved in trying to help the IRS determine how to 
best focus its attention so that a nonprofit agency that is 
collecting money--there are tax deductions that go with that, 
and therefore are foregoing tax revenues--that we are making 
sure that that agency is actually using its money for the 
intended nonprofit purpose instead of paying their executives 
high salaries. Or do we want to make sure that if we have a 
program like the first-time home buyer tax credit, that we are 
not sending money off to a 4-year old who applies for a first-
time home buyer tax credit, so that we are not being defrauded 
out of those $8,000 in tax credits that we are giving to 
Americans.
    Mr. Zients. Let me start at the beginning of your question, 
which is prioritization. There are efforts, and we have talked 
about a few of them today, the performance management system 
that is the main focus of the hearing today, contracting, 
information technology, where they really are horizontal across 
agencies. The work we do hopefully applies to FEMA in your 
example and the IRS. So we want to create those institutional 
capabilities across the government in performance management, 
contracting, information technology and some other areas.
    That said, there are certainly areas where we believe they 
are at the intersection of large and inefficient, and that is 
where we want to focus more of our energy.
    So to bring that same philosophy to the IRS, there is a tax 
gap of I think $300 billion. And closing that tax gap is, I am 
sure, important for the IRS and for all of us. And within the 
IRS, the commissioner should be prioritizing to say where is 
that intersection of it is big and I can get it done.
    So that philosophy of systemic horizontal improvement but 
at the same time focusing in on some areas that need special 
attention in getting early results and returning, in this 
situation, dollars to the taxpayers or dollars to the 
government is exactly the philosophy that we are embarked on.
    Mr. Becerra. I think many of us would have a great deal of 
interest in supporting and observing what you do if we had a 
clear sense that in terms of trying to extract efficiency in 
the management of government we really went after the big 
apples.
    IRS, I suspect you will find, is strapped. It doesn't have 
enough personnel to go out there and do all the work it needs 
to do. And that is because too often it gets a bad rap; that it 
is just out there like the bad cop trying to get Granny to pay 
her taxes when, in fact, there are many, many very wealthy 
individuals or corporations that are not doing what Granny has 
done, and that is paid her taxes.
    I would hope that what we are able to find in the work that 
you do is you will focus in on the big guys, the Department of 
Defense which does all these no-bid contracts or cost-plus 
contracts, which cost the taxpayers tremendous amounts of 
dollars, IRS and other agencies, and figure out what they need 
to do. In some cases we shouldn't just blame them, because they 
don't have enough personnel to do the work; in some cases we 
should try to help them be more efficient.
    But when you let $250 billion to $300 billion go on an 
annual basis because it is uncollected taxes, that is probably 
the biggest--the biggest inefficiency we can have in 
government.
    Mr. Zients. I agree with your philosophy. Contracting, 
saving $40 billion across 2 years, of the $530 billion two-
thirds of that is DOD. So clearly if we are going to move the 
dial and achieve our $40 billion goal, which we are committed 
to doing, hopefully exceeding, DOD has to be front and center 
in that effort. And they are, and they are making good 
progress.
    Mr. Becerra. Thank you. Thank you, Mr. Chairman.
    Chairman Spratt. Let me pick up on that point because as 
you go through the portfolio business at DOD, you will sooner 
or later run into the SAR, the Selected Acquisition Report. 
Have you or your office done any work in this area with DOD to 
improve upon or at least to see how well working the Selected 
Acquisition Report is?
    Mr. Zients. As part of my responsibilities I oversee the 
Office of Federal Procurement Policy, which interacts with DOD 
and the civilian agencies on procurement and is the lead policy 
group. I am not familiar with the details of SARs but I do know 
that DOD, as I said before, is far and away the largest 
contractor. They are making good progress on increasing 
competition; reducing the use of cost reimbursement contracts; 
moving to fixed price; and also looking at have we in some 
situations contracted out or outsourced inherently governmental 
functions or areas that we need to make sure we have the 
capacity to perform our critical function.
    So I think DOD is--I am impressed by their focus. They 
obviously have a lot to do when you are contracting for over 
$300 billion in the context of, you know, two wars and all the 
rest. But I think they are making good progress and they will 
contribute to their share, or hopefully even more of the $40 
billion target.
    Chairman Spratt. I am glad you mentioned the outsourcing 
because that is a big issue of concern in the Department of 
Defense, how much we are spending on outsourcing. And it has a 
repercussion, too, within the Department in the sense you 
aren't training and bringing on board people who would 
otherwise be developing the management talents that you need 
internally are instead being displaced by outside contractors 
who charge substantially more than you would be paying for the 
talent inside.
    I worked years ago as a young officer in the Army with the 
development of the SAR. I didn't have much to do with it, but 
it was in the office I was working. The guy sitting across from 
me was Hank Paulson. One of the other guys in the room was Walt 
Minnick, who is now in the Congress. When I came back here in 
1983 I went to see--I got on the Armed Services Committee and I 
went to check out the SAR, the Selected Acquisition Report. 
When I pulled it--that is about 13 years after I had been in 
the service--I saw it was essentially the same document it was 
in 1971 when I left here. It had not evolved, it had not 
improved, it was about the same document. It was a variance 
analysis document for measuring cost, schedule and technical 
performance. And I guess over the years looking and dealing 
with the SAR, the one conclusion I have drawn is if it is used 
and it works, it will become more useful; and if it is not used 
and it is sort of done as something perfunctory that has to be 
done, then it doesn't evolve, it doesn't become more useful.
    The SAR should be much much more sophisticated than it is 
presently, but it hasn't been used on the Congress well enough. 
When we have tried to dictate and put it in legislative 
language it always fails--the translation of it into real 
action on the bureaucratic side failed us.
    I would urge you to take a close look at that because it is 
way overdue on overhaul and improvement. And in particular, you 
mostly talk about judging performance, which is backward, 
looking how results have been produced. The SAR needs to be 
adapted so that it is forward-looking. And there are certain 
things that are picked out in advance to be watched from a 
variance analysis standpoint, so that if something is going 
awry, you will know that soon enough to take some preventive 
action so you don't have to lose a lot of money and learn the 
hard way that the system is not going to be up to specs.
    Mr. Zients. I completely agree. We need to have forward--
this conversation we were having earlier with Congressman 
Schrader--we need to have forward metrics that we are tracking 
our progress against, and if we are not meeting or exceeding 
those, alarm bells should go off and we need to fix it.
    You know, with SAR and others, I think there is too much of 
a compliance mentality rather than let's use this to drive 
results. And where that is happening, we should either revamp 
and create something that passes the standard of we are going 
to use it to manage performance or we should get rid of it, 
because it is just clutter and taking up time. I think on 
acquisition, one of the root-cause problems is the workforce 
itself on acquisitions as we doubled contracting across the 
last 5 years.
    Chairman Spratt. I will give you two examples. Some years 
ago--because I sponsored some legislation to change the SAR. 
When I was hiring a legislative assistant to do military and 
defense work for me, I put in the RFP, so to speak, that I 
would like to have somebody that had that ability to work with 
Selected Acquisition Reports, forbearance analysis, because I 
would like to be doing some work in that area. And I got two or 
three applications from the Beltway consultants of people who 
were doing SARS, and I was curious as to how it was they were 
doing SARS.
    What I found out is that the program management officers in 
many cases themselves outsource the SAR, get an outside 
management consulting firm to do the work that they should be 
doing. And if they are not capable of doing it, they shouldn't 
be in the management position with respect to that program.
    Mr. Zients. As part of the contracting work, we have asked 
each agency to identify an organization where they believe they 
might be overly relying on contractors. A significant portion 
of the 23 or 24 agencies that are doing the pilot selected 
their acquisition organization because they have contractors 
doing acquisition. So that is an area it is not unusual to have 
contractors in the acquisition area. It doesn't mean that that 
is always incorrect. But I think that it is data that so many 
of the agencies pick that area of acquisition as an area we are 
potentially over-relying on contractors.
    Chairman Spratt. Which brings me to the next point. And 
that is, we shouldn't get so lost in devising management 
reporting systems that we forget that the real payoff comes 
from getting good managers.
    Mr. Zients. I 100 percent agree.
    Chairman Spratt. They are useful and helpful, but they are 
no substitute for getting good people.
    Mr. Zients. If you want great management you need great 
people.
    Chairman Spratt. How do we do that? That is the sleeper 
issue, it seems to me, within the efficiency and effectiveness 
of the Federal Government. How do we attract----
    Mr. Zients. Well, we have to have a hiring process that 
actually attracts the best and brightest. If it takes 6 months, 
on average, to hire someone--my experience in the private 
sector is the best talent doesn't loiter for 6 months, it finds 
another home. So we need to be able to hire the best talent and 
to hire the best talent you have to streamline the process.
    We need to make sure that we are providing enough training 
and continuing education. We need to make sure we have an 
appraisal system that rewards those that are performing well 
and enables us to give out feedback and potential out-
counseling for those who are underperforming.
    So I think there is a lot that we need to do on the human 
resources side, working closely with Director Barry at OPM, and 
it is an area of a lot of focus; because I 100 percent agree 
with you, if you want good management get great people.
    Chairman Spratt. You need to be doing some face-to-face 
interviewing too, if I can tell you how to run your shop. I 
know this is free advice and worth what it cost. But so much of 
your civil service applications today are generated by the 
Internet.
    Mr. Zients. To support your point I am so struck by--again, 
not to keep coming back to the private sector because it 
doesn't have all the answers--but how important part of a 
senior manager or any manager's time recruiting and coaching is 
and how central it is to their performance review in the 
private sector--again, with exceptions because there are good 
pockets of performance here too, but for the most part it is 
not as front and center for managers to be doing the recruiting 
and doing the coaching, and we need to change that.
    Chairman Spratt. Two areas where I really think you need 
help, big-time, top-flight help--IT, health IT, on which we are 
spending billions, literally billions. I think it was $18 
billion on the Recovery Act by itself, more money to come with 
the health care reform bill that is before us right now. It is 
clearly something where we have got to spend, where lots of 
money can be wasted if it is not closely supervised by people 
who are capable of doing it.
    And secondly, maybe even more importantly, with higher 
stakes, is financial regulation, the financial institution 
regulation. We have got to get people at the FDIC, the 
examiners, the people on the ground who are out there making 
day-to-day assessments of the quality of loans that banks are 
generating and many other things: investment quality, risk 
management, things of this nature. We have got to get better 
people than we have had. Not to disparage anybody, it is just 
that the problem has outgrown, I think, the capacity of many of 
our regulators.
    Do you have a plan for that? I know this is a little bit 
outside the scope of management performance, but in truth it is 
one of the keys to management performance and assessment.
    Mr. Zients. They aren't two areas that I am deep in 
personally, but I agree with you they are a high priority.
    Chairman Spratt. Are there other members? Mr. Schrader, do 
you wish to ask further questions.
    Mr. Schrader. Just, if I may, kind of a closing comment. I 
am excited about the prospects of your office and working with 
Congress and getting better results, the tendency for our 
bodies to micromanage all these agencies. I don't know about 
everybody else here, but I am a veterinarian, and so my ability 
to micromanage the Defense Department is probably miniscule. 
Some of the members have been here a long time and have greater 
expertise, but I can manage results.
    I don't have to be an expert in weapons procurement if we 
set targets and look to see whether or not the procurement 
process is getting us where we need to go. I think that is 
pretty clear. And I would hope that as you work through the 
process, that the outcomes that are worked up in concert with 
Congress are posted on a Web site so that--and actually I would 
hope they become part of every appropriation bill at the end of 
the Congress; that we can look back and see what the benchmarks 
were, what our targets were, how close we got, why we didn't 
get there, and use that to inform the discussion. Because 
sometimes I think we got to avoid the ``gotcha'' mentality.
    I also believe strongly that while I agree that certain 
agencies should probably be doing some of these things anyway, 
the real world in my little corner of the universe, in a small 
business, is that I reward employees for extra effort and 
behavior. And that gets me results, that gets me great results. 
I do better economically. I think my clients do better 
economically. And I think that same thing would hold true here 
in the government; that our taxpayers would do better if these 
resources are strategically invested.
    And working across the silos is so critical, Mr. Zients. I 
agree with you 100 percent. There are numerous States that have 
ways of addressing that, making the management more efficient, 
cutting through the middle management bureaucracy--whether it 
is a private industry or certainly in the public sector--is 
absolutely critical. And I would urge you to look at those 
examples that are out there, going forward.
    This Congress, myself in particular, is very interested in 
working with you in the short term and in the long term to make 
sure that outcomes-based budgeting becomes part of the Federal 
psyche. Thank you. I yield back.
    Chairman Spratt. Mrs. Lummis, any questions?
    Mrs. Lummis. No thank you, Mr. Chairman. I do very much 
appreciate your presence here today and the attention to the 
subject. It is a worthwhile expenditure of time.
    Chairman Spratt. Ms. Schwartz.
    Ms. Schwartz. No questions.
    Chairman Spratt. Mr. Director, your talents, experience, 
and ability and your presentation today speak well of the 
administration's commitment to the goals that you set out. And 
count on us to work with you in any way we can to bring these 
to fruition.
    Thank you very much for what you are doing and thank you 
for taking time to come and lay it out for us this morning. We 
very much appreciate your being here.
    Mr. Zients. Thank you.
    Chairman Spratt. At this point, I would like to ask 
unanimous consent that members who did not have the opportunity 
to ask questions be given 7 days to submit questions for the 
record. Any member who would like to submit an opening 
statement may do so as well. Without objection so ordered. 
Thank you again.
    [Questions for the record and their responses follow:]

Questions for the Record Submitted by Messrs. Ryan and Aderholt and the 
                        Responses by Mr. Zients

                questions from ranking member paul ryan
    1. Mr. Zients, you mentioned in your testimony that you want to 
create a partnership with the Budget Committee because it is in a 
unique position to look at government-wide program performance and help 
ensure that OMB's measurements are used by Congress. After 16 years of 
GPRA, 7 years of PART, and almost a year into the new Administration, 
your agency must have a running list of programs that are duplicative, 
ineffective, have outlived their usefulness, or are in need of cross-
agency coordination. Will you please provide us with a list of these 
programs so that we can get started?

    The Administration has identified 121 terminations, reductions, and 
other areas of savings that will save approximately $17 billion. The 
Terminations, Reductions and Savings volume of the Budget the 
Administration proposed in May 2009 identifies programs that do not 
accomplish their intended objectives, are not efficient, or that 
replicate efforts being completed by another initiative--and recommends 
these programs for either termination or reduction. These changes range 
from eliminating entitlements to banks and lenders making student loans 
that will cost taxpayers $41 billion over the next decade to ending a 
$7 million education program that was used by only 15 school districts 
and with no evidence that it was improving student achievements. No 
matter their size, these cuts and reductions are all important to 
setting the right priorities with spending. As part of the FY 2011 
budget that will be released in February will identify additional 
programs for termination and look forward to working with you on those 
proposals.

    2. Mr. Zients, are there any legislative changes that can be made 
that would help the Administration's performance budgeting effort?

    I believe the Government Performance and Results Act (GPRA), 
relevant Executive Orders, and requirements for outcomes measurement in 
several laws provide a powerful legal foundation on which to build and 
do not see the need for changes at this time. My views on that may 
change, though, as we gain experience so I would like to hold open the 
possibility of answering that question until after we get a chance to 
see how well our performance management approach is working and what 
barriers we encounter.

    3. Mr. Zients, you stated at the hearing that performance 
evaluations will be rigorous and conducted by a third party. Who will 
be the third party evaluators?

    The Administration is committed to rigorous, independent program 
evaluations and has devoted time and resources to improving the 
evaluation of programs throughout the Federal government. The 
Director's October 7th ``Increased Emphasis on Program Evaluations'' 
memo is that latest sign of that commitment. The third-party 
contractors who have the expertise to conduct rigorous evaluations will 
vary from agency to agency and from program to program. A competitive 
process is typically used to select the contractors who perform these 
evaluations.
                 questions from rep. robert b. aderholt
    1. You state in your testimony that ``Secretaries and Deputies will 
be charged with the setting of agency goals.'' What do you view 
Congress's role to be in the setting of these goals?

    OMB has asked agencies to determine the priority goals they will 
work to achieve given existing legislative and budget authority. The 
goals reflect near-term priorities for agency senior leadership, and 
are a subset of the efforts agencies will undertake to implement the 
laws passed by Congress. OMB has asked agencies to include the goals in 
their annual performance plans and Congressional Budget Justification, 
and to engage Congress as appropriate to discuss these priorities.
    We welcome efforts by Congress to help agencies achieve these 
important performance improvements, including monitoring agency 
progress and helping to overcome any barriers which arise. We will work 
to facilitate this by ensuring you have accurate and timely reporting 
available on progress.

    2. You state in your testimony that ``A clear line must link agency 
strategic goals and measurements to programs and employees.'' If done 
properly, this is a good way to identify underperforming employees. 
When your performancebased budgeting initiatives identify such 
employees, what is done? At what point are underperforming employees to 
be terminated?

    It is critical for Federal employees to understand how their 
efforts contribute to achieving the broader agency mission, and for 
managers to be able to consider the achievement of ultimate outcomes 
when evaluating the performance of individual employees. Guidelines for 
employee performance measurement are currently set by each Federal 
agency under regulations issued by the Office of Personnel Management. 
We will work to ensure the government-wide framework we establish 
enables agencies to link the measures they use to evaluate individual 
employees in the broader context of the strategic planning and 
performance reporting framework for the agency.

    3. It is my understanding that the Administration has abandoned the 
Program Assessment Rating Tool (PART) which received the 2005 
Innovation Award from Harvard University's John F. Kennedy School of 
Government. Is this true? If so, can you cite cases in which PART 
failed to successfully assess certain programs? Could the 
Administration not make improvements to PART instead of abandoning it?

    Some components of the PART were successful while others were 
problematic. We are reviewing the PART now to determine which elements 
should be continued as part of our performance management framework, 
and which should be discontinued.

    4. This past year, the Social Security Administration (SSA) came 
under scrutiny for hosting a lavish retreat for many of its employees. 
Were there any goals set under your performancebased budgeting 
initiative for this retreat? If so, were any of the goals met and what 
did you do with the results?

    OMB leads performance management efforts on a government-wide 
basis, and coordinates performance measurement activities at the agency 
and program level. We are not involved in setting performance measures 
for individual events.

    [Whereupon, at 11:28 a.m., the committee was adjourned.]

                                  
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