U.S. GOVERNMENT PRINTING OFFICE

61–821 CC WASHINGTON : 2000

TO ESTABLISH AN OFFICE OF MANAGEMENT

IN THE EXECUTIVE OFFICE OF THE PRESIDENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

FEBRUARY 4, 1999

Serial No. 106–70

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JOHN T. DOOLITTLE, California

HELEN CHENOWETH, Idaho

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

CARLA J. MARTIN, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman

JUDY BIGGERT, Illinois

THOMAS M. DAVIS, Virginia

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

J. RUSSELL GEORGE, Staff Director and Chief Counsel

HARRISON FOX, Professional Staff Member

MASON ALINGER, Clerk

FAITH WEISS, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on February 4, 1999 ......................................................................... 1

Statement of:

DeSeve, G. Edward, Deputy Director for Management, Office of Management and Budget; Dwight A. Ink, president emeritus, Institute of Public Administration, former Assistant Director for Executive Management, Office of Management and Budget; Harold Seidman, senior fellow, Center for the Study of American Government, Johns Hopkins

University, former Assistant Director for Management and Organization, Bureau of the Budget; and Herbert N. Jasper, fellow, National

Academy of Public Administration, former professional management

staff member, Bureau of Budget .................................................................. 6

McMurtry, Virginia, Specialist, American National Government, Congressional Research Service; J. Christopher Mihm, Associate Director, Federal Management and Workforce Issues, U.S. General Accounting Office; Paul Posner, Director, Budget Issues, Accounting and Information

Management, U.S. General Accounting Office; and Ronald C. Moe,

Specialist, Government Organization and Management, Congressional

Research Service ........................................................................................... 71

Letters, statements, et cetera, submitted for the record by:

DeSeve, G. Edward, Deputy Director for Management, Office of Management and Budget, prepared statement of ................................................... 10

Horn, Hon. Stephen, a Representative in Congress from the State of

California, prepared statement of ................................................................ 4

Ink, Dwight A., president emeritus, Institute of Public Administration,

former Assistant Director for Executive Management, Office of Management and Budget, prepared statement of ................................................... 28

Jasper, Herbert N., fellow, National Academy of Public Administration,

former professional management staff member, Bureau of Budget, prepared statement of ........................................................................................ 38

McMurtry, Virginia, Specialist, American National Government, Congressional Research Service, prepared statement of ......................................... 73

Mihm, J. Christopher, Associate Director, Federal Management and

Workforce Issues, U.S. General Accounting Office, prepared statement

of ..................................................................................................................... 97

Moe, Ronald C., Specialist, Government Organization and Management,

Congressional Research Service, prepared statement of ........................... 79

Seidman, Harold, senior fellow, Center for the Study of American Government, Johns Hopkins University, former Assistant Director for Management and Organization, Bureau of the Budget, prepared statement

of ..................................................................................................................... 21

Turner, Hon. Jim, a Representative in Congress from the State of Texas,

prepared statement of ................................................................................... 51

(1)

TO ESTABLISH AN OFFICE OF MANAGEMENT

IN THE EXECUTIVE OFFICE OF THE PRESIDENT

THURSDAY, FEBRUARY 4, 1999

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2154, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee) presiding.

Present: Representatives Horn, Biggert, Ose, and Turner.

Staff present: J. Russell George, staff director and chief counsel;

Bonnie Heald, director of information and professional staff member; Harrison Fox, professional staff member; Mason Alinger, staff

assistant; Paul Wicker and Kacey Baker, interns; Faith Weiss, minority professional staff member; and Earley Green, minority staff

assistant.

Mr. HORN. A quorum being present, the hearing of the Subcommittee on Government Management, Information, and Technology will come to order.

Our Federal Government is one of the largest, most complex organizations on the planet. The President’s budget, released this

week, records a government with over 1,300 budget accounts,

20,000 programs and activities, and 4.2 million employees, both civilian and military. Through the years, there have been countless

attempts to improve its management structure. Nearly all have

failed to control the government’s unwieldly and often overlapping

functions.

Today, enlightened Federal management in the United States

lags far behind other, more progressive countries. In New Zealand,

for instance, improved management practices have reduced government spending from 58 percent of gross domestic product in 1990

to a projected 47 percent in 1999. This improved management has

decreased New Zealand’s taxes by nearly 20 percent, and has dramatically improved government performance. I guess we could ask

the question: Why can’t our Federal Government do the same?

In the last 60 years, three Presidential commissions—the

Brownlow Committee in 1937, the first Hoover Commission report

in 1949, and finally, the Ash Council report in 1970—each recommended strengthening management within the executive

branch. If that is to happen, the President needs a core group

2

whose professional staff members can advise him and his Cabinet

officers at his wishes on key management questions.

In 1998 hearings before the House Subcommittee on Government

Management, Information, and Technology, several witnesses concluded that on a regular basis, OMB’s management leadership has

been subordinated to budget concerns and timeframes.

As many of you know, I was a very strong advocate of adding the

‘‘M’’ to the Bureau of the Budget and making it the Office of Management and Budget. I thought for once we could get the budget

its clout to have some focus on the management questions that

often are just thrown under the rug regardless of administration.

This has nothing to do with Republicans and Democrats. This has

nothing to do with liberals or conservatives. Behavior has been the

same. As my friends in the senior civil service have been telling me

for the last 10 to 15 years, it isn’t working. So we are here today

to discuss what makes it work and what kind of task group can we

have that will really get management done.

Government management problems are regularly ignored because short-term policy and spending issues drive out valuable,

long-term management stewardship.

Nearly everyone agrees that the executive branch of the Federal

Government needs better management.

We can either try—once again—to focus general management responsibilities in the Office of Management and Budget where they

currently reside, or we can move management responsibilities to a

newly created Office of Management in the Executive Office of the

President.

The first choice has been tried and retried with little success.

The second would give the President two teams of advisers: one for

budgetary issues and another for management.

Resistance to the second alternative has been resolute because

many believe that the clout of the budget can force management

reform. And as I said earlier, empirical evidence, fortified with experience, proves just the opposite. Long term-employees in the Executive Office, three of whom are here today to testify, confirm that

within the Federal Government, the budget often drives out good

management.

In Theodore Roosevelt’s speech on ‘‘New Nationalism,’’ he provides a road map for effective government management. The

former President stated: ‘‘No matter how honest and decent we are

in our private lives, if we do not have the right kind of law and

the right kind of administration of the law, we cannot go forward

as a Nation.’’

An Office of Management is a key step to a more efficient, effective, and responsive administration of government. My friends in

the Office of Management and Budget, both current and past senior officers, surely understand that their dedication, good intentions, and hard work are not being criticized. The intent in creating

the Office of Management is to make it easier for dedicated public

servants to succeed and, therefore, to improve management

throughout the executive branch.

We now turn to a discussion on the best way to accomplish that

goal.

3

I think one of our sort of reference points here is the various

studies that the Government Accounting Office [GAO], has done.

And this year, as usual, they have done an excellent study and this

is ‘‘Major Management Challenges and Program Risks, Government-Wide Perspective,’’ and just to take up one of many, major

management challenges and program risks, DOD.

A lot of these matters should have been dealt with many, many

years ago. The one that comes to mind more recently is the year

2000 problem. That should have happened way back in 1989 when

the Social Security Administration was the first agency on its own

initiative to face up to what was coming at the end of the century.

And the example I have used so often of the Federal Highway

Administration where it had been brought to their attention by one

of their excellent employees and they didn’t pay attention to it.

There was no system for management. This was 1989. This has

nothing to do with the current administration, but this is the type

of thing that happens where they don’t face up to these issues either at the Department level, the Cabinet level or the executive

branch level. I believe the trouble that we are in and the procrastination that occurred over a decade is a good example of when the

Director of the Office of Management should have been knocking

on the door of the President and saying, ‘‘Look, we have a problem,

we need your help and let’s discuss it.’’ [The prepared statement of Hon. Stephen Horn follows:]

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Mr. HORN. We have two panels with us today.

On panel one, we welcome the Honorable Edward DeSeve, the

Acting Deputy Director for Management, Office of Management

and Budget; Mr. Dwight Ink, president emeritus, Institute of Public Administration, former Assistant Director for Executive Management, Office of Management and Budget; Mr. Harold Seidman,

senior fellow, Center for the Study of American Government at

John Hopkins University, former Assistant Director for Management and Organization, Bureau of the Budget; Mr. Herb Jasper,

fellow, National Academy of Public Administration, former professional management staff member of the Bureau of the Budget.

And we will wait to introduce panel two. Could we have the ones

that I have named, Mr. DeSeve, Mr. Ink, Mr. Seidman and Mr.

Jasper come forward and take the oath.

[Witnesses sworn.]

Mr. HORN. Before I start the first panel, I do want to introduce

the members who are here and ask if they have any opening statement. We would be glad to have it at this point.

The vice chairman, Mrs. Biggert, do you have any comments?

Mrs. BIGGERT. No, I don’t have any comments. I would like to

hear the testimony.

Mr. HORN. The gentleman from California?

Mr. OSE. No.

Mr. HORN. The ranking member, if he has a statement, it will

be put in the record following my own opening remarks.

Now, let us start with Mr. DeSeve. It is always good to see you

here, and we would welcome your comments.

STATEMENTS OF G. EDWARD DeSEVE, DEPUTY DIRECTOR FOR

MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET;

DWIGHT A. INK, PRESIDENT EMERITUS, INSTITUTE OF PUBLIC ADMINISTRATION, FORMER ASSISTANT DIRECTOR FOR

EXECUTIVE MANAGEMENT, OFFICE OF MANAGEMENT AND

BUDGET; HAROLD SEIDMAN, SENIOR FELLOW, CENTER FOR

THE STUDY OF AMERICAN GOVERNMENT, JOHNS HOPKINS

UNIVERSITY, FORMER ASSISTANT DIRECTOR FOR MANAGEMENT AND ORGANIZATION, BUREAU OF THE BUDGET; AND

HERBERT N. JASPER, FELLOW, NATIONAL ACADEMY OF

PUBLIC ADMINISTRATION, FORMER PROFESSIONAL MANAGEMENT STAFF MEMBER, BUREAU OF BUDGET

Mr. DESEVE. Mr. Chairman, I would like to submit my testimony

for the record, and then I have three points that I would like to

make. And we are going to use some charts over here, if you would

tell us what the best position for these charts is so that the committee can best see them.

Mr. HORN. We need to move it forward.

Mr. DESEVE. Let’s do that.

Mr. HORN. Do you have color charts to pass out to us?

Mr. DESEVE. I am afraid that our budget doesn’t take us that

far. I also want to apologize for my own speaking voice which is

not normally this timbre.

What I want to do is make three points today in regard to the

linkage of management and budget and the imperative that I believe will continue the need to link them in the future.

7

First, we will be preparing, and I am happy to submit an early

draft to the committee—this has just been bound today and I have

extra copies—of the Government-Wide Performance Plan. That

plan is required by the Government Performance and Results Act

and it is three sections of the President’s budget as it was last

year, section 3, section 4 and section 6. I am going to talk about

two of the sections today and use those two, section 3 and section

4, to show you what I believe is the inextricable linkage between

management and budget if you are to use budget to lever management.

You and I disagree on that, and I appreciate your oversight because it does keep us on our toes and keep us thinking about how

to best articulate the relevance of these issues.

The first chart on the left is one that Director Lew has used and

Deputy Director Mathews has used recently to demonstrate to the

general public both the peril that the Nation faced during the

years, Republican or Democrat, prior to this administration and the

way in which surplus was reached.

If the United States had been a European country under the

Maastricht agreement, it would not have been admitted to the European Monetary Union because its deficit as a percent of GDP exceeded 3 percent annually during the period.

As you can see, the receipts averaged 181⁄2 percent during that

period and the outlays averaged 21.9 percent. So we would have

failed the Maastrict test of less than 3 percent of GDP. Everyone

says it is the wonderful economy that brought us to this point.

This chart demonstrates that it is the decrease in outlays as a

percentage of GDP as well as the increase in revenues. And much

of that decrease in outlays can be laid to the oversight of this committee and other committees of Congress as they took very seriously their responsibilities under the Budget Reconciliation Act of

the past as well as under the Balanced Budget Act. It was carefully

crafted to put caps on domestic discretionary spending. What that

forced agencies to do was to manage to those caps so that budget

led the need for management, and it was almost in lockstep.

What we see in the center chart is the decline in FTE, full-time

employment. That is the full time equivalent employment during

that same period. And the driver here again was the notion of scarcity. If we are to constrain our budget, we need to continue to constrain and streamline the way government works. That budget constraint helped to drive management constraint. Management without budget in that case would perhaps have led to a line that was

more gradual, but this Congress committed that there would be

more police on the streets. It was a substantive decision, and funding those police came in large measure from 365,000 fewer FTE,

about a 16-percent decrease during the period 1993 through 1998

actually.

Now it will go up slightly this year. Why? Because we are hiring

a lot of census workers, about 64,000 census workers. But the permanent work force will continue its decline while the temporary

census increase moves it up. So there are 365,000 fewer FTE on

the payroll during the period ended September 30th compared to

1993.

8

Again we had to manage to that. Each department had to manage that budgetary constraint because of the desire to bring those

two lines together.

When we go to the far right, we see how the Office of Management and Budget has reorganized itself to deal with those challenges. The Office of the Director, and this is not a chart that I created, I turned to the Budget Resources Division and I said, ‘‘Give

me the latest chart.’’ It is a chart that we use all of the time.

It shows the OMB Director, Deputy Director, and Deputy Director for Management are the Office of the Director. On the right

side are the three statutory offices which by statute report to the

Deputy Director for Management.

On the left side are the very important support functions of OMB

that in a new Department of Management would have to be re-created. We would have to have an administrative division. We would

not have to have a budget review. We would have to have some

kind of a communications office. We would have to have some kind

of nexus with the economy, maybe not an Economic Policy Office.

We would have to have a Legislative Affairs Office, and the use of

our legislative reference division, which sounds innocuous, but that

is the clearance process that is part of the guts of how OMB operates.

All of those entities on the left-hand side are continuously available for management purposes. I really use those folks. Section 3

of the budget talks about economic performance, and it is part of

the Government Performance Plan. I worked very closely with

those economists in preparing that section and highlighting the

performance targets we have for the economy and for the deficit.

On the right-hand side, I supervise those offices. But as we try

to carry out the responsibilities of OMB—and if I move over to the

chart, will that be a problem for the stenographer?

Mr. HORN. There is microphone over there at the end.

Mr. DESEVE. The reason that I want to do that, these are priority management objectives. This is the second year in the budget

that we have had these. We talked about them to you in December

when we began the process of creating them. There are four different types. The first set are the governmentwide priority management objectives.

The first is Y2K. A year ago at the urging of many—certainly

you and Congresswoman Morella were in the forefront—the President agreed that it was appropriate to create the Office of the

President for Y2K conversion. John Koskinen is dual hatted, as you

probably know. He has a hat at OMB and a hat in the White

House. The way John and I work is we use each of the Program

Associate Directors here as the filters for all of the budget information and the program information for Y2K. They are the gatherers

and the filterers of everything that the Department does.

Similarly when I move down to section 3, these are the audited

financial statements of the government. We have a target to have

a clean opinion of the governmentwide financial statement in a

year. I expect to be before you again sometime in early April talking about the progress that has been made with GAO. Are we finished? No. Has progress been made? Yes, and we will testify to

that.

9

The way that we get that done is we use the resource management offices, the RMOs, as our levers. First of all they supply the

dollars to the IGs for the audits and they nudge the departments

as they go forward to do better and ask them why they are not

doing better.

But the other important factor, as we go through other PMOs,

priority management objectives, many of them are budget driven.

Why do we want to improve contract management in DOE? To save

money.

Why do we want to strengthen HCFA’s management capacity?

Because we took savings in the budget this year that now we have

to follow through with management reform.

Why do we want to implement IRS reform? Because this Congress and OMB felt very strongly that the IRS reform is needed.

We supported legislation. We passed legislation with sweeping

management changes in salary structures, accountability and reporting, putting a citizens’ advocate in the IRS. How do we do

these things? We do them as a result of the RMOs, the budget people bringing proposals forward that can either save money or improve operations. My job is the part of a coordinator.

When John Koskinen testified that there are 518 people in OMB

who work on management, he was simply expressing the notion

that this entire organization is available to him. To bifurcate it,

take this group out and perhaps some of these folks out and to

move them away would be to significantly weaken that linkage and

make more difficult our ability to carry out these, to keep the pressure on to keep this going in this direction, and ultimately to

achieve the performance that we all care about which is the nature

of the surplus.

That is my testimony today. I would be happy to take questions

at this point.

[The prepared statement and charts of Mr. DeSeve follow:]

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Mr. HORN. Well, I am going to not only have Members ask you

some questions, but since we have a distinguished panel of your excolleagues who have broad experience in five or six or seven different administrations, have a dialog here, not just a Q and A.

When John answered that question that way, I thought he said

there were 540, so maybe you have dropped a few.

Mr. DESEVE. It is 518.

Mr. HORN. My answer was when you have that many people involved, it means that you have nothing involved because you just

can’t get the focus on that, and you don’t have 500 people. Roosevelt and Truman and Eisenhower had probably 20 or so that

knew what they were doing in this area, which didn’t mean that

they didn’t call on their colleagues throughout the Bureau of the

Budget at that time, or call on the Cabinet departments or call on

outside people, whoever it is.

But they focused and they knew, they drafted the Marshall Plan.

They drafted Government Corporation Designs which was a new

delivery of service, and all of that, and nothing stops the two offices

from cooperating. They are both part of the Executive Office of the

President that came out of the Brownlow Committee, and it doesn’t

mean that they are duplicating resources. You don’t. You work

with the budget people. But the fact is the ‘‘M’’ bit since Nixon has

not worked. And if it was working, we wouldn’t be here today and

GAO wouldn’t be writing reports on management things that

haven’t been dealt with.

There is a wonderful, nice group of people there. I am not criticizing them. The five resource offices have been around since at

least the sixties, and they have a lot of skilled persons, but their

major concern is the budget and not management, and that is

where we need to have people that know something about management and structure and can work on that and can give the President that insight.

The fact is that President Reagan, President Bush, and President

Clinton did not really get good management advice out of that system in the year 2000 situation. Until our hearing in April 1996, not

much was happening, only Social Security. When I surveyed the

Cabinet, several of them said, I have never heard of the problem—

Mrs. O’Leary and Mr. Pena to be exact. They had no goals. They

had no person in charge or their own agencies, and it just went

right down the line as a major management failure under three administrations.

Here is Social Security. They are smart. They have always have

been considered the best run Federal administration in the city.

They were when I was on the Hill in the sixties, and they are still

today. So they saw it, and that idea should have gone throughout

the administration and not had to wait until February 1998 to appoint someone in charge. If the President had been briefed in

1988–1989, that person would have been back there working

throughout that decade. Now we have a time crunch and we have

had much procrastination, but we can’t do anything about it. The

clock moves on, and so now we have to solve the problem, maybe

in a rush, maybe in a panic. Maybe it is costing more money than

if we had systematically done it, and those things concern me.

20

Would any member of the panel like to get into this dialog? Mr.

DeSeve has to leave in a little while and this will be our only

chance to have this dialog.

Mr. INK. In my testimony I have a number of points.

Mr. HORN. Move the microphone right up to you because these

hearing rooms were not designed with any great management

thought.

Mr. DeSeve is not going to be able to stay with us. I am interested in what your perspective is and what questions you would

raise, because he isn’t convinced that the separate management office will help much.

What can you tell us in a nutshell as to what under Roosevelt

and Truman and Eisenhower worked, and then it sort of slowly

went down and there was political intrusion by both parties and all

of that?

Mr. SEIDMAN. I think Ed DeSeve’s testimony proved the point.

The two functions are not integrally related to each other. What I

don’t find in his testimony is how you are dealing with the basic

cross-cutting issues. Their approach is focused around agency and

agency budgets.

The function of the management office when I was there was primarily providing staff advice to the President and the Congress in

dealing with these across-the-board issues. Some of the things that

I was dealing with, for example, included such questions as how do

you govern the territories and possessions of the United States?

How do you bring new States into the union? Pay comparability.

How do you remove the obstacles that States and local governments faced in dealing with the Federal Government? Working cooperatively with the Governors’ Conference, with the mayors, these

were the kind of things that we did. We developed an organizational philosophy and criteria.

The two different functions are not integrally related. In fact it

was a handicap for us. We did not need budgetary clout. I found

clout to be a handicap. One of the things on the management side

we had to do was establish our independence of the budget before

we talked. As I pointed out in my testimony, you don’t get into

really a rational debate with someone with a club behind their

back. I found it was a strength not to have clout because it put the

burden of proof on us to persuade people of what we were proposing.

[The prepared statement of Mr. Seidman follows:]

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Mr. INK. I found the same to be true. I found the more we could

distance ourselves from being identified with the budget process,

the greater our strength with the Cabinet members, the greater

our credibility with the Congress, the greater our ability to help the

President in advancing initiatives, the greater our ability to develop legislative executive initiatives and reforms on a bipartisan

basis.

One of the problems is that: Mr. DeSeve is an extremely able

person, as was John Koskinen, and Jonathan Breal for whom I

have the greatest respect.

What we are really saying is that we would like to liberate them

from the handicaps and limitations of working within the budget

which is basically a long program, individual program alliance. The

tremendous pressure associated with the policy disputes involved

in these budget issues is very time-consuming. It is very difficult

for the very best people to break away long enough to address

these fundamental management issues, particularly those that

have a long-term impact that don’t fit into a 12-month annual

budget cycle, which is the focus of the budget.

I think we get a little confused because there are useful things

going on. There are good initiatives that are being undertaken.

What we fail to recognize is that the potential is much greater than

what is going on. The need, in my view, for fundamental change

is much greater than we recognize today.

My view of what ought to be done and many people think is too

radical, and it is if you don’t have good management underpinning

those changes. It has always been my view that you can be more

creative, more innovative, take more radical steps if you follow

basic principles of management.

We need to be training people as we downsize to get them better

equipped for new roles. The smaller the work force, the more important it is that the work force we retain are highly qualified and

well trained.

For example, we talk about outsourcing. This chart doesn’t show

the number of people that the taxpayers are now supporting

through contracts. What it doesn’t show either, and neither does

the GAO report, is the fact that in a number of these agencies as

we rely more and more upon private companies and third-party arrangements to carry out governmental missions, we are failing

badly in a number of these agencies to retrain people and develop

people for entirely new roles, that of administering third-party government.

[The prepared statement of Mr. Ink follows:]

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Mr. HORN. Mr. Jasper, let me get Mr. Jasper in on this in terms

of any example, and just reacting to the testimony of the Deputy

Director for Management on that.

Mr. JASPER. I would like to draw a sharp distinction which may

help us focus on some of the issues.

In Mr. DeSeve’s prepared statement he suggests that somehow

or other your proposal would transfer responsibility for GPRA to

the new Office of Management. That is not necessarily true, and

it is not written in your draft bill.

One of the things that we emphasized, and that Harold Seidman

has just articulated, is that there are a number of functions that

we call governmentwide organization and management. Those are

the things that the new office would focus on primarily things that

are of great importance to the President, not to discount the importance of internal agency management. And nothing in the bill

would reverse the ‘‘OMB 2000’’ reorganization as I see it. The

RMOs would continue to have responsibility for internal agency

management matters and budget matters, and thus could achieve

most of the objectives that Mr. DeSeve spoke about. But what is

missing is some focus on the government as a whole and the crosscutting issues that have been alluded to.

[The prepared statement of Mr. Jasper follows:]

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Mr. SEIDMAN. In 1952 they did the same thing, integrated the

budget and the management functions, except that they did preserve the government organization staff. It was a small staff. They

provided for Assistant Directors of each budget division for management and organization. All of them disappeared within 2 years

and became budget examiners. And it didn’t work and without any

change in the rules, the Office of Management organization grew

right back to where it was, to perform the functions that it needed

to perform, without any formal statement of the change in purpose.

It just did not work.

Mr. INK. That same merger that you talked about Harold, as I

mention in my testimony, directly led to major scandals in the General Services Administration. The General Services Administration

knew that they had a very weak and problem-ridden procurement

system. They moved to reorganize it and set it up anew. They persuaded the head of procurement in NASA to come over to GSA and

head it up and there would be no additional cost whatever. But the

merger left OMB without management capacity, and OMB vetoed

the procurement reform. Consequently GSA was left vulnerable to

the furniture scandals that then began to emerge within months

after that veto took place.

There are other instances. You look at the earlier down trend of

HUD, and much of that goes back to a misguided budget influence

that concluded HUD did not need any auditors in the management

area, you need them all in the inspector general area. Once you do

that, and that happened in agency after agency, once that happens,

then you rob the secretary of a department of much of his or her

capacity for prevention, and the emphasis on preventing fraud and

abuse shifts to catching the crook after the damage has been done.

This I think was a major problem that occurred, and it occurred

largely because the budget dominated the management considerations in OMB after the merger.

Mr. HORN. I agree that deterrence helped win the cold war in

foreign policy, but in domestic policy deterrence sort of got muddied

away. That is really what you are saying. If you can get that fraud,

waste and abuse to have a team that is reponsible to the person

that the President is holding responsible to run a series of programs, if they don’t have those people on their staff working, it just

isn’t going to happen.

Let me ask Mr. DeSeve, we seem to be in agreement that we

must find ways to continually link up management and budget

within the Executive Office of the President, and I guess my question to you is how do you do it organizationally? You say that you

can easily run to those five resource Directors; you should. But

nothing would stop the Director of the Office of Management from

doing the same thing. In fact, you wouldn’t even need to change offices.

What we are talking about, though, is getting a focus on management questions so he can go bug those five Directors, because if the

budget has clout, it needs some guidance from people who give

their attention to management and not just budget. The way that

we organize government now, under many administrations, we say

let’s squeeze them a little bit and give us back a few full-time

45

equivalents. We don’t really think through how we are delivering

these programs.

Granted, Congress gets into this in some ways; some ways we

like and some ways we don’t like, in terms of the authorizing committees. And I won’t say that they are always wrong and I don’t

say that they were always right, but they are a factor when it

comes to Cabinet departments and what you will have that Cabinet

department do.

And so I guess I would like your views, Mr. DeSeve, as to why

would a Director of an Office of Management in the same Executive

Office of the President, where you can just walk next door and coordinate, it doesn’t stop these people from working together just

like you say that you are working together?

Mr. DESEVE. I have to go back to my own professor of public administration, James C. ‘‘Charles’’ Worth. I suspect that these gentlemen know Jim Charles Worth. Jim was a very gruff fellow. He

called himself a shiny-pants colonel from one of the war procurement agencies.

And he said, ‘‘Son, you can coordinate that which you can control.’’ I can coordinate my two hands because I can control them.

I have a much harder time controlling Mr. Ink’s hand, and he

would take us by the hand and do that.

Without the unity of control shown in a single Office of Management and Budget, it is much more difficult.

We have heard the perspective of these gentlemen on fundamental changes in the nature of management over the last 80

years or 90 years, and I would like to give you my perspective, and

I hope that I can do it quickly.

If we go back to Theodore Roosevelt, we see the things that Roosevelt was combating in putting in a personnel system that was

fundamentally civil service. He was combating the legacy of the

bootlegging and scandal in the Tweed administration in New York,

and he then moved on. When we turn to the thirties when Gulick

and Barnard were beginning the principles of administration that

were laid out for us in that period. They were dealing with the existence and the coming of age of a large bureaucratic form of government which had not previously existed in the teens, twenties

and thirties.

We are in a fundamentally different era now. We have changed

how government operates. When you asked me how I administer

cross-cutting programs, I do it through a network of chief financial

officers, chief information officers, inspectors general and chief operating officers that come together continuously. Literally I will get

20 e-mails a day from the CIO council, the CFO council, the PMC

and so on, and they have taken on much of the burden of working

together to find new priorities.

One of the things that I didn’t talk about in section 4, is all of

the goals and objectives of those councils, all of which I chair. The

goals are articulated in section 4. The councils are doing much of

the work of Y2K. Kate Adams from the Social Security Administration is chair of the Y2K committee of the CIO council, and she and

her colleagues have been laying out the pathway. I am the network

manager. I make sure that they have food, water, and sustenance

authority, so in a flow control way I cause that to happen.

46

This is fundamentally the same change that we have seen in

computing. We went from mainframe driven to one that is now

networked-based and distributed processing. So I think we are in

a brand new era of management where worrying about the shape

of organizational hierarchies was tremendously important as we invented a new bureaucratic society.

As we move to a much more distributed network society, we find

a new way of managing, and I think that is where we are now. I

have a much longer presentation complete with slides that I do,

and if you would like to see that, I will be happy to send it down.

But I think we are in a different time and place. I think management consists of more than organizational structuring. It consists

of allocating resources. It consists of identifying the possibilities of

technology. It consists in the kind of customer service that we provide, and it consists in tracing the root from political campaigns

and the promises made there, through the legislative hierarchy

into program implementation and beyond, into evaluation of the results of those programs and back into an articulation to the public

of what those programs are actually delivering in terms of service.

All of that is management, not just a smaller view of organizational

structure.

Mr. HORN. Well, we agree with you on that. The whole purpose

of GPRA and others has been to get better delivery of service by

the executive branch.

Mr. DESEVE. And GPRA is in the budget; you will prepare in the

budget and submit with the budget a plan of how your results are

going to be achieved.

Mr. HORN. But I would hope they would be in the budget because

the budget should be based on the goals that Congress and the

President have given these agencies, and the budget should be simply the unifying document where you translate it into money to

carry out the goals. But the problems come—as you know we had

major ones on GPRA. It was a new experience for a lot of agencies

when State government is going through this around the country

for years, universities have and other public entities, and we are

only just getting to this in terms of the executive branch.

Now, would you consider yourself the senior management officer

within the Executive Office of the President, excluding the President, obviously?

Mr. DESEVE. I think the statute suggests that. The Chief Financial Officers Act creates the Office of Deputy Director for Management, and I believe it suggests that that is the case.

Mr. HORN. How many times have you met with the President in

the last few months?

Mr. DESEVE. Six or eight, I would say.

Mr. HORN. This is eyeball to eyeball?

Mr. DESEVE. In meetings. I don’t have a one-on-one relationship

with the President.

Mr. HORN. The Director of the Budget presumably does have a

one-on-one relationship with the President.

Mr. DESEVE. It is typical to meet with the President in groups.

People who need to be there are there.

Mr. HORN. The chief of staff?

47

Mr. DESEVE. The chief of staff, head of the National Economic

Council, Domestic Policy Council, National Security Council. There

would be 8 or 10 people around a table.

Mr. HORN. I realize that there are a lot of things that go on in

terms of bringing people and cueing them in and cluing them in,

but it seems to me if you are going to get something done, the Director of the Budget in this case, and now Management and Budget, has to really say, Mr. President, let’s sit down and talk about

this thing, and you should know there are some real emergencies

coming down the line and there are some things that can blow up

in our face.

The HUD example under Reagan is a very good example while

that whole apparatus that Brownlow suggested when he talked

about six administrative assistants who were anonymous, and we

have never had anyone anonymous in the White House staff since

then, but nevertheless the President needs to know before something blows up and he reads it in the Washington Post and the

Washington Times in the morning. The Director of the Budget, one

of the most powerful positions in the government, should have that

relationship. It seems to me if—has anybody talked to him about

management in the last 6 months?

Mr. DESEVE. I certainly have talked to him about management

in the last 6 months. One of the things that the President did very

consciously is that he asked the Vice President in the Office of the

President to bear the primary responsibility, and my interactions

with the Vice President are much more direct and much more frequent. And he has taken that role, just as in other administrations

the Vice President had other roles that the President cared about,

and I believe as I communicate to the Vice President, we have a

dialog going on right now on a particular labor management issue

where I and the Vice President will communicate once or twice a

week. He will be continuously talking to the President about how

the President wants to handle that issue. The access that I have

to the Vice President is unparalleled, and I think it represents the

Office of the President in that way.

Mr. HORN. I think the President has made very good use of the

Vice President, and we all tried to support the National Performance Review and hold hearings and all of the rest, but that isn’t

always going to happen, and that is the problem. Some Vice Presidents have been squeezed out by Presidents. The staff of President

Kennedy didn’t have much use for or faith in Vice President Lyndon Johnson.

Now, when Lyndon Johnson became President, he did the same

thing to Humphrey for 6 months, as a matter of fact, as Humphrey

would tell the story, that the Kennedy staff did to him. And that

is sort of a very iffy thing, as you know. And then, of course, Vice

President Bush was well known for going to a lot of funerals.

When I was in the Eisenhower administration, President Eisenhower did give Vice President Nixon, besides funeral duty, he gave

him the Equal Employment Commission and a number of other

things, but those are specific assignments that the President can

give a Vice President even though technically under the Constitution he is a legislative officer; but he is a person in waiting, and

I think the President made good use of Vice President Gore.

48

But that ad hockery is what we are trying to get away from. We

are trying to get an institutional memory that will go between administrations, whether Democratic or Republican administrations.

Often the succeeding administration of the same party has had a

completely different approach to some of these questions than the

preceding administration of the same party. So it isn’t just partisan; it is just people and how they look at large organizations and

what they expect to get out of it.

Is it not true that the budget demands often win out over management concerns within OMB?

Mr. DESEVE. You see, I can’t separate the two. If you had sat

with us in our Director’s reviews this year, which is the time of the

year during September, October, and November when the fundamental decisions are made, the first page would summarize the financial information about the budget. The second page would summarize the results expected under GPRA. The departmental totals

would then be carried. We would then go into a series of issue papers. An issue paper, for example, would be how do we get a lower

spending level in HCFA by eliminating some portion of the erroneous payments that need to be eliminated? And in that discussion

paper, performance measures would be used to highlight what we

were going to do and how we were going to do it. I sat through

every review and asked all of the questions necessary. But the

interrelationship is almost unitary between management and budget in those conversations.

Jack Lew, following on Frank Raines, following on Alice Rivlin,

has taken to a higher level the ability to manage particular situations and make sure that in those particular situations, especially

cross-cutting ones, we have a priority management objective

verifying that the right person is getting the right benefit. We will

be using the new hire data base that comes from trying to find

deadbeat parents, people not paying their child support. That is a

current data base of information. We will be using that to inform

the people in student loan about how to find some of the deadbeat

student loan folks. That is a management initiative across a series

of areas. We will be doing other things like that in the benefits

area. That stems from wanting to stay within the budgetary constraints as they exist. As an abstract management technique, it is

something that cuts across eight or nine agencies in trying to get

benefit verification done properly. We use certain kinds of IRS

data, not confidential taxpayer information, but other data. So Jack

has been very forceful in doing this and has demonstrated these

management techniques as being terribly important in preparing

this year’s budget.

Mr. HORN. I ask Mr. Turner for his round to his heart’s content,

but first let me ask you: How many people from other White House

offices sat in on those budget reviews? Did the head of Environmental Quality, did the chairman of the Economic Advisers, did

they sit in?

Mr. DESEVE. We have tried it both ways. During Dr. Rivlin’s tenure, we had the broader councils in to the conversation, and we

found that it made it very hard to have them effectively deal because they didn’t have good information.

49

So what we have done this year is disbursed it. We meet separately with those councils and bring their views back to Director’s

review, so we can represent the position of the Office of Science

and Technology Policy about NASA’s performance goals or Energy’s

performance goals.

The same thing with the Department of Environmental Protection in managing the Superfund program. We had to make some

changes this year because the level of funding was not as high as

we had requested in the prior year, so we had to change Superfund

goals. In doing that we had to change some of the ways that the

program was managed. And so what we do is we consult prior to

the Directors’ reviews, get the views of the other organizations in

the White House and bring those into Directors’ review. Honestly,

it was just taking too long in the process to try to bring the other

agencies up to speed at the table so we do it ahead of time.

Mr. HORN. But nothing stops a White House Director of equal

rank to the Director of Budget—like the chairman of Economic Advisers, in particular, certainly has a long-standing role beginning

1946.

Mr. DESEVE. Absolutely.

Mr. HORN. Nothing stops them from coming into those Directors’

reviews if they are invited?

Mr. DESEVE. That is correct.

Mr. HORN. We assume that, but it often doesn’t happen.

Mr. DESEVE. They are seen as cousins, as opposed to brothers

and sisters.

Mr. HORN. Have you had a chance to read ‘‘Inside OMB’’ by Shelley Lynn Tompkin?

Mr. DESEVE. I have not. I was interviewed for it, I believe. I was

hoping she would send me a free copy.

Mr. HORN. As I book collector, I feel the same way.

But a recent book, ‘‘Inside OMB,’’ she says on page 203, ‘‘Budget

management mergers tended to result in budgetary pressures overshadowing the efforts of OMB staff to review agency management

issues.’’ That is her summary after talking to all of you experts.

Mr. INK. And she didn’t interview me, by the way.

Mr. DESEVE. Is there a page where she refers to how excellently

management is currently handled by Mr. Koskinen and Mr.

DeSeve? I think there is.

Mr. HORN. Is she right? Is she wrong?

Mr. DESEVE. I think she is reflecting the past rather than the

current state, and the state of the last several years. I think she

did the research for that book in 1995. I beg off on the year.

Mr. HORN. I think it was fairly recent, the last 2 years.

Mr. DESEVE. I would stand with my colleagues at GAO who I believe will testify later that it is important to keep the functions together.

Mr. HORN. I now yield to Mr. Turner for such time as he would

like for questions.

Mr. TURNER. Thank you, Mr. Chairman. First I apologize to the

Chair and this distinguished panel for my tardiness. I was at the

National Prayer Breakfast, and it tends to run a little longer than

we expect. I apologize.

50

Mr. HORN. You had a delightful speaker this morning. I happened to listen on C–SPAN radio, and this is a plug for C–SPAN,

90.1 on your FM dial. He was hilarious.

Mr. TURNER. I hope the Chair will accept my opening statement

as part of the record.

[The prepared statement of Hon. Jim Turner follows:]

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Mr. TURNER. My experience, of course, is not as deep, Mr. Chairman, as yours in this issue. Inasmuch as I have not been with you

on this subcommittee, but for last year, I did have some experience

in management issues when I was in the State legislature. Texas

I think in many ways led the Nation in performance-based budgeting and in performance reviews. Much of the Vice President’s initiative on performance or on reinventing government came from

the State of Texas where our State Comptroller, John Sharp, initiated a ‘‘reinventing government’’ effort for us there.

I fully appreciate the Chair’s diligence in trying to improve the

management practices of the Federal Government to be sure that

taxpayers are getting the very best they can for every dollar that

they pay into the Federal Treasury.

It does somewhat disturb me, however, to contemplate the legislation that we are having the hearing on, in spite of the distinguished panel of experts you have assembled, when the White

House advises us they think that it would be a bad idea inasmuch

as we know that it is primarily a responsibility of the President to

execute the laws in an area of separating the Office of Management

and Budget. Many management changes, as we all know, occur

from time to time in government and business, and if they are not

acceptable to those that the change is forced upon, they sometimes

tend not to work.

I guess I would like to ask Mr. DeSeve to expand a little bit more

on the comments that he made earlier because I have had the distinct impression, as we moved into this new age of performancebased budgeting, that there is in fact a very direct link between

management and budget issues that does represent somewhat of a

change from the way that things used to be done. If you don’t mind

commenting on that to be sure that I am on the right track.

Mr. DESEVE. If I may use the analogy of historic eras, I believe

we have moved from what I call the hunter-gatherer era into a fundamentally different era. Budgeting, until recently and still in

some places is, I will go to the Hill, I will kill the beast, I will bring

it back to my department. They will have more.

And the department head who is most successful in bringing resources home was rewarded. That is the hunter-gatherer mentality

in budgeting. We are hoping that is changing and moving to what

I call the agricultural era. I don’t think that we are in the Industrial Age yet.

The agricultural era says I will plant my corn in rows. I will plan

where those rows will be. I will attempt to have a surplus to feed

my family. That is what GPRA is. It is the notion that there is an

orderliness to the process of planning the output, the crop that you

will get, and the outcome, having a surplus to feed your family and

trade in the village.

This requires a new set of disciplines. It requires you to have a

new mind-set in how you approach budgeting. We are starting to

see that fundamental change in departments and agencies. Certainly they want more, but in justifying that more, they were beginning again and again to talk about if you give me this, I can

do that. I can reduce the time that it takes to do this, or I can fundamentally change the way that we deliver that service. So the relationship is becoming much more integral. If we were a company,

55

we would certainly want to integrate our production with our financial results so we understood our profitability. GPRA is the

proxy of that. The Results Act is the proxy of that for the Federal

Government, and it requires a more sophisticated kind of budget

analysis that is also management analysis at the same time.

Mr. TURNER. Just as a followup on that, in watching our experience in Texas, where I served in the State Senate, and as we implemented performance-based budgeting ideas, I always was impressed that it seems to take some period of time to develop a sophisticated set of performance tools, and some of them in the early

stages seem to be somewhat elementary. I would like to get your

evaluation on where we are in the Federal Government in regard

to really developing a sophisticated performance-based budgeting

system.

Mr. DESEVE. I would like to make two points. First, I think that

this committee and Majority Leader Armey, and I have said this

here before, have been invaluable in causing the focus on GPRA to

occur. But I think GPRA fundamentally has three things that need

to be focused on.

First, the usefulness of the measures for the managers. Can they

use them in their everyday work to understand how to make their

operation work better internally and for their clients?

Second, can they be used in resource allocation? Can they be

used as appropriators make decisions?

Third, can they be used to change the fundamental nature of programs and the way services are carried out? Can the authorizers

and the legislative base of those programs be fundamentally shifted

as a result of having measures available?

Right now I would assert we are at a point in developing the

measures where we have a good set of measures in many places,

but they need to be tested against the legislative process of appropriation. We will need to get more and better involvement of people

like your legislative body in Texas to ask the hard questions in the

regular order of business.

Mr. Armey and Mr. Horn have excellent oversight hearings, but

in some ways it is oversight, not the regular order of business, that

dominates the Congress. The appropriations process and the authorization process are much larger aspects of the Congress’ life.

We are beginning to see performance measures in the Higher Education Reauthorization Act last year. The use of performance measurement of that act was very appropriate, but we really don’t see

as much as we would like to see in the use by the appropriators

in the regular order of business.

Part of the argument is that the measures have not been good

enough. We would ask them to tell us how they would like them

to be better. We are finding them useful in our own OMB processes. We use them more in the OMB process each year. I think

the measures are getting better. They could get still better and be

built into the legislation at the front end as we do authorization

so it is clear.

One of the successes that we think that we have had is in the

drug area. The chairman and Mr. Armey have been very complimentary to General McCaffrey’s cross-cutting measures in the

drug arena. We are on our third set of measures there, and they

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have great scrutiny in the authorizing process and in the appropriating process.

Mr. TURNER. In Texas I served on the Senate Finance Committee

which did the biannual budgeting, and it seemed to me that in the

process of developing our State budget, we went into a much greater analysis of the performance measures that had been developed

than seems to occur here in the Congress through the appropriations process.

I must say that I am not on the Appropriations Committee and

haven’t had the opportunity to really go through the process, but

it seems to me that there could be an improvement in terms of

linking appropriations decisions to the performance-based measures that you work so hard to develop.

In fact, if the data is useful to you in a management sense, that

is one thing, but at some point it has got to translate over into the

appropriations process, and I really don’t know if that is happening.

I guess what you are telling us is that you think that we need

to improve in terms of utilizing the measures that are being developed.

Mr. DESEVE. OMB would never say that appropriators need to

improve. Let me be very clear about that. We believe that there is

the opportunity for you to use the measures. We are providing the

opportunity, but we would never be so bold as to say the appropriators should improve the way they do business.

Mr. INK. But I would say that.

Mr. TURNER. You would.

Mr. INK. Yes, I would.

Mr. TURNER. I do not know if you could quantify where we are

in terms of developing a sound performance-based budgeting system, but it would seem to me that we cannot be too far along the

road, and that we have a long way to go before we really are able

to realize the potential of the legislation that we passed and develop a performance-based budget at the Federal level.

Is that a fair assessment?

Mr. DESEVE. You and I are in complete agreement that there is

a long way to go before performance-based budgeting is the order

of the day. And agencies need to be not just reassured, but prodded

by their own appropriators and authorizers in the process for them

to sharpen their skills at measuring their performance.

Even OMB, as powerful as we are deemed to be, pales in comparison to a phone call from an appropriations Chair. They certainly want to prepare the President’s budget and get all the numbers right, but the real action is with the cardinals.

Mr. TURNER. You know, the President’s budget laid out the

adminstration’s management priorities, but where are we in terms

of having the resources for OMB to be able to implement those priorities?

Mr. DESEVE. What we tried to do, and again, that is the set right

there, the 24 items, what we do is we have a management system

that tracks those 24 continuously. Most of the work to achieve

them is either done in the agencies with our helping both from the

RMO side as well as the statutory office side, helping them do it;

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or in the various offices, the Chief Financial Officer’s office, the

Chief Information Officer’s office.

When we talk, for example, about critical information infrastructure protection, the National Security Council will work through

what’s called the CIAO, the Critical Infrastructure Assurance Office, with the CIOs and the PMC to make sure that they have good

practices. Under Presidential Decision Directive 63, there are plans

developed which we participate in and the budget folks participate

in, along with the NSC and each of the agencies.

So when we have the resources, it is a collective, it is a network

that comes together that uses various nodes to create an overall

critical infrastructure network, just as we are doing in Y2K. It’s

very similar to the way we are doing Y2K. John Koskinen and staff

is fewer than five people, but he relies on the chief information officers throughout government and then the sectors in the private

sector—the electric utility sector, the communications sector, the financial sector—and he gets their involvement and engagement in

helping him do the work.

So we have enough resources to do the work because we find

ways to use the resources of others and get them moving in the

right direction. To me that is what management is about. There is

a whole theory that the best manager is a lazy manager because

he finds a way to get other people to do his job for him. I somewhat

subscribe to that theory, although I have to be careful about calling

myself lazy. I have to be real careful about that.

Mr. TURNER. Thank you very much.

Mr. HORN. The gentlewoman from Illinois and the vice chairman,

Mrs. Biggert.

Mrs. BIGGERT. Thank you, Mr. Chairman.

I think I am going to enjoy this committee and certainly learn

a lot about history. I have already had a lot to absorb today, and

I am afraid I do not know as much certainly as probably most of

the members who have been on this committee about the issue, but

I will try and ask some questions that will help me and hopefully

shed some light on this.

When you were talking about contractors, it does not show the

number of contractors. That was a question that was asked. What

are the contractors that are involved in this issue?

Mr. INK. All I was saying is that, in addition to the number of

Federal employees shown on the chart, there are also many contractor people that are funded by the taxpayers. In some instances

as we decrease Federal employment, we increase the number of

contractor people to carry out that particular program. And all I

was saying is that we see a part of the equation here in this chart,

which is a very interesting one, but it does not reflect the total burden on the taxpayers.

Mr. DESEVE. Let me refer you to a recent article in Government

Executive Magazine called ‘‘The True Size of Government.’’ It was

written by a gentleman named Paul Light, who is at the Brookings

Institution, and what he found was that, in addition to this work

force, there is a very large what he called shadow work force,

which are the contractors. He found that both have been in decline

during the administration. This number came down and the number of contractors came down at the same time. But there is a large

58

work force out there that we support in the State and local arena

as well with Federal dollars that he adds to that also.

Mrs. BIGGERT. Do you have any idea how many Federal Government management laws there are?

Mr. DESEVE. I actually have a book that was put together by this

committee when Mr. Clinger was here that is about that thick, and

it pertains to most of the management laws. It is about that thick.

But we also know that there are titles on personnel management,

other aspects of management, that are not in the core volume.

Mr. INK. And there are also, of course, many management implications in other laws that are not regarded as management laws

per se.

Mr. SEIDMAN. They are often written in appropriations acts.

Mr. DESEVE. Too often found in writing.

Mrs. BIGGERT. I do not think I want to read all those.

One of the CRS specialists, Ron Moe, has put them into five

major categories: Institutional and regulatory management, financial management, budget and accounting, human resources and

ethics management, procurement and real estate, real property

management and intergovernmental relations management.

How do you, as the Deputy Director for Management, make sure

that the intent of these laws are being implemented?

Mr. DESEVE. In most cases, when you look at the chart, there is

a specific reference in the law to the responsibilities of something

like the Office of Federal Financial Management [OFFM], or the

Office of Federal Procurement Policy [OFPP], or the Office of Information and Regulatory Affairs. So the Director of those offices has

responsibility, for example, for implementing Clinger-Cohen, which

is the IT, that is in OIRA; or the Paperwork Reduction Act, which

is in OIRA; or the Chief Financial Officers Act, or the Government

National Reform Act, which is in OFFM.

So very often the statute points to the responsibility that the individual entity has. Where it does not, we try to use again the statutory reference; for example, ethics and waste fraud and abuse.

The inspectors general are the group as they come together in the

President’s Council on Integrity and Efficiency that are most worried about that. So where there isn’t a specific reference to an office

in OMB, we more broadly use the government officials who have

that responsibility to assist us in monitoring and making sure that

the statutes are carried out.

Mrs. BIGGERT. What would be the difference of, like, a budget examiner and a management staff member?

Mr. DESEVE. We have actually have gone away from the word

‘‘budget examiner’’ at this point, although it continues to crop up.

When you use a word long enough, it is hard to get away from it.

There are now program analysts along the way.

You would be hard put to find the difference between people in

the statutory offices and their counterparts on the budget side. The

primary difference is, on a day-to-day basis, a budget examiner will

have organizational segments and budget accounts within departments and agencies that they are responsible for, whereas someone

in one of the statutory offices will have a crosscutting function or

OMB circular. An OMB circular will make your eyes glaze over.

59

But let me use the example of David Childs. David is actually

on the Budget Resources staff, although he does what would you

call management work. David is our A–76 expert. This is a thing

the committee has been concerned about, managed competition.

The committee was very active in the Fair Act last year. So David

will look across all the departments in a very narrow segment of

management called managed competition. He will interact with his

budget colleagues as they bring submissions forward under that

and provide guidance for it. So he will be crosscutting on a fundamental management issue like managed competition, and the budget examiner will be dealing with the organizational issues.

They will intersect at various points, so various management

staffers dealing with A–21, A–110, all the oldies but goodies. A–110

is also very current in the news now because intellectual research

and science has been challenged to provide additional data according to A–110. So the people doing A–110 work very closely with the

people in the science and technology community to make sure that

it gets done properly.

Mrs. BIGGERT. Don’t they have very different roles, then, and

need different skills? If one is a systems—what did you call it?

Mr. DESEVE. Well, you can call it systems, or it can be a variety

of things. It is a fundamental narrow management area, like procurement. Let’s use procurement. That is perhaps a better example. In the procurement arena, we will have a specialist who knows

a lot about performance-based contracts.

We had a circumstance the other day where in FAA, FAA has

an initiative on performance-based contracts. The people in Michael Deich’s area, which is one of the RMOs, dealing with this,

had a very strong point of view. The Department had a very different point of view. They called their friends in OFPP, the contract area, and said, would you please come in and talk to us about

how all this works elsewhere outside our narrow area. The OFPP

people were able to come in and strongly support FAA and change

the minds of the program examiners in that arena once they saw

the broader perspective. So one cuts this way across the function,

the other cuts this way through a department, and they meet as

needed around these kinds of issues.

Mrs. BIGGERT. Thank you.

Mr. HORN. Let me pursue a few questions just for the record

here.

What changes would you suggest in the Office of Management

draft? There is one error here that legislative counsel put in that

I did not want where he calls it the Office of Federal Budget Management. Sorry, knock the Federal out. It is Office of Budget, which

is what will be basically in the bill. But do you have some suggestions to make to us?

Mr. DESEVE. The only other thing I noted, Mr. Chairman, was

on page 3, I do not know what the Office of the Chief Financial Officer is, item No. 5 in section 1 on page 3.

Mr. HORN. Who is the one in the current chart of OMB that

works with the financial officers?

Mr. DESEVE. The Office of Federal Financial Management, and

that you have cited as No. 3.

Mr. HORN. OK, so that is all subsumed under that then.

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Mr. DESEVE. That’s correct. Technically, under the statute, the

Deputy Director for Management is the Chief Financial Officer of

the Federal Government.

Mr. HORN. Right.

Mr. DESEVE. However, the Controller, who is the head of the Office of Federal Financial Management, carries out that designation

by cochairing the CFO council. There is no designation of the Office

of the Chief Financial Officer.

Mr. HORN. Should there be?

Mr. DESEVE. I don’t think so. The Controller in OFFM has that

responsibility.

Mr. HORN. You also have the chief statistician, don’t you, in

OMB?

Mr. DESEVE. That’s correct. That is Kathy Wallman, and she is

in OIRA.

Mr. HORN. But she is not the Director of OIRA, she is part of

it?

Mr. DESEVE. That’s correct, because OIRA has multiple functions. I would say that OFFM has really a single function; that is,

financial management. That is why the Comptroller also functions

as the Chief Financial Officer. OIRA has regulations, statistics and

information and technology subsumed.

Mr. HORN. Personally I am not particularly interested in loading

down an Office of Management with a lot of other functions, and

I would just like your reading of the Office of Federal Procurement

Policy. Is that appropriate for an Office of Management, and what

are the reasons you would argue that it should stay with the Office

of Budget?

Mr. DESEVE. Having stipulated I am opposed to the Office of

Management here, I am trying to perfect your draft rather than

support it.

Mr. HORN. We look on you as a professional.

Mr. DESEVE. It is my disclaimer.

No, I think that the three statutory offices on the right-hand side

of my chart, which you have in No.s 1, 2 and 3, are quite appropriate for that purpose.

Mr. HORN. For management?

Mr. DESEVE. Yes.

Mr. HORN. And right now are you the primary official of OMB

that relates to them?

Mr. DESEVE. Yes. That again is by statute. If you look at the

Chief Financial Officers Act, you will see that is the case. They

meet with me, as my staff, weekly, and then we interact continuously on a daily basis.

Mr. HORN. Now, what is there under your jurisdiction besides

those statutory offices? Is it simply the crosscutting role of bringing

the right people together at Department and OMB on management

questions or what?

Mr. DESEVE. Again, the other way we work—— Mr. HORN. Because we also in this draft, the legislative counsel

felt we had to have the Office of the Deputy Director for

Managment as you merge it into a separate Office of Management.

Mr. DESEVE. What would happen here is this office would staff

itself with some of the support functions on the left-hand side.

61

There is no way you could draw any of those out and put them into

the management office. Some portion of them would have to be

made available, or they would have to be recreated.

Mr. HORN. Well, as part of the Executive Office of the President,

you have a separate Office of Administration, which is also statutory, in the White House that can handle the small amount, hopefully, of either personnel transactions or budget or anything else.

Mr. DESEVE. Certainly. I’m not trying to dispute that at all.

The real authority in the Deputy Director for Management is

also resident in the way he relates across the government, so that

leaving the authority of chairing the CFO Council, the CIO Council, the Executive order authority chairing the PMC, the statutory

authority chairing the PCIE, as long as all of those authorities are

in place in addition to oversight of the statutory offices, then you

have the network that you need to do the job.

Mr. HORN. Is there anything else that we ought to be thinking

about?

Mr. DESEVE. Well, I got a call from both Dave Barram, the head

of GSA, and Janice LaChance, the head of OPM, who are both

nervous about what this implied for them. So I certainly would not

want to make them any more nervous by suggesting that.

I think the only additional item you would want to take out is

perhaps, when we set up the RMOs, the personnel aspect went into

the health and personnel arena so that if you were going to have

an Office of Management, you probably would take that out, the

personnel issues out, and put them in the Office of Management.

You would refer to personnel. I think that’s the only thing that is

not there at this point.

Again, please, I continue in my opposition to this idea.

Mr. HORN. No, no, I understand that. But obviously, management is management and that includes a lot of things such as personnel.

Mr. DESEVE. That’s correct.

Mr. HORN. But here you have, obviously, five resource officers

that are basically budget oriented and they, too, can make suggestions on personnel, I would think. That is up to the President really. I am willing to give the President flexibility because different

Presidents have different approaches.

President Eisenhower walked into the White House, he said, my

heavens, the only thing around here was the Bureau of the Budget

practically. They had no real congressional liaison staffing. President Truman had gotten two people over and put them in the Bureau of the Budget to at least read the Congressional Record for

him every day and that was sort of the start of a liaison. And then

President Eisenhower created a cabinet that actually he read the

minutes and initialled them and then they had to report as to have

they done it or haven’t they.

So if you had a situation like the GAO material, in the Eisenhower administration that would have been a cabinet brief that

would have gone out to all members, they would have talked to

their people at the department level, they would have come back,

and he would have gone over this and said, folks, we are going to

have a 3-month and a 6-month reporting period to see that you

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clean up your act in relation to what the General Accounting Office

has followed.

Now, I do not see that happening nowadays. Does it? Am I missing something?

Mr. DESEVE. Yesterday I went through with the President’s

Management Council our tabulation of GAO’s high-risk list and

other management challenges. We do that periodically. I then

looked at the priority management objectives as they link to those

challenges. And we monitor many of the high-risk lists on a monthly basis.

When we review either monthly or quarterly the status of various of these updates, we also talk about the high-risk elements.

We get the audits of the agencies in now, which didn’t exist in Eisenhower’s day, and we and GAO actually go out and meet with

the agencies about how they are doing on their audits. Many of the

items on the high-risk list will come up at the point.

So we use the PMC, the President’s Management Council, as

that vehicle, as well as the review of the agency’s performance

plans. President Clinton created the notion of the Chief Operating

Officer in the Department, essentially the Deputy Secretary level,

and we use them to deal with those issues as opposed to the more

policy-oriented issues that we have.

Mr. HORN. Usually it is the under secretary, now called deputy

secretary, that runs the department while the secretary is out

spreading the good word. And nobody disagrees with that. Let’s

face it, somebody has got to run the store.

Mr. DESEVE. And that’s the way we respond.

Mr. HORN. Well, that was true of the Eisenhower administration

also. The Secretary ran around the country explaining administration policy and the good deeds or bad deeds of Congress as the case

may be.

Now, do you have any other suggestions for us of such a fine constructive nature as you have provided this morning?

Mr. DESEVE. No, sir. I think I am suggested out.

Mr. HORN. Does anybody on the panel? Before we leave, we will

take one question. Because we do not have a gem like you often

here, Ed.

Have you a question for the distinguished Deputy Director for

Management?

Mr. JASPER. No. I was going to make a suggestion as to what is

missing from the bill.

Mr. SEIDMAN. His concept of management is exactly what we

have. It is the broader concept. With reference to the councils and

committees, in our experience when everybody is responsible for

something, then nobody is.

Now, these councils are useful but I never saw a council that

really did the kind of creative thinking necessary to solve problems.

They can advise but somebody has to provide the leadership for it

to work.

Mr. HORN. Mr. Ink, do you have any comment for Mr. DeSeve?

Mr. INK. Well, you know, I think the networking is useful so long

as they are not really a decisionmaking group. But I want to add,

it seems to me that you have developed some networking beyond

what we used to have in Washington, but I do not see it in the

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field. We used to have a lot of networking in the field that dealt

with the field offices and with State and local governments and

interface between State and local governments that dealt with how

government impacted on families, how it impacted on communities

and so forth. I don’t see that happening now.

Mr. DESEVE. That is a good question. I think many of the departments have built their networks locally and not used the Nixonian

principle of regional offices and field offices. We can argue about

that probably at another time.

We decided to deemphasize the regional office and emphasize

where we could the local office and local contact as well as more

electronic interaction along the way. And I think the jury is still

out on how that is going to work, whether you need a regional

presentation or not.

We tried to delayer but let the local folks in our associations

have greater access to headquarters rather than working always

through the field. That’s another structure we restructure from

time to time. I am not as hard over on that one.

Mr. INK. I think that is worth looking at. And I would argue that

it doesn’t really depend on whether you have regional offices or

don’t have regional offices. The important concept is the communication out in the field and networking among the different agencies who have programs that are closely related all of which impact

on local businesses, on local neighborhoods and so forth.

Mr. DESEVE. I agree with that. I would like to find a better

model for that.

Mr. SEIDMAN. When I came into the Bureau, there was an identifiable budget season and the examiners were able to spend about

half the year actively out in their agencies. They were out in the

field. They were to us a source of information when we were doing

the management work because they were intimately involved.

It is my understanding that that is not true anymore, and that

they are pretty much tied to their desks.

Mr. DESEVE. I would agree with that. What has happened is we

have had what we call the perpetual budget season. In the year

where we are then trying to get to this gap closing, especially

around the Balanced Budget Act of 1997, it has been necessary to

continuously redo programs and policies to try to fit them into an

ever-narrowing box and it has been a tremendous strain on the

budget folks. It is not that they don’t want to get out in the field.

It is just the demands.

Congress sat last year, and this is not a criticism, sat last year

through until October on budget issues and we were in the process

of preparing the 2000 budget and finalizing the 1999 budget. So

there was no break during that time. And the hearings were all

through the summer.

Mr. INK. I agree, it is not a criticism of those people, but as that

began to develop some years ago, the Office of Executive Management then began arranging for people to spend most of their time

out in the field because the budget examiners could no longer do

that. This role could be restored under an Office of Management.

Mr. HORN. Well, I agree with both of you on the field situation.

In the days of modern communication, you do not need a regional

office, you can get directly at people who are there where they

64

could have access on a person-to-person level. And we might well

hold a hearing on that. We have had a few field hearings on regional offices a couple years ago and then we got off on the year

2000 bit. But we will get back to that and I think you both are

right. Thank you very much for spending the time. Sorry to hold

you up.

Gentlemen, now we can proceed with you. Do not read us your

statement is all I ask. We are going to put about 10 minutes on

this for each person and then Mr. Turner and I or anybody else

who walks in on either side will ask you some questions. But we

are interested in having you deal with the draft bill. And at this

point we knock out ‘‘Federal’’ before ‘‘Office of Budget’’ on page 3.

And as Mr. DeSeve suggested, we need to knock out the ‘‘Office of

Chief Financial Officer.’’

Mr. JASPER. Could I make one suggestion as to something that

is clearly missing, and it addresses Mr. Turner’s question in some

way. It builds upon the comment you made about the ephemeral

nature of Vice-Presidential responsibilities.

Clearly, it will take a while to get this bill through the Congress,

and if it should pass you would have an effective date that is sometime in the future so that there can be an orderly transition. I

would respectfully suggest that a proper effective day for this bill

would be early in 2001. So it would be the next administration that

would have to envision the establishment of the Office of Management and appoint the first Director. Thus, it wouldn’t be at odds

with this administration’s concern about the new office.

In fact, the NPR, as Mr. Turner knows, borrowed some people

from Texas. I think he mentioned that, about 10 as I recall. It had

a staff in the NPR. One incarnation, of close to 250 persons, more

than I believe is the size of the management staff reporting to Mr.

DeSeve. So there is a nucleus of management activity that has

been going on outside of OMB. But there is no continuity to it because these people are all on loan from Federal agencies to the Vice

President’s NPR. And they will go back to their agencies and the

NPR will disappear.

If you had a permanent Office of Management, you could think

of it as simply institutionalizing the NPR in the next administration.

Mr. HORN. I agree with you. Well, I don’t know if I agree about

the expiration or the beginning point, but I certainly agree with

you about the need for an institutional memory that the President

can tap and not have it floating around in pieces where you cannot

find it, and that is what is missing here and that is what got us

into that.

Mr. SEIDMAN. I think one of the suggestions with respect to the

bill is that the functions be transferred to the President, not to the

office. This was true initially of the Bureau of the Budget and all

of its functions were vested in the President. This then allows the

President to allocate these functions. It avoids some of the problems where you have overlap, and I think it simplifies some of the

problems of organization. Within the Executive Office of the President, I believe all the functions should be vested in the President

so he has the flexibility to determine organization structure.

65

Mr. JASPER. Of course, as Harold said, it is not only true of the

Bureau of the Budget but also of OMB; the functions were transferred to the President rather than directly to the new office.

Mr. SEIDMAN. I would also comment, since we are having a kind

of a dialog, there was one thing that was totally absent, I thought,

from Mr. DeSeve’s presentation. Except for the Appropriations

Committee, he didn’t talk about the Congress. I don’t think you can

do this job without congressional support. That was basically one

of the conflicts in culture, I think, between the budget examiner

and the management analyst.

I spent a good deal of my time because of the President working

with the staff of this committee and the Senate committee. You

cannot deal with these problems unless you involve the Congress.

They are interactive. You cannot separate. It is part of the process.

We don’t have separation of powers. We have separated institutions sharing power.

And all of us here, I spent to the horror, frankly, of the budget

analyst because you didn’t present legislation, you didn’t deal with

Congress. That was patently contrary to the role of what they did

in the budget, which was behind the scenes. I would testify from

20 to 30 times a year.

When they did a self survey that said that within the budget side

they were outside the mainstream, I said come back and look at

my calendar. At that time I was supposedly outside the mainstream, I had testified 20 times. And as I think Dwight would confirm this, we looked at our role in the process of budget design, and

I mentioned program design is an important part of how you do

things, you would rise in providing advice when called upon to both

the Congress and to the President.

Mr. HORN. Let me ask on that point, because Mr. DeSeve mentioned it, there would have to be a duplication of services with Office of Management from Office of Budget and that the implication

was that this would be a parallel system. I do not see that. I do

not see why you cannot draw on the services already operated in

the Office of Budget or the White House Office of Administration,

which is a huge operation now compared to what it was 30 years

ago. And I think the important thing there is to talk for a minute

about the Office of Legislative Reference historically in the Bureau

of the Budget.

It seems to me, in coordinating on behalf of the President to see

if the program is in accord with the program of the President, they

can ask the Director of Management, just as they can every cabinet

head, and piece it all together in one place.

Mr. SEIDMAN. That was our principal relationship, and Dwight

will confirm, with the Office of Legislative Reference because they

are not with the budget division.

Mr. INK. What happened was that handling of management legislation was in effect subcontracted out to the management staff.

My Office of Executive Management, for example, actually handled

the clearance of legislation that related to management.

Also in our work with the Office of Legislative Reference, they

then farmed out to us the management aspects of other legislation

that was not basically management in nature. But on the manageVerDate 23-FEB-2001 08:39 Mar 09, 2001 Jkt 010199 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 E:\HEARINGS\61821 pfrm07 PsN: 61821
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ment issues, we did the clearing, we did the negotiating with Congress on behalf of the President.

I was the representative of the President in persuading the Congress to establish the Office of Management Budget in the first

place. And by the way, some of the Members of Congress, such as

Senator Bayh in the Senate, and Chet Holifield, who used to chair

this committee, said I was wrong. They said management was

going to be subordinated to the budget, and it never will be able

to stand on its own. Of course, they were right and I was wrong.

Mr. HORN. Confession is good for the soul.

Mr. JASPER. As an alumnus of Legislative Reference, as well as

management at the former Budget Bureau, I would like to comment on your question.

One of the things that has happened with the politicization of

senior positions in OMB, is there are now, of course, Program Associate Directors who are political appointees. The Legislative Reference policymaking function has virtually been decentralized to

the PADs. So what used to be a Government-wide coherent view

on what made good sense legislatively is now subordinated to the

programmatic and agency-focused view of the Program Associate

Directors. So that’s a serious problem that has arisen since those

positions were created. And while the functions of Legislative Reference have not diminished, the power or the influence of it has,

because of this political reality.

Mr. INK. Related to all this is the fact that so many budget issues

are heavily laden with political issues. They are fiercely fought battles from a partisan political nature. By setting up an Office of

Management, you free it from those kinds of political overtones. So

an Office of Management is in a far better position to represent the

President in terms of dealing on a bipartisan basis with Congress.

Mr. HORN. I remember I used to attend the appropriations committees that had general government and the OMB budget was in

there and usually the House was filled, at least for the appearance

of the Director of the Budget, because Members here had all sorts

of beefs to unload on the poor Director when he came up on either

agricultural policy or something that one of the budget examiners

has done and they were not interested in the management side so

much as they were interested in what have you done to my people.

And whereas they could not take it out on the President usually,

they took it out on the Budget Director.

Mr. INK. On a new Presidential initiative, I would always, and

I think Harold did too, meet jointly with the chair and the ranking

minority, regardless of which party was in power. I would meet

with them jointly and go over the President’s proposal informally

before any piece of paper ever came up. I would carry back to the

President any major suggestions that they had, suggestions which

the President might or might not adopt. But at least there was an

opportunity for congressional input on a bipartisan basis before the

formal proposals came up. Every single proposal I’ve associated

with reorganization plan passed. Harold passed a lot more than I

did.

Mr. SEIDMAN. Well, that was the policy when I was there. And

certainly under Presidents Johnson, Kennedy and Eisenhower we

did not send up anything until we could discuss with committees

67

and staff. It was quite conceivable that the Members of Congress

had some constructive suggestions. We ought to pay attention to

them. We weren’t telling them.

In fact, one of the things we tried it once to this committee and

they said, ‘‘Well, you have such a big committee, why don’t you

come up and meet the whole committee.’’ I had to present to this

committee our program for the year, and what we considered to be

the principal management issues. You have to work together.

Mr. INK. But this bipartisan cooperative approach has been lost,

you see. As the budget has been dominated, this dimension, which

I think is terribly important in terms of the effective functioning

of our government in terms of the legislative and executive

branches working together, this has been lost.

Mr. HORN. I think that is a good point.

Mr. SEIDMAN. One of the things when I came up here I think is

illustrative of the problems, Congress has been more interested in

some of the management issues than the executive branch. An example is the Office of Federal Procurement Policy. That was a

branch in my office when I was Assistant Director dealing with the

questions of procurement and procurement policy. When the Bureau was looking for a way of finding positions to create these new

Associate Directors, what they call them, PADs, Program Assistant

Directors, on the budget side, they dumped the procurement functions on the General Service Administration with no positions.

It was the Congress that put the Office of Federal Procurement

Policy back in OMB as an independent agency.

Mr. INK. That moved over when I went to GSA and the reason

was the whole management field of responsibilities was going to be

killed. And finally Mr. Ash decided, rather than killing management, he would put it in exile with Mr. Ink over in GSA. Fortunately, when I left GSA it came back to OMB.

Mr. SEIDMAN. The other thing I think we did which illustrates

what wouldn’t happen on the budget side and dealing at that time

with the intergovernmental problems, which is again our systems,

many programs are administered through State and local governments. We started surveys and I invited the Governors Conference,

the Conference of Mayors, the Council of State Governments, to include people. We sent up joint teams out of my office, which had

the people from the State and local governments on those teams.

We had the inputs of both. Those would not have happened but on

the budget side.

Mr. INK. You will find in the record joint letters from the heads

of the big 7, the mayors, the Governors, the city managers, the

counties, the State legislatures, complimenting this management

group on the work that it did in streamlining the Federal Government and reducing the negative impact on State and local government and on communities. This is an example of reaching out to

the public.

What you hear today are some very impressive things with respect to the budget. What you do not hear is how government affects people and families, what is the burden of government on

families and people and businesses. That is missing. And you find

to some extent in the GAO report, the GAO report looked at how

the 2000 program affected the budget process. It really did not look

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at how it affected the management issues we are talking about.

And I would hope in the next review that GAO makes it can look

at not only the budget but also look at the management role of

OMB.

Mr. HORN. Any other comments on this dialog? Mr. SEIDMAN. Well, the one thing which I think is always important is it is not only what you do but how you do it. And many programs fail because they are not properly designed. The White House and the Congress both looked to us on the

management side that then existed in the Bureau of the Budget for

assistance in designing programs. This is another skill. If you don’t

do it right then, you run into problems. Frankly, there’s sometimes

conflicts between what makes administrative sense and what

makes political sense, which is part of the problem. Mr. HORN. I think the important point which very few people on

the Hill now realize is that over 30 and 40 years, we had a group

of professionals in the old Bureau of the Budget that served every

President in that period. They were not political appointees. These

were professionals that worked with whatever administration was

in power. And that is not true. I guess starting with Kennedy there

was more politicizing down into the bowels of the Bureau of the

Budget. And we ought to get a chart on that from Mr. Moe. Mr. INK. This would have been invaluable to Mr. Clinton early

in his administration when he was struggling with health care proposals. Having the kind of resources we are talking about here,

having an Office of Management, they could have been a part of

the health reform team. Looking at the workability of these proposals before they were surfaced would have been a tremendous

help to Mr. Clinton. But he did not have that help. It no longer exists.

Mr. SEIDMAN. One of the things that Mr. DeSeve did mention,

with which I agree, is that we have a number of developments

where we should be looking at their implications to the organization and management of the government. Such as the technological

revolution, the increasing reliance on third parties to deliver government services. These are the things that we ought to be looking

at. I agree that we cannot go on the old principles of that of

change. Who is doing the constructive creative thinking? This requires a different, a longer-term perspective. As I said, we have a cultural clash here. They are two different

jobs between the management analyst and the budget analyst. One

looks at long-term, one looks at the whole. But these things are

going by the board. I have been raising this. We did this when I

was there and we did what became the Bell report, which was done

out of my office and was on contracting for research and development, you know, what are the implications of this. Mr. INK. I recommend one change if I might. Mr. HORN. Sure.

Mr. INK. I would like to amend the bill so as to require that the

appointees to these top positions be men and women with successful experience in managing large institutions, ideally both public

and private sector. I think it is very important. Mr. HORN. You mean to be either the Director or the Deputy Director?

Mr. INK. Yes.

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Mr. HORN. How about if you are the head of a major consulting

firm, like Arthur D. Little, that has had management analysis experience, as opposed to simply being the chief executive? I am not

against that, believe me. As an ex-chief executive, I am all for

somebody there. But some people have also had deep experience in

looking at a whole series of different types of organizational entities, and should that count?

Mr. INK. I think it is fine to have it count, but I think they also

should have had some direct management experience. Not just

critiquing, not just teaching, but should have some direct management experience.

Mr. HORN. I think back, and you can think back better than I

do, often when a Republican was President they would put an accountant in charge of the Bureau of the Budget. When a Democrat

was President, they would put an economist or perhaps a very

skilled politician in that role.

Mr. INK. I think that is fine for the budget. But again, Mr.

DeSeve has been talking all morning about the fine things done for

improving the budget and I think some of these are excellent. I

think some of these initiatives that have been taken, that Mr.

DeSeve has been taking are extremely good in terms of improving

the budget. What we are talking about today, however, are these

broad fundamental management issues which have such an impact

on people.

Mr. HORN. Does the gentlewoman from Illinois have any questions on this? The gentleman from Texas?

Mr. TURNER. No questions.

Mr. HORN. Well, we thank you. And if there are any last points

you want to make, please make them.

Mr. SEIDMAN. We request that our statements be put in the

record.

Mr. HORN. It is automatic. On this committee, the minute you

are sworn in, the statement goes in the record.

Mr. JASPER. I would like to make one additional observation

about the NPR as it relates to this whole question.

The allegation that you ‘‘can’t separate management from budget’’ has of course been demonstrated to be false because management has been vested primarily in the Vice President’s office during this administration.

Mr. DeSeve noted that his close working relationship with the

Vice President allows him to essentially have his hand in, but he

has his hand in something which is being executed someplace else.

If you look at the reports of the NPR, you will find that they cover

a wide range of management initiatives that ought to be institutionalized, as we discussed earlier.

Furthermore, if you look at the functions of the DDM as established by law in the Chief Financial Officers Act, I count some 8

significant management responsibilities which were nowhere reflected in his 24 management priorities. So the result of this administration’s focus on performance-based government, as important as that is, is that it has overlooked a whole bunch of other

statutory responsibilities that the Congress explicitly vested in the

DDM.

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I would submit that if there were a separate Office of Management, it would adhere more faithfully to the strictures of the CFO

Act other than financial management—which is in a different section of the act.

Mr. INK. I have two quick comments.

One, departments and agencies long ago learned that it was unwise to merge together the management and budget capabilities.

You don’t find that around the departments. I don’t know why we

are so slow to realize the same principle applies to the Executive

Office of the President.

Second, in establishing an Office of Management, while we feel

very strongly that you not only don’t need the leverage of the budget, and as a matter of fact in our experience that more often was

a negative than a plus because it was a forceful action rather than

a leadership action, nevertheless there are tools that would be required in an Office of Management in order for it to have stature,

in order for it to be effective, and these are listed in my testimony.

Mr. JASPER. I would like to add just one more point. I reflected

this in my prepared statement. And, given that there are members

present from both parties, I want to emphasize that this is not a

political statement, but it is a historical statement.

The unwisdom of using the Vice President for such a comprehensive management agenda is underscored by the fact that Vice

Presidents rarely succeed Presidents. In the 20th century, only

three sitting Vice Presidents have earned their party’s nomination

and two of them were defeated. So, statistically, if one thinks that

what is in the Vice President’s office is working well, the likelihood

that it will continue in the future is slim, just from the standpoint

of probabilities.

Mr. INK. Which is different from Mr. Gore providing political

leadership, which we all feel has been a positive and very helpful

role, but that is very different from the institutional capacity to

make the system work.

Mr. HORN. Point well-taken.

We thank you gentlemen. You have had some great experience

and wisdom on this question and we deeply appreciate it. Thank

you for coming.

We now move to the last panel. This will be Dr. Harold C.

Relyea, Specialist, American National Goverment, Congressional

Research Service; Dr. Virginia McMurtry, Specialist, American National Government, Congressional Research Service; Mr. J. Christopher Mihm, the Associate Director, Federal Management and

Workforce Issues, U.S. General Accounting Office; Mr. Paul Posner,

the Director of Budget Issues, Accounting and Information Management, U.S. General Accounting Office; and Dr. Ronald C. Moe,

Specialist, Government Organization and Management, Congressional Research Service.

You bring a lot of institutional memories to the table. If you will

rise. Have we got everybody? Who are we missing?

Ms. MCMURTRY. Harold Relyea is not going to be able to join us.

[Witnesses sworn.]

Mr. HORN. The clerk will note all four witness have been sworn.

So why don’t we start down the row with Dr. McMurtry and give

us about a 10-minute summary at the most. Why don’t we turn the

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clock on. We would like to have question period time. It means a

lot to us. Your fine papers are already in the record.

STATEMENTS OF VIRGINIA McMURTRY, SPECIALIST, AMERICAN NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE; J. CHRISTOPHER MIHM, ASSOCIATE DIRECTOR, FEDERAL MANAGEMENT AND WORKFORCE ISSUES,

U.S. GENERAL ACCOUNTING OFFICE; PAUL POSNER, DIRECTOR, BUDGET ISSUES, ACCOUNTING AND INFORMATION

MANAGEMENT, U.S. GENERAL ACCOUNTING OFFICE; AND

RONALD C. MOE, SPECIALIST, GOVERNMENT ORGANIZATION

AND MANAGEMENT, CONGRESSIONAL RESEARCH SERVICE

Ms. MCMURTRY. Mr. Chairman and members of the subcommittee, my name is Virginia McMurtry and I am a Specialist

in American National Government with the Congressional Research Service of the Library of Congress.

My colleague, Harold Relyea, also a CRS Specialist in American

National Government, had planned to participate today with me in

the presentation of our joint statement. Unfortunately, he is unable

to be here now due to a home emergency. He has asked me to convey his regrets to the subcommittee, he really is sorry that he has

to miss this session. We thank you for your invitation to appear

here today for this hearing.

In October 1997, Dr. Relyea and I began meeting with subcommittee staff concerning the requested review of internal reorganizations of the Bureau of the Budget and its successor, the Office

of Management and Budget, with a view to the structuring of BOB/

OMB capacity and capability to guide or assess aspects of management, both governmentwide or by sectors, and in the Federal executive departments and agencies. The timeframe set for the review

was 1921–1993; that is, beginning with the creation of the BOB

and concluding with OMB structure on the eve of the arrival of the

Clinton administration and OMB 2000. The study was transmitted

to the subcommittee on May 7th, and we subsequently appeared

before you to discuss it at a hearing last spring on May 12, 1998.

Last year we offered six observations on the basis of that study,

and today I want to reiterate those findings and also provide some

additional comments.

First, the BOB/OMB has experienced an ever-changing structuring of management responsibilities, reconfiguration seeming to

occur more and more frequently with the progression of years after

1950. Over the years, the internal structure has tended to alternate

between two patterns, a bifurcated structure with separate sides

for management and budget staff, and a programmatic structure

with budget examiners and management staff integrated in various

functional units. The current structure of OMB of course reflects

this latter approach. In 1994, the OMB 2000 reorganization merged

the old budget examining divisions and most management personnel and units into the new resource management offices.

Second, the BOB/OMB has become responsible for various kinds

of management: Administrative, intergovernmental, personnel utilization, procurement, paperwork/information, statistical, regulatory, and financial, among others, which appear generally to have

increased with the progression of years after 1960. The BOB/OMB

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has met these responsibilities in various ways; for example,

through analyses and evaluations, coordination, and clearance with

shifting resources.

While the accumulation and detailing of these diverse responsibilities was intended to strengthen BOB/OMB’s management role,

this legacy is likely to complicate any efforts to separate entirely

the management duties from budget concerns in certain areas,

such as intergovernmental and financial management.

Third, especially since the early 1960’s, when PPBS, or the planning-programming-budgeting system, was introduced throughout

the executive branch, the BOB/OMB has been required by successive administrations to adopt and adapt to a variety of changing

arrangements for planning and budgeting. While these frameworks

generally shared an orientation toward objectives and outcomes,

each system entailed some modifications of BOB/OMB management

capacity, sometimes for brief periods of only a few years.

Now perhaps a more stabilized planning and budgeting situation

based upon a statutory mandate is evolving pursuant to the Government Performance and Results Act of 1993. The first governmentwide performance plan as required by that statute was submitted as a part of the President’s fiscal year 1999 budget. Then

the second effort of a governmentwide performance plan was of

course included just released earlier this week in the fiscal year

2000 budget submission.

Fourth, considering the management-budget relationship within

the BOB/OMB, it appears that the budget authority has largely

been used or threatened to accomplish or seriously pursue management objectives but not vice versa.

Fifth, since the reconstitution of the BOB in 1970, the resulting

OMB has during the succeeding years experienced an expansion of

non-career middle managers and, consequently, a more complex

and extended hierarchy between the more senior leaders of OMB

and the first line staff. Moreover, specialized entities, such as the

Office of Federal Procurement Policy, the Office of Information and

Regulatory Affairs, and the Office of Federal Financial Management have been grafted onto the OMB.

Sixth, and finally, recent developments may engender a reexamination and reconsideration of OMB’s management role and the

most suitable structure for fulfilling the management responsibilities now vested in OMB. Experience with implementing the Government Performance and Results Act would be relevant to such a

reassessment.

In addition, the achievement of a balanced budget in fiscal year

1998 for the first time in many years and the projection of continuing revenue surpluses might reduce OMB’s preoccupation with

budget concerns prompted by decades of Federal budget deficits.

CRS, of course, takes no position on any particular option Congress

may elect to pursue in these regards.

Thank you. I would be happy to respond to questions later.

[The prepared statement of Ms. McMurtry follows:]

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Mr. HORN. Well, we thank you for that very thorough report.

And not only will your testimony but the study that was personified by your statement will be put in the record at this point.

We will then go now, I think, to the next specialist from the Congressional Research Service. That is Mr. Moe, who has been very

helpful to the committee over the years; and then we will go to the

General Accounting Office.

Mr. Moe.

Mr. MOE. Thank you, Mr. Chairman, for inviting me to testify

before your committee on the proposed Office of Management Act

of 1999. It is appropriate at the outset to note that the opinions expressed here are my own and do not express those of my employer,

the Congressional Research Service.

In my extended written statement for the record, I have attempted to trace the intellectual and political history of the debate

over whether or not the two subject fields, budget and management, are best served by being in one agency or separated into two

agencies. If I understand correctly the view of the subcommittee

and its chairman, at any rate, this debate has been largely settled

in favor of providing the President with two equal, separate offices,

one for budget and one for management. You requested the witnesses to come forth with some ideas on what the Office of Management would do in the future.

However, as I listened to the overall discussion this morning, I

have thrown out my prepared remarks and I want to go on some

shaky ground but I think some things need to be fully understood

in this discussion.

There is a fundamental debate that is going on at all levels of

government, but particularly in the Federal Government, and it is

a debate over the premises of management. What is the essential

character of management in the governmental sector?

One school, the school supported by OMB and Vice President

Gore and a host of professors argues, in essence, that business and

government are essentially alike, both being subject to the same

behavioral modes. They should use the same titles, that’s why they

are making up titles like CEO. If you have a program that works

at General Electric, the odds of it working in the Federal Government are very high. So that is one school that argues on universality of administrative principles.

The opposing school argues that business and government are essentially unalike, distinctive in their norms, with surprising little

carryover between the sectors. The first school argues, that is universality of principles. Government, they say, should be run like

General Electric. And that’s why you never hear them discuss Congress.

Congress, to the new entrepreneurial managers, is a nuisance. It

is part of the old way, and remember the word ‘‘old’’ in their lexicon

is bad; if you give an example that is over 3 years old, they will

inform you that you are representing the old way of functioning.

Now, the second school argues that, in effect, public law is the

basis of our management system and that all behavioral principles

have to be within the construct of the law. The laws are passed by

Congress. Congress is the board of directors. It is Congress that determines the mission of an agency. It is Congress that determines

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its funding, its personnel systems across the board. It is Congress

that does this.

Now in the new system, in effect, that they are promoting, they

want the managerial class to make the missions. That’s why a lot

of this GPRA stuff has to be taken with a grain of salt. Performance is not the highest objective in the governmental sector; accountability is. In most instances, accountability and performance

work together very well. But when there is a direct challenge, as

was the case with the IRS, the IRS was off the boards. They were

the model agency in terms of collecting money and able to measure

it. They forgot one thing however, that’s not the agency’s highest

job.

Their highest job is due process and the protection of the citizens’

interests, and you all came back and forced them to go out to the

performance system. And I promise that I won’t bother you with

performance and quotas any more.

So what we have here is a fundamental culture clash. This is

why the panel here we are talking past each other.

Let me just mention four small points. One problem facing this

government is proliferation of general management laws. The

study that you asked for that we provided in 1997 is being updated

in 1999, and it goes through the various management laws. There

is no one overlooking them all. In fact, until this came out, if you

asked OMB what they were, they would be unable to tell you.

Second, we are facing a situation where the disaggregation of

government is increasing rapidly. Agencies proliferate or are spun

off from departments. The civil service systems proliferate. It is my

understanding that less than half of the civil servants remain in

the general schedule as each agency manipulates its subcommittee

on the Hill to have its own personnel system and preferably its

own special pay system.

And what you have created with that chart that showed a decrease in the permanent employment is totally misleading. They

decreased the middle managers by that amount, kept the same

number of political appointees, and we have upgrade not only of

personnel in the contractor sector but authorities going to them.

I could give you my favorite example of Ginnie Mae. What we

have here is a situation where the government is disintegrating.

Third, we have an amateur government. We are a government

run by political executives selected often because they were successful on the outside, frequently with no experience in the government. They come in for short periods, averaging 18 months; they

leave; and they go out, typically, to a lobbying firm here on K

Street.

You will have a hard time even finding any Federal employees

in the Department of Energy because there is a 10 to 1 ratio of contractors to employees in that Department. We have no comprehensive plan today to attract, train, deploy a professional cadre of career civil servants, period. It is unbelievable.

I don’t suppose that any other country could function this way.

I talk to New Zealanders, when they come over here, and they see

very little of what we have done here could be done there, and we

don’t know if we would ever do it again. They have no political apVerDate 23-FEB-2001 08:39 Mar 09, 2001 Jkt 010199 PO 00000 Frm 00080 Fmt 6633 Sfmt 6602 E:\HEARINGS\61821 pfrm07 PsN: 61821
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pointees in New Zealand. They don’t try to run their government

with amateurs.

Entrepreneurial versus constitutional models of management.

That is the issue. The entrepreneurial model is reflected in GPRA,

and all of the literature that you see that is, for the most part,

from Harvard Business School. And you will note that Congress is

rarely, if ever, mentioned.

The other side are the constitutionalists who say Congress is the

key. In an entrepreneurial model, the budget is supreme. It is the

tool of control.

The constitutionalists argue that the purpose of management is

to build the capacity of the government to perform the people’s

business.

Fifth and final, really what we hear that is passing for the latest

management terms is process triumphant over substance. Performance is some sort of God put out there in which people argue over

how best we can get there. If there is one thing that we have

learned in this century, it is that the life expectancy of the latest

reform is getting shorter. Five years from now we will be discussing a whole set of new words and this sort of thing.

That doesn’t mean that having a Government Performance Results Act is a mistake. What it means is that you should recognize

that it handles only the mid part of management. It has not gone

up to the level of management that these gentlemen were talking

about earlier. It is a substitution, a process over substance. So

what we have is management by ad hoc groups.

The President’s Management Council is not created by law. It

has, according to Mr. Koskinen, and I heard him personally say

that we have a 50 percent turnover at one of our rare meetings.

Therefore, they are caught in a bind. Do they bring the last group

up to speed or do they go on with half the group not knowing what

is going on?

What they are telling you is that the institutional capacity of the

President to supervise the Federal Government hardly exists. I perceive that the top management of the government of the United

States is not getting better, but is getting worse, and that it is the

reality. Since the executive branch isn’t prepared to do anything

about it, it is forcing Congress.

One final political comment, if I may. Much of this debate is really for an audience of one. That is, to really take on management,

we have to have a President who wants to think about it once in

awhile. It never will be his major concern, but he has to have an

institutional support, not friends and neighbors, not part-timers

from other departments, but institutional support in order for real

management corrections to be made.

This being the case, it is very important that whoever is running

for Congress—for the Presidency, conservative or liberal, to be

aware of this debate at some level. Because if a President comes

in and says, ‘‘this is important, I want to run the system right.’’

Such a President would be the most likely to request Congress for

this authority and during the honeymoon period they would be

likely to get it. And so Congress ought to be thinking what do we

want in this office and what don’t we want.

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I take a more comprehensive view on this. Nonetheless, it is a

good reason for you to hold your hearings because your hearings

provide the record on this issue over the last 4 years. It is an issue

that the next President may decide is important, and that is what

I think we are doing here.

Thank you.

Mr. HORN. We thank you. We always enjoy having contrarians

on our panel, and you do a great job at that and we thank you very

much. I know all of the fine documents that you have, we will put

the general management laws, the selective compendium also in as

an appendix if the budget isn’t completely broken on the Committee on Government Reform.

[The prepared statement of Mr. Moe follows:]

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Mr. HORN. Let us move now to our friends from the General Accounting Office who do very thorough work, just as the Congressional Research Service does, and that is Mr. J. Christopher Mihm,

the Associate Director, Federal Management and Workforce Issues.

Mr. MIHM. Thank you, Mr. Chairman and Mr. Turner. It is an

honor to appear before you today. My colleague, Paul Posner, and

I are pleased to be here to discuss OMB’s efforts to lead the management of the executive branch.

Our colleagues, Susan Ragland, Denise Fantone, and Lauren

Alpert were instrumental in helping us prepare our statement.

As you mentioned, Mr. Chairman, last month we issued a new

series of reports—and you held up just two of them, but I must

hold up the whole group—entitled, ‘‘Performance and Accountability Series: Major Management Challenges and Program Risks.’’

We issued separate reports on 20 agencies as well as reports providing a governmentwide perspective and an update on our high

risk series.

Collectively, the reports show that long-standing performance

and management challenges continue to hinder the Federal Government’s efforts to achieve results. The report series highlights

numerous opportunities for agencies to make fundamental improvements in management, performance and accountability.

At the same time, the reports also underscored the pivotal role

that OMB must play in guiding and overseeing agencies’ efforts to

fix their shortcomings and implement needed changes.

As you observed in your opening statement, Mr. Chairman, and

as the discussion with the first panel clearly illustrated, OMB’s perennial challenge is to carry out its management leadership responsibilities in such a way that leverages opportunities of the budget

process, while at the same time ensuring that management concerns receive appropriate attention in an environment driven by

budget and policy decisions and the tight timeframes that those efforts require.

Our prepared statement detailed OMB’s efforts in 11 separate

management issues that have been of special concern to this committee and the focus of much of our work. Implementation of the

Results Act, financial management, the year 2000 problem, and implementation of the OMB Circular A–76 are among the issues that

we discuss. We show that, overall, OMB has made uneven progress

in fulfilling these important management responsibilities.

In the interest of brevity, rather than go through each of these

issues, this morning we will offer observations in two areas that

are of particular importance to improving the management of the

Federal Government.

First, I will discuss the factors that are necessary for successful

management improvement. Second, Mr. Posner will discuss our

prior work on OMB’s organization and how the Governmentwide

Performance Plan prepared under the Results Act can be used to

articulate a Federal management improvement agenda.

Turning to our first point, the experiences to date suggest that

certain factors are associated with the successful implementation of

management initiatives. Building and sustaining these factors is

important regardless of the specific organizational arrangements

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used to implement management initiatives. I will touch on each of

these factors in turn.

First, top management support and commitment both within

OMB and the White House is often critical to providing a focus on

governmentwide management issues throughout the budget process

and within agencies. The commitment to achieving a clean financial audit opinion that Mr. DeSeve referred to as one of the priority

management initiatives provides a case in point. However, top

leadership’s focus can change over time, which can undermine the

follow-through needed to move an initiative from policy development to successful implementation.

Mr. Chairman, the point that you made in the first panel about

the importance of institutional memory, given the turnover, is relevant here. This suggests that the top leadership support is a necessary but not sufficient factor in sustaining management improvements.

Second, a strong linkage with the budget formulation process can

be a key factor in gaining serious attention for management initiatives throughout government. As you were suggesting, Mr. Turner,

many of the management policies require budgetary resources for

their effective implementation, things like addressing the Y2K

problem or improving human resource improvement initiatives as

well.

Furthermore, initiatives such as the Results Act seek to improve

decisionmaking by explicitly calling for performance plans to be integrated within agnecies’ budget requests. The Results Act is intended to address exactly the type of issues that you were raising,

Mr. Turner. How do we integrate performance planing within agencies as part of the resource allocation system? We have found that

previous management reforms, such as the planning-programmingbudgeting-system [PPBS], which I know that the chairman has

been kind enough to instruct us all about, and management by objectives, suffered when they were not integrated with routine budget presentations and account structures.

In short, management initiatives need to be reflected in and supported by the budget but, I would stress, no single organizational

arrangement by itself guarantees this will happen.

Third, effective collaboration with the agencies, through such approaches as task forces and interagency councils which Mr. DeSeve

referred as network management, has emerged as an important

central leadership strategy in developing policies that are sensitive

to implementation concerns and gaining consensus and consistent

follow-through within the executive branch.

Finally, support from Congress has proved to be critical in sustaining interest in management initiatives over time. Congress has

served as an institutional champion for many of these initiatives,

providing a consistent focus for oversight and reinforcement of important policies. This subcommittee’s focus on the Y2K issue has,

without question, had a major influence in shedding the executive

branch’s initial optimism about the nature and scope of the problem and the executive branch’s adopting a more aggressive posture

to addressing the crisis.

In conclusion, these four factors—top leadership, commitment,

linkages to the budget process, collaboration with agencies, and

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congressional interest and oversight seem to be critical to governmentwide improvement efforts no matter what specific organizational arrangement is used.

With that, I conclude my statement.

[The prepared statement of Mr. Mihm follows:]

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Mr. HORN. Mr. Paul Posner is Director of Budget Issues, Accounting and Information Management, U.S. General Accounting

Office. This is a joint statement, and we are delighted to have you

here since your division has also done some terrific work for us.

Mr. POSNER. Thank you, Mr. Chairman. It is a pleasure to be

here.

I want to reflect for a few minutes on the work that GAO has

done.

In 1989, we did a study of the management of OMB, of their effectiveness in carrying out their management leadership functions,

and we returned to that subject in I think it was 1995–1996 with

the study of OMB 2000. We looked at the first year and we assessed how well management issues fared in that new, integrated

process over there, and we have been kind of addressing this very

question that you have been raising. And I will tell you that, as

someone said at a NAPA lunch that I attended the other day, we

are firmly on the fence. It is not particularly comfortable, but we

arrive at that uncomfortable position honestly.

Mr. HORN. You know what Theodore Roosevelt called people on

the fence. Those were the mugwumps. Mug on one side and the

wump on the other.

If you don’t mind, with those fine studies you mentioned in 1989

and I think 1996, we would like to have them for the record. And

Mr. Turner would like a set, and I would like a set. And also the

staff directors on both sides might like one.

[NOTE.—The May 1989 GAO report entitled, ‘‘Managing the Government—Revised Approach Could Improve OMB’s Effectiveness,’’ GAO/GGD–89–65 is retained in subcommittee files.]

Mr. POSNER. Let me say that we do view the idea of integrating

management into the budget and vice versa as being mutually reinforcing. We have talked to a number of people here particularly

about the benefit that management gets from being associated with

the clout of the budget, the fact that the budget process is the single signaling device respected by management, by managers. And,

after all, it is agency managers that are the linchpin to improving

the way that these programs are carried out; and getting their attention is obviously critical.

I will note over the years when we have been studying this that

even when management has been encompassed at OMB, the linkage is problematic and difficult. We looked at 1989, OMB had a

separate division; and we found that frequently those people were

often on their own pursuing their own agendas and the budget examiners were pursuing theirs and the twain never met, so to

speak. What we called for there was a closer integration so that the

budget examiners would take some ownership of these management issues, because after that is what we felt was important to

reinforce these important policies.

But another thing about the integration that is also important—

budgeting can gain from the integration as well. In other words,

good budgeting should involve understanding the financial management of agencies and the financial position, financial statement.

Good budgeting should involve a clear understanding of the performance measures and indicators that agencies are using and

their track record.

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Good budgeting, for example, should involve knowing the quality

of the data that you are getting about the spending that agencies

are doing. For the first time this year, we are subjecting that data

to the discipline of the financial audit in the 1998 statements, and

we are going to get some useful information about whether agencies can even keep track of their unobligated and obligated balances, essential things to knowing what money we have spent,

never been audited before.

I think there is a tremendous spin-off benefit from having these

management initiatives, from having budget people take ownership

of these things. I think it improves their ability to do budget analysis in some sense.

Notwithstanding this, Chris has pointed to our work that Mr.

Turner talked about on performance budgeting where, you know,

just understanding that linkage has become a very difficult question but essential, as we found looking at PPB and ZBB and all of

the other acronyms over the years. The key feature that prompted

the volatility and the short lives of those initiatives was the fact

that they were not firmly linked into the budget process that people paid attention to, and we are concerned that GPRA may go the

same way if appropriators do not pay attention to it.

Having said all of this, the reason why I think it is such a difficult issue is because when you place management initiation in the

budget, as you have heard and to use someone else’s words, the urgent tends to drive out the important.

The real question that we raised on OMB 2000, while we found

some very positive results when Alice Rivlin was there and a lot

of attention was being paid to these things, we raised the question,

how sustainable is this? Will an initiative that primarily devolves

responsibility to these things be sustainable over the long term

without an institutional gadfly or nudges, as Ed DeSeve called

them, to keep the focus on these things? And that, frankly, is a serious question and one that is worthy of much of our time and attention.

I think what has happened in this period as well is that, in the

absence of a defined focus on management, we have also seen what

I will call a differentiation of management leadership responsibilities. We have seen the President appoint an Assistant to the President for Y2K. We have seen the Vice President take responsibility.

We have seen responsibility spun to agency counsels, and we have

seen GAO taking some responsibilities and issuing executive guides

on a variety of things. Perhaps that is healthy, but perhaps also

it reflects a lack of a sustained focus.

One of the devices, and I will conclude with this, that has been

developed I think which could be a management leadership tool,

are the performance plans, particularly the governmentwide plan,

that OMB has just issued. This plan provides a vehicle to address

the fragmentation that we point to time and time again. So often

when we look at things from an outcome perspective we have so

many programs that are considered in isolation, tools that we use

to address the same problem, whether it is housing or agricultural

and through tax expenditures and loans, a variety of grant and

spending programs and the like that are never really thought

about in a fabric together.

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And what we hope—and, again, we know OMB is perhaps the

only institutional focus that can do this—is that this plan could become a vehicle to bring some attention to these cross-cutting issues

that Mr. Seidman referred to as an essential part of management

leadership. So we are looking for those plans to become that vehicle

possibly in the future.

That concludes my statement.

Mr. HORN. Any other comments that any member would like to

make reacting against other panelists’ testimony? I regard you experts as very expert people. If you didn’t like what somebody said

or if you did like what they said, do you want to reinforce it?

Dr. McMurtry, any comments on your colleagues and their ideas?

Ms. MCMURTRY. I guess what strikes me, having heard the various presentations this morning on the former panel as well as this

one, I am not sure that we are going to come up with a perfect arrangement.

I think we all agree that management functions are very important. They have been packaged various ways over the years within

BOB and then OMB. Is creating a separate office necessarily going

to be a cure-all? I don’t think so.

Would having some kind of a statutory office within OMB be an

improvement? Perhaps. If we leave things as they are, with the impact of developments such as the budget coming into balance and

continuing implementation of the Government Performance and

Results Act, perhaps if no organizational changes occur, things will

still improve.

I guess I am somewhat optimistic at the place we are. I didn’t

expect to be at this place where we had a surplus in 1999. So from

someone who has followed the budget more closely than the management side, although I have been interested in OMB as an institution, I think it is a fairly optimistic time.

Mr. HORN. OMB did not get us to a budget with no deficit.

Ms. MCMURTRY. This is true.

Mr. HORN. Regardless of who is in power.

Ms. MCMURTRY. I didn’t mean to imply otherwise. I was just notifying the circumstances now.

Mr. HORN. How about the General Accounting Office? Any comments that you want to make on CRS?

Mr. POSNER. I will defer.

Mr. HORN. Dr. Moe is not shy. Go ahead.

Mr. MOE. Well, this is an important issue, and a lot of us have

institutional constraints. You have the administration’s view from

Mr. DeSeve, who presented it very well.

I would like to read one little part of the prepared remarks I

didn’t read, and I hope that this raises some interesting questions.

As Paul Light and others have argued, much of government is

‘‘hollow.’’ In an unenlightened attempt to keep the statistics of government employment artificially low and to equate this statistic

with the size of government, thereby meaning if you decrease the

number of Federal employees, you are decreasing the size of government. A high price has been paid for this strategy by Congress,

the President, the agencies and the public.

At the same time that Federal employees have declined both absolutely and relative as a percentage of the work force, the work

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is increasingly assigned to third parties, principally private firms

with very different perspectives and interests than those of the

Federal Government.

Paul Light has recently estimated that 17 million persons versus

2 plus million in direct civil employment are part of this third

party orbit of government. Let’s look at one instance of the consequences of this current practice of equating Federal employment

with the size of government. The Federal National Mortgage Corporation, better known as

Fannie Mae, is a privately owned, government-sponsored enterprise. Its portfolio is about $1 trillion in mortgage-backed securities. The president of Fannie Mae received approximately $7 million in compensation in 1996. All of the other executive employees

are paid similarly high salaries. Performing a similar function with a half a trillion dollar portfolio is the Government National Mortgage Association known as

Ginnie Mae. Fannie Mae, to perform its functions, has 3,400 employees. The salary of the president of Fannie Mae is considerably

larger than the compensation for all Ginnie Mae employees put together. Ginnie Mae runs with only 53 employees. Why is the Federal Government so much more efficient than the

private sector? I mean, any time you want to see something luxurious, go to the Fannie Mae headquarters. And yet what we have

is 53 employees running Ginnie Mae, and they want to decrease it.

It was 72 a few years ago, and I phoned up and found that they

dropped employment to 53. So how is it that we have a half a trillion dollars being watched

over by so few people? And the answer is that they have essentially

turned over the management of this function to some private firms. And if you read the GAO report on Ginnie Mae written in 1993,

there are some very disturbing statistics in there and very disturbing quotes. Because, in point of fact, even the contractors

themselves say we are not being properly supervised. So what is

the hidden cost when you use employment numbers as a measure

of size? We are paying a tremendous cost in moral hazard as a people.This is similar to when 2,500 savings and loans were going

under. We came up and asked for 43 employees at the Federal Savings & Loan Insurance Corporation so they could begin to look at

these 2,500 insolvent savings and loans. OMB said, no, you can’t

have them because that would disturb our policies of cutting back

on employees. I have heard people estimate that ended up costing

us $20 billion to $40 billion because we did not have the capacity

to go into governmentwide management issues. Ginnie Mae is a classic case here where we are understaffed.

They don’t have their own legal staff. They contract out 4,000

hours of legal work. I don’t care how good these law firms are, the

fact is that, within Ginnie Mae, they have very little capability to

judge the quality of what they are getting back on their legal work

because they have no law office. So there is often a hidden cost to what I view as relatively simplistic proposals. What I just said to you does not appear in any

of the process programs. You can read GPRA forever and building

management capacity will never come up because to them it is a

numerically driven concept without substance.

So I find it is not all bad, but I am telling you that it is not the

complete story and that is presumably why people concluded that

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So I find it is not all bad, but I am telling you that it is not the

complete story and that is presumably why people concluded that

you will never have the complete story, never, as long as management is subordinate to budget.

Mr. HORN. Mr. Posner.

Mr. POSNER. I want to augment what Ron just said. Because I

think the more our programs involve third parties, State and local

governments and the private sector and really doing most of what

we find important in government, the more management makes a

difference, but also the more it makes a difference how we design

these programs. How do we design these incentives to encourage or

avoid things like moral hazards?

You look at a program like the student loan program. We had a

default rate exceeding 20 percent. Was it because we had bad management at the Department of Education? It is unclear, but we

know that we were giving the banks absolutely no interest in

screening people or collecting these moneys. We had a situation

where we were encouraging all sorts of, frankly, fly-by-night providers to enter the program and serve lower income people with ineffective training that gave clients little prospect of paying back the

loans.

It was—retrospectively, when you look at how we designed it, we

couldn’t have helped but had an over 20 percent default rate. And

Congress took that on with Department of Education’s insight, and

managers stepped up and worked in the implementation phase,

and they redesigned it, and the default rate has come down significantly.

That is a parable of how so many of our programs are really run

and why these performance problems reflect management, but they

reflect a lot more than just management.

Mr. HORN. That is a good point. You have raised a couple of interesting issues, and certainly the Congress is partly at fault on

the thrift situation, and the Congress is also partly at fault on the

student rate default. Because when they put proprietary schools

into that mix, that is when the nonpayment went up substantially.

I remember once trying to make a telephone call. I walked across

the floor and Representative Waters was taking on the whole Committee on Education. This was in the Democratic-controlled Congress of 1993 and 1994. I listened to her; and I said, she is right.

And so I waded in on her side. And my friend Bill Ford, who I had

worked with for 20 years in higher education when he headed postsecondary ed, he and the committee, both parties, they beat us

solid because, apparently, we had had a lot of interest of the proprietary schools in Members of Congress of both parties, and that

is part of the problem.

As far as Fannie Mae, I have been wanting to hold a hearing on

that for a long time. There was a leak once out of my committee

on just an innocent five words in a report that got to them and suddenly seven of the highest paid lobbyists in Washington show up

on Capitol Hill thinking, ‘‘Gee, they might be looking at us in a future year.’’ We will be. We will get to them. It is amazing, and you

have made some very interesting points.

I now yield all the time that he wishes to consume to the gentleman from Texas, Mr. Turner.

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Mr. TURNER. Thank you, Mr. Chairman.

This has been an interesting discussion; and I was certainly interested in your comments Dr. Moe. You don’t hesitate to state

your position, and I found that somewhat enlightening, and I appreciate that.

When you labeled the management model and the entrepreneurial model and the accountability model, is that basically the

way you would describe the two approaches?

Mr. MOE. Constitutional.

Mr. TURNER. Constitutional.

The thing that has always impressed me in my years of service

in elected office is how, oftentimes, we fail to appreciate the people

in government who are the line managers. Because I really believe

to be a manager in government is probably one of the most difficult

management jobs you can ever be assigned because, in essence, you

are constantly faced with that dilemma of those two models.

It seems to me to be easier to be in the business world and be

a manager because the bottom line is all you have to worry about.

You are looking for productivity and profit. In government, these

two models intersect.

I am one who has always expressed concerns about the move toward privatization because I firmly believe, if government is run

right, we ought to be able to manage government as efficiently as

the business world does. But there is a concept afoot in this country today that says somehow government is bad and that business

knows better and that we need to just run government like a business and everything will be OK.

Certainly, we do need to have sound business management practices in place in government, but it doesn’t necessarily mean that

government can be run like a business, because we know that businesses run on the entrepreneurial model and in a democracy and

constitutionally based form of government there are other interests

other than the bottom line that always have to be protected.

Maybe one of the things that we can do to help improve government is to be more sensitive, particularly those of us who are in

elected positions, to not making derogatory comments about government as compared to business, and to try to end, if we can, the

attitudes that prevail in many quarters of our country today that

government is bad and business is good. We need to make both of

them good.

Maybe we need to work harder to try to encourage young people

to go to some of our schools of public affairs, like the Lyndon B.

Johnson school that I am familiar with in the State of Texas,

where we can train managers and make young people feel proud

to enter into the service of government.

But, I found your comments enlightening, and I guess the conclusion I came to on this is that—and I think several of the panelists

have stated this position—I am not sure that the structure is our

big problem. I am not sure that we can even say that simply institutionalizing government is the right thing to do versus having ad

hoc committees, because even in the business world sometimes it

is that ad hoc group that shakes up the institutional structure and

makes some improvements in the institutional structure.

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One of the good things about our democratic system is that as

we elect new people and new leaders, they do bring new ideas. But

we can improve the institutional structure and the quality of the

people who serve in those positions who ultimately are going to

make the government work efficiently and effectively—not only like

a business but also to serve the needs of the people that we all collectively agree have to be served.

So maybe there is no easy answer here, but it could be that simply through a better effort on our part to enhance the importance

of the role of government and to clearly enunciate what that role

is, as you have done, and to talk about the contrasting models, that

perhaps through that effort we can come to some better resolution

of some of these management issues. Because it is not easy, and

actually very difficult.

I welcome your comments.

Mr. MOE. To talk briefly about the theoretical dispute that you

mentioned, oddly enough, it is very difficult to have a mesh of the

two. That is why they talk past each other as models. The fact of

the matter is that the fundamental management of the executive

branch is by the general management laws. They provide the rules

of the game.

The rules of the game in the private sector are the maximization

of equity return to owners. You don’t do that, you go to jail for fiduciary irresponsibility. But that is not the objective in the Federal

Government. It is designed to implement the laws passed by Congress, wise and unwise.

When you do not have an agency downtown that is capable of

sending up to Congress an administrable program or an administrable agency, no amount of process management will save the

day.

So what has also occurred is that, as the proliferation of these

general management laws have occurred, you see that book explains what every manager in government has to have in front of

them, these are the laws that I have to follow. So the laws are

what drive them.

In order to have in the executive branch an institution that takes

these laws as seriously as Congress does, you have to separate

them from the budget. I know that this may sound unusual, but

budget to me is only one part of management. It is the most important single part, but there are other elements to the management

equation. And those other elements, if they are subordinated to the

budget, will never get sufficient hearing.

This is why—for example, GAO reports 25 risk areas this year.

Notice that is all after the fact. How much time is spent on not getting to the risk point? Not very much. I have been here for 25

years, and I have never been to a discussion about how to properly

design an agency of the United States that had great influence.

Structure is important. Proper structure is a necessary but not

sufficient basis for proper management in the Federal Government

because accountability remains our highest value. That means we

may have to sacrifice performance on occasion because it is a political decision. You try to keep such trade-offs to a minimum, but the

two sets of values are different.

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For years I believed that we could get what it is that we are worried about and change the culture of OMB and not have to split.

I believed that until but 1986 or so, and then I finally concluded

it isn’t going to happen because the current culture of OMB cannot

properly address the management issues which is—this final thing

on privatization.

If you had an Office of Management, presumably one of its responsibilities would be to keep track of and to know all about the

various privatization—itself a term with many definitions—activity

going on in the country, in the Federal Government, up here on the

Hill, and be able to aid agencies and inform committees about what

are some of the rules that we have learned historically about how

to do a privatization correctly, as opposed to incorrectly.

But we have none of that today. So what we have, in essence,

is that every agency is told you are on your own to make a deal

with your congressional committees. This is why the FAA got its

own civil service system. It went to its committees, did not go to

the Civil Service Subcommittee, and got exempted from title 5 because everybody is on their own.

This is one of the hidden agenda objectives of the National Performance Review. They believe that government should consist of

numerous organizations all competing with one another to offer

services to one another, we call this franchising, and so forth.

Basically, there are not many rules on organizational management. There is no law, for example, saying that the executive

branch can create a performance-based organization [PBO]. This is

just made up. And so what we have here is sort of a disaggregation

and disintegration of the concept of fundamental management, and

structure does play a big role in any reassertion of our management responsibilities. It isn’t the whole thing, that is for sure, but

I think OMB experiences a failure.

Mr. MIHM. On the notion of accountability that Ron pointed out,

the point that I would make is that accountability for most agencies is something that cuts in many, many different directions at

the same time and in opposing directions.

One of the places where the concept that government ought to

work like business breaks down most directly in my view is that,

unlike in the private sector, we don’t have one bottom line. Businesses have profit and market share and these all create incentives

for certain types of behavior.

The problem that managers in the public sector face is that they

have competing sets of priorities from which they have to build

goals. These competing priorities are embedded in the very missions of organizations, that force them to systematically create

goals that tug agencies in different directions.

In Ron’s opening statement, I believe he mentioned the situation

at IRS. They have to create a goal that, on the one hand, deals

with the collection of revenues but, on the other hand, ensures a

directly competing priority to make sure that IRS treats taxpayers

in a fair and courteous manner. In fact, Commissioner Rossotti has

mentioned that customer service is what the agency is now going

to be about. So the notion of accountability is very ambiguous at

the Federal level.

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One of the good things about the Government Performance and

Results Act is that it provides a venue through strategic plans and

annual performance plans for raising these types of issues up for

discussion, and to make sure that decisionmakers understand the

various tensions that agencies’ operations are under.

We did some work at the EPA a number of years ago, and they

told us one of the best things about reaching out to stakeholders,

which is a requirement of the Results Act, was not so much that

they heard from stakeholders but that they educated the public

about the different pressures that the EPA is under. EPA needs to

manage and deal with different priorities that are placed on it,

such as reducing burden on businesses and at the same time protecting health and safety. How does it strike the appropriate balance? There is no immediate or easy answer for that, and EPA is

accountable for both.

Mr. TURNER. You mentioned how the Results Act is working, and

I may be wrong on this, Dr. Moe, but it seems to me when we talk

about trying to place an emphasis on management institutionally,

that the National Performance Review effort was that very thing.

We know that it is not institutionalized, and we know that it may

not last past this administration, and we may not agree with all

of the theories that they are pursuing, but, in essence, wasn’t that

what that was? Maybe it was not planned and maybe nobody

thought through that ‘‘we need to emphasize management,’’ but

that is what that amounted to, to place emphasis on management?

Mr. MOE. It did. It implicitly made the case for a separate Office

of Federal Management. They knew right off the bat that if they

took their exercise into OMB, they were dead. They didn’t draw the

right conclusion, however, from their experience.

The proper conclusion should be—my view on this—would be

that you would have a separate Office of Management to continue

the activities that we did plus the activities we are talking about.

However they didn’t draw that conclusion.

So it is sort of up for grabs. The future is sort of up for grabs.

That is the problem. When you have an institutional problem, you

should have an institutional response to it. And merely asking

somebody to do a good job doesn’t generally get it done and particularly in the government where our laws and regulations are relatively strict.

One reason that it is important to have one agency watching over

all of these laws—and when you talk about clout, the real clout

comes from being able to design and implement the general management laws, and here is why. It is an intellectual reason.

The purpose of a general management law is, in essence, a contract between the executive branch and the Congress on how certain procedures and laws shall be implemented. It remains in effect

unless an exemption is given by Congress to it. Notice what we

have done in this situation. We have created the politics of generality. In other words, the burden of proof to be exempted from

some law or exception lies with the agency that is seeking it, OK?

So in the absence of a persuasive case, the government is wholly

accountable to OMB and to the President through OMB.

The other politics, and this is the one represented by the National Performance Review and that is the politics of

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exceptionalism and that is you have very few general laws and you

don’t have continuing institutions in place. But, in point of fact, a

thousand flowers shall bloom throughout the government, all agencies with their own independent compensation systems, and those

seeking to have general management laws apply across the board

have the burden of proof. That is why we are here.

So we are trying in this act to reimpose accountability across the

board and not have everybody with their own little dukedom out

there. We have to make a case for this argument. That is what we

are trying to do here, to restore some overall accountability to the

President.

Now, I have to say this. Presidents since Kennedy have found

the management function to not be politically rewarding. They say,

if you do something good in management, the benefit will accrue

to your successor; but if there is a problem with it, you get the criticism. So their political advisers say that management is not a very

profitable thing to get involved with.

But we have paid a price for that, and that is it is the President

who has to support those actively who are concerned about all

these laws. For example, these laws are not related very well to

each other, you see. In 1933, we passed a law and it reflected the

values of 1933. We passed another law in financial regulation law

in 1993 to reflect the values of 1993.

We don’t have anybody there to integrate the laws in a way that

makes them contemporary. We are a republic and the laws do run

things and the fact that you try to do everything outside the legal

system is a weakness and Congress doesn’t realize it. That is why

I believe we do have to have a quality constitutional system in

which Congress is an active player and we don’t get caught up in

business school jargon.

Mr. TURNER. Thank you, Mr. Chairman.

Mr. HORN. I thank the gentleman. There are some excellent

questions and dialog.

Let me ask Dr. Moe at this point, and then I will move to the

GAO. I just have a few more questions.

You noted, Dr. Moe, that major fields of government activities

are essentially unmanaged. Would you give examples of how this

has led to statutory laxity and the neglect of standards for organizations, operations and accountability?

Mr. MOE. I am not sure that I followed your question well.

Mr. HORN. I can repeat it, because it is a cumbersome question.

You note the major fields of government activities are essentially

unmanaged. Would you give us some examples of how this has led

to the statutory laxity and neglect of standards for organizations,

operations and accountability? Is this a matter of statutory laxity

or is it just that they don’t know what they are doing?

Mr. MOE. There is a sequence for proper management in the

Federal Government. Notice I am saying Federal Government,

which is different than GE or a university. At the top rung is the

law. If you have to design a law that is conceptually sound, particularly in programmatic terms, knowing full well because of the political process and if you require great management perfection you

are going to be discouraged, but nonetheless you can avoid some of

the worst problems because history is not something to be ignored,

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which we have a tendency to do, it is something that you build

upon. You don’t need to make the same mistakes over and over

again.

The second level has to do with your central management agencies. One of the NPR’s major points has been to downgrade and to

disembowel the central management agencies. That is OMB, for example. They are shadow agencies now, and we have a hollow central management operation. But central management remains the

absolute key to ensuring that all of the officials, most of which, as

I pointed out, are short term political appointees are following on

the same team. Without it, everybody goes their own way.

So the second element is the quality of your central management

agencies.

And the third element has to do with the quality of your leadership. It is very difficult to get an 18-month Assistant Secretary in

a department to get all enthusiastic about a 10-year improvement

program. Incidentally, the National Performance Review has never

addressed the question of political appointees. They apparently

want more of them. They don’t want to cut them, even in relationship to the mid-level people.

So we have here this very large group of people who have not

been trained for this job, and yet we are asking them to be management gurus. Well, the fact that we are going to be disappointed

shouldn’t come as a surprise. There is a dysfunction between the

needs of the agencies and the quality of leadership that we force

upon them.

And a fourth element is the quality of the individual agency

structure itself. There are many activities that could be properly

designed, and that is the keyword, government corporations rather

than appropriated agencies, and they would run very well. So we

need to recognize that within the governmental structure itself

there is a wide range of options available for us on how to design

an agency and its program in a way to maximize administrability,

but this requires quality people in a central location so that each

subcommittee on the Hill or each agency in government isn’t designing itself.

I always view this as something of a conflict of interest. This is

where we have assigned the project since, if you got on the telephone and tried to phone OMB and asked to speak to their expert

on government corporations, the odds are that they would say that

they don’t have one. I have phoned them for years, and they don’t

have one. The agencies themselves are at a disadvantage in the absence of that type of managerial assistance.

I hope that I answered your question or at least answered toward it.

Mr. HORN. Well, you are warm on that one. There is no question

about it, that we lack that memory to give them options in trying

to deliver on a particular program.

When I was in the administration back in 1959 we had a crew

that worked with the Congress on, say, the Labor Management

Disclosure Act of 1959, and we were ready to implement that the

day that the President signed the law. And we had thought

through and gotten the basis for having that agency work. But, as

you say, when you phone up OMB, who is the expert on governVerDate 23-FEB-2001 08:39 Mar 09, 2001 Jkt 010199 PO 00000 Frm 00144 Fmt 6633 Sfmt 6602 E:\HEARINGS\61821 pfrm07 PsN: 61821
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ment corporations? Who has had some experience with them, and

who has looked at the current ones, and are they doing what we

thought they should do? And that will start with TVA right on up.

Mr. MIHM. We did a report on government corporations several

years ago, and they directed to us Dr. Seidman. They said, go see

him in NAPA.

Mr. HORN. That will look good in the committee report on the

floor.

Mr. POSNER. Can I add to Ron’s response?

Again, if you are looking at what really matters in terms of the

implementation of these programs and an interconnected environment, it is true that agency matters, structure matters, but what

equally matters is the rules, the incentives and the way we design

these things. I do believe that has been kind of a neglected area

of public policy, public administration.

I was involved 10 years ago in the U.S. Administrative Conference study that produced a guide to grant design for Members

of Congress. What do you do about something so obscure as maintenance of effort which most people are very dimly aware of which

has a huge impact on whether Federal money is going to get where

it is supposed to go or not? And when you look at the largest programs, most of them don’t have a maintenance of effort provision

or it is outdated. It is no wonder why we are not getting the performance we think we should be getting.

Chris mentioned the notion that we need better information

about what we are getting, so it is structure, but it is also information. I mean, for many, many years GAO has had to become the

primary data collector of record on things that agencies should very

well understand and know. IRS didn’t have any idea who owed

them delinquent tax debt. They had no idea how many were businesses, how many were individuals and different types, and now

they are getting better information.

We had to do samples, very time-consuming work; and what you

are hopefully going to start seeing is we developed this information

infrastructure under GPRA and IT is that we are going to become

better able to understand how our programs are linked to the behaviors that we are trying to implement. And the interesting questions will get to be the things that Chris said—what we really care

about, how we are impacting or not impacting the behavior, and

which of these conflicting goals do we want to put priority on. And

that is where ‘‘management’’ becomes part of the policy debate.

Mr. HORN. I think the point that you are making also here is

that Presidents are busy people. They have demands from every interest group in America, and so do their Cabinet officers. But there

is no great incentive to have good management until the chickens

come home to roost, and then you have a major scandal, and then

everybody scurries around and says gee, not me, let’s do something

about that.

There is no question if a President starts on it in a 4-year term— and we have had many Presidents with 4 years and not 8 years— if you do something worthwhile, credit may go to your successor,

whether your party or the opposite party, so there is no great incentive in that. And the bureaucracy can wait you out and say this,

too, shall pass.

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I remember PPBS, that was supposed to be across the board with

Mr. McNamara and later with President Carter, all that zero-based

budgeting. And they say, folks, this, too, shall pass.

And that is what we are down to. Somewhere we need that institutional memory that, even if the President can’t spend much time

on it, he can give some leadership and direction and he can let his

Cabinet know that he is serious about it. And that is essentially

how President Eisenhower used a Cabinet. Many Presidents

haven’t even had them in the room.

Certainly Franklin Roosevelt ran the government in a number of

unique ways and didn’t very much care if his Cabinet ever met, but

at least his people knew here is what he wanted to achieve. And

then the question was, how can you most effectively and economically achieve it? And until they know that the President is serious,

nothing much is going to happen, no matter who is in the White

House.

Let me ask one last question here of GAO. Has the Congressional

Budget Act of 1994 strengthened or hindered good management?

And what, if any, changes do you see in that act that should be

made? Any thought given to you that——

Mr. POSNER. The Congressional Budget Act?

Mr. HORN. I testified on it at the time.

Mr. POSNER. Well, I think that there were some information provisions, as I recall. It was title VII, and I am not sure that that

has really had much of an impact at all.

It reminds me of the Intergovernmental Cooperation Act of 1968

that mandated that GAO do periodic studies of programs and document the various agencies that were at play and recommend ways

to consolidate and streamline. We did not exactly receive deafening

interest following that up from our clients here. So those things are

all well and good.

I do think that the Congressional Budget Act did set up a very

interesting structure where the budget committees have to assign

spending by functions, the 17 broad mission areas, and I think that

has largely remained an academically interesting exercise that does

not drive resource allocation. And it gets back to the governmentwide performance plan, that somehow we need to be focusing on

those as our unit of analysis for making a decision, and we have

not yet succeeded in doing that.

We focus on discretionary spending, $555 billion. It gets divided

up among 13 appropriations subcommittees, which is very difficult

to understand. So the promise of the act in that regard as an

allocational device across goals that we care about as a Nation has

yet to be fulfilled.

Mr. HORN. There is no question that we have a lot of problems

with that act, although we are stumbling and muddling through

with it, as the British might say. We certainly could do better.

Let’s face it, the aim of both the La Follette and Maloney bill in

1946, which didn’t last too long either when it came to budgeting,

and the 1974 act was to try to get the relevant people together that

make these decisions up here, namely the Finance and the Ways

and Mean Committees and the various appropriations subcommittees and get them to relate to each other since one is either going

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to have to raise revenue and the other is going to have to cut

spending if you are going to have a balanced budget.

Unfortunately, that isn’t the way that the process worked. We

have a Budget Committee that is sort of out there somewhere that

has some of these people on it and some other people on it. It

wasn’t a bad idea because the other people presumably would try

to keep honest the appropriators and the revenuers. Yet we don’t

have the guidance that is needed, and you get sort of artificial

caps, and you wonder this year if we are going to have any caps.

The Budget Committee has been sort of a political obstacle to

most Members of whatever party that is in control because they

have a whole bunch of crazy ideas in there as to how they might

do this and this. And your opponent throws that at you on the

stump, and, by George, it is a document of the House, and it is

your party, whether it is Democratic in the 103d or Republican in

the 104th, and it really has no real impact. And it is the appropriating committees that count, is reality, and that is where they

are segmented.

The President took 130 years, I think, for the President to have

a unified budget. It used to be that the department heads sent it

to the Secretary of the Treasury, and he put a binding on it and

shipped it up here. And we, unfortunately, have 13 subcommittees

that we will never be able to get rid of. It doesn’t happen that easy.

I suggested 20 years ago, let’s have five to match their resource

areas. The President brings that budget together in five major

areas. We could do that, too, but nobody is going to give up their

chairs unless there is a crash somewhere, but it is a heck of a way

to do business.

We appreciate all of your wisdom that you have given us. It has

been very helpful. These have been excellent statements, and they

will be in the record, and we will refer to them, and over the next

few months we will put the pieces together.

I am going to read the staff members into the record.

I want to thank not only the witnesses but the staff members:

J. Russell George, the staff director for the Subcommittee on Government Management, Information, and Technology and chief

counsel. Bonnie Heald, our director of information is sitting patiently back there wondering where the media is. They are not interested in management, right? Harrison Fox, to my left, professional staff member responsible for this hearing; Mason Alinger,

staff assistant. And we have two interns here, Paul Wicker and

Kacey Baker.

And then for the minority we have Faith Weiss the professional

staff member and Earley Green, staff assistant.

And we have two court reporters, and they are both here at the

same time: Doreen Dotzler and Ryan Jackson. We thank you both.

It is tough when we have all of the dialog going back and forth,

and we appreciate it.

With that, this meeting is adjourned.

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.]

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