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THE REFUSE OF THE FEDERAL SPENDING BINGE

II: HOW U.S. TAXPAYERS ARE PAYING DOUBLE

FOR FAILING GOVERNMENT PROGRAMS

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 3, 2011

Serial No. 112–10

Printed for the use of the Committee on Oversight and Government Reform

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 3, 2011 .............................................................................. 1

Statement of:

Davis, Thomas M., III, director of Federal Government Affairs, Deloitte

and Touche LLP; Gene L. Dodaro, Comptroller General of the United

States, U.S. Government Accountability Office; and Ryan Alexander,

president, Taxpayers for Common Sense .................................................... 7

Alexander, Ryan ........................................................................................ 39

Davis, Thomas M., III ............................................................................... 7

Dodaro, Gene L. ......................................................................................... 13

Letters, statements, etc., submitted for the record by:

Alexander, Ryan, president, Taxpayers for Common Sense, prepared

statement of ................................................................................................... 41

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 5

Davis, Thomas M., III, director of Federal Government Affairs, Deloitte

and Touche LLP, prepared statement of ..................................................... 10

Dodaro, Gene L., Comptroller General of the United States, U.S. Government Accountability Office, prepared statement of .................................... 15

(1)

THE REFUSE OF THE FEDERAL SPENDING

BINGE II: HOW U.S. TAXPAYERS ARE PAYING DOUBLE FOR FAILING GOVERNMENT

PROGRAMS

THURSDAY, MARCH 3, 2011

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 9:30 a.m., in room

2154, Rayburn House Office Building, Hon. Darrell E. Issa (chairman of the committee) presiding.

Present: Representatives Issa, Platts, Mack, Walberg, Lankford,

Amash, Buerkle, Meehan, DesJarlais, Walsh, Gowdy, Ross, Guinta,

Farenthold, Kelly, Cummings, Towns, Maloney, Norton, Kucinich,

Tierney, Clay, Connolly, Quigley, Welch, and Murphy.

Staff present: Thomas A. Alexander, senior counsel; Michael R.

Bebeau, assistant clerk; Robert Borden, general counsel; Will L.

Boyington and Drew Colliatie, staff assistants; Molly Boyl, parliamentarian; Ashley H. Callen, counsel; Sharon Casey, senior assistant clerk; Benjamin Stroud Cole, policy advisor and investigative

analyst; John Cuaderes, deputy staff director; Howard A. Denis,

senior counsel; Gwen D’Luzansky, assistant clerk; Christopher

Hixon, deputy chief counsel, oversight; Tabetha C. Mueller, professional staff member; Laura L. Rush, deputy chief clerk; Jeff Wease,

deputy CIO; Lisa Cody, minority investigator; Carla Hultberg, minority chief clerk; Lucinda Lessley, minority policy director, Scott

Lindsay, minority counsel; Leah Perry, minority chief investigative

counsel; Dave Rapallo, minority staff director; Mark Stephenson,

minority senior policy advisor/legislative director; and Cecelia

Thomas, minority counsel/deputy clerk.

Chairman ISSA. Good morning. The committee meeting will come

to order.

As is the new tradition of this committee, we will begin by reading the Oversight mission statement. We exist to secure two fundamental principles. First, Americans have a right to know their

money Washington spends and takes is well spent. And second,

Americans deserve an efficient, effective government that works for

them. Our duty on the Oversight and Government Reform Committee is to protect these rights. Our solemn responsibility is to hold

government accountable to taxpayers, because taxpayers have a

right to know what they get from their government.

We will work tirelessly in partnership with citizen watchdogs to

deliver the facts to the American people and bring genuine reform

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to the Federal bureaucracy. This is the mission of the Oversight

and Government Reform Committee.

Today’s hearing is the second time this committee has met in 2

weeks to consider the effects of wasteful spending have on the Federal Government, the economy and the taxpayers. This week’s GAO

report exposes serious government breakdowns in effective, efficient use of taxpayer dollars. By conservative estimates, the duplication and fragmentation highlighted in the GAO report represents

over $100 billion in annual losses.

Yet, there was great consternation and 90 hours of hard debate

in order to propose just $62 billion in cuts. The GAO report, unlike

the cuts, is not about eliminating services. It is about standardizing, combining, and eliminating duplicative services that cost the

American people money without serving an additional use. Meaning, if we cut the bureaucracy, if we cut so many of these programs

that repeat and repeat, each of them having high paid and high

ranking individuals, and IT groups, and separate publishing and,

if you will, advertising campaigns, we can eliminate costs without

the American people suffering one loss of the essential services believed to be done by these programs.

I am sure in future times, we will have additional hearings on

programs that should simply go away, whether it is one or a hundred within government. But today, we are going to meet with

three very talented and very educated individuals, who are going

to help us understand what should be a win-win for the American

people. Win-win, because we are not talking about cuts. We are

talking about cuts in bureaucracy. Cuts in bureaucracy save

money, while delivering a better product to the taxpayers.

And with that, I would like to yield the remainder of my time

to the gentleman from Florida, Mr. Mack, for his comments.

Mr. MACK. Thank you, Mr. Chairman. I appreciate the hearing

today, and I look forward to hearing from our witnesses.

But something strikes me as odd. That is, we have heard the

President say over and over again that he is ‘‘going to conduct an

exhaustive line by line review of the Federal budget and seek to

eliminate government programs that are not performing.’’ That is

something we can all agree with. Yet we have seen no action on

the President’s words.

Then we have a hearing today where we invite the Director of

OMB, which is a Presidential appointee, and he refuses to show up.

So is the President serious about doing a line by line review? Is the

Director of the OMB trying to hide or duck the questions?

It is outrageous that we find ourselves at a hearing where we

have an opportunity to do something good for the American people,

and that is, cut spending and cut this budget and get rid of waste.

Mr. Chairman, you talked about the duplication, and $100 billion,

and the Director of OMB won’t show up to give us an opportunity

to ask questions and find out what we can do to cut this $100 billion, to find another $100 billion to cut, to try to bring this budget

in line?

I think it is outrageous that the Director doesn’t show up. I think

it shows a disregard to the legislative branch and the separation

of powers. It says to me that the administration and the Director

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of OMB is more interested in talking a good game out in the public,

but doesn’t really want to get to the hard work.

So Mr. Chairman, I look forward to this panel. I look forward to

your leadership, but I am extremely disappointed that the Director

didn’t show up. I am not sure that this administration is serious

about cutting spending, if they can’t even send the Director.

Chairman ISSA. I thank the gentleman. Reclaiming my time.

Our invitation to the Office of Management and Budget will remain open. I thank the gentleman for his comment.

I now recognize the distinguished ranking member for his opening statement.

Mr. CUMMINGS. Thank you very much, Mr. Chairman, and I

thank you for calling this hearing today.

I just want to go immediately to what Congressman Mack just

said. I don’t think the President is hiding, or the OMB is hiding

anything. The fact is that the President, in his State of the Union,

made it clear that he is about the business of addressing these

issues. And OMB is currently in the process of conducting its own

analysis of effective ways of streamlining the government, improve

services and cut unnecessary costs.

This task is critical to ensuring Federal programs are working as

effectively and efficiently as possible. That is why I signed the letter with the chairman requesting ongoing updates, as OMB takes

on this monumental task. It is my understanding that letter will

be going out as soon as we get the signatures of two Senators, Collins and Lieberman, I think it is.

But I want to make it clear, and I do believe that again, one of

the things about this chairman, I know he likes to do things effectively and efficiently. So I would think that OMB, there will come

a time when OMB will appear before us and will be in the best position to provide some testimony that will be helpful.

Now, Mr. Chairman, it is certainly good to see all of our witnesses here today. To Chairman Davis, it is a pleasure to see you

again. Your name has been evoked quite favorably around here. So

it is good to see you and Darrell.

Chairman ISSA. His picture is shining down on us, too.

Mr. CUMMINGS. Oh, my goodness. [Laughter.]

And Ms. Alexander, it is good to see you again.

Today we will hear the results of a report issued by the Government Accountability Office on duplicative programs and major opportunities to enhance Federal revenues. First, GAO’s report demonstrates that there are real opportunities to streamline Federal

programs, save taxpayer dollars and deliver services more effectively and efficiently. For example, GAO identified at least 31 entities within the Defense Department that are supposed to address

the urgent needs of war fighters. GAO reported that there are challenges with the Department’s fragmented guidance. And GAO

raised concerns about the numbers and the roles of the various entities and processes involved.

Solving these problems will take dedication, bipartisanship, but

it will help both American troops and taxpayers. GAO’s report also

describes numerous areas where we can recover hundreds of billions of dollars in Federal revenues. For example, GAO highlights

that the United States is essentially giving away up to $53 billion

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to oil companies that are not paying royalties on certain leases to

extract oil and gas from Federal lands. That is our money.

A lot has been said about what the taxpayers said during the

last election. Well, one of the things they said is they don’t want

to be cheated of their own money. Congress passed legislation in

1995 to give oil companies so-called royalty relief. The goal of the

legislation was to encourage production by exempting oil companies

from paying royalties to the Federal Government. The legislation

was supposed to require companies to start paying royalties when

they recouped their investment and began making a profit.

But the legislation was poorly drafted, and when oil companies

challenged it in court, they successfully avoided paying any royalties at all. In its report, GAO concluded that this problem could result in $21 billion to $53 billion in lost revenue to the Federal Government.

This windfall is going to an industry that is making staggering

profits, despite the worst economic downturn since the Great Depression. Mr. Chairman, we need to do significant work on this,

and you have. You have been a leader in this area. As a matter

of fact, in 2009 you issued a report warning about what would happen if these companies won their lawsuit. You said, any company

that entered a similar lease between 1996 and 2000 could escape

paying royalties. That was what you said.

You also said this: ‘‘The Fifth Circuit decision may force the Federal Government to reimburse companies who have already tendered royalty payments. Depending upon the market price of oil

and natural gas, the total costs of foregone royalties could total

nearly $80 billion.’’

Mr. Chairman, you warned about this problem, and I commend

you, I really do, for that. But now we need to fix it. We have to

fix it, and it is going to take a bipartisan effort. We just had a vote

in the House where we had an opportunity to fix it, and we were

not able to.

And so I think, as Mr. Davis has said many times, this is one

where we can come together, as Democrats and Republicans. It is

a win-win situation, but it is a win-win. It is not a win just for Republicans, not a win just for Democrats, but most importantly, it

is a win for the American people. And I just don’t want to be sitting

here 10 years from now saying the same things, having lost even

more money.

So I look forward to the hearing, Mr. Chairman. And I thank

you. With that, I yield back.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Chairman ISSA. I thank the ranking member. All Members will

have 7 legislative days in which to submit their opening statements

for the record.

I now go to our distinguished panel. The Honorable Thomas M.

Davis, III, former chairman of this committee, as the ranking member said. He looks down on us every day. Now the director of Federal Government Affairs at Deloitte and Touche, and the man who

issued the subpoenas to the oil companies on my behalf in order

to begin the process of doing the oversight on those flawed contracts that have cost the American people tens of billions of dollars.

I want to thank you for that today publicly.

The Honorable Gene Dodaro, the Comptroller of the United

States, appearing I think for the second time as the confirmed

Comptroller versus the many times that you appeared before us

graciously as the Acting. Your work as a legislative branch employee, spanning both the Executive and legislative branch, providing more than 3,000 people who give us the non-partisan reports

and fact-finding that we absolutely rely on.

And Ms. Ryan Alexander, president of the Taxpayers for Common Sense, an often contributor, and welcome back.

Pursuant to the committee’s rules, all witnesses are asked to be

sworn in before they testify before this committee. If you would

please raise your right hands.

[Witnesses sworn.]

Chairman ISSA. Let the record reflect that all witnesses have answered in the affirmative. Thank you. Please be seated.

In order to allow time for discussion, and as my predecessor

would say, a longstanding tradition is that you will have 5 minutes. There will be a green light for as long as you may talk freely.

There will be a yellow light to warn you that your time is elapsing.

And I will be understanding for you to complete your sentence or

paragraph, but not much more once it turns red. And that will

allow a healthy dialog afterwards.

The chair recognizes Mr. Davis for his opening statement.

STATEMENTS OF THOMAS M. DAVIS III, DIRECTOR OF FEDERAL GOVERNMENT AFFAIRS, DELOITTE AND TOUCHE LLP;

GENE L. DODARO, COMPTROLLER GENERAL OF THE UNITED

STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; AND

RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON

SENSE

STATEMENT OF THOMAS W. DAVIS III

Mr. DAVIS. Thank you, Chairman Issa and Ranking Member

Cummings and colleagues. Thanks for the opportunity to testify before you today. I am doing so in my capacity as a former Member

of the House, and specifically chairman of this committee.

I want to thank Gene Dodaro and his staff for putting together

an outstanding report that formed the basis of today’s hearing. Let

me just say, I hope we can engage OMB before this is done. Because we are in this together, Republicans, Democrats, House, Senate, executive branch. We all caused the problem, and I think we

all need to be there to solve it, as we look forward to this. At this

point, they are not here today, but I think in the future we need

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to make sure they are engaged. They are doing some things over

there we need to hear about.

During my tenure, I examined how the Government could operate more efficiently, focusing on governance issues, procurement, IT

policies, civil service, governmental organization. In this process, I

have long said the way we try to extract savings from the Federal

Government is to simply cutoff fingers and toes, rather than go

after the fat that is molded throughout the body politic.

I still believe that is the case. But as we see in the GAO report

issued earlier this week, sometimes Uncle Sam does indeed have

a few too many digits, and some surgery may well be in order.

So where does the blame lie? As I noted, there is plenty of blame

to go around. There are a lot of places to point the finger. Let me

start with Congress. Duplicative and overlapping programs frequently exist because of the way that we in Congress legislate. Indeed, one of the earliest and most enduring lessons I learned upon

my election to the House was that jurisdiction trumps all. So while

two different Members believe there may be a need for a given Federal service, they will surely write the authorizing legislation with

their individual committees in mind.

For example, if a member of the Education Work Force Committee wants to enact a job training program, they will write the legislation to ensure it falls under an agency in that committee’s purview. The same would be true of a member of the Veterans Administration. A member of the Financial Services might link job training to low income people in order to guide such a program to HUD.

Thus, we find three different programs with essentially the same

goal, job training, under three different agencies. Under this arrangement, they are all funded differently, measured differently

and administered differently. Common sense suggests they should

be combined to take advantage of economies of scale, or even just

to make it easier for the citizens to know where the programs exist.

We can blame the bureaucracy, but in many ways, Congress created the many-headed monster we bemoan in an attempt to protect

our jurisdictional prerogatives.

Another point that should be examined: in the quest to corral duplicative or overlapping programs, or to implement broad personnel

reforms, the need to implement Government-wide solutions is often

discussed. But while the executive branch has the ability to affect

such efforts to a certain degree, again, the compartmentalization

approach that Congress takes often prevents the type of holistic action required. This is especially true of the appropriations process

in which all the subcommittees would have to agree to provide

funding for a given initiative, a task akin to asking a cat to take

a bath.

Finally, there are areas where unnecessary duplication at the

Federal level has ramifications at the State and local levels. Congress should examine the myriad reporting requirements of Federal

programs, human service programs, educational programs and

transportation programs, to see where we can make better use of

consolidated systems. With existing technology, it seems unnecessary to have every State maintain its own reporting system for a

given Federal program, when essentially the same information is

required from everybody. Government-wide, in the executive

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branch, the same culture exists. Too many agencies have erected

stovepipes for the delivery of IT services, personnel rules, and internal protocols. The result is that seamless congruencies in communications and information sharing are rare among government

departments. Information gets lost, analysis becomes disjointed

and operability becomes hindered.

OMB can serve as an effective catalyst for establishing cooperation and communication between agencies, which could in turn lead

to an exponential increase in efficiency. It has the authority and

the mandate to do so. Unfortunately, under administrations of both

parties, the Office of Management and Budget simply becomes the

Office of Budget. The concentration falls on the budgetary aspects

of agencies’ spending, when in fact a management review could

yield much more long-term savings.

The key to success is focusing how services are delivered, how

services are procured and how information is gathered and analyzed. In these areas, the executive branch seems to be deficient.

Reorganizations, mergers and assimilation of redundant programs

are not Government skill sets. Often, attempts to reorganize are

thwarted by inadequate time constraints, unwilling employee participants and skeptical Federal managers, who know that a slow

roll or wait it out approach will always rump the most ambitious

change management efforts.

So what can Congress do and what can OMB do to improve the

situation? From the congressional standpoint, a complete restructuring of the committee system is unlikely. A first step to avoiding

a program duplication or inefficiency, however, might be a CBOlike review of newly proposed programs prior to floor consideration.

In closing, let me just say, there are good, dedicated people working in government. But upon examination of how they are employed, it is clear that some of them are doing tasks they don’t

need to be doing, performing under regulations that didn’t need to

be written, filling out forms that should not have been printed. I

hope today’s hearing marks the start of an effort, and a sustained

effort, to address these issues.

Again, I appreciate the opportunity to share my thoughts. I look

forward to your questions and ask that my entire statement be put

into the record.

[The prepared statement of Mr. Davis follows:]

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Chairman ISSA. Without objection, so ordered.

Mr. Dodaro.

STATEMENT OF GENE DODARO

Mr. DODARO. Good morning, Mr. Chairman and Ranking Member Cummings, and members of the committee.

I am very pleased to be here today to talk about the GAO report

which outlines opportunities to tackle overlap and duplication, reduce costs and enhance revenue collections. Our report discuss 34

different areas of overlap and duplication and fragmentation. And

it outlines a number of specific activities that need to be reviewed.

I would highlight a couple of categories here this morning. One,

there are multiple programs in specific areas that have developed

over the years and that need to be tackled. For example, there are

over 40 programs in employment and training areas. There are

over 80 programs trying, at least in part, to improve teacher quality. There are 80 programs intended to improve economic development. Surface transportation has multiple programs as well.

These programs have developed over the years, in some cases,

decades. And in many cases, there is really not a lot of empirical

evidence to show the outcomes of the programs or that they are operating effectively. This is a perfect opportunity for the Congress

and the administration to look at these portfolio programs that we

have outlined in our report, and to begin to rationalize the programs, prioritize what the role of the Federal Government should

be, and give clear directions as to what is to be accomplished

through the programs, how to measure their results and how to

streamline delivery systems and also reduce administrative costs.

I think there are a lot of opportunities here.

We also outlined in the Defense area opportunities there, in medical commands, urgent needs, as was mentioned in the opening

comments. And there are other areas where DOD and VA can leverage their purchasing power, for example, in purchasing of drugs.

They are also pursuing parallel paths in developing electronic medical records that there are opportunities to conserve resources and

get better results for less costs, we believe.

In addition to the overlap, fragmentation and duplication, we

also outline a number of other opportunities for cost savings and

enhanced revenues, 47 areas are outlined in the report. Many of

the cost saving opportunities go to the nuts and bolts of the Government and how it operates, as Chairman Davis outlined. There

is a need to make sure there is more competition in contracting,

that there are fewer contracting vehicles to help reduce the costs.

We are paying to maintain unneeded Federal property. We are paying through improper payments for services that either are not rendered or are not well documented, that we have confidence that

they are being saved or appropriately paid.

And in the revenue area, there is a yawning gap at the tax level

between taxes owed and collected. The last estimate is $290 billion.

And there are areas that we believe through prudent use of increasing the electronic filing, using third-party data to identify potential non-filers, and other activities that need to be looked at.

Now, one of the things that we are going to continue to do, since

this report is the first report that meets our statutory requirement

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to annually produce these types of reports, we will be looking at

other opportunities going forward. Tax expenditures, for example,

and how they might duplicate other things. For example, in this report, we mention the tax credit in the ethanol area duplicates the

renewable fuel standards that are in place, and that Congress

should take a look at the need to continue this ethanol tax credit,

which is billions of dollars a year in foregone revenue.

There is potential overlap between tax credits, loan programs

and other Federal spending. So we will be looking at these areas

in the future. We already have work underway for our next year’s

report, and we look forward to working with the Congress to help

streamline the Federal Government’s activities, to make sure it is

operating more effectively, more efficiently and in the taxpayers’

best interests.

Mr. Chairman, that concludes my opening statement. I will be

happy to answer questions at the appropriate time.

[The prepared statement of Mr. Dodaro follows:]

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Chairman ISSA. Thank you. The gentleman yields back 14 seconds. [Laughter.]

Ms. Alexander, please.

STATEMENT OF RYAN ALEXANDER

Ms. ALEXANDER. Good morning, Chairman Issa, Ranking Member Cummings, and members of the committee. Thank you for inviting me here to testify today.

Our mission at Taxpayers for Common Sense is to achieve a government that spends taxpayer dollars responsibly and operates

within its means. All of our work reflects our core belief that no

one, no matter where they fall in the political spectrum, wants to

see their money wasted.

To that end, TCS has worked with the left and the right to

achieve victories on stopping the bridge to nowhere, getting the

earmark moratorium enacted, cutting funding for an alternate engine for the joint strike fighter and creating an inspector general

for the Iraq war.

We have testified before this committee several times with proven results for American taxpayers. We testified on the cost overruns and problems with the F–22 Raptor and that program was

stopped. When Mr. Davis was on the dais, we testified on crop insurance waste, prompting the Agriculture Committee to take action. And working with you, Chairman Issa, we have testified on

Army Corps of Engineers issues, and worked with the committee

regarding lost royalty revenues from offshore oil and gas leases,

both of which are in the GAO report we are discussing today.

In addition to my written testimony, I would like to enter for the

record our two recent reports detailing recommended budget cuts.

In our more than 15-year history, TCS has worked on many of

the programs and issues highlighted in the GAO report. We hope

the increased scrutiny generated by this report, the current political will to tame the deficit and the good work of this committee will

lead to meaningful and overdue reform or elimination of many of

these programs.

Obviously there is much too much to tackle in this voluminous

report in 5 minutes or even 50, so I will just highlight a few issues.

Across the Government, GAO found examples of duplication. Reforms to the acquisition process, governmentwide, could yield significant savings. This is particularly true in the Pentagon, where

the risks of duplication across services are high. Efforts to acquire

weapons like tactical wheeled vehicles should be coordinated across

services. Encouraging competition and inter-agency contracting can

help drive down costs by as much as $500 billion by GAO’s estimate. And as Mr. Dodaro mentioned, coordinating between DOD

and Veterans Affairs electronic health records systems and working

together to control costs in the area of drug purchasing.

Real property management by GSA also has enormous possible

savings, both from disposing of billions of dollars worth of unnecessary Federal property, better fleet vehicle management, and better

cost analysis of purchasing and leasing decisions. In addition to opportunities to reduce spending, the GAO report highlighted important ways to enhance revenue, another critical element of reducing

our deficit. Giveaways to the oil and gas industry through royalty

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management and collection systems have been highlighted by the

GAO numerous times and added to the high risk list this year.

Chairman Issa, you know all too well from your work on these

problems resulting from the royalty relief provided in the mid1990’s to oil and gas companies operating in the Gulf of Mexico the

problems stemming from the Deep Water Royalty Relief Act, including a portfolio of leaseholders that pay no royalties at all for

oil and gas exacted from Federal waters will cost taxpayers up to

$53 billion in the next 25 years. The GAO report notes that almost $1 trillion in Federal revenue

was foregone in fiscal year 2009 due to tax expenditures, what the

Simpson-Bowles Commission called tax earmarks. The 173 tax expenditures are similar to spending programs and can be the same

magnitude or larger than related Federal spending in some mission

areas, except without the oversight. We believe this is an area for

this committee to play a critical role in increasing accountability,

examining effectiveness and saving taxpayer dollars.

In its recent report, GAO says reductions in revenue losses from

eliminating ineffective or redundant tax expenditures could be substantial. Tax expenditure performance is an area that would benefit from enhanced congressional scrutiny as Congress considers

ways to address the Nation’s long-term fiscal imbalance.

Last year, for example, GAO recommended that Congress modify

the research tax credit to reduce windfalls to taxpayers for research spending they would have done anyway. This report suggests changes to the new markets tax credit as well as reviewing

the tax-exempt status of Government bonds. Evaluating these tax

expenditures for effectiveness and value and eliminating the largest corporate tax loopholes would pave the way for simplifying the

corporate tax structure, lowering overall rates and establishing an

important level of certainty for the business community. Other tax

expenditures, such as the mortgage interest deduction or deduction

for State sales tax should also be considered.

Reforming Federal activities related to corn ethanol would be a

double whammy, eliminating redundant programs and enhancing

revenue in one fell swoop. The use of ethanol is mandated, it is protected from foreign competition and it is subsidized. Any one of

these redundant and market-distorting policy options might be proposed to help an emerging industry. It is indefensible that the mature corn ethanol industry continues to benefit from the decadesold refundable tax credit to blend ethanol, at a cost to taxpayers

of more than $5 billion per year.

Clearly, the GAO has given Congress much to think about.

Eliminating duplication and waste in government and responsibly

enhancing revenue are the critical first steps to addressing our

$1.65 trillion budget deficit.

[The prepared statement of Ms. Alexander follows:]

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Chairman ISSA. I thank the gentlelady. You beat Mr. Dodaro,

you yielded back 18 seconds. This is probably a record for any committee.

I now yield myself 5 minutes.

Mr. Davis, the work you did while you were here continues on.

But as you can see, there is more to do. When we start looking at

duplicative programs, from your experience on this side of the dais,

do you recommend that if the committee authors legislation that

we use carrot or stick or both? For example, we could look at these

programs and we could simply say, through appropriations, we are

only going to fund X amount, now you have to figure out how to

combine these, rather than perhaps only eliminating them when

you run out of money, period.

Or do we create legislative authority for pools of savings being

combined, and thus create an opportunity in which there is a carrot

for agencies that come together, such as the electronic medical

records, if in fact DOD and our previously serving members, often

known as veterans, can simply come together and realize they are

dealing with the same people and yet dealing stovepipe with two

different systems? How do you view those two options?

Mr. DAVIS. I like the carrot better, simply because when you try

to starve a budget, they look within their budget. They don’t look

at how they can share savings with another agency. It is just not

in the nature of the beast. If you can incentivize groups to work

together in those kinds of shared savings environments, you can do

much better.

Look, organizations are, you have to look at how they are

incentivized. They are hesitant to give up the control or to partner,

because they don’t know what authority they may lose over the

long haul. So when it comes to shared savings, we are not getting

the sustainability we need.

I would do something like mandating agencies to look at two or

three lines of businesses within each one where they could share

some of these instead of putting them into stovepipes. But just

starving them doesn’t incentivize them to work with other agencies,

unfortunately. That is just not the nature of the beast.

Chairman ISSA. I appreciate that.

Mr. Dodaro.

Mr. DODARO. I agree with Mr. Davis. I think the incentive——

Chairman ISSA. He is not chairman any more, you know, you

don’t actually have to agree with him. [Laughter.]

Mr. DODARO. In this case, I mean it. [Laughter.]

I think there are disincentives in the budget process, for example, in the way the money is there. It is difficult to collaborate

across agencies. And I think there could be more flexibilities that

way.

Also, the ideas that you posit there I think are also true at the

State and local level, in dealing with Federal on grants. For example, we have recommended that the Federal agencies look at incentives for States to combine in the employment and training area.

Now, a lot of these programs are delivered through State and local

administrative structures. A lot of times they have to set up separate structures in order to deliver multiple Federal programs.

49

So I think there is a lot of opportunities for incentives and some

flexibility.

Chairman ISSA. Quick followup on that. Since so much of what

is delivered in programs like that is in fact Presidential earmarks,

often called grants and competitive grants and so on, should we require that the executive branch do that consolidation? Recognize

that if you are going to give five pots of money that do substantially the same thing all from the executive branch and all on,

many of them, non-formula, that in fact that they be combined? Do

you think that is a wise piece of legislative, or should we try to

work, if you will, to combine with the administration in their own

best interest?

Or last, should we give the States authority to essentially combine grants, so that no matter where they come from, they can

merge them, which is something that Governor Barbour has talked

about, where he gets different puddles of money, and each one is

with different strings. How do you view those various options to try

to get the efficiencies?

Mr. DODARO. I think all the options are very valid ideas. At the

Federal level, I think there are opportunities to consolidate these

various programs. For example, we understand in the administration’s proposal for reauthorization in the education area actually 38

programs that we have identified are proposed to be consolidated

into 5. There are some thoughts on surface transportation. Clearly,

that.

I do think the States should have some flexibility to show, and

they can do it on a way to help reduce some of their own costs. As

you know, they are struggling with their own fiscal stress. And give

them some flexibility to combine, as long as there is proper accountability in place.

One of the things we have said is that there is not enough tracking of unobligated balances in a lot of the grant programs. So I

think all those could work.

Chairman ISSA. I appreciate that.

Ms. Alexander, just a quick one. In your opening statement,

when you took on one of the hardest pillars to take on around here,

the ethanol subsidy, and I appreciate that, how do you propose that

we begin the process of doing away with one of the obvious nonfossil fuel wastes in government? Do you suggest that we in fact

take that $5 billion and simply force it to be put into renewable

fuels more broadly, so there can be competition from what most

would call the more promising fossil fuels? Or do you have an alternate suggestion?

Ms. ALEXANDER. Our preference would be to have that be savings, and that be savings that go to deficit reduction. That has

been our preference in terms of the elimination of VEETC for several years. I think in many ways, the answer on VEETC for us is

this just can expire. It is done at the end of this year. It could have

been done last year. So we don’t see a need for replacing it.

There are lots of efforts to look at new and more promising fuels.

But I don’t think that they need to be tied to VEETC. That is just

a failed policy that is redundant.

Chairman ISSA. Thank you very much.

I recognize the ranking member for his questions.

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Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Dodaro, one of the things that I found interesting about your

report is, in the report it said DOD made major revisions to its acquisition policies. And you went on to say, more emphasis was

placed on knowledge about the requirements, technology and designs. I found that when, as chairman of the Coast Guard Subcommittee, what we discovered, when we were dealing with the

Deep Water project, when they were buying $25 billion worth of

hardware over 25 years, and had boats that didn’t float, part of the

problem, literally, literally, part of the problem was, the acquisitions process. In other words, they didn’t have people who knew

what they were doing with regard to specifications, with regard to

putting together contracts, with determining when something, performance was done. They even had the contractors determining

when bonuses would be given.

And so I am just trying to dig deep in here with this DOD, because we see a lot of money going out the door there. How far have

they gotten with that whole acquisitions process? You said they

have made some movements. What do you see that, how much

progress have they made, and do you see other things that could

be done in that regard?

Mr. DODARO. I think basically, for example, in the weapons systems acquisition, they put in place, as a result of congressional

laws the Weapons Systems Acquisition Reform Act of 2009, they

put good policies and good practices in their regulations and manuals. But they need to implement them more consistently across the

department.

Mr. CUMMINGS. How can we get them to do that? I guess that

is the question.

Mr. DODARO. I think there is no substitute for regular congressional oversight.

Mr. CUMMINGS. And Chairman Davis, you talked earlier to me

privately about, it has to be a sustained effort. How do we sustain,

I know with the Coast Guard, we just kept bringing them back,

over and over and over again. And we got things done. We saved,

I am sure, a few billion dollars in a very few years. But I am trying

to figure out, how do we keep that sustained effort, Chairman

Davis?

Mr. DAVIS. Two things. One of the difficulties in sustaining this

in government is that you have people who are replaced over a period of time.

Mr. CUMMINGS. Right.

Mr. DAVIS. They have a lot of other priorities. I liken it to mergers and acquisitions. In the private sector, when you merge, it is

costs, you have to take those out, you need to stay competitive. You

have strict time lines, you have management oversight from above.

So many times in government, you have costs that look good at the

front end, on paper, but by the time they are translated 2 or 3

years, it sometimes ends up costing you, because you have this

wait it out atmosphere.

One other thing on the procurement, we still don’t have enough

procurement officers. There is a paucity of procurement officers at

the Pentagon. They need to hire and train more people in these

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areas. It saves money in the long term to have good people behind

there.

Mr. CUMMINGS. Mr. Dodaro, I only have a few minutes left, 2

minutes left. Your report also says the United States is essentially

giving oil companies up to $53 billion because back in 1995, Congress exempted them from paying royalties on certain leases in the

Gulf of Mexico. There are some oil companies today that are paying

no royalties to the American taxpayers on certain leases. As part

of this so-called royalty relief program, these companies are removing the oil and gas, which belongs to the American people, selling

it and making record profits.

So I am just trying to figure, this is our money, isn’t it?

Mr. DODARO. Basically, we have recommended that, there has

not been a comprehensive look in 25 years of what the Federal

Government is charging for these leases. And when they are

ranked, the U.S. Government is ranked against other countries and

even some States, we rank very low as to what we are asking for

on a regular basis for return on the leases for these lands.

Interior has finally agreed to do that comprehensive assessment.

It is supposed to be completed this year. I would encourage the

Congress to review that study and to make sure that there are

proper incentives.

We have also said, Mr. Cummings, that there is not enough verification of the production that is occurring on those lands, in order

to make sure the government is getting its fair return.

Mr. CUMMINGS. And you put this on your high risk list, is that

right?

Mr. DODARO. That is correct.

Mr. CUMMINGS. And why was that?

Mr. DODARO. Well, we believe that there wasn’t reasonable assurance that the Federal Government was getting the revenues

that they were due as a result of those leases, for two of the reasons that I mentioned before.

Mr. CUMMINGS. In other words, we are being cheated?

Mr. DODARO. Well, I think it is not clear that we have reasonable

assurance we are getting everything we should.

Mr. CUMMINGS. You say that in a very nice way, but the fact is,

it is money that is due the American people, on our land, and we

are not getting it. Let me tell you something. If that happened anywhere, if people were being cheated, folks would be going to jail in

my district. Matter of fact, if somebody steals a $300 bike, they go

to jail.

So here we have billions drifting away, and at the same time, we

are trying to find money to make sure that kids can go to school

and have teachers and all that kind of thing. But this has to be

a priority. I know the chairman has made it a big issue, this is a

big issue for the chairman. I am really looking forward to working

with you, Mr. Chairman, as we tackle this problem.

Thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Florida, Mr. Mack.

Mr. MACK. Thank you, Mr. Chairman.

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A quick note on the ethanol. Count me in on finding those savings. On a personal issue, the ethanol has been screwing up my

boat motor. So count me in. [Laughter.]

A minute ago, the ranking member said that the OMB wasn’t

here partly because they are planning and they are doing. But

wouldn’t it have been a great way to plan to actually come to the

hearing and get some input and share their thoughts? And the

ranking member also said that one of the ways that they were able

to get some savings and be effective in another committee dealing

with the Coast Guard was, keep bringing them back. Well, I would

like for the OMB to show up for the first time, so we can keep

bringing them back and figuring out ways to save some money.

Let me start with this, Mr. Dodaro. Has the administration had

any reaction to your report so far?

Mr. DODARO. I have not talked to them about the report. There

are some areas in here in our high risk list that we have made a

number of attempts to have discussions with OMB and the agencies on the high risk list and the GAO. So we are engaged in regular discussions on that.

I do believe the announcement also yesterday that they were proposing a commission to deal with the Federal real property issue

was in response to this report as well. I do plan to followup with

them and try to create dialog to make sure that all these issues are

addressed.

Mr. MACK. But they haven’t had a reaction? It would be nice if

the Director of OMB was here so we could ask him that question.

Mr. DODARO. Yes. My understanding is yesterday that the deputy for management over at OMB, Jeff Zients, said that they are

on the same page as we are.

Mr. MACK. Mr. Davis, good to see you again. Isn’t this really, I

remember my first term here when we were in the majority,

weren’t the reports, and didn’t President Bush at the time, didn’t

they come out with programs that were duplicative in nature, that

could be done away with? So this is a real problem, this isn’t the

first report or the first time that we have learned that the Federal

Government is wasting money by having duplicative programs.

Mr. DAVIS. No, Mr. Mack, unfortunately, it is a soap opera. I

think Mr. Dodaro would agree with that. There are things that

have been on that high risk list for generations. It takes a sustained effort on the part of Republicans and Democrats up here

working with the administration to get these done. The problem is

just keeping your eye on the ball with everything else that goes on.

And when you cut budgets, when you go through CRs, these are

the kinds of things that fall through the cracks.

You still have the Pentagon. Books aren’t auditable. So how do

you know where you are on these kinds of things? So yes, it is a

soap opera.

Mr. MACK. And Mr. Dodaro, can you give us any recommendations on what might be some of the low-hanging fruit? Mr. Chairman, if we could move on any of these, I think it would be a sign

of moving in the right direction. So is there any kind of low-hanging fruit, things that are so either ridiculous in nature that by not

acting, is kind of a shame?

53

Mr. DODARO. I think, my recommendation would be to first build

off where there is pretty good consensus about the need to streamline. Like for example, in the areas I mentioned about multiple programs, there are some recommendations to the administration. For

example, in the employment and training area, to reduce and consolidate some of the programs. In surface transportation, there is

agreement. Teacher quality, improving those programs, consolidating in the education field. There is some common agreement there.

So my suggestion would be to build off where there is consensus

as a starting point. A number of these areas are also, as Mr. Davis

mentioned, on our high risk list. There we have seen progress.

I would say the real point, though, we took two areas off the list

this last update. And both those areas had more than a dozen congressional hearings, and a lot of dialog with the administration to

produce the results that were there. It requires top level attention,

metrics on progress. But there are a lot of opportunities to do this.

There are also opportunities in the real property area, Federal

real property, that is not needed but needs to be disposed of. We

are spending, by latest estimates, almost over $1.6 billion a year

to maintain property that is under-utilized. That doesn’t make

sense. There should be more competition in contracting. About a

third of the contracts that were put in place either had no competition or only one bidder on the competition. There is also $640 million that is sitting in a Customs collection

account for a number of years that there haven’t been decisions on

how to use. That could be clearly an easy and quick win there.

And there is also a lot of money going out the door in improper

payments that I think could be stopped. That is going to take some

time and effort. We have talked about the use of technology there,

but I think that is another area where the latest estimate, and not

all programs have been estimated yet. The latest estimate is about

$125 billion.

So I think there are plenty of targets of opportunity, and we

would be happy to work with the Congress and the administration

to get results.

Mr. MACK. Thank you very much, and thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Ohio, Mr. Kucinich, for 5

minutes.

Mr. KUCINICH. Thank you very much.

Ms. Alexander, I would like to ask you, as president of Taxpayers

for Common Sense, for your take on the American people giving

the most profitable industry in the world a $53 billion gift. I would

like to break this down in laymen’s terms. And if I have any

misperceptions about this, maybe you could help me with it. Due

to a flaw in the 1995 Outer Continental Shelf Deep Water Royalty

Relief Act, numerous oil companies are now drilling in the Gulf of

Mexico, in Federal lands, and paying no royalties to the Federal

Government. Is that correct?

Ms. ALEXANDER. That is right.

Mr. KUCINICH. And as we have heard, GAO—could you say that

louder?

Ms. ALEXANDER. My mic was not on. I am sorry. That is right.

They are paying no royalties right now as a result of an error at

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Interior and the structure of the Deep Water Royalty Relief Act

and subsequent court case.

Mr. KUCINICH. Thank you. Now, as we have heard, GAO reports that U.S. taxpayers could lose as much as $53 billion as a result

of this. And it has already begun. In fiscal year 2011 alone, the Bureau of Ocean Energy Management, Regulation and Enforcement

estimates that we will lose $1.4 billion.

In contrast, the oil industry is making staggering profits. For ex- ample, the top five oil companies reported profits of $485 billion

from 2005 to 2009. ExxonMobil, the largest American oil company,

reported a 53 percent increase in its fourth quarter profits. Chevron, the No. 2 American oil company, reported fourth quarter earnings were 72 percent higher than the preceding years. The third

largest, ConocoPhillips, reported that its quarterly profit climbed

46 percent.

Now, Ms. Alexander, is this an industry that needs billion dollar

giveaways?

Ms. ALEXANDER. Taxpayers for Common Sense has worked on

this issue for a long time, and I think our position is perfectly clear

that we do not think the oil companies need these subsidies or really any others. So we think this is an issue that is ripe for Congress

to address. And because in some ways it is so outrageous, the problems with the Deep Water Royalty Relief, that there should be bipartisan agreement on it. These are taxpayer assets that people are

taking. If any one of us owned those oil and gas reserves and said,

yes, just take it, people would think we were a little crazy.

Mr. KUCINICH. Well, back in 2005, when the oil was at about $55

a barrel, President Bush addressed the American Society of Newspaper Editors. I want to quote to this committee what he said. ‘‘I

will tell you, with $55 oil, we don’t need incentives to the oil companies and gas companies to explore. There are plenty of incentives. What we need is to put a strategy in place that will help this

country over time become less dependent.’’

Ms. Alexander, would you agree with that statement by President Bush?

Ms. ALEXANDER. I would, and with oil at, last I checked, about

$98 a barrel, it seems like it still applies.

Mr. KUCINICH. So his point makes more sense now, right?

Ms. ALEXANDER. Right.

Mr. KUCINICH. Recently, John Hofmeister, who retired from Shell

in 2008, and now runs Citizens for Affordable Energy, told a national journal that big oil companies don’t need government help.

Would you agree with Mr. Hofmeister?

Ms. ALEXANDER. I would agree that big oil does not need government help.

Mr. KUCINICH. How could we modify this subsidy structure to encourage a transition of, let’s say, clean, renewable energy sources?

Ms. ALEXANDER. Our position has always been, we know what

we don’t need and we can get rid of it. Congress can come together,

develop a solution to the problem with the Royalty Relief leases

and simply just, some of the bigger tax expenditures have significant benefits for oil and gas companies. There are subsidies for oil

and gas companies riddled throughout the tax code and throughout

different spending programs. So we think this is a big opportunity

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for there to be bipartisan action for reform that will help close the

deficit, just one baby step, and let a mature industry stand on its

own two feet. Many of these subsidies, the Royalty Relief is not 100

years old, but other oil and gas subsidies are as much as 100 years

old, and it is a mature industry that doesn’t need them any more.

Mr. KUCINICH. And these handouts don’t do anything to help the

American economy, is that right?

Ms. ALEXANDER. We think that these handouts are enriching

very profitable companies.

Mr. KUCINICH. OK, thank you, Mr. Chairman. I yield back.

Chairman ISSA. Would the gentleman yield his remaining time

for just a followup question?

Mr. KUCINICH. Sure.

Chairman ISSA. Ms. Alexander, you are nuancing, and I think it

is important for everyone that wasn’t here when Chairman Davis

headed up our investigation, it is the leases that are flawed, not

necessarily the law, isn’t that correct? In fact, the leases did not

properly have the language to trigger when fuel prices, when oil

prices and natural gas prices reached a threshold to actually trigger the royalties. That is the reason that most of this money is not

being paid.

Ms. ALEXANDER. My understanding is that there is a set of leases

that were issued between 1996 and 2000 that are flawed. There

was an error in the drafting. Then because they didn’t have a price

threshold in them, subsequently a court ruled that all the price

threshold language in any leases in that period that contained

them was flawed. So all of those leases are exempt from royalties

right now. So it is a complex problem.

Chairman ISSA. And I do think there is bipartisan support, still,

to try to fix that. I thank you.

Mr. Lankford of Oklahoma.

Mr. LANKFORD. Thank you. And thanks to you all for coming.

We had talked earlier today about incentives for agencies to try

to look for duplicative waste. Obviously everyone wants to have

more staff, wants to do more things, wants to engage it, and everyone sees the problems, they want to help solve it. What incentives

specifically do you see that you think, OK, this is an incentive to

help? Because honestly, I have talked with several people that are

Federal workers. They see it as well, they see the waste around

them. They say, I can’t believe we fill out this form, I can’t believe

we do this, someone else does this. They see it. How do we create

incentives within that agency to that specific employee to say,

when you see it, here is a way to be able to help us get out of it?

Mr. DAVIS. I will give you a couple of examples. When I was head

of the county government in Fairfax, I went to my agency heads

at a budget time and asked them to cut their budget. They came

up with nothing. When we said look, of what you can find, you can

spend some of this your own way, within certain guidelines, they

came up with a lot more.

Mr. LANKFORD. Right.

Mr. DAVIS. Who is interested in cutting their budget if it is going

to go to somebody that overspent their budget, or if it is going to

‘‘deficit?’’ It is just not in the nature of the way things work. So

that is one thing you could do.

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Another thing is, we could bring agencies in and ask them to

take certain line of businesses and look for ways to share savings

and report back. Just if it is two or three lines of business per

agency, where right now they are stovepiped but they could work

together. The best example of that is the health records between

VA and DOD. There is no reason you have to do different sets of

health records.

Now, I will give you one other that affects the State, if I can just

take a second. Right now, for State governments, they are spending

a lot of money on just being able to authenticate their communications with the Federal Government. Security standards exist for

States to authenticate users to access data in federally funded systems that are hosted by the State. But each Federal agency interprets the standards differently, so States have to meet each Federal agency standard, replicating a different process to various programs. That costs a lot of money.

So Social Security uses technology for verification, Department of

Justice will use a certain procedure and protocols on that. So they

are having to do different things. They ought to have one standard

across the board for these kinds of things.

Mr. LANKFORD. That is terrific. Mr. Dodaro, do you want to comment on that as well?

Mr. DODARO. Mr. Davis talked about, within each agency, and I

do agree with his suggestions in terms of forcing people to come up

with recommendations. But many things that we point out in our

report are multiple agencies involved in the same area. We believe

the only way this is going to get solved is by high level attention

within the administration. OMB needs to play a very critical role

in this whole endeavor, and the Congress does as well, to provide

the right type of incentives there.

For example, one of the areas, it is not mentioned in here, what

we are going to work on, it is on our high risk list, is modernizing

disability programs. There are about 200 different disability programs. And because of our insistence in working with OMB on the

high risk set of meetings I talked about before, we brought together

all the agencies involved in that process. It was one of the first

times they have ever met to be able to discuss that.

So I think there are ways to build in incentives and deal with

disincentives.

Another area that we have recommended before is leasing versus

buying. There is sort of a bias in the rules toward scoring that differently. We have recommended that be changed as well.

Mr. LANKFORD. Let me ask you a specific question as well, Mr.

Dodaro. You had mentioned about the contracting vehicles, and you

are recommending fewer contracting. Have you compiled a list of

contracting vehicles you say, these should be seriously looked at?

Mr. DODARO. Yes. These are contracts that are inter-agency contracts. What we have said is there is really not a list, the list ought

to be compiled by the executive branch, it ought to be made visible,

and people should make sure they——

Mr. LANKFORD. So right now, we have a multitude of different

contracts and systems of contracts for procurement. You don’t have,

at this point, a list to say, here are the different contracting vehicles we think are inherently inefficient?

57

Mr. DODARO. We have the types of vehicles that are inefficient,

or pose more risks to the Federal Government. I would be happy

to provide you that.

Mr. LANKFORD. That would be terrific. I would like to be able to

have that list as well.

Is there a need as well, you were able to reach into all these different agencies and be able to research them in a way that most

people cannot. What would you perceive as the need for individuals

to be able to reach in and be able to search the data, so the agencies can get out their employment, their strategies, their program

philosophies, to be able to go through data and to be able to actually search it? Not just a .pdf on some Web site, but actually

searchable data, is there a need for that and is that possible to pull

off?

Mr. DODARO. There is definitely a need for it. There is not

enough of it. And it is possible to pull off.

Mr. LANKFORD. That is one of the areas I look at and say, you

have the opportunity to be able to do that. But there are lots of

people at home that would like to be able to search that and research that, whether they be journalists, whether they be individuals. That is something I would like to see us continue to push on

as a committee. I know it has been talked about before, to continue

to find ways to be able to push and do that.

And one last thought on it, sunsetting programs. Is there a particular plan that you have seen to say, this is a great way to sunset

these things out?

Mr. DODARO. I think there needs to be regular reauthorization of

programs. There are too many programs that are created that don’t

have a regular review and process in place. I do think the Federal

Government needs to invest more in regular program evaluations.

One of the things we find and we talk about in here is a lot of

these programs have been operating for years, and there is really

not a lot of empirical evidence of what the returns are and whether

they are being effective. So I think the Federal Government has,

in the past, shortchanged the program evaluation, and I think it

needs to be more put in place on a regular basis.

Mr. LANKFORD. Terrific. Thank you. I yield back.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Virginia, Mr. Connolly, for

5 minutes.

Mr. CONNOLLY. Thank you, Mr. Chairman. Let me welcome the

panel, in particular, our former chairman and my predecessor in

this seat in Virginia, my good friend, Tom Davis. Welcome back,

Tom.

In fact, perhaps, Congressman Davis, we could begin with you.

You talked about the fact that it would be a wise investment to expand the number of acquisition and procurement personnel within

the Federal Government, so that we are looking for efficiencies and

cost savings. Could you expand on that just a little bit? Because

one of the things that certainly has struck a number of people is

that Federal contracting increased enormously in the 1990’s, but

procurement and acquisition personnel within the Federal Government did not keep up with that.

58

Mr. DAVIS. In fact, in some areas it declined during that time.

It was a way to cut budgets. In fact, many times you go to a procurement meeting now, and what you have is a lot of contractors

running the procurement. That is not all bad, but you need a cadre

inside of Government who understands the tool box that they have,

can figure out what gets the best value for the Government. And

that needs constant training, it needs all of those kinds of things.

And what has happened, many times, is we end up scrimping on

procurement personnel, we lose good personnel to the private sector. And yet that is where you get your cost overruns, that is where

you get contracts that are not performing well, because you don’t

have the appropriate oversight all along. That has been my experience.

And I think it is money, for the most part, that is pretty well

spent, provided you continue to train people once you hire them.

I don’t know if Gene agrees with that or not, but that is my observation.

Mr. DODARO. I think that is definitely the case. For example, at

DOD, the amount of contracting of goods and services more than

doubled over the past several years. And the acquisition work force

grew less than 1 percent. There are efforts now to try to bolster

that work force with proper training and proper oversight. It is a

good investment.

Mr. CONNOLLY. I think that is a really good point. Sometimes we

get carried away with things like refuse of Federal spending binge,

titles like that. But sometimes we have to make strategic investments, in fact, if we are going to protect taxpayer dollars. Is that

not correct, Mr. Dodaro?

Mr. DODARO. That is true. You need to look at the outcomes you

are getting from the programs. But you have to make sure you

have the proper oversight. Contracting is a particularly important

area.

Mr. CONNOLLY. Congressman Davis, just one other thing. Just

knowing your interest in the technology sector, right now the administration is looking at Federal data centers and trying to consolidate. There has been a big proliferation of the Federal data centers. What is your sense of the prospect of perhaps both achieving

more efficiency, protection of data and cost savings for the taxpayers?

Mr. DAVIS. You have over 2,100 data centers right now in the

Government for 24 different agencies. I think you could save several hundred million dollars a year by consolidating. I think you

ought to put this on a fast track.

You need to look at the security as you do those kinds of things.

But look, in so many areas, we are not sharing savings, we are

stovepiping. And as Mr. Dodaro said, there are so many ways we

could work across agencies to store these kinds of things. You get

not only economies of scale in this, you get a lot of other savings

along the way if we would learn, between agencies, to share these

things. It has just not been the culture.

Mr. CONNOLLY. Thank you.

Mr. Dodaro, going back to the subject of oil, and Ms. Alexander,

in response to the chairman’s question on Mr. Kucinich’s time, he

said the problem is really with the royalty agreements, not so

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much with the law. I thought I heard you say, well, actually there

was a change, a flaw perhaps, in the law that was written in 1995

that had the effect, did it not, of pretty much exempting a lot of

offshore oil drilling from any royalty payment at all.

Ms. ALEXANDER. It is my understanding there was a flaw in the

execution of the leases at Interior in the 1990’s. Whether or not

there is a flaw in the law is a little more of an opinion matter. But

I think it is a fact that there were errors in the drafting and execution of the lease agreements at Interior in the 1990’s. We think

there are problems with the structure in the law just because it

then, subsequently in a court decision, moved all price thresholds

in that context, the legal. But it is, the execution of the leases was

a problem.

Mr. CONNOLLY. Yes, but with respect to this change in the law,

that is something, obviously, within the purview of Congress.

Ms. ALEXANDER. Well, Congress can solve this.

Mr. CONNOLLY. That is right.

Ms. ALEXANDER. This is something that Congress can come together and figure out a solution for, and we hope that you do.

Mr. CONNOLLY. And finally, because my time is about to run out,

Mr. Dodaro, any estimate on the lost revenue to the U.S. taxpayers

in terms of the fact that we are 93rd out of 104 countries in royalties exacted from the oil industry?

Mr. DODARO. I don’t believe we have a current estimate in that

regard. But I do think, as I mentioned earlier, that we don’t have

reasonable assurance that we are collecting as much as we should.

Mr. CONNOLLY. Thank you. I yield back, Mr. Chairman.

Chairman ISSA. Thank you.

Mr. Kelly of Pennsylvania for 5 minutes. And would the gentleman yield for just a moment?

Mr. KELLY. I will, sir.

Chairman ISSA. Thank you.

I think the gentleman, Mr. Connolly, made a very good point,

and his chairman, Mr. Lankford, that in fact this is probably one

of the areas in which the subcommittee needs to take on, under

procurement reform, and work together. Because I do believe that

this is an example where these kinds of questions and answers

here, we can provide your subcommittee some of the history, so

that you could work on procurement reform to make it clear that

we never write a law again that could be misinterpreted by Interior, written incorrectly and then ultimately not survive at the

court. So I appreciate that, and I yield back.

Mr. KELLY. Thank you, Mr. Chairman.

Mr. Dodaro, good to see you again. It is nice to have Western

Pennsylvania people in the room.

One of my questions, from where I am, we do a lot of touring,

and I have been to a lot of meat packing plants. My question has

always been, and I don’t understand this, and maybe you can shed

some light on this. We start to talk about duplication and how

many people we have in different places checking different things,

a lot of them checking the same things at the same time and trying

to come up with maybe some type of a lead on how to do it.

But I know in meat packing plants, the USDA has an inspector

there every day, is that not true?

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Mr. DODARO. I believe so.

Mr. KELLY. And again, I say this from being there. My question

then comes, we have these folks there every day. And then we have

a plan called the Hazardous Analysis Critical Control Point, and it

is, let me just read this. Considered that its pure and scientific application is a state-of-the-art food safety system, every meat plant

designs their own system, in accordance with USDA requirements,

and must operate successfully under this system. We do not need

an inspector at every plant every day. We operate the same facilities, the same systems, whether inspectors are present or not.

And I would just say that, for what I have done in my lifetime,

running footage is a lot more important than snapshots from time

to time. So we have these folks in these plants every day, USDA

inspectors. They are watching what these people do. In addition to

that, we send in another group that comes in to go over what they

have already gone over.

Now, when that happens, these folks, and these are not large

meat processors, in some cases, they are small places, have maybe

40, 50 employees. They have to stop what they are doing and spend

a week going over the plan, which is gone over every day with the

USDA inspector. I am just trying to understand, as we go through

this, and we see the duplication of this and the cost to taxpayers,

and really the cost benefit analysis, where in the end does it serve

the taxpayer or the people in those businesses? Could you shed any

light on that at all?

Mr. DODARO. Yes. We have pointed out, for a number of years,

that the food safety system is completely fragmented. It is really

not operating effectively. There is a need to go to a risk-based approach, and I think that is where you are pointing out the real

need to do that. We have recommended that there be, Congress

commission a study with the National Academy of Sciences or some

blue ribbon panel to redesign this. A lot of our food now is coming

from foreign sources, and we are still focused on domestic production a lot.

So we have said that the system right now can be a lot better,

and there needs to be a real look at it. The risk-based approach is

really the way to go.

Mr. KELLY. And I wonder about this. I come from private industry, I am not really well-hinged with government. I just keep wondering why we keep shooting ourselves in the foot and wonder why

we are limping. We have these committees, we ask these questions,

we keep going over and over and over again. And everybody comes

up with the same answer. There are too many regulations from too

many agencies, there is too much duplication, there is too much

overlap. When does it stop? When do we fix it?

Mr. DODARO. I think you just have to figure out which priorities

Congress wants to pursue and stick with it. There is not a lot of

substitute for just rolling up our sleeves and focusing on these

areas and making sure we get results. It requires sustained followthrough. There are cultures and incentives that will keep things in

place until they are broken. And the only way they will be broken

is through sustained efforts by the Congress and the administration in order to do it. Otherwise, it won’t change materially.

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Mr. KELLY. Well, I am looking forward to working with you. We

try to drive to those same conclusions and get things fixed.

Thanks very much. And with that, Mr. Chairman, I yield back.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Massachusetts, Mr.

Tierney, for 5 minutes.

Mr. TIERNEY. Thank you, Mr. Chairman.

It is interesting, Mr. Dodaro, I heard my colleagues say that they

would like to solve the problem having to do with the leases and

the non-collection of royalties on that. Your report recommends

that the Government obtain a fair return on oil and gas produced

by Federal leases. It seems like a very common sense recommendation. Everyone on the panel says they agree with it.

But interestingly, these no-royalty leases continue. And you

agree that we are not getting a fair return currently, correct?

Mr. DODARO. There is not reasonable assurance we are.

Mr. TIERNEY. And then we had the report last year from Mr. Issa

and his colleagues tell us on page 4 that the total loss from offshore

drilling may extend beyond the troubled 1998 to 1999 leases. The

paragraph goes on to culminate in the end saying, depending on

the market price of oil and natural gas, the total costs of foregone

royalties could total nearly $80 billion. In fact, your report, Mr. Dodaro, says it is between $21 billion and $53 billion, dumping from these oil companies into their pockets instead of paying down our debt. We have Shell and BP and

Chevron and ExxonMobil, $485 billion in profits. And they have

lost 10,200 jobs. So this is the situation we do, and we talk about

wanting to understand the history. That is the history. Everybody

knows what the problem is. Everybody knows what the consequences are.

And I just want to make sure everybody knows there is a solution out there. My Massachusetts colleague, Ed Markey, has proposed a way to address this problem. First, he recognizes that you

can’t go back and void the leases without risking new litigation.

His resolutions are an alternative to that. It would not allow any

new leases to companies that are currently benefiting from no-royalty leases. Those companies have a choice, you either keep your

no-royalty leases, or you can renegotiate them to begin paying a

fair price and get new leases eventually on that. It is up to them.

Now, my colleague has worked very closely with the Congressional Research Service to make sure there are no constitutional

issues with this problem. So my question to you, Ms. Alexander, is

does Taxpayers for Common Sense support Mr. Markey’s legislation?

Ms. ALEXANDER. We worked with Representative Markey on

that, and we support that, among other options. We just want to

see this fixed.

Mr. TIERNEY. But that would work?

Ms. ALEXANDER. That would work, yes.

Mr. TIERNEY. Good. So now we have the history, and now we

have everybody saying that they agree that they want to resolve

the problem. And yet it is not resolved.

Let me tell you that last week, last Friday, Mr. Markey offered

that legislation on the House floor. Not a single one of our colVerDate 11-MAY-2000 14:24 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67367.TXT KATIE PsN: KATIE
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leagues on the other side voted for it. All of the people on our side

did. It was offered again this week as a floor amendment. And

again, not a single one of our colleagues on the other side voted for

it, and everyone one of the people on this side of the aisle voted

for it.

And last year, and the year before, let me go back. This is not

a new idea for Mr. Markey, this is something he has repeatedly

brought to the floor. So if we think that we all understand the

problem, if we know the history, and if we all say we want to fix

it, it always takes deeds to make things happen, not words. I hear

a lot of words, we have seen no deeds.

So Ms. Alexander, we can offer this over and over. But until our

friends on the Republican side of the aisle really want to put deeds

behind their words, we are not going to get much action on that.

So what would you say to convince my Republican colleagues

over here who are blocking the fix to this change, what would you

say they should have in mind next time Mr. Markey brings it to

the floor?

Ms. ALEXANDER. As I say, our position over time has just been,

just get this done, just fix it. The Markey bill does fix it, so that

is one way to do it, is vote for that. Come up with another solution

if you have another solution that you think is better.

Mr. TIERNEY. Well, tell them why the Markey Amendment

works. Tell them why you support it.

Ms. ALEXANDER. We support it because we think that it is a constitutional approach, based on what we have read, to putting the

leaseholders of the no-royalty leases in a position where they have

an incentive to renegotiate. And simply put, we just want to not

continue to give away those resources. So we are looking at lots of

different options.

Mr. TIERNEY. Thank you.

So let me say to my Republican colleagues, we understand the

problem, we share what you say. Is your intention you want to resolve it? We have provided you with a perfectly good way, a legitimate way and constitutional way to resolve it. Let’s work on it, and

next time it comes up, maybe you will vote with us on it and we

will get the matter resolved, $53 billion back to our people, so we

are not running around cutting matter from teachers and reducing

Pell grants so students can’t afford college, whacking job training

so people who are unemployed can’t get back to work. Let’s get serious. Let’s do something for real.

Mr. CUMMINGS. Will the gentleman yield?

Mr. TIERNEY. I will yield.

Mr. CUMMINGS. Ms. Alexander, one of the things that the report

said was that, in some instances, information was being provided

by the oil companies erroneously. And there was self-reporting.

And in some instances, there was no reporting whatsoever.

Could you comment on that, please?

Ms. ALEXANDER. The issue of self-reporting, this is basically an

honor system, here is our oil, take it, tell us how much you have

taken. We don’t think that is the right way to do business. We

don’t think that is Congress and the administration treating taxpayers like they have a fiduciary responsibility to manage our assets aggressively.

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And I just want to give credit where credit is due, we do support

the Markey fix, but we also have worked very closely with Chairman Issa. I think there is a real potential for a bipartisan solution

on this. And from the taxpayers’ perspective, it is just, move forward.

Mr. CUMMINGS. Thank you.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Pennsylvania, Mr. Meehan, for his comments, for 5 minutes.

Mr. MEEHAN. Thank you, Mr. Chairman, and thank you for the

presentations from the entire board.

Mr. Dodaro, I didn’t know for sure, but I was listening to the language. And I thought I picked up the Pittsburgh. Is Jim Dodaro

your brother?

Mr. DODARO. No.

Mr. MEEHAN. OK, but it’s the Pittsburgh in the voice.

Thank you for your presentation today. I come to this committee

with a background that includes times as a U.S. attorney. In that

capacity, I came in just after September 11th, when we were dealing with the issues of terrorism. We each share responsibilities in

other committees as well, and one of those committees on which I

serve is Homeland Security.

As a result, I think as each of us went through your very comprehensive assessment of Government spending in various capacities, but also the duplication, I was really struck for two reasons.

One, with respect to sort of the bureaucratic overlay of so many

agencies, but also what is at stake with the issue of bioterrorism.

So I take a minute to read from your report at least five departments, eight agencies and more than two dozen Presidential appointees overseas, $6.4 billion related to bioterrorism.

Then on the front end of this, we are saying there is no broad,

integrated, national strategy that encompasses all of the stakeholders with biodefense responsibilities to identify the risks systematically, access the resources that are needed to do it, and then to

prioritize and allocate the investment across the spectrum. So that

is on the front end, to prevent an incident.

Then you conclude, there is no national plan to coordinate Federal, State and local efforts following a bioterror attack. And the

United States lacks the technical and operational capabilities required for an adequate response.

This could be Katrina all over again. We are really on the front

end of a remarkable challenge. And from my work on the Homeland Security Council, bioterrorism is a very real threat. Can you

take a minute and comment on this very, very important aspect of

this report?

Mr. DODARO. Yes, I would, thank you.

Following September 11th, there was a lot of focus on protecting

the transportation system, particularly the airline industries. Then

what we were trying to focus on, and I think the 9/11 Commission,

was, what are the other potential risks to the country, what are

other avenues that could be pursued. For example, smuggling information or threats over the border physically, other modes of transportation.

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But the biodefense area is one that we felt, for a number of

years, wasn’t getting enough attention, and understanding what

the threats were, having an appropriate plan in place to be able to

do it, it is like a number of areas that really requires multiple

agencies to be involved. And there really hadn’t been a means to

coordinate that.

We tried to elevate this to the Homeland Security Council and

the National Security Council, which are well postured to be able

to do this. We haven’t gotten as much response as I would have

liked from them in this area, to provide the proper leadership. So

I do think this is an area where congressional oversight is warranted, and from my perspective, would be very welcome, to bring

about some of the very important things that could be done to

make sure we are in a position to detect and prevent something,

not only in a position to be reacting after the fact.

Mr. MEEHAN. Mr. Davis.

Mr. DAVIS. Mr. Meehan, let me just say, if you think that is

tough, you ought to look at cybersecurity, where you have Intel,

DHS, DOD, and every agency doing a different approach to FISMA,

the Federal Information Security Management Act. I think it would

be even more alarming.

Mr. MEEHAN. Well, I only have 50 seconds, but I am going to ask

both of you, in response to this, would you tell me how we look at

creating the kind of mechanism where there is a national strategy

and a focal point where we can get a single point of response that

enables us to both be prepared on the front end, to coordinate these

assets, and as importantly, in the event that we have an incident,

to be able to respond effectively on the back end? We have asked

for attention to be paid. I understand maybe you can tell me the

history here. But what is the solution? What works best in terms

of how we organize and then seek accountability?

Mr. DAVIS. I will take a quick stab. One of the problems at the

executive branch level is jurisdiction and turf over who is going to

be in charge. This is going to take engagement from the Congress,

from both parties, with the administration in figuring out a path

and moving ahead. We haven’t had FISMA revisions since 2002,

long overdue. But I think it is going to take a lot of dialog and a

lot of bipartisan cooperation to move this ahead. But it has to be

done.

Mr. DODARO. I agree with that completely. This needs top level

congressional and administrative support to be able to do it. You

can’t work with the agencies on a peer level and expect that they

are going to create this type of mechanism. That is the fundamental problem.

Mr. DAVIS. And I would just add, I didn’t grow up in your district, but I had two of my kids who went to Swarthmore College

in your district.

Mr. MEEHAN. Well, they are obviously very bright children.

[Laughter.]

Chairman ISSA. Ending on that high note, the gentleman’s time

is expired.

We now recognize the gentleman from Vermont, Mr. Welch, for

5 minutes.

Mr. WELCH. Thank you very much, Mr. Chairman.

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Mr. Dodaro, that is a great report. I really want to thank you for

it. I thought what, among other things, was terrific about it is it

was balanced, it looked at the whole problem, not just the loss from

duplication, but also the loss from inappropriate tax subsidies, improper payments, the error rate in our payments. So it was quite

comprehensive and extremely helpful.

Mr. Chairman, I want to thank you, too. I think the focus of this

inquiry is really important. Mr. Ranking Member, I really appreciate it.

I am asking a little bit about the oil subsidies, because it is an

easy target for us, but astonishing that it isn’t taken care of. Your

report indicated $53 billion would be saved by taxpayers if we

eliminated that oil subsidy for royalty-free drilling at a time of

$100 a barrel oil. So you fully support eliminating that subsidy for

the oil companies, so we can save money for the taxpayers?

Mr. DODARO. We were asked to calculate what it would be if that

had been in place properly during that period of time.

Mr. WELCH. Right. I would ask you what you support, if it would be $53 billion.

Mr. DODARO. I believe that is the high end of our estimate. But

what we are trying to focus on——

Mr. WELCH. Let me just go on, I will come back to you in a

minute.

Ms. Alexander, you indicated that was, again, I applaud you because you are taking a comprehensive approach, you are looking at

all the elements of how the taxpayer is getting hammered unnecessarily. But that oil subsidy was something you spoke about as well,

that we should get rid of. The oil companies disagree, and they

spent about $340 million in the past 2 years lobbying to retain this

taxpayer help.

Ms. ALEXANDER. It is the oil companies’ job to make money drilling oil and selling it. It is Congress’ job to have a fiduciary role and

take care of taxpayer dollars. We are looking out for the taxpayers,

and we think there is room for a fix.

Mr. WELCH. Is it your view that if there are going to be taxpayer

subsidies, and that is an expense to every taxpayer in the country,

but the intention is to create jobs, that subsidy should go to emerging technologies and industries, not mature and profitable industries?

Ms. ALEXANDER. We take a skeptical look at all subsidies, and

certainly, as a starting point, we want to know what we are getting

for our tax dollars. If we are putting a dollar into an industry, we

want to know why we are doing it and what our goals are. Are we

trying to get jobs out of it and we are not getting jobs? Then it is

an ineffective subsidy. If it is a very profitable industry that is mature and should be able to take care of itself, then it shouldn’t need

subsidies.

We are going to be skeptical about subsidies to new and emerging technologies, and set very high performance standards. There

is a reason and a timeframe.

Mr. WELCH. And basically, that skepticism is appropriate. It

should be applied to a tax expenditure, which costs the taxpayer

money, just as it should be applied to any line item expenditure in

the budget, correct?

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Ms. ALEXANDER. We see it that way, yes.

Mr. WELCH. Mr. Davis, some people say you are a real smart politician. I am going to ask you really for some advice.

Mr. DAVIS. I am a reformed politician. [Laughter.]

Mr. WELCH. In this room, we have the Democrats who tend to

hammer away on what we see as tax giveaways. And a lot of times

the other side of the aisle is focusing on duplication. My view, we

are both right. Where there is duplication, we ought to eliminate

it. Where there is a freebie tax subsidy, we ought to eliminate that.

But we are sort of arrayed on opposite sides of the line here, and

I know that the chairman and the ranking member want to save

taxpayers’ money. That is the ultimate goal.

I wonder what you would think of us trying to pair off areas

where we agree. In other words, Mr. Lankford is doing good work

in his subcommittee. You mentioned, for instance, duplication that

makes no sense, VA and DOD records. Why don’t we have one set

of medical records. What if we paired that with, say, getting rid of

the ethanol subsidy, where there does seem to be some bipartisan

support, and you are doing them together? Or another pairing

might be these oil subsidies that just serve no purpose and cost the

taxpayers $53 billion, and we pair that with following your advice,

where we have different Federal agencies requiring the States to

accommodate each one of their different standards for verification?

It makes absolutely no sense.

So how do we, my frustration here at times is that it seems like

it is a political impediment that inhibits us from taking appropriate

action that can make real progress. And in your testimony, you

suggested to us that we look in the mirror. Frankly, I think that

is pretty good advice.

And my goal here would be to save taxpayers’ money. Where

there is duplication, we can agree on, it ought to be eliminated,

let’s do it. Where there is a tax expenditure that is just a ripoff

from the perspective of the taxpayer, let’s eliminate it. From a moving ahead, making progress on what the chairman and ranking

member want to accomplish here, do you think that makes some

sense?

Mr. DAVIS. It not only makes sense, it is essential if we are going

to move ahead. You have a Democratic administration, you need an

administration buy-in. You have a Congress that is divided. And

when it comes to waste, you say one man’s pork is another man’s

steak, but on a lot of these efficiency issues, I think we ought to

be able to come together on this committee, sit down, we are not

going to agree on everything.

But there are enough things we agree on, put together that report and then you have to drive it. Then you have to go to the administration, you have to go to the floor. And look, let’s face it,

there are interest groups outside of this committee room that want

to weigh in on some of these subsidies and the like. It is easy to

talk in a vacuum where you have your bean counters here, these

are the numbers. But when you get outside, it becomes a little

more difficult.

So this committee, I think, could play a very vital role in coming

together with a strong bipartisan report and pushing that, holding

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hearings on that. I think you could get everybody back again, once

you get some agreement on this and trying to drive it.

The frustration I felt up here in 14 years in the House is just,

there is no sustainability to this. You get a report, you have a hearing, you get a little momentum, and you forget about it and you

move on to the next new thing. But this is something this committee was empowered to do when it was formed back in the 1950’s.

I think it is something that, we are not going to agree on everything. But there are enough things we agree on, we could put together a pretty juicy report, and I think save the taxpayers hundreds of billions of dollars. So I think it is a good suggestion.

Chairman ISSA. I would give you more time if I possibly could,

because you were on all the right message. I thank the gentleman.

We now recognize the gentleman from Pennsylvania—we are

very Pennsylvania-oriented committee, as you know—Mr. Platts,

for 5 minutes.

Mr. PLATTS. Thank you, Mr. Chairman. I certainly thank all

three of our witnesses. It is great to have all of you here, and your

insights.

Mr. Davis, I actually, with all respect to the current chairman,

I always want to say, Mr. Chairman, great to have you back as

well.

Chairman ISSA. Let it out, just keep letting it out. [Laughter.]

Mr. PLATTS. Your insights are certainly very helpful to us. I want

to commend Senator Coburn for having sponsored the legislation

and the result in this report, and the important work of GAO and

now following through on the assignment. Really what I see is the

beginning of the process, the first of what will be hopefully a lot

of dialog between GAO, this committee and its important work.

Tom, you touched on it perfectly, sustainability, that we don’t just

talk about these things, but we follow through.

As when you were chairman and now with Chairman Issa, I

have the privilege of chairing the Subcommittee on Government

Organization, Efficiency and Financial Management. I assure you,

we will do our best as a subcommittee to sustain this effort from

the legislative side and working with all the parties.

On a specific issue, when you think about what is in the report,

what is highlighted, and the inefficiencies, the duplication, the

waste of resources, teacher quality, education of our kids, employment training, especially with unemployment over 9 percent for almost 2 years, DOD, Homeland Security, these are all top priorities

for our country and for our citizens. Yet, we know we can do a lot

better with the resources we are putting into them.

Two first questions, Mr. Dodaro, to you, and this probably will

be maybe in a followup hearing with you or staff on the subcommittee level, as you looked at some of the duplication such as the $4

billion on teacher quality, is there any ability to give even a guesstimate of savings, administrative savings, if we took those 82 different programs into even half that number? Any ability to give a

guesstimate of that $4 billion, how much could we likely save from

eliminating the duplication?

Mr. DODARO. I will go back and take a look and work with the

team. I don’t think we were able to do it, because there are a lot

of limitations on the amount of information that is available on

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what it costs to administer some of these programs, particularly

those in this case that are administered through the State and

local level. But we do believe there is plenty of opportunity here to

consolidate programs. And as I mentioned earlier, in the administration’s proposal for education reform, they are already proposing

to consolidate 38 of these programs into 11. So I think there are

a lot of opportunities. I don’t have a cost estimate. I wish I did.

Mr. PLATTS. And I think that is a positive sign here, your reference to Secretary Duncan and DOE, looking at trying to be

proactive in that consolidation effort to be more efficient.

A follow-on, and I think it is a similar answer, that you don’t

have the ability to have the details at this point, and that is, I am

going to stay with teacher quality, teacher preparation, those 82

programs, I don’t think you probably have the data available to you

right now to do a cost benefit analysis to say, all right, we have

these 82 programs, these 5 over here we can show have really done

a great job. These other 77 are struggling. Is that accurate, that

at this point you don’t have the data or info to be able to get to

that detail, that cost benefit analysis?

Mr. DODARO. That is correct, especially for the smaller programs.

We do mention in the report that a number of the smaller programs are so small, it is hard to evaluate them.

Mr. PLATTS. That under $50 million number, what the administrative costs, what the savings would be?

Mr. DODARO. Right. That is correct.

Mr. PLATTS. In looking ahead to the hearing process, I have to

tell you, the temptation is to try to make the point about the duplication, to invite one representative from all 82 programs on just

teacher education to come. We would fill the room, there wouldn’t

be any seats left, to make the point that your report does, that we

need to do a lot better here.

An additional question I am going to try to squeeze in here, im- proper payments, huge issue, you reference $125 billion as probably the low end. That is what we know or think we know about

it, who knows how much is really out there. Any specific recommendations? Because when we think of how to balance the

budget and deficit reduction, it is entitled reform. And two of the

biggest areas of improper payments are Medicaid and Medicare.

Any specific areas you want to put us toward regarding improper

payments and those two programs?

Mr. DODARO. The first thing I would say, in the Medicare area,

there needs to be an estimate for the prescription drug component.

Right now there is not, so the estimate is incomplete.

There are opportunities to use more information technology up

front to help detect, and we are looking at and evaluating opportunities right now. We talked about it at the high risk hearing with

Chairman Issa. So we are looking at that issue.

I think the Improper Payments Elimination and Reporting Act

that was passed by Congress last year is a very important vehicle.

It lowers the thresholds, it requires accountability, it requires regular reporting, setting of targets and followup and transparency in

reporting. So I do think this is a really important area that, with

sustained attention, that we can make a lot of progress on going

forward.

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Mr. PLATTS. Hopefully we can sustain that effort with you.

Chairman Davis, did you have something to add?

Mr. DAVIS. I would just add, improper payments I think has been

constantly a problem for government. And this legislation helps.

There are so many great software items out there on fraud detection, anomaly detection and the like that aren’t being utilized. I

think you need to continue to push that from here.

And I would just add, share and savings contracts are something

the Government needs to look at in some of these areas. That is

basically that you don’t pay anything unless you get a return, and

then you can do a percent from that, and it is negotiated down.

They are legal under the FAR, but they are rarely used. But it is

a great way to get something out there quickly. It doesn’t have to

come out of budgets at this time. It is a net-net to the Government.

I throw that out for discussion.

Chairman ISSA. I thank the gentleman.

Mr. PLATTS. Thank you, Mr. Chairman.

Chairman ISSA. The gentlelady from the District of Columbia,

Ms. Norton, for 5 minutes.

Ms. NORTON. Thank you very much for this hearing, Mr. Chairman, it is a very important and helpful hearing.

I have a question for Mr. Dodaro, and my good friend, Mr. Davis,

my regional neighbor and good personal friend. But I am going to

give you a pass on the topic du jour. I am not going to ask about

oil subsidies. In fact, I am going to ask you about a subsidy that

lies way beneath the surface.

I am ranking member of a committee that has to do with property and property disposal, also with building and leasing. I note,

Mr. Dodaro, that among your lists of areas identified was, and I

would like you to elaborate upon it, because it is stated so tersely,

‘‘improve cost analyses used for making Federal facility ownership

and leasing decisions could save tens of millions of dollars.’’

Let me give you an example. We just built a beautiful Department of Transportation building just a few years ago. It is huge,

it was state-of-the-art. Guess what? We built the Department of

Transportation, it will always be there, it is a headquarters building, we built it, built by a developer, we have a 15-year lease on

it. When that lease is out, we probably shall have bought the building. Then we will start buying the building again.

I believe this has a lot to do with scoring. What changes do you

think should be made and who should make it? We run up against

these humongous losses, it is not tens of millions, it is billions of

dollars, because we don’t do real estate the way the private sector

does it. How should we change scoring? Who should do it? Is it administrative? Does it take an act of Congress?

Mr. DODARO. We have recommended that OMB come up with a

proposal to be able to deal with this issue. That has not been done

yet. But it is a combination of action by OMB, working with CBO

and the budget committees that really would have to make a

change in the scoring rules. I think it is appropriate. There needs

to be flexibility. It is not always one way or the other, but there

needs to be a good cost benefit study, and the government and the

taxpayers would benefit.

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Ms. NORTON. Yes, all I am asking for is that the Federal Government not have one way of doing real estate transactions, while the

rest of the country does it another way. The first thing you have

to look at is, why does everybody else do it that way? Why do you

buy a home with the mortgage, and if you are the Federal Government, you have to put the money straight down? Why is that better

for the taxpayers?

Mr. Davis, I was interested, in light of your, this is so Davis-like,

win-win approach to things, this notion of trying to find ways to

work together on these things, I noted that in property disposal, I

have just signed a letter with the chairman of the subcommittee,

in which we are asking GSA for access to their database on excess

property. Now, the President has a whole study on excess property

going on, and now you see our committee interested as well.

So you see the administration, you see this committee and you

see the appropriate subcommittee all going at the same issue, all

seeing that there are dollars there. What role, Mr. Davis, having

been chairman of this committee, do you think the committee

should play now that there are so many actors interested in this

low-hanging fruit?

Mr. DAVIS. Well, and there is an initial actor. Martha Johnson,

the Administrator at GSA, has put a team together, her own advisory committee on this subject, too, of doing away with surplus

properties. You have a lot of cooks in the kitchen right now. This

committee needs to drive an outcome. I think you need to hold

their feet to the fire. We need to put some time limits on this. This

has been around a long time, before I came to Congress, trying to

dispose of property or utilize dilapidated properties in a way that

we can rehabilitate them, use them, sometimes share it with the

private sector.

What we need to do here at the subcommittee level is continue

to hold hearings and drive it and keep their feet to the fire. You

have to put time limits on this, or the clock runs out. I think Mr.

Dodaro’s report shows a lot of savings in this, if we can get it right.

I would just add one other thing on the scoring. I hate to mention this, but you get frustrated, Congress can always direct scoring, too, if you don’t get any action out of the——

Ms. NORTON. What do you mean, direct scoring?

Mr. DAVIS. You can direct scoring. You can write the rules for

scoring. We have done it, I don’t say we do it all the time, but we

have done it with some frequency.

Ms. NORTON. Save a lot of money. I yield back, thank you.

Mr. PLATTS [presiding]. The gentlelady yields back, and another

former chairman of the committee, Mr. Burton, recognized for 5

minutes.

Mr. BURTON. Tom, it is good seeing you again. I understand you

are out there in the private sector making lots of money. So it is

good to see you. See, he is blushing.

Mr. DAVIS. Not this morning. [Laughter.]

Mr. BURTON. Well, anyway, welcome back. It is good seeing you.

This picture simply doesn’t do you justice.

But anyhow, I would like to make a brief comment about Mr.

Tierney’s remarks a few minutes ago when he was here. I wish he

was still here. We checked on the issue that he raised on that

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recommital motion. The reason that recommital motion failed was

because they were, in effect, I don’t like to use the term blackmailing, but blackjacking the oil companies into renegotiating leases

that had already been agreed to in order to get a new lease. And

that is something that I think most people would agree is a violation of law. The leases, some of them are for 20, 25, 30 years.

And there was a case, and I am stating all this for the record,

there was a case, the Kerr McGee case in 2007 that went to court,

where they tried to force a renegotiation of the contract, and Kerr

McGee won because the contract was valid and the government

had no right to go back and insist on a change in that, simply because they wanted to get more back from the company.

Now, I think there is a way that we can do this in the future.

We have talked about this up here. That is, we can encourage

them, when we negotiate new leases, not threatening the old

leases, but when we renegotiate, when we negotiate new leases, to

create a better way to get those funds back that would help bring

more money into the Treasury and reduce the debt.

I would like to go into this a little bit further, this is a little off

the subject at hand but I think it is extremely important. We have

been talking about this, and I noticed on the news in the last few

days, there are more and more commentators and ‘‘experts’’ that

are talking about it, and that is, our dependence on foreign energy.

It plays into what we are talking about in an unusual way.

We import about 63 percent of our energy. Back in 1972, when

we had the oil embargo, it was about 25 or 26 percent. So we have

more than doubled our dependence on Middle Eastern oil, oil coming from Mexico, Canada and Venezuela, the communist dictator

down there, Chavez. So we are in a position right now where if

these oil supplies were in jeopardy, we could see the cost of oil per

barrel go through the roof and the cost of gasoline and other things

that we use oil for, as far as energy is concerned, go through the

roof.

I got some gasoline last night, which may not be of interest to

anybody, but it was regular gasoline, and it cost me $3.57 a gallon.

And that was the lowest that I could find on the entire George

Washington Parkway. So the cost is higher than that here in D.C.,

and it is going up. Some people say that there is a disruption of

the oil supplies coming in from the Middle East alone, if we had

a blockage of the Suez Canal or the Straits of Hormuz, or the Persian Gulf, that we would see oil and gas costs go through the roof.

You could see $5, $6 a gallon gas.

Now, we deliver, in this country, a great deal of our resources by

truck. T. Boone Pickens was in to see me about a week or two ago,

and he told us if we converted or got all of the 18 wheelers to use

natural gas, we could cut our dependence on foreign oil by 50 percent within the next decade. That one thing. And yet we are not

drilling or doing anything to explore for energy in this country. We

can’t get new oil leases, we are getting all kinds of environmental

issues raised that way, we can’t drill here, we can’t drill there. We

have trillions of gallons of coal shale that could be converted to gas

to oil, we have oil all over this country, in the ANWR and off the

continental shelf and in the Gulf of Mexico. We have trillions of

cubic feet of natural gas, and we are not doing anything.

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So we are in effect creating a greater dependency on foreign energy than we ever have in the history of this country. We have

gone from 25 percent to 60 some percent dependence on foreign energy, since we had the oil embargo, where people were walking four

blocks to get a can of gas to get to work.

If you would just give me another 30 seconds, Mr. Chairman. I

think it is extremely important, and I know this is off the subject

and I really appreciate your being tolerant of my comments here.

But I think it is really important, when we are talking about renegotiating or negotiating oil leases or gas leases or whatever we

are talking about that we realize, we have a huge dependency on

foreign energy. And this country, from an economic standpoint, and

a defense standpoint, could be in a terrible situation if we don’t

move toward energy independence.

I think all of us, all of us on this dais and all of us, regardless

of whether we are Democrat or Republican, ought to be talking

about ways that we can move in this direction as quickly as possible. Because if we don’t, and things go south in the Middle East

or in Venezuela or elsewhere, we could really see problems, lights

off, gasoline going through the roof, the cost of all the goods and

services that are trucked going through the roof, an inflationary

spiral that could kill this country.

With that, I thank you very much, Mr. Chairman.

Mr. PLATTS. Thank you.

Mr. DAVIS. Mr. Burton, can I react to that for just a second? I

think you are on, but can I just make one comment?

Mr. PLATTS. Sure.

Mr. DAVIS. You have to remember, the stone age didn’t end because they ran out of stones. Our dependency on oil, it is not because we run out of oil. There are going to be alternative fuels developed. That, I think, continues to be the long-term strategy.

What is the most frustrating is about Congress’ inability, and I

was part of this, to come to grips with some kind of defined energy

policy that has more domestic production, as you have noted, more

research and incentives into alternative fuels, which we have started to do, and then more conservation. It is a three-pronged deal.

The parties should be able to come together on this or exactly what

you say is going to happen.

Mr. BURTON. Mr. Chairman, let me just make one brief comment.

That is, the things that Chairman Davis just mentioned is absolutely accurate. We need a comprehensive approach.

But a lot of these things they are talking about are going to take

time, it is going to take 5, 10, 15 years. We don’t have the luxury

of time. We need to get moving on energy independence right now.

Thank you very much.

Mr. PLATTS. The gentleman yields back. Having had the privilege

to serve under both former chairmen, how could I not agree with

both of you. You make great points when we talk about energy

independence. It is economic security, it is national security. They

are all intertwined.

With that, I yield 5 minutes to the gentleman from Missouri, Mr.

Clay.

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Mr. CLAY. Thank you so much, Mr. Chairman. Let me first welcome Mr. Davis back. Your portrait and Mr. Burton’s certainly look

good in this freshly painted hearing room, don’t you think?

Let me start my questioning with Mr. Dodaro. Thank you for

your testimony, and recommendations on ways we can make the

Federal Government more efficient and save taxpayer dollars. I

would like to focus on the Department of Defense.

I am concerned about DOD’s pattern of negative appearances in

GAO reports. As we continue to increase DOD’s budget, the agency

continues to be plagued by inefficiencies, duplicative programs,

waste and in some cases fraud. In your report, you identified the

DOD’s military health system as an area of concern for duplication

and redundancy. The report states that the DOD military health

system has no central command authority or single entity accountable for minimizing costs and achieving efficiency. That is very

troubling, given its mission.

Can you share with the committee the annual costs of DOD’s

military health system, and what are the projected cost increases

through 2015?

Mr. DODARO. It is about $50 billion.

Mr. CLAY. Fifty billion for the health care. Wow.

Mr. DODARO. Right. We point out in the report, too, that health

care costs at DOD, just like they are in other parts of our economy,

are growing. The area that we mention in terms of military health

care commands is something that has been studied by the Defense

Science Board and others, or recommendations within DOD to do

it. And they pursued a strategy that had minimal changes involved. We think if they pursue a broader strategy, it would be

very important.

Also in the health care area, Congressman, is the cost of prescription drugs, which is a fast growing component of health care.

We think that DOD and VA working together, which they were

doing a few years ago, could yield some benefits by leveraging their

purchasing power as well. They have agreed to start revisiting that

issue.

Mr. CLAY. Thank you for that response.

What impact do you think the system’s redundancy and command structure issues have on those costs?

Mr. DODARO. The estimates that were made at the time, savings could be achieved between $250 million and I think over $400 million a year, depending on the nature of the consolidation.

Mr. CLAY. OK, so that would kind of help save taxpayers, if they

took the recommendations and implemented them?

Mr. DODARO. That is correct.

Mr. CLAY. And right now, they are pretty much ignoring them?

Mr. DODARO. They have made some minimal changes in that regard. But we think they could do more.

Mr. CLAY. OK, and you have recommended alternative concepts

that have been on the table for a while, in addition to your report,

the Center for Naval Analysis did one in 2006. And you also report

that DOD officials generally agree with the facts and findings of

your analysis on their health system. With rising costs in the billions, with DOD’s health system and clear inefficiencies, do you

think DOD is doing enough right now to make improvements?

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Mr. DODARO. I think they can do more, as we pointed out in our

report. We have encouraged them to do so. We will continue to do

studies, basically outlining what some of the options would be. For

example, a single military command is an option. There are other

options that could be pursued. But this is a case where there is cultural stovepiping by the services, and there needs to be some

broader leadership brought to bear. I think it is warranted, giving

the fast-rising health care costs.

Mr. CLAY. Thank you for that response.

Mr. Davis, going back to an efficient energy policy, one argument

we hear is that eliminating these subsidies would cost jobs. I note

that from 2005 to 2009 the top five oil companies have reduced

their U.S. work force by more than 10,000. What would happen if

we shifted these subsidies from oil to wind or other domestic producing energy initiatives? Wouldn’t that spur job creation in this

country?

Mr. DAVIS. I am just not an expert on those areas. I am one who

would let the marketplace set that, rather than some of these incentives. But we are starting to incentivize wind, we are starting

to incentivize some of these other areas. It is having an effect, not

just on job creation, but pre-positioning us for the future, and a

global economy.

Chairman ISSA [presiding]. I thank the gentleman.

Before I recognize Dr. Gosar, we have a request from two Members who have had to leave the dais that there be unanimous consent for the General to revise and extend your report. I understand

there is some additional detail that has been requested your people

say they could give us in supplemental for this report. Is that amenable to you? We will leave the record open for you to supplement

with any additional details, for example, the 80 programs and four

agencies, naming them, those sorts of things.

We realize that is not easily put together in 1 day.

Mr. DODARO. Yes, we will do that.

Chairman ISSA. I thank the gentleman.

Dr. Gosar is recognized for 5 minutes.

Dr. GOSAR. Mr. Davis, I am currently co-sponsoring resolution

606, which establishes a bipartisan Presidentially appointed sunset

commission that identifies failed programs and those that are not

achieving their goals, to review them and subject them for termination. I suspect the commission would review this committee’s

work.

With your experience, what are your thoughts on this, if this legislation were enacted into law?

Mr. DAVIS. If I were in Congress, I would co-sponsor it. I think

that is a good place to start.

One of the things you have to remember is when you start talking about programs that don’t work or that have expired and the

like, that there are a lot of interest groups out there that really

don’t care about efficiency. And they push Members, and they have

their say in this by the time it is over.

So it is great to have a GAO or a commission like this that can

call the balls and strikes. And then it gets harder for some of these

groups to defend some of these subsidies and some of these proVerDate 11-MAY-2000 14:24 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67367.TXT KATIE PsN: KATIE
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grams that may not be doing well. So I think it is a wonderful idea.

It is another starting point on this.

The only point I would make is that in all of this, it is sustainability, keeping the momentum going. It is a lot easier to make

government work more efficiently and to take costs out of government in terms of delivering services than it is to cut programs.

That is where our focus needs to be.

Dr. GOSAR. Thank you.

Ms. Alexander, would you see this as a real benefit that taxpayers could get behind?

Ms. ALEXANDER. We supported different forms of sunset commissions in the past. It is something that, we would look at the details

of your resolution, but certainly we are open to the idea.

Dr. GOSAR. Good. Mr. Dodaro, to Mr. Mack’s earlier questions,

you mentioned real property owned and maintained by the Government that are unnecessary and not being used. In your view, what

is the best method to get the agencies to part with this property

and sold to the private sector? What are our next steps to make

this happen?

Mr. DODARO. We have recommended in the past, OMB chaired,

and they do have a real property council at this point in time. I

think Congress should require regular reports on a quarterly basis

from OMB about what the plans ought to be to dispose of property.

Right now, there are over 45,000 buildings that are under-utilized.

That has grown over the past year by 1,800 buildings. The cost to

maintain under-utilized properties, over $1.6 billion a year. So I

think there needs to be plan.

Now, the administration has set goals to try to dispose of property by the end of 2012. But I think it is part of Congress’ responsibility to hold them accountable for what progress they are making toward achieving those goals.

Dr. GOSAR. Thank you very much. I yield the balance of my time.

Chairman ISSA. Would the gentleman yield?

Dr. GOSAR. I would yield.

Chairman ISSA. Thank you. Mr. Dodaro, have you looked at some

of the excess property in sufficient detail to look at things, for example, I was out at Moffett Field on a committee fact-finding. We

discovered that NASA was utilizing a relatively small portion of it,

leasing out a small portion of it profitably, and then leasing out for

de minimis amounts large amounts of it for non-core business that

was important to the community.

Have you looked at those sorts of things, of whether or not agencies holding land that is not technically under-utilized, but being

utilized for non-core functions, did you look at any of those sorts

of items?

Mr. DODARO. I would have to go back and check with my team

and I will provide you an answer for the record, Mr. Chairman, on

that.

Chairman ISSA. I appreciate that.

One additional one is, you talked in terms of, the other side was

asking questions, and I think it was very insightful, you were almost saying we need a second Goldwater-Nichols, that we need to

go further in merging the command structures of the military from

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the standpoint of spending. Is that pretty much a succinct part of

your report?

Mr. DODARO. I think there needs to be some outside intervention,

in order to break some of the stovepipes down at DOD.

Chairman ISSA. Chairman Davis, you have certainly seen this

and you were here for the BRAC process. Would you say that in

fact, that is one of the things that committee should look at, is lessons learned and failures, if you will, post-BRAC, when they no

longer belong to the military, yet they are still costing the taxpayers?

Mr. DAVIS. Well, one of the problems, the McKinney Act was

passed, I think, with the greatest of intentions. But at the end of

the day, I think the priorities have shifted from how do we use this

land in the community in some cases to how do we put this back

on the tax rolls. Which also helped those communities, and how do

we get money back to the Federal Government. We are borrowing

40 cents on the dollar. It is just not sustainable. We have to start

looking at costs. I agree.

Chairman ISSA. Thank you. And one last question, as a followup,

Ms. Alexander, you have been very supportive of many fixes. I remember that your organization and several others were supportive

of us stripping the courts of the ability to make the decision that

they unfortunately made that puts us with these billions being lost

through oil leases that were flawed. And I know that we agree to

disagree on whether or not Mr. Markey’s fix would be held constitutional, or whether it would fall into that punitive.

But more broadly, have you looked at what could be gained by

Congress taking all of the various subsidies, oil being one of them,

but there are other energy subsidies, and requiring them to be

brought together, something that follows the theme that we have

been talking about here today?

Ms. ALEXANDER. We haven’t specifically looked at how to package

all the energy subsidies together. We tend to, our work has been

to look at individual subsidies. But certainly, we recognize the need

for a comprehensive energy policy, and to look at whether or not

each dollar is going toward a common goal. So that is something

we would be happy to work with the committee on. We have looked

at lots of different energy subsidies across different fuels. We try

to look at them together, but we understand the difficulty of looking at them all side by side. We certainly don’t think that we have

apples to apples comparisons coming out of the administration or

Congress as often as we would like.

Chairman ISSA. We look forward to working together on that.

With that, we recognize the gentlelady from New York for 5 minutes.

Mrs. MALONEY. First, I would like to welcome my former colleague, Tom Davis, who did an extraordinary job as chairman of

this committee, on which I was honored to serve. He was always

a good fighter for the partisan cause, but also reasonable and listened to the minority and we worked together on a lot of good bills.

It is good to see you, we miss you, Tom, welcome back.

Mr. DAVIS. Thank you.

Mrs. MALONEY. I want to thank Mr. Dodaro for your excellent report. It is really very helpful, and the chairman, for focusing on it.

77

This is a time that we need to look at ways to protect taxpayers’

dollars and start reducing that deficit and debt.

Your report says that some oil and gas companies are not paying

what they owe under existing leases. I think that is a little bit of

an understatement. Your investigation examined royalty reports

for 2006 and 2007, and found that many were simply missing. They

also found many sales reports were erroneous.

Specifically, your report states that you found numerous instances in which oil and gas production data were missing or sales

data appeared to be erroneous. Is that correct?

Mr. DODARO. That is correct.

Mrs. MALONEY. For just these 2 years alone, 2006 and 2007, your

investigators found that oil and gas companies may have withheld

$117 million in uncollected royalties. That is a staggering amount.

Your report indicates that one reason this may be happening is because we rely on oil companies to self-report.

Mr. DODARO. There needs to be more verification by the Interior

Department of the data to make sure that the Federal Government

is getting, there is reasonable assurance that they are getting the

revenues that are there. So there is a set schedule for verifications

that are supposed to occur. But the Department was way behind

in maintaining that schedule.

Mrs. MALONEY. Well, why in the world are we relying on them

to self-report, when we have documentation that they are not capable of self-reporting accurately? Why in the world don’t we have the

royalties reported, what is due, by the agency, or at least a third

party? Why in the world are we relying on the oil and gas industry

that is not reporting accurately, according to your own study after

study after study?

Mr. DODARO. Our recommendation is that there is more verification that needs to be done by them.

Mrs. MALONEY. But you are still letting the companies verify,

correct?

Mr. DODARO. No. Interior needs to verify.

Mrs. MALONEY. Interior needs to verify.

Mr. DODARO. Having self-reported information can work if there

is verification by the departments of the checks and balances, rather than go out and have people independently measuring it. So it

can work, but the Department has to do their part to protect the

taxpayers. That is what you are saying and that is what we have

said in our recommendations.

Mrs. MALONEY. Well, also in your recommendation your report

proposes that the Federal Government use independent third party

data to provide greater assurance that royalties are accurately

paid. But my question is, do you think it is better to have a third

party or just have Interior do a better job verifying?

Mr. DODARO. Well, Interior needs to do a better job verifying it.

They can use their own verification, they can use other third parties to corroborate as well. That is what we do in doing our audits

and verifications. You should use everything that is available to

you to corroborate data, to make sure that the reporting is as complete as possible and that taxpayers are protected and we are getting the revenue that we deserve.

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How much do you estimate we would be able to bring in if they

verified it in an appropriate way?

Mr. DODARO. We don’t have an estimate right now.

Mrs. MALONEY. And why is it taking so long? Are they verifying

now in a better way? Have they taken the steps to respond to your

recommendations?

Mr. DODARO. They are starting to, from the team. We are going

to be following up and staying on this, and we will provide regular

reports to this committee.

Mrs. MALONEY. Do you think it is important that maybe we need

to legislate that they verify, to make sure it happens? What do we

do to make sure this happens?

Mr. DODARO. I think you ought to have Interior up here and explain what they are doing and the importance of doing it. I think

a regular oversight is important. We have done work. The Inspector General has done work over there. We are continuing to do our

part. So I think that it is good to have sustained followup with the

department that is responsible for handling these matters.

Mrs. MALONEY. Well, I regret that there was an amendment that

I authored in another committee, and the debate went on just until

now. So I missed a great deal of your testimony. In the 21 seconds

left, I would like to ask you, in your report, what other area in government can we manage better and save funds? Obviously the oil

and gas has historically been an area of tremendous abuse, particularly on oil extracted from federally owned lands. But what other

category in government do you think, if we managed it better, we

would be able to save taxpayers dollars and make a dent in this

terrible deficit we have?

Mr. DODARO. Our report discusses opportunities virtually across

government. The Department of Defense is an opportunity there, I

think, for significant savings. I also mentioned the need to focus on

revenue collection, where we are not cutting, we are actually getting more than we are owed in from a revenue standpoint, beyond

the Interior issue. I think the IRS can and should implement a

number of our recommendations to take that area on.

I think we have also recommended that tax expenditures be

brought under regular review. That is almost as much as discretionary spending in a year, in revenue foregone.

So I think all those are really good opportunities, to be able to

save moneys and to be more efficient. But in tackling our deficit,

efforts there have to go beyond just these programs and to entitlement spending as well.

Mrs. MALONEY. My time is expired. Thank you.

Chairman ISSA. I thank the gentlelady.

Mr. Davis, I think you wanted to respond to that also.

Mr. DAVIS. I just wanted to, Mr. Issa had asked a question earlier where he talked about, he asked something similar. There is

a lot of savings between agencies, where they can chart sharing

services. I know they allude to that in the report. It wasn’t just the

focus of this report. But agencies can share services. Right now it

is just very stovepiped in terms of the way they look at it, the way

they are budgeted. And they are reluctant to do that.

But you could save literally billions of dollars, probably tens of

billions, if they could share services between agencies. As we talked

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about, the best illustration being medical records between VA and

DOD. There is no reason you need two separate lists.

But that is the kind of thing, the collaboration between agencies,

that is not really existing now that could save a lot.

Chairman ISSA. I thank the gentleman.

In closing, actually for the gentlelady’s edification, too, because

I think Mr. Dodaro did it very well when he was explaining something to us, this third party data that we want to explore further

with the GAO, the idea of when an oil company takes oil, they put

it onto a tanker that is weighed and measured. They offload it and

it is metered. This is all third party data, that if we gathered it

all, it would be almost impossible not to see any discrepancies between what is reported and so on.

This is also, earlier, what they said about the IRS. The fact is

that if somebody says, I don’t have any money, and yet you see

credit card receipts saying they are spending money, if that data

is compared within the Internal Revenue Service, that third party

collaboration, because remember, IRS is voluntarily reported, too.

But some people don’t quite report accurately, as they discovered

when people were saying what they lost in Louisiana, and it didn’t

match anything that they had ever declared.

So I look forward to working with the gentlelady on that.

In closing, particularly for Mr. Dodaro, our intention in the committee is to have you back on a roughly quarterly basis. I hope that

either you or a designated representative would be able to do that,

so we can continue this dialog in a way to stay on top of what you

are doing and of course, on top of what the administration is agreeing to do.

Additionally, I want to again repeat for the record that the commitment to go after a number of areas you have covered here

today, including natural gas and oil, and find constitutional ways

to keep from losing the money that we are losing, and particularly,

we are going to have the new agency, the Ocean Energy Management, the old MMS, we intend to have them back. Out of deference

to the reorganization that was announced by Interior, we are trying

to give them a reasonable amount of time. But Carolyn, we are

going to have them in, specifically, as we did when Chairman

Davis had them in repeatedly.

So I want to thank the witnesses today. I would like to have you

all back. I suspect, because of your expertise, we will have you all

back. And this committee stands adjourned.

Mrs. MALONEY. And my statement in the record. I ask unanimous consent.

Chairman ISSA. Oh, sorry, and unanimous consent that your

statement and all statements may be placed into the record, for up

to 7 legislative days.

And all of you, by unanimous consent, may revise and extend for

that same period of time.

We stand adjourned.

[Whereupon, at 12:45 p.m., the committee was adjourned.]

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