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97–666 PDF 2015

S. Hrg. 114–127 

PRUDENT PLANNING OR WASTEFUL BINGE? A 

LOOK AT THE END OF THE YEAR SPENDING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FEDERAL SPENDING 

OVERSIGHT AND EMERGENCY MANAGEMENT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 30, 2015 

Available via http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JONI ERNST, Iowa 

BEN SASSE, Nebraska 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

CORY A. BOOKER, New Jersey 

GARY C. PETERS, Michigan 

KEITH B. ASHDOWN, Staff Director 

GABRIELLE A. BATKIN, Minority Staff Director 

JOHN P. KILVINGTON, Minority Deputy Staff Director 

LAURA W. KILBRIDE, Chief Clerk 

LAUREN CORCORAN, Hearing Clerk 

SUBCOMMITTEE ON FEDERAL SPENDING OVERSIGHT AND EMERGENCY 

MANAGEMENT 

RAND PAUL, Kentucky, Chairman 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JONI ERNST, Iowa 

BEN SASSE, Nebraska 

TAMMY BALDWIN, Wisconsin 

CLAIRE MCCASKILL, Missouri 

CORY A. BOOKER, New Jersey 

GARY C. PETERS, Michigan 

BRANDON BOOKER, Staff Director 

DAHLIA MELENDREZ, Minority Staff Director 

RACHEL NITSCHE, Chief Clerk 
(III) 

C O N T E N T S 

Opening statement: Page 

Senator Paul ..................................................................................................... 1 

Senator Baldwin ............................................................................................... 2 

Senator Lankford .............................................................................................. 10 

Senator Ernst .................................................................................................... 17 

WITNESSES 

WEDNESDAY, SEPTEMBER 30, 2015 

Jason J. Fichtner, Ph.D., Senior Research Fellow, The Mercatus Center at 

George Mason University .................................................................................... 5 

Dean W. Sinclair, Changing the Culture of Washington ..................................... 7 

Philip G. Joyce, Ph.D., Professor of Public Policy and Senior Associate Dean, 

University of Maryland School of Public Policy ................................................. 9 

ALPHABETICAL LIST OF WITNESSES

Fichtner, Jason J., Ph.D.: 

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

Prepared statement .......................................................................................... 23 

Joyce, Philip G., Ph.D.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 62 

Sinclair, Dean W.: 

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

Prepared statement .......................................................................................... 60 

(1) 

PRUDENT PLANNING OR WASTEFUL BINGE? A 

LOOK AT THE END OF THE YEAR SPENDING 

WEDNESDAY, SEPTEMBER 30, 2015 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL SPENDING, OVERSIGHT AND EMERGENCY MANAGEMENT, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Rand Paul, Chairman of the Subcommittee, presiding. 

Present: Senators Paul, Lankford, Ernst, and Baldwin. 

OPENING STATEMENT OF SENATOR PAUL 

Senator PAUL. I call this hearing to order. Today we are going 

to be discussing wasteful spending. I think it is particularly appropriate since we have just gone through an escapade or a situation 

where we have basically continued to do more of the same without 

any changes, a continuing resolution (CR). And I think what we 

have failed to do through doing that is we have failed to look at 

particular problems like this one. 

The problem we are going to look at today will not balance the 

budget, but it would certainly be something that we ought to start 

somewhere with trying to cut out wasteful spending. 

So we are going to look today at the end-of-the-year government 

spending binge and how spending goes up at the end of the year. 

Today is the last day of the fiscal year (FY), and I think this should 

be of some concern. 

All last week, and even all month, Federal agencies have been 

ramping up their spending. Many studies have shown this. One of 

the witnesses, Dr. Fichtner, has shown September spending will be 

nearly double that of August. Another study shows spending jumps 

nearly 500 percent over average in this last week. And in a clear 

effort to spend as much as possible, today’s spending will move 

west in order to gain a few more hours in fiscal bingeing. West 

coast spending will be 70 percent higher today compared to spending in the east. 

Today we are going to hear some examples of wasteful end-ofyear purchases, and I will start with one that we have in our little 

Committee here. When I took over this Subcommittee and we 

moved into the new office, we found printer cartridges stacked almost to the ceiling for a printer that was years out of date. So we 

asked: ‘‘Why would someone with the knowledge of this buy all of 
2 

this stuff? And why would it be still sitting around?’’ We found out 

that a previous Chairman, several Chairmen back bought the toner 

as part of an end-of-the-year spending binge, and that Senator has 

now been gone for years, but the toner still remains. 

This practice will not continue under my chairmanship. This 

year I am again going to turn back in nearly half a million dollars 

from my own personal office budget. We are going to turn back 

money here in this Subcommittee as well. More than just talking 

about problems, we want to find solutions. 

I have a possible solution or a way to help to end some of the 

wasteful spending, and this is called ‘‘Bonuses for Cost-Cutters 

Act.’’ What it would do is reward Federal employees for identifying 

excess funds and to actually turn those funds back into the Treasury. 

As you can imagine, appropriators from both parties are opposed 

to my bill, but we think it would be another way to go forward with 

trying to actually reduce some spending by giving people bonuses. 

If you are in the private marketplace and you can save money for 

your employer, you often get a bonus. Why don’t we give people, 

instead of having the perverse incentive to spend it all at the end 

of the year, why don’t we actually give you a bonus if you will turn 

it back in? 

We have had a great deal of discussion on the floor about controlling the power of the purse and how having a continuing resolution 

does nothing to really exert our power of the purse. There are too 

many, though, I think, who often do not care what we buy or how 

much we spend of their money. 

So another idea I have other than giving Federal employees bonuses is why don’t we give contractors bonuses as well for coming 

under budget instead of having programs where we simply add cost 

plus whatever it takes to get a project finished. I think really it is 

important, if Congress is to assert its authority of the power of the 

purse, that we look in every nook and cranny of the budget and 

look for ways to save money. To me, even when I was not in office, 

we often heard at every level of use it or lose it, get rid of it, spend 

it, or you will not get it next year. And I think this still happens 

in government, and it has happened for a long time. And I for one 

hope that this Committee hearing will go a ways toward trying to 

stop this. 

With that, I would like to recognize the Ranking Member, Senator Baldwin. 

OPENING STATEMENT OF SENATOR BALDWIN 

Senator BALDWIN. Thank you, Mr. Chairman. 

Good afternoon. I want to welcome everyone here today. We are 

here today to discuss end-of-the-year spending at agencies throughout the Federal Government. I want to thank our witnesses who 

are here today, which we all know is the last day of the Federal 

fiscal year. I look forward to your testimony that I think will help 

put these spending patterns that will be talked about into some 

perspective. 

The title of today’s hearing is, ‘‘Prudent Planning or Wasteful 

Binge?’’ It suggests that this is the day that Federal agencies work 

through to spend what is left in their budgets, either as the result 
3 

of managing funds to sustain unexpected costs or by any means 

necessary before the funds expire. And I imagine that if we were 

to check in with budget directors at Federal agencies this afternoon, they would have something else on their minds, and that is, 

whether the Federal Government will be open tomorrow. 

No doubt that they are examining resources and preparing their 

operations for any number of scenarios, including a shutdown, no 

matter how close leaders in the House and Senate say they are to 

passing and reaching a final deal. I know we did our work in the 

Senate earlier today, but it is not done yet. That is because the end 

of the fiscal year—presents a deadline for Congress as well. Political games have resulted in another manufactured crisis that is 

driving us to the brink of yet another government shutdown. These 

are problems that we have seen before. 

Hardworking families in my State of Wisconsin and across the 

country expect and deserve better from the Congress of the United 

States. The people we represent get up every day and do their job, 

and it should not be too much to expect that we do ours by keeping 

the government open for business and working together to get 

things done for the American people. 

This afternoon we will examine if spending at the end of the fiscal year is, in fact, a source of waste in the Federal Government. 

But I think we already know that planning for a possible shutdown 

and operating on continuing resolutions are most definitely a 

source of waste. Even after a CR is passed, agency budget officers 

must spend time planning for the short term. Drifting from one 

budget crisis to the next makes our government less efficient and 

more expensive for taxpayers. 

The 2013 government shutdown not only wasted resources and, frankly, weeks of productivity, it cost $24 billion in lost economic 

output. Our full Committee described the failure to pass appropriations bills on time as part of ‘‘crisis budgeting’’ when in 2013 it 

looked at the costs and impacts of operating through continuing 

resolutions, the threat of shutdown, and across-the-board budget 

cuts to Federal programs through sequestration. Two years later, 

not much has changed. 

And so how do Federal agencies deal with the uncertainties of 

crisis budgeting? In areas where they have discretion to delay 

spending money, they do. And that is no different than anyone balancing their household budget would do. 

With all of this uncertainty, it is a reasonable response for budget directors to wait until later in the year when it is clear how 

much funding is available for staff training or staff generally, let 

us say. Agencies issue shorter grants and contracts with increased 

overhead costs and delay contracts until later in the fiscal year because it takes time for contracting officers to do their work. Squeezing contracts, grants, and purchases into the last few months of the 

fiscal year can certainly lead to inefficiency. 

When the Government Accountability Office (GAO) surveyed 

agencies about the impact budget uncertainties have on their operations, the Bureau of Prisons Field Acquisition Office admitted that 

when a CR is in place, trying to complete their contracts of more 

than $100,000 each by the end of the fiscal year negatively affects 

the quality of competition. 
4 

Resolving crisis budgeting may not reduce pressure to ‘‘use it or 

lose it,’’ as it is called, but it would certainly restore some certainty, some predictability. To only refer to money obligated in August or September as ‘‘a spending rush’’ or ‘‘wasteful binge’’ assumes that at the end of the fiscal year a Federal agency would do 

just about anything to pad their budget. But as we all know, the 

need for staff training and technology are inexhaustible, and in our 

current budget environment, there are simply fewer resources for 

low-priority purchases. GAO found this to be true for most discretionary programs in their 1998 report on year-end spending and 

would likely find the same, I would say, in 2015. 

In my home State, we have a work ethic that is really second to 

none, and we pinch our pennies. And our people expect the same 

with their taxpayer dollars that we invest in their future. So when 

we find egregious instances of wasted taxpayer dollars, it is our job 

to act no matter at what point in the fiscal year that money is 

spent. The fact is that far too many Wisconsin families and individuals, despite their hard work, do not have extra money left in their 

own budgets at the end of the month or the end of the year. Stories 

about government spending their tax dollars on a truckload of flower pots or other such examples to avoid budget cuts are simply indefensible. 

I expect that we will have time this afternoon, Mr. Chairman, to 

talk not only about what happens at the end of a fiscal year, but 

also continue the dialogue that the Chairman and I have begun 

earlier this year about finding solutions to the problems of wasteful 

government spending. And I want to thank Chairman Paul for once 

again providing us an opportunity to root out wasteful spending. I 

look forward to our conversation about the incentives built into our 

budget process and the extent to which they lead to decisions that 

waste taxpayer dollars. 

Senator PAUL. Well, thank you, Senator Baldwin. 

I think that it is important to note that there is some agreement. 

I think continuing resolutions are a terrible way to run government. But I think it is also important to point out that this has 

been going on for a decade under Republicans and Democrats. It 

is both parties that have been a huge failure, and it is part of the 

reason why there is about an 11-percent approval rating for Congress because we do not do our job. 

End-of-the-year spending will not balance the budget if we were 

to fix it. It is a phenomenon, and we should fix it. But we do not 

fix anything around here with a continuing resolution. Nothing 

gets better. We never examine bad spending or good spending, and 

nothing gets better. So I am very frustrated with the process of the 

continuing resolution and will continue to fight against that. 

At this point, I would like to introduce our first witness, Dr. 

Jason Fichtner, who is a senior research fellow at Mercatus Center 

at George Mason University. His research focuses on Social Security, Federal tax policy, Federal budget policy, retirement security, 

and policy proposals to increase savings and investment. Previously 

he served in several positions at the Social Security Administration, including as Acting Deputy Commissioner of Social Security. 

Most relevant today, he is the lead author of a paper published just 

last year entitled, ‘‘Curbing the Surge in Year-End Federal Govern-
5 

1The prepared statement of Dr. Fichtner appears in the Appendix on page 23. 

ment Spending: Reforming ‘Use It or Lose It’ Rules.’’ The Committee would like to at this point welcome Dr. Jason Fichtner. 

TESTIMONY OF JASON J. FICHTNER, PH.D.,1 SENIOR RESEARCH FELLOW, THE MERCATUS CENTER AT GEORGE 

MASON UNIVERSITY 

Dr. FICHTNER. Thank you, Senator. Good afternoon, Chairman 

Paul, Ranking Member Baldwin, Senator Lankford. Thank you for 

inviting me to testify today. 

My testimony focuses on two issues: first, the extent to which 

perception of a year-end spending problem is reality; and, second, 

how various reforms would improve the efficiency of spending by 

Federal Government agencies and departments. 

From this discussion, I hope to leave you with the following two 

takeaways: 

First, while anecdotes and media stories of year-end spending 

surges are widespread, empirical evidence for year-end spending 

surges and use-it-or-lose-it spending—or the motivation behind the 

spending—is significantly less available. However, my research and 

recent research by other scholars is beginning to demonstrate empirical evidence that a year-end spending phenomenon is real and 

potentially wasteful. 

Second, allowing Federal agencies limited rollover or carryover 

authority could reduce wasteful year-end spending splurges. Similar reforms at the State level and internationally have shown 

promise, but more research is still needed. 

The use-it-or-lose-it phenomenon refers to the propensity of U.S. 

Government agencies to spend unused financial resources toward 

the end of the fiscal year. This spending is usually driven by fear 

that leftover resources will be returned to the Department of the 

Treasury and will prompt future congressional budget cuts for the 

agency. 

Economists Jeffrey Liebman and Neale Mahoney analyzed data 

from the Federal Procurement Data System and the White House’s 

IT Dashboard to show that not only is there a surge in Federal 

spending at the end of the year, but also the spending is of lower 

quality. According to Liebman and Mahoney, at the end of the fiscal year, ‘‘the prospect of expiring funds’’ causes agencies to spend 

all their remaining resources, ‘‘even if the marginal value is below 

the social costs of those funds.’’ The International Monetary Fund 

found that year-end spending surges are a ‘‘commonly observed 

phenomenon in government administrations.’’ Such surges have occurred in Canada, Taiwan, and the United Kingdom, just to name 

a few. 

My research analyzed publicly available data from 

USASpending.gov related to spending on prime contracts awarded 

by executive departments. My analysis focused on this type of 

spending—which comprised roughly 12 percent of total 2013 Federal spending—because the data are readily available throughout 

the USASpending data archive. 

My research shows that a remarkably large percentage of Executive Branch contract spending occurred near the end of the fiscal 
6 

year. If an agency were to spread its contract authority evenly over 

a 12-month period, roughly 8.3 percent of spending would occur in 

each month. However, in the last month of fiscal year 2013, the Department of State spent 38.8 percent of its contract expenditures, 

and the Department of Health and Human Services (HHS) spent 

28.7 percent. 

Now, not all agencies exhibited a year-end spending surge. For 

example, the Department of Energy (DOE) spent only 6 percent of 

its annual contract expenditures in September. But as the data 

show, most Federal agencies were well above 8 percent, and many 

were above 16 percent. Between 2003 and 2013, of the data I 

looked at, across all executive departments, 16.9 percent of obligated contract expenditures occurred during the month of September. That is more than twice what we would expect if spending 

were split evenly over 12 months at 8.3 percent per month. 

It is important to point out that the pattern of fiscal year-end 

spending surges is evident across all fiscal years analyzed and it 

is not unique to the current administration or the past few Congresses, as Senator Paul referred to. Year-end spending surges 

have become the norm, regardless of administration, party control 

of Congress, or delays in finalizing agency appropriations. 

Academic research and some anecdotal evidence suggests that 

the current budget rule of use it or lose it is not optimal and may 

be encouraging wasteful spending of taxpayer dollars. The question 

remains: If such spending is indeed wasteful, what can be done to 

reduce it? 

One idea is to allow agencies limited rollover authority—also 

known as carryover—for funds not spent by the end of the fiscal 

year. The Federal Government could begin with a pilot exercise to 

test the merits of limited rollover authority. Within certain Federal 

departments, agency subcomponents could be given the authority 

to roll over up to 5 percent of the contract budget authority into 

the next fiscal year. 

To avoid lengthy delays in the spending of rollover funds and to 

discourage large accumulation of such rollover funds, such funds 

should be spent within 2 years. Department or agencies that wish 

to participate in the pilot could submit a request to Congress, 

which could then direct the Government Accountability Office to 

oversee, audit, and evaluate the program. 

Executive departments should be required to submit midyear 

budget reviews to Congress and the GAO. These reviews would detail, by agency subcomponent, the anticipated expenditures for the 

remainder of the fiscal year, the anticipated surpluses at the end 

of the fiscal year, and the reasons for these surpluses. Midyear reports with similar components have yielded success in reducing 

use-it-or-lose-it pressures and year-end spending surges when tried 

at home in Oklahoma and overseas in Taiwan. A pilot program 

that gives limited rollover authority to several departments, combined with congressional and GAO oversight of rollover accounts, 

would be a useful experiment to see whether these changes to the 

Federal budget process would reduce wasteful year-end spending. 

Thank you for your time and this opportunity to testify today. I 

look forward to your questions. 

Senator PAUL. Thank you, Dr. Fichtner. 
7 

1The prepared statement of Mr. Sinclair appears in the Appendix on page 60. 

Our next witness is Dean Sinclair of Changing the Culture in 

Washington. Mr. Sinclair was a long-time Federal employee overseeing multi-million-dollar contracts. This was particularly the case 

when he was the Executive Director of the Iraq Scientists Engagement Program for the Department of State in Baghdad. Mr. Sinclair is keenly aware of the use-it-or-lose-it phenomenon and is 

deeply troubled by it. 

I am looking forward to hearing more about your experiences and 

getting your insights. Mr. Sinclair. 

TESTIMONY OF DEAN W. SINCLAIR,1 CHANGING THE CULTURE 

OF WASHINGTON 

Mr. SINCLAIR. Thank you, Chairman Paul, Senator Baldwin, and 

the Subcommittee. Thank you for letting me join you today. 

I have a lifetime of experience working both sides of the fence as 

a contractor and as a direct hire for the U.S. Government, both in 

the military, in the army, and in the Department of State. I will 

start with the story that you referred to, Senator Baldwin. 

There was an ambassador in Africa who asked his facility manager to order four flower pots, and thinking about it, he came back 

to that facility manager and said, ‘‘Hey, it is the end of the year. 

I have a big budget there. Why don’t you buy a truckload of flower 

pots for us?’’ And the facility manager, who I spoke to personally 

firsthand, hated himself for having to do that. He was disgusted 

with the whole process, but, of course, he did it because he was 

asked. 

So he got the flower pots in Africa. Who knows where they came 

from? When they showed up, they took four of them out, put them 

around the embassy where they were needed, and the rest were 

put behind a building and left just to rot in the sun, because you 

cannot let them go, you cannot give them away because of the 

rules, you cannot sell them. You had to keep them. 

Now, you have to wonder. That was an ambassador. I am sure 

he or she sometimes risked his or her life in the course of their 

duty, like I was doing in Iraq for 9 years, just to do our job. It was 

often a very insecure thing. We are doing things that are for the 

benefit of America. Oftentimes it has direct impact on our national 

security. These are not disloyal people. These are not people who 

are out to just do evil things to America. If that is the case, then 

what is happening? What causes a person to make such an egregious decision about wasting money at the end of the year? 

My thought, after all these years, is that they do not have any 

incentive to do it. At the end of the year—and let me give it to you 

clearly. There are three steps that I think need to take place on 

this end of it. For the employees themselves to voluntarily come 

forward and not waste the money but spend it effectively and efficiently, three things need to happen. 

One, at the end of every year, they are evaluated. They get an 

employee evaluation form. You will not find on that form a good 

statement that says, ‘‘Have you spent your money that has been 

budgeted?’’ And if you did and completed your program, well, that 

is one of the best check marks you can get. 
8 

However, if you happen to complete your mission and return surplus money to the Treasury, well, that should be the highest check 

mark an employee gets on their annual evaluation. Notice you do 

not have to build a bureaucracy. You do not have to come up with 

a new program. You just need to put it in there, and it is not— 

if you check—and I have—it is not in there in a way that effectively evaluates employees that way. 

Another one, with no bureaucracy, no extra programs attached to 

it, simple public recognition is one of the most effective motivating 

tools for employees, and if at the end of the year they turn money 

back and that is surplus money, they should get, like I did, I got 

two plaques for having an outstanding program in Iraq from an 

Under Secretary and from the Ambassador himself. You better believe I worked hard for those. And at the end of the year, if people 

have turned money back in, why not just give them the plaque, 

‘‘Hey, that is what we wanted,’’ do it in front of the whole organization, and put it in their personnel record, and probably in the local 

news source for that agency. I was written up in the agency—it 

was the U.S. Army Corps of Engineers (USACE) magazine. It was 

the proudest moment of my life just to see that news article. 

So the third one, Senator Paul, is exactly what you said. I know 

you did it in a bipartisan effort with Senator Mark Warner, and 

that is, why not give people a bonus of some sort? And I am not 

saying a large one, but I personally turned back $1 million when 

I was running an $8.5 million program. And when I did that, the 

people I was working for, they looked at me like a deer in the headlights, ‘‘I have never seen this before.’’ What if they had just given 

me a little bonus for doing the right thing? 

Those are the three things that you need to do to get the people 

on board to support not wasting money at the end of the year. 

Senator BALDWIN. I would like to take the opportunity to introduce Dr. Philip Joyce and add my personal thanks to you, Dr. 

Joyce, for being here today. 

Dr. Joyce is associate dean and professor of public policy at the 

University of Maryland and has spent more than 30 years practicing and studying budgets at the Congressional Budget Office 

(CBO), the Illinois Bureau of the Budget, and the Illinois Department of Corrections. He is the author of a report detailing the costs 

of budgeting uncertainty based on his research and interviews with 

current and former government officials. That report describes the 

effects of late appropriations on Federal agency operations over the 

last 35 years and explains how Federal budget officers have attempted to address greater levels of uncertainty every year. That 

report is relevant today as Congress votes to keep the government 

open. 

Dr. Joyce testified before our full Committee in 2013 and talked 

about year-end spending in the context of budget uncertainty, and 

I am delighted to welcome you to the panel here today to provide 

us with your insight. Thank you, and we await your testimony. 
9 

1The prepared statement of Dr. Joyce appears in the Appendix on page 62. 

TESTIMONY OF PHILIP G. JOYCE, PH.D.,1 PROFESSOR OF PUBLIC POLICY AND SENIOR ASSOCIATE DEAN, UNIVERSITY OF 

MARYLAND SCHOOL OF PUBLIC POLICY 

Dr. JOYCE. Thank you very much. Thank you, Chairman Paul, 

Senator Baldwin, Senator Lankford, Members of the Subcommittee. 

I am very happy to be here today. 

My message to you today is a relatively simple one; that is, I 

think end-of-year spending is real, I think it is potentially a problem to the extent that funds are wasted. I do not think in the overall scheme of things it is perhaps the highest priority problem that 

we have. But if end-of-year spending is real, I do want to point to 

something else that is real as well, and that is the uncertainty that 

is created by the dysfunction of the appropriations process. 

I think end-of-year spending to some extent is a predictable and 

understandable response by Federal agencies to the incentives that 

they face, and that creating more certainty in the process would actually do far more to curb waste and inefficiency in government 

than trying to rein in end-of-year spending. 

But first I want to acknowledge that spending, particularly for 

contracts and other types of non-salary items, is backloaded, at 

least in relative terms. And this, by the way, is not peculiar to the 

Federal Government, as has been suggested. There are lots and 

lots of governments where this is an issue. I started my career as 

a budget analyst in the Illinois State budget office. The fiscal year 

started on July 1. June was a very busy month. So this is not 

something that is peculiar to the Federal Government. 

A lot of this at the Federal level has to do with the laws that 

govern Federal spending. Agencies cannot overspend their appropriations because of the Anti-Deficiency Act. On the other hand, 

they are supposed to spend the funds that have been appropriated 

because of the anti-impoundment statutes. So it is quite prudent 

for agencies to set aside funds until they know that they have the 

money. To that extent, end-of-year spending could be a prudent response to the incentives that they face. 

But that is not to suggest that agencies do not sometimes spend 

money just to avoid losing the funds and that they also do not 

sometimes spend money in order to protect their budgetary base for 

a future fiscal year. 

So it is not an excuse for wasting funds on unneeded expenditures, not only at the end of the year but any other time. But if 

one is to get a handle, I think on the real problem, I think it is 

important to be clear about the distinction between end of year and 

wasteful, because the two are not synonymous. The key question 

here has to do with the quality of spending, not necessarily the 

timing of spending. And if one looks at the GAO high-risk list, for 

example, there are a whole lot of examples of fiscal exposure, larger fiscal exposures than end-of-year spending. For example, there 

is the $80 billion annual cost for Medicare and Medicaid improper 

payments, which I would say substantially dwarfs the cost of endof-year spending. 

So in relative terms, I would say we are not talking about a lot 

of money, but to the extent that some spending is wasted at the 
10 

end of the year, it may be useful to curb the practice. Among other 

things, it actually does a lot of damage to the credibility of the Federal Government when these kinds of examples come to light. 

But how? That is where I think budget uncertainty comes in. 

Two years ago, as Senator Baldwin said, I testified at a hearing 

held by the full Committee designed to highlight the harmful effects of budget uncertainty. We know what happened this year, but 

this year is not unusual. There have only been four times in the 

last 40 years that the appropriations process was completed on 

time. And it is a good thing to avoid government shutdowns, but 

government by CR is no prize either in the sense that it creates 

a lot of uncertainty and that uncertainty itself causes waste. Late 

appropriations push many contract renewals to later in the year. 

That creates a greater potential to make mistakes. It increases the 

cost of contracts, either because savings cannot be locked in or because contractors sometimes exact a risk premium for dealing with 

the Federal Government because of the uncertainty that they face. 

In addition, agencies waste a great deal of time and, therefore, 

money preparing for potential government shutdowns and also interpreting what they are permitted to do and not do under a continuing resolution. 

The effects of budget uncertainty, of course, are also felt by recipients of Federal funds, such as State and local governments and 

private contractors. 

All this suggests that our normal dysfunctional way of doing 

business creates a lot more waste and compromises the effectiveness of government far more than does end-of-year spending. And 

no State or local government could get away with this. Chronic 

funding delays would result in lower bond ratings and increased 

borrowing costs and a lot of political fallout. 

So my purpose here is not to defend waste. Wasteful spending, 

regardless of the magnitude or the timing, should be avoided. It is 

that end-of-year and wasteful are not synonymous, and that in the 

current fiscal environment, end-of-year spending practices are an 

entirely understandable—even reasonable—response to the dysfunction and unpredictability of the appropriations process. I think 

making that process work better would not only reduce end-of-year 

spending, but would also improve the overall effectiveness of government. 

I thank you very much for your attention. 

Senator PAUL. Thank you. Senator Lankford. 

OPENING STATEMENT OF SENATOR LANKFORD 

Senator LANKFORD. Thank you. Thanks, Mr. Chairman. Ranking 

Member, thank you. I appreciate that. 

Dr. Joyce, let me pick up where you just left off there, and that 

is this broken process. As you mentioned, I believe you said four 

times in the last 40 years, appropriations have been done on time 

and in order with the 12 appropriation bills at the scheduled moment. That is not just a broken process; that is a shattered process, 

and it has got to be fixed. 

Dr. JOYCE. Right. 
11 

Senator LANKFORD. One of the ideas that is being floated is some 

way to be able to build in an incentive. Congress only seems to get 

stuff done when they have to get it done. 

Dr. JOYCE. Right. 

Senator LANKFORD. And at that point, even at the last moment, 

to build in some sort of process that would create certainty in two 

areas. One is that the appropriations process will be done, and the 

other one is that we do not have shutdowns. 

So one idea being floated is that at the end of a fiscal year, we 

would have an automatic short-term CR that would kick in for 30 

days, but that there would be a cut in the budget for the legislative 

branch, both the House and the Senate, and our committees, and 

the White House Executive Office, just limited to those folks that 

actually do the negotiation, we would have a small budget cut. 

That budget cut would increase the next month and the next 

month to push Congress to actually get its work done. That is not 

damaging other agencies. They are still functioning. But it is not 

trying to create an arbitrary deadline but to put it on Congress, 

there is really no difference between October 1 right now and December 11. We have just created another deadline. But there is 

nothing going to change between the two. So I am trying to find 

some sort of pressure point to create and do that. 

Have you heard of that kind of idea? I agree CRs are a terrible 

way to do it, but if we trip over into October 1, I do not want to 

have the instability as well. I want us to get to the appropriations 

process. I would be interested in your input. 

Dr. JOYCE. I think that any kind of incentive that you create, if 

you believe that it would work, would be a good thing. I do think 

that what might end up happening in that case is that the real 

deadline, to the extent there is one, would just shift from being October 1 to November 1; that is, the point at which somebody believes that something that matters to them is actually going to 

happen is the point at which someone will actually get down to 

doing the job. 

Senator LANKFORD. Correct. 

Dr. JOYCE. And when I interviewed people for this 2013 study, 

one of the striking things that I found is a lot of people out there 

in Federal agencies—and this I think accounts partially for the 

movement of contracting toward the end of the year—actually do 

not believe they are going to get an appropriation on October 1 

and, therefore, they view normal as January 1 because they have 

experienced that. 

Senator LANKFORD. Right. And so that is the fixable moment 

that we have to find a way to be able to add leverage basically to 

Congress and to the White House that in our negotiations all three 

parties can get together and try to get this done on time and try 

to get us back to that. 

Dr. JOYCE. Correct. 

Senator LANKFORD. So we will continue to explore that together 

in the days ahead. 

Let me ask this group as well, the idea about floating a cap of 

what you can do in contract spending or in total spending. As you 

mentioned before, the 8.3 percent would be the normal in the process. If you did a cap saying that you could do no more than 12 per-
12 

cent of your budget in the final 2 months, would that make a difference? Or would that basically instead, being September now, you 

would have this big massive spending in July? 

Mr. FICHTNER. I think, Senator, you already hit the perverse incentive in your question, which is one of the things—the problem 

we have is there is a deadline that forces agencies to spend without 

being able to roll over any sort of authority to the next fiscal year. 

If you moved that one month up, my guess is you would see the 

data show that that one month up would then be a spending 

splurge as well. So the idea is not necessarily changing the date, 

but how do you change the incentives with the structure of the 

budget process to give them a different incentive to roll over money 

and spend it more prudently. 

Senator LANKFORD. Right, because the key really here is oversight and to make sure that things are done well, and that when 

there is wasteful spending, rather than just they were being careful 

with budgets and making sure they did not go over, that is understandable to be able to leave that. The problem is, at the end of 

it, leftover funds need to be returned to the taxpayer and to what 

is happening in debt reduction rather than spent on flower pots. 

Mr. SINCLAIR. Another thing that happens is when you come up 

with rules like that, then people, they work to the rule. And what 

it does not address is that cultural mindset of wasteful spending, 

that is acceptable. And if you change that, then you will not need 

to worry as much about those caps. 

Senator LANKFORD. OK. One last question as well about the carryover authority. Oklahoma has that in some of our agencies and 

within the State has the ability to be able to do carryover. Again, 

how does that not just incentivize agencies to carry over and then 

spend twice as much, I guess? 

Mr. FICHTNER. Again, Senator, the point is changing the incentives, and you also mentioned the idea of congressional oversight. 

This cannot be done in a vacuum. So one of the things I recommend is a pilot that looks to the States where they were successful, and part of that success is having midyear reports. 

Senator LANKFORD. Do you have an agency that you would recommend as a pilot on that? 

Mr. FICHTNER. Right now I would start with the Department of 

State and also the Department of Health and Human Services, sir. 

Senator LANKFORD. Why? Because they spent 38 percent in the 

final month? 

Mr. FICHTNER. That is part of it. They are the two biggest 

outliers, and I think they are also the two biggest examples with 

the anecdotes that show where waste is. So we could control waste 

and also then change the incentives by the same time. It could be 

a double win. 

Senator LANKFORD. Thank you. 

I yield back. Thank you. 

Senator PAUL. Thank you, Senator Lankford. And the only thing 

I would add to that is if you are going to cut someone’s budget as 

an incentive, if you actually cut salaries, that might be more of an 

incentive. 

Now I would like to recognize Senator Baldwin. 
13 

Senator BALDWIN. Thank you. I know, Mr. Chairman, you yielded to Senator Lankford because he has another obligation. 

Senator PAUL. Go ahead. 

Senator BALDWIN. Well, thank you all for your testimony. I very 

much appreciate it. 

I know we are focusing in on the Federal Government and, in 

particular, the Executive Branch. Dr. Joyce, you said in your testimony that year-end spending is not unique to the Executive 

Branch of the Federal Government, nor is it unique to government 

at any level, and perhaps not even to government. There may be 

examples of use-it-or-lose-it within the private sector operating on 

fiscal year calendars. 

I am sure if there was a silver bullet answer to the problem, you 

would have offered it in your testimony, but are there examples of 

budget directors outside of the Federal Government finding useful 

tools that we should be looking at to address the waste that can 

be present in year-end spending? 

Dr. JOYCE. Well, I think there are—two things I would say. The 

first is that the premise of your question, which is that this is a 

phenomenon that exists across lots and lots of organizations, is absolutely correct. And the reason for that is because most organizations have budgets that are time limited; that is, most organizations have some point in time when the fiscal year ends, and anytime you have that situation, you are going to create incentives for 

those people to try to use the money that they have before it disappears, unless there is some way to incentivize them to not do 

that. 

So the only thing that I am aware of is trying to exercise more 

oversight; that is, if you think that end-of-year spending is actually 

a problem and that the spending at the end of the year might tend 

to be for less high priority items, that you create some additional 

checks. 

For example, when I worked in the Illinois Budget office, when 

agencies were trying to spend a lot of money at the end of the year, 

they actually had to get our approval in order to do that if it occurred in the last quarter of the year for some things where they 

did not have to get that approval if they had spent the money earlier in the year. Just as an example. 

Senator BALDWIN. Just out of curiosity, I came from local and 

then State-level government prior to the Congress of the United 

States. Wisconsin had a 2-year budget. 

Dr. JOYCE. Right. 

Senator BALDWIN. And you talked about the propensity for 

backloading these expenditures just because you get a budget and 

it takes you awhile to begin to implement competitive bids for contracts, et cetera. Have you had the opportunity to examine others 

that do a 2-year budget? And I am not necessarily a proponent of 

that, but how does it change behavior? Do you see less backloading 

in different budget lengths? 

Dr. JOYCE. Dr. Fichtner may have looked at that. I have not 

looked at it. I think logically what one would think would occur 

under a 2-year budget—and I have some reservations for other reasons about a 2-year budget, but in terms of—— 

Senator BALDWIN. As do I. 
14 

Dr. JOYCE [continuing]. This specific question, I think that the 

incentives would occur half as often if what happened was that you 

had funds available for 2 years as opposed to having funds available for only one year. 

Senator BALDWIN. I want to explore further, Dr. Fichtner, your 

comment or your ideas about rollover authority. You talk about the 

Federal agencies being allowed to keep a portion of their unobligated funds to reduce the incentives created under use it or lose 

it. What safeguards would you propose be in place to ensure that 

these funds, which would arguably be subject to less oversight once 

they were removed from the regular appropriations process, so that 

these funds do not become more susceptible to wasteful spending 

once rolled over? 

Dr. FICHTNER. Senator, that is an excellent question. In fact, I 

would actually give them more scrutiny, not less, in the congressional process, including having GAO monitor it. One of my concerns—and I think you probably are showing this as well—is if you 

give an incentive to an agency to have rollover authority, they may 

purposely not spend money that Congress has authorized and appropriated for the funds intended, just to show they can get a 

bonus or just to show they have saved money and roll it over. 

So what I would do is have a pilot in which they apply to Congress so that Congress can have a chance to have witnesses, ask 

them: Why do you think your program is best suited for rollover 

authority? How do you plan to do it? Then have midyear reports 

that go to Congress. GAO evaluates it to make sure that they are 

spending it appropriately and not just putting it in what is called 

the ‘‘rathole.’’ That is very insightful, and that is how I would put 

some protections on it, Senator. 

Senator BALDWIN. Do you have any other comments on that, Dr. 

Joyce? 

Dr. JOYCE. Well, on rollover authority, actually going back very 

far into history, when Vice President Gore was Vice President, 

there was a reform called ‘‘Reinventing Government,’’ and one of 

the specific recommendations of Reinventing Government was that 

agencies be able to keep 50 percent of the money that they saved 

at the end of the fiscal year. The trick from an agency perspective 

is that they have to believe that in the executive process the Office 

of Management and Budget (OMB) will not take that money out of 

their base for the next fiscal year. So they have to believe that they 

will actually get to keep and spend it as opposed to it will just become a reduction in next year’s budget. So everybody has to sort 

of agree to play along in order for the game to work. 

Dr. FICHTNER. And the congressional process as well. 

Dr. JOYCE. Correct. 

Senator BALDWIN. Right. Points that you have both made. Thank 

you. 

Senator PAUL. I would like to have this question really for the 

panel. We have put forward a bill that Mr. Sinclair mentioned, and 

it is a bill to basically give incentives. We have talked about incentives for your budget or for our general budget, but I think people 

respond best to incentives that actually have to do with themselves. 
15 

In our bill basically we put forward—and someone has to approve that they have done what they were told to do. Basically 

your agency has a mission, and I believe we have the chief financial of course, and an Inspector General (IG), both have to certify 

that you have performed your mission. 

But, see, I think throughout an enormous government that spends $3.8 trillion that, the cartridges that are piled up in our 

room back here, that somebody, if they thought they were getting 

a $1,000 bonus by not ordering $10,000 worth of printer toners, 

they probably would not have done it. And this does work. 

And as far as end-of-the-year spending, it would only work in a 

corporation or happen in a corporation where there is not good 

oversight and where it is so big and bureaucratic that it is somewhat like government. In a well-run business, it would never happen because the incentives would exist throughout, and you would 

want to be pleasing your boss to get a promotion to save money. 

You would be telling your boss, ‘‘Hey, I ordered 30 percent less 

toners this year, so we saved the company money.’’ And you would 

expect something for that. 

But I would like to know, just each of you individually, what you 

think of the idea of giving a personal incentive. I personally do not 

think much of carrying the money over to the next year. It might 

help a little bit not to have the crunch of everybody trying to get 

rid of it. But it really does not give anybody the incentive to give 

it back to the people whose money it is, which is the taxpayer. 

Why don’t we start with Jason and work our way down? 

Dr. FICHTNER. Thank you, Senator. I think that your idea in the 

bill is a very good idea. What I would also do is couple it with the 

rollover spending, because one of the things you want to do is make 

sure incentives align. You give the employees an incentive, but the 

management does not have an incentive to rollover authority. Then 

basically they might look at their employee poorly and say, ‘‘Hey, 

you just gave money back. Congress is going to take it away next 

year, and you have ruined my career.’’ That is one of the things Mr. 

Sinclair was pointing out. So I would look at this as a tandem idea 

of giving the incentive to the employee to identify fraud and wasteful spending with a dollar award, and the manager as well. 

Senator PAUL. Well, one thing on that, you could sort of share 

the incentive and make everybody part of a team where the guy 

at the very top or the woman at the very top is also getting a piece 

of the action as well. So I think there could be something where 

the whole agency could even take a little small portion of the savings, and the guy or the woman who found the big savings gets a 

bigger percentage chunk, but then it is spread throughout the 

whole agency. People just react to stuff that affects them personally. 

Dr. FICHTNER. I agree, Senator. The other thing I would mention, 

because I have mentioned this to Mr. Sinclair and we have talked 

about this, is changing the incentives for the Senior Executive 

Service (SES). They have performance reviews every year which 

are based on some qualities and assessments, and one of them is 

business acumen. That category should include something that 

says if fiscal dollars are not spent appropriately, are you going over 

too much or are you on budget, not going over or not going under, 
16 

if you are carrying over too much and not spending, or you are 

spending at the end then you cannot get a salary bonus award. 

Senator PAUL. Yes, I like that idea, and I think maybe we should 

look at our bill to see about adding that to our bill about the way 

we review employees. I think that would be good as well. 

Dr. FICHTNER. Thank you, sir. 

Mr. SINCLAIR. Senator, I looked at your bill, too, and I liked what 

I saw. It had protections in there so that there would be review, 

because there was also the possibility of abusing that system, ‘‘Let 

us pad my budget so I can turn some money back and get a bonus 

at the end of the year.’’ That would be a hardship—— 

Senator PAUL. But they do not create their budget. We create the 

budget, right? 

Mr. SINCLAIR. Well, but they would tell you what they need, so, 

‘‘Let me expand on what I think I need so that I can get a bonus.’’ 

Senator PAUL. I think that already occurs without the bonus. 

[Laughter.] 

Mr. SINCLAIR. Essentially what I am saying I am agreeing with 

you that since you have protections in there, that is a good thing. 

Money is one of the three motivations that I recommended. It is 

not the top one, though. I think it is an excellent one if you do not 

make it—like, if I have saved $1 million, how much should I receive for that as a bonus? Well, in my mind, $1,000, $2,000? Is that 

a good bonus for the government to save $1 million? That seems 

fine. That is just a suggestion. 

Senator PAUL. Right. 

Mr. SINCLAIR. I would like to point out, though, that we pretty 

much agree here on this panel on everything except probably one 

thing, and that is, the magnitude of the problem. It is a serious, 

hugely important problem. I think it is an unseen problem, and the 

reason I say that is because people who have this mindset that 

they have to get rid of that money throughout the year are making 

bad decisions about that money. And some of those decisions have 

to do with things like our national security, and notice the recommendations that I have said. I am not talking about eliminating 

agencies or anything. I want every agency to work well. 

Senator PAUL. I think one other point I would make is that even 

if it is not 50 percent of the budget or 50 percent of the problem—— 

Mr. SINCLAIR. Correct. 

Senator PAUL [continuing]. If it is one percent, if you take one 

percent savings across the board and you compound it, it adds up 

to real savings. I mean, you actually can balance your Federal 

budget, as bad as it is now, with one percent real compounded savings over a 5-year period. 

I would like to have Dr. Joyce comment, and then I will be done. 

Dr. JOYCE. The only comment I could add is that you do not provide Federal agencies and programs with money as an end in and 

of itself. You provide agencies and programs with money because 

there are particular missions and jobs that you want them to do. 

So the only thing that I would add in is that you would have to 

make sure that the saving of money was not an end in and of itself, 

but that you also factored in what did you accomplish with the 

money that I provided you; and if you can accomplish what you are 
17 

supposed to accomplish and simultaneously save money, then I 

think you are really on to something. 

Senator PAUL. Right. I would appreciate it if all of you would 

look at our bill. We do have that in there, a safeguard to try to 

make sure you are accomplishing your mission. But if you will all 

look at the bill—it is a very short bill—I am open to suggestions, 

and from Senator Baldwin as well. We need more Democrats on 

this. We have one Democrat right now, so we need more. I do not 

think we are going to get any appropriators. They just do not care, 

I mean, and that is just sad to say. But I would appreciate any 

kind of influence from you that says that we could change the bill 

in one way, and we will look at that. And we would also look at 

it from Senator Baldwin—if you would come on board, we are willing to take suggestions. Senator Ernst. 

OPENING STATEMENT OF SENATOR ERNST 

Senator ERNST. Thank you, Mr. Chairman. I appreciate it. 

Gentlemen, thank you for being here today. And, Dr. Joyce, I will 

echo what you said about all levels of government. I started my 

elected career as a county auditor, and, of course, we saw some of 

these same issues at a much smaller scale at the county level. 

One of the things—of course, we had the contract spending at the 

end of the year, but one of the things that we implemented to try 

and control that end-of-year spending, something that we can think 

about at the Federal level, have discussions on. But when the 

budget was set for the fiscal year, at the beginning of the year— 

of course, ours was a July 1 fiscal year as well. At the beginning 

of that fiscal year, our county supervisors would only authorize a 

certain percent of the budget, and when you hit that mark, then 

that department would come back in and then justify the rest of 

their spending going forward. That might be cumbersome, but it 

did slow down that end-of-year and unwarranted expenditure. So 

that was something that we utilized, and it did help. 

I do want to go back to some of your testimony, Dr. Fichtner. You 

provided some graphs and charts in your testimony—thank you for 

doing that—on the agency contract expenditures, and this is a big 

issue. The State Department, I cannot believe it, at the end of 

every year, and HHS, well above the average with other contract 

spending authority compared to other agencies. And so what is the 

State Department spending 38 percent of its entire contract budget 

on in that last month of the fiscal year? Can you explain to us what 

that is? 

Dr. FICHTNER. Senator, I wish I could in detail. There are anecdotes about them wasting money on $1 million grant statues, $5 

million—— 

Senator ERNST. Lovely. 

Dr. FICHTNER [continuing]. For stemware for the embassies. This 

report was a year ago. It was based on fiscal year 2013 data. Because I was testifying today, just over the weekend I played around 

with USASpending.gov just to look at the State Department, because someone asked, ‘‘Well, how much is done last year in the entire fiscal year? How much is done today?’’ I thought, well, that is 

an interesting question. So I pulled up just the State Department 

fiscal year 2014 contract data, and of the entire year, there are 
18 

roughly 19,500 contracts that they manage and sign. At the end of 

the fiscal year, just on the last day of the fiscal year, there were 

2,000 contracts signed. Now, that is only 0.2 percent of all contracts. Big deal. However, the dollar magnitude was 8.4 percent of 

the entire dollar amount for the fiscal year. 

Senator ERNST. Oh, my gosh. 

Dr. FICHTNER. So to get to the point is this a wasteful binge or 

prudent spending, I would argue a little from Column A and a lot 

from Column B. It is a problem. The question is: What can we do 

about it? And that is the issue. 

Senator ERNST. Right. Very good. 

Yes, Dr. Joyce. 

Dr. JOYCE. If I could just add, one of the things that I found 

when I was talking to people in Federal agencies about this research that I was doing a couple years ago is that agencies have 

responded to the delays in the appropriations process by making 

sure that contracts do not come up for renewal during the early 

part of the fiscal year because they do not want contracts to come 

up for renewal at a point where they do not know how much money 

they are going to have. So I have not looked at the data to the extent that Dr. Fichtner has, but a lot of this is why I focused on the 

uncertainty of the appropriations process. A lot of what occurs in 

terms of incentives for Federal agencies pushes them to try to 

renew contracts later in the year just because they do not know 

whether they are going to have the money or they do not know how 

much money they are going to have. 

Senator ERNST. Right. Very good. And it is not just the State Department. It is not just HHS. I am going to hit one other agency 

that I think has the potential to do so much good for so many men 

and women that have put their hand up and sworn to defend and 

uphold our Constitution and defend our freedoms here in the great 

United States, and that is, the Department of Veterans Affairs 

(VA). It really could do so much more for us, and yet what we have 

seen in recent years is just scandal after scandal with the Veterans 

Administration. And they are going through some tough times, I 

would say right now. They bring that on themselves. I am not 

going to offer any excuses for them. 

This is for everybody on the panel. Do you think an agency like 

the VA should be spending $562,000 on art work in one week? 

Dr. FICHTNER. So, Senator, what I would say is, as you pointed 

out, part of the comment is the Department of Veterans Affairs has 

a lot of problems right now. Some of it also is leadership, in which 

the culture of the agency from the staff level is trying to report to 

Congress with similar activities, and they are getting pushback by 

the managers, executives. I think that should be somewhere where 

Congress could focus on how to help those employees stand up and 

report to Congress on the abuse that is happening. 

Senator ERNST. Exactly. Thank you. 

Mr. SINCLAIR. May I add something else? 

Senator ERNST. Yes, go ahead, Mr. Sinclair. 

Mr. SINCLAIR. It took time and energy to waste that money. A 

lot of time and energy. 

Senator ERNST. Of course it did. 
19 

Mr. SINCLAIR. I can give you an example from the Department of State. That is who I worked for. The $1 million that I was ready 

to turn back was—they told me in August, ‘‘We need you to spend 

this by the end of September.’’ Well, my program had been one of 

the most successful in the embassy, but it took a lot of work to get 

it there. And the reason I said I cannot do it right now is because 

my program will be hurt if I try to spend that money. Let us put 

it in the budget for next year. I think we could do something reasonable with it. But that was not an acceptable answer. 

Senator ERNST. That is not the right answer in today’s age, is it? 

And that is very unfortunate. 

Going back to the art work at the VA, there was a Washington 

Post article from 2 years ago that outlined some of the spending 

that the agencies are doing in those last few weeks, and this is just 

one of those examples. We have some great therapeutic programs 

for our veterans. They do art work. Why are we not using that art 

work in our VAs? Wasteful, wasteful spending. We have to do better for our taxpayers. We certainly should be doing better for our 

men and women in uniform and those veterans. 

So thank you, Mr. Chairman. 

Senator PAUL. Thank you. 

We have mentioned a little bit about giving incentives to Federal 

employees. I think there also could be a similar type financial incentive program for contractors, and maybe there is and I am not 

aware of it. But while we are talking about the VA and waste— 

and we could go on and on—the veterans hospital in Aurora, Colorado, is going to cost $1.8 billion. It is a 182-bed hospital. It is 

nearly $10 million per hospital room. It is outrageous. It ought to 

be wallpapered with gold to have cost that much. 

But I am wondering whether or not we could do something similar with contractor money, that if you were contracted and you 

were given $1 billion and you were told $50 million of it was profit 

for you and the rest was the cost of building something, couldn’t 

we say that if you can do it for $800 million and you save the government $150 million, that maybe you get a percentage of the savings instead of what we do, the opposite, we give you just whatever 

your costs are, we will give you cost-plus whatever the profit margin is? But I really think that we could work in incentives into the 

contracting process as well. 

If each of you will comment on whether or not you know if any 

of that exists or what you think of the idea? 

Dr. FICHTNER. So, Senator, I am not sure it exists in the Federal 

Government. I know in the private sector there are a lot of examples. They try to give incentives to contractors, and what they do 

is there are performance bonuses for finishing early, not just on 

time but early, in budget and in quality. And so you could do something in the Federal Government that basically—— 

Senator PAUL. You do it on time and you could do it coming in 

under budget. 

Dr. FICHTNER. Right. 

Senator PAUL. And then you get a percentage of what—— 

Dr. FICHTNER. So the only thing you want to avoid is a perverse 

incentive for a contractor to then pad the estimate. But if you have 

a very competitive process, that should eliminate that. 
20 

Senator PAUL. Exactly. 

Anybody else? 

Mr. SINCLAIR. I just agree with that. I think it would be useful. 

It would only be one tool, though, and I think a bigger problem 

probably is the plus-ups that the client, the Federal Government, 

would give to the contractor over time, and also the continuing resolution problem. When you do not know when your contract starts, 

you always have to add money to it. So I like your idea, but it is 

only one element that we need. 

Dr. JOYCE. Yes, I want to followup directly on that. I do not want 

to hit the same note over and over again, but I think the uncertainty is really a big issue for contractors as well. So I think if you 

are going to try to rein in waste in terms of contractors, I think 

contractors also would benefit from a lot more certainty in the 

budget process. 

I will say that I have not studied this at the Federal level, but 

I was involved in a study of the 50 State governments and their 

management processes a few years ago, and there was a wide variation in terms of the States in the extent to which they did what 

Dr. Fichtner was describing, which is really performance contracting. So, a performance contract basically says we are going to 

write into the contract up front what those incentives are, and we 

are going to talk about quality, and we are going to talk about 

timeliness, and we are going to talk about cost, and we are going 

to create some incentives for you to come in with a high-quality 

product on time and under cost. And unless you do that up front, 

I do not think you can hope that it is just going to happen on its 

own. 

Senator PAUL. Well, thank you, and if you have any ideas, like 

I say, we are open on this, too. I think there is a contractor problem, and we have to figure out how to say that it is not acceptable 

to spend $1.8 billion on a 180-bed hospital. Thank you. Senator 

Baldwin. 

Senator BALDWIN. The last time that the GAO took a look at 

year-end spending was in 1998, and I have two questions based on 

that last exam. When the GAO looked at it Dr. Fichtner, 

USASpending.gov did not exist, and part of their report mentioned 

inadequate data on the timing of spending in Federal agencies. 

And I believe that the website does much to increase transparency, 

but it has certainly been criticized in some quarters that OMB 

must address underreporting and inconsistency in the website. 

So I have a wide-open question for you. What did you think of 

it? What were its limitations, its inconsistencies? How could we do 

better? 

Dr. FICHTNER. Well, Senator, thanks for the question because as 

researchers, we are always looking for better data, and, again, you 

have to give credit where credit is due for President Obama putting 

this information out for the public and for researchers to use it, because that is what transparency is about, is putting this information out. 

Senator BALDWIN. Yes. 

Dr. FICHTNER. And I know GAO is working heavily with OMB 

and others to improve the data set. I think the data is useful, but 

it does have limitations. One is that there are constant updates 
21 

going on. So if I download data today from last year—so it is yearold data—and I look at it again one week from now, the numbers 

are different. There might just be very small changes, but there are 

still changes. So there are reporting changes going on where agencies say, ‘‘We found some late contracts that came through.’’ There 

are a lot of reasons why realistically there could be changes, but 

there still are changes. So you always have to question how clean 

the data is. There are refunds that go on as well. So I do my best 

sometimes to go through it, but, again, there are 20,000 contracts 

a year for State, so you try to find the big ones that could affect 

the numbers in large areas. 

So I think just sort of, again, having Congress look at and say 

how do we improve it, how do we make it more clean, getting researchers in who have used it and say this is great but how do we 

make it better, I think is a great idea, Senator. I appreciate you 

looking into this as well. 

Senator BALDWIN. Thank you. 

And, Dr. Joyce, a different question about that GAO report. 

When they last looked at the issue, it found that procurement reforms were helping to safeguard against improper or unnecessary 

contracts that had been associated with a rush to spend funds at 

the end of the fiscal year. It has been quite some time since that 

report, and Congress has made and there have been other changes 

made to the procurement system. So I am wondering, has anything 

in your work demonstrated that further changes in law or practice 

may be necessary, especially in this procurement reform arena? 

Dr. JOYCE. I have not looked at that, Senator, specifically. I 

mean, I know that OMB has an Office of Federal Procurement Policy, and I know some folks over there, and I know that this is the 

kind of thing that they are focused on. And I think that, one of the 

things that that would do, one of the things that we should think 

about, is moving beyond the data. I mean, for example, it is one 

thing to say that the State Department spent 38 percent of their 

money; it is another thing to then go into it and say, well, what 

did they spend the money on? And how can we differentiate between what we think is wasteful and what we think is not wasteful? I mean, that is not a criticism of what Dr. Fichtner did. It is 

just saying that peeling away additional layers of that onion in 

order to answer the why and what did we actually get for that 

money I think is the next step in this process. 

Senator BALDWIN. Exactly. 

Mr. SINCLAIR. I can answer part of that question. Again, working 

for the Department of State, the only way I could have spent that 

$1 million was on equipment, because you can do equipment purchases in a day. All right? I did not need equipment because I had 

already gone through almost every laboratory around Iraq, and I 

saw every laboratory full of new equipment sitting in the box unopened that had already been placed there by either the Department of State or the Department of Defense (DOD). They could not 

use it, and yet we were willing to spend more money on equipment. 

So, right, that is an issue that is there, and it needs to be corrected. 

Senator BALDWIN. Thank you. Thank you to all of you. Great 

hearing. 
22 

Dr. FICHTNER. Senator, I would also just add real quickly, since 

you have a little bit of time left, because Dr. Joyce has it in his 

written testimony: The one thing that can really put a focus on 

agency spending is congressional oversight. Having this hearing is 

one example. Call up some of the agencies. Have them come, have 

them tell you why they spent the money, what were these contracts 

for. Have them explain it. That is part of the oversight job. 

Senator PAUL. And if there were repercussions, your appropriations would actually go down, which would mean we would have 

to have an appropriations process. But I want to thank Senator 

Baldwin for being part of this and the panel for being part of this 

today and reiterate that I am open to suggestions on any of this. 

I do not think this is a partisan issue. I think that everything that 

everybody has said has some validity to it, and we have at least 

the one bill, Bonuses for Cost-Cutters, that we are open to suggestions to make the bill better, and that we do not yet have a bill 

but we are open to suggestions on something to do with contracting. But we want to do the same thing. We want some kind 

of financial—it can include other things, but we do want at least 

part of the bill and probably the main focus of the bill to be financial incentives for people to come in under budget on things that 

they contract. But thank you for being part of this today. 

The record will remain open until October 14 for the Members 

to submit additional questions or comments, and with that, the 

hearing is adjourned. Thank you. 

[Whereupon, at 3:35 p.m., the Subcommittee was adjourned.] 
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