59

never been better. You will get all of that, and I am just saying
empirically that is not true.

Mr. Horn. OK. Mr. Mihm, Mr. Posner, what I am curious
about—is the General Accounting Office Controller Generals have
done a very fine job in their so-called high-risk series. You have
also had a very fine best-practices series. When did that start?
1970, 1975, 1980? Or is it mostly the 1990’s?

Mr. Posner. I think it was mostly the 1990’s. The late 1980's is
when I believe the high risk started.

Mr. Horn. Under Mr. Boucher, essentially.

Did anybody in OMB ever run with those high risk or best prac-
tices? What did you see happen to it after you made those sugges-
tions to Congress?

Mr. POSNER. Well, this goes back a ways. I think it was in the
late 1980’s that OMB had their own high-risk list that was quite
extensive and were trying to get agencies to focus on a lot of the
same issues. And I think it has kind of been over the years some-
what uneven in their focus.

About 2 years ago they didn’t have a high risk. They decided to
discontinue that high risk program. Now they have something in
the governmentwide performance plan that they call priority man-
agement objectives—they have 11 governmentwide and 11 agency-
specific that track, to a great extent, the high-risk initiatives we
have talked about.

Mr. Mino. I would add that, in terms of the best practices work,
in many cases OMB has adopted the best practices that we have
identified as guidance or criteria for agencies. I know OMB has
done that in the area where I focus most of my time on the Results

ct,

More directly and specifically, they’ve done it, of course, in the
area of information technolo; We also worked very closely, as
Paul mentioned earlier, with OMB on capital planning. Therefore,
a great deal of our best practice work has been embodied in OMB’s
guidance to agencies.

Mr. Horn. How do you think they have done with the year 2000
issue as a management problem? Are you aware?

Mr. MIHM. I could start off on that.

Mr. Horn, Will the clerk note the silence? It’s unbelievable.

I mean, just tell us.

Mr. Mimo. Silence from OMB I think in the early years, too, sir,
was part of the problem. As I mentioned in my opening statement,
we are now beginning to see OMB shed some of its initial optimism
about year 2000 compliance.

I know that in a number of hearings that you’ve had and in other
public pronouncements made as recently as a few months ago,
OMB was quite confident—initially. OMB was confident it wasn’t
a big problem and then OMB was confident that agencies would be
able to lick the problem. Now I think there’s a real acknowledg-
ment on their part that we’re beyond the problem stage and at the
point of recognizing that all mission-critical systems are not going
to be able to be year 2000 compliant. We need to start doing some
triage to make sure that at least those systems that most directly
affect the health and safety of the American people are year 2000
compliant. I think it’s a signal of the administration’s at least


25

Improving Capital Decision-Making

OMB's efforts to improve capital decision-making are a third example of where OMB's
leadership efforts are yielding some results. For example, OMB has required agencies to
submit 5-year capital spending plans and justifications~thus encouraging the use of
flexible funding mechanisms-and also held the first OMB Director's review on this issue."
OMB added a new section to its fiscal year 1998 budget preparation instructions that
outlined several broad principles for planning and monitoring acquisition and required
agencies to develop baseline cost schedules and performance measurement goals. OMB
has also implemented other policy and guidance changes to support new management
decision-making requirements and the Chief Information Officers (CIO) Council has
adopted the establishment of sound capital planning and investment management
practices as one of its strategic goals. The development of the "Raines' Rules"-requiring
agencies to satisfy a set of investment management criteria before funding major systems
investments~can potentially serve to further underscore the link between information
technology management and spending decisions. These investment management practices

are also required under the PRA and the Clinger-Cohen Act. The extent to which the

‘Capital Programming Guide. Version 1, July 1997 (Executive Office of the President,

OMB) OMB's Capital Programming Guide provides a range of guidance, from linking
capital decisions to strategic goals and objectives to analyzing and ranking potential

investments. We provided input to OMB's latest guidance on capital program planning.
Also see Executive Guide: Leading Practices in Capital Decision-Making Exposure Draft
(GAO/AIMD-98-110, Apr. 1998).

9


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

J. DENNIS HASTERT, Illinois

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

CHRISTOPHER COX, California

ILEANA ROS.LEHTINEN, Florida

JOHN M. McHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

‘THOMAS M. DAVIS, Virginia

DAVID M. McINTOSH, Indiana

MARK E_ SOUDER, Indiana

JOE SCARBOROUGH, Florida

JOHN B SHADEGG, Arizona

STEVEN C LaTOURETTE, Ohio

MARSHALL “MARK” SANFORD, South
Carolina

JOHN E. SUNUNU, New Hampshire

PETE SESSIONS, Texas

MICHAEL PAPPAS, New Jersey

VINCE SNOWBARGER, Kansas

BOB BARR, Georgia

DAN MILLER, Florida

HENRY A. WAXMAN, California
TOM LANTOS, California
ROBERT E. WISE, JR., West Virgi
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

CAROLYN B. Sema ew Nor York
THOMAS M. BARRETT, Wi

ELBANOR HOLMES NORTON, We Washington,

CHAKA FATTAH, Pennsylvania
ELIJAH E. CUMMINGS, Maryland
DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Ulinois
DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts
JIM TURNER, Texas

THOMAS H. ALLEN, Maine
HAROLD E. FORD, JR., Tennessee

BERNARD SANDERS, Vermont
(Independent)

Kevin BINGER, Staff Director
DaniEL R. MOLL, Deputy Staff Director
JupitH McCoy, Chief Clerk
PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY
STEPHEN HORN, California, Chairman

PETE SESSIONS, Texas

‘THOMAS M. DAVIS, Virginia

JOE SCARBOROUGH, Florida

MARSHALL “MARK” SANFORD, South
Carolina

JOHN E. SUNUNU, New Hampshire

DAN BURTON, Indiana

DENNIS J. KUCINICH, Ohio

PAUL E. KANJORSKI, Pennsylvania
MAJOR R. OWENS, New York
CAROLYN B. MALONEY, New York
JIM TURNER, Texas

EX OFFICIO

HENRY A. WAXMAN, California

J. RUSSELL GEORGE, Staff Director and Chief Counsel
BoB ALLOWAY, Professional Staff Member
MATTHEW Expert, Clerk
Fart WEISS, Minority Counsel

ap


68

However, these examiners have little time or incentive to look in any depth at
management problems in individual agencies or those which cut across organization
lines. They are simply not equipped to provide leadership in developing approaches to
the more significant management problems or see what works best for the government
as a whole, Neither are they in a position to see the cumulative impact of either budget
or management actions of the federal government on state and local governments or on
families and individuals. This total burden is sometimes shocking in magnitude when it
is revealed.

The reward system for examiners is based on how well they can pare the budgets in
their assigned areas. As a result, the basic power structure of OMB, and most of the
attention given to departmental operations, are channeled along the budgetary tunnels of
the examiners. Crosscutting management issues are given far less attention than in
earlier times.

In the last few years, for example, we have seen various types of proposals for
government corporations, but , as Harold Seidman has testified before this Committee,
there has been no consistent set of OMB criteria among the various proposals . He and
Alan Dean have also expressed concern about the lack of consistency in the approaches
advanced for performance based organizations. In recent years, little attention has
been paid to the roles of field operations or headquarters-field relationships. Little
effort has been devoted to how the thousands of field offices relate to state and local
governments or private businesses impacted by government policies and actions.

Earlier, despite the fact that OMB had a stronger central management component than
today, I found that this tunnel vision frequently delayed or even prevented us in OMB
from undertaking needed reforms in the financial management systems of the
government which are badly outdated.

Focus on the Annual Budget Cycle

Budget examiners are just as interested as anyone else, perhaps even more so, in the
long term impact of current budget and management actions. But the inexorable
pressure of meeting the budgetary targets of the budget year too often end up
subordinating long term efficiencies to the demands of the current budget which often
limit their focus to the 12 month budget year. Over the years, I found this 12 month
budget priority a major handicap in working with Social Security and other agencies in
designing and implementing major computer systems that were needed to better serve
the public. It worked against investing in modern technology which required an initial
investment of funds but would save money over a period of years. I should stress that
this problem grew out of the guidelines within which examiners had to operate and not
because of shortsightedness on the part of the examiners.

Dwight Ink May 12, 1998 Page 4 of 8


79

ed the Office of Budget and Management; and the Nixon adminis-
tration stood with it, saying that management should come first.
Despite that Promised link, it’s just really not there.

ere has been, third, a marginalization of the management staff
at OMB, although they’re quite talented. We have Jonathan Brew
here from OMB, a distinguished new fellow of the National Acad-
emy of Public Administration. But notwithstanding the talents of
the staff at OMB, you know, I think that the management staff is
marginalized and not well regarded as colleagues. y're kind of
a last thought in many meetings.

Fourth, in all candor, I think we have the lack of a high-level ad-
vocate for management issues within Government. We do have a
Deputy Director for Management. That person is, theoretically, at
the same executive level as the General Deputy Director, but let’s
face it. It’s a No. 3 slot, and it’s kind of an odd fit.

And we've done everything we can—I’ve participated in a Senate
Governmental Affairs Committee conversation about how to elevate
management once again, how to give it a little more heft, and so
we elevated it and gave it a little Figher title, gave it a little higher
pay grade. But at some point you have to say, look, we've tried just
about everything. Maybe we should the separation of manage-
ment from OMB, see how that works. Given the tides of reform and
the pounding over the years, we can always put it back together
if it doesn’t work, but this notion is to give it a chance, you know.
I mean, it has not worked within OMB. Perhaps we should try it
outside of OMB.

Now that’s a reluctant endorsement, isn’t it? But it’s the best I
can do, Dwight. I am making progress, I think.

Well, that will conclude my brief statement.

Mr. Horn. Well, we thi you for that humorous but accurate
statement, and thank you very much for coming down here this
morning.

[The prepared statement of Mr. Light follows:]


15

you engaged i in a dialog with Mr. Koskinen on this issue and the
Federal response in recent months to the crisis has increased.

Finally, OMB can analyze crosscutting program design, imple-
mentation and organizational issues. In our work, we have pointed
to the need to integrate the consideration of various tools used to
achieve Federal goals, such as loans, grants, tax expenditures and
regulations. In addition, our work has provided numerous examples
of mission fragmentation and program overlap, and we have sug-
gested that OMB take the lead in ensuring that Results Act plans
address these concerns.

This effort, however, will be hampered if attempts to resolve
problems of program overlap and fragmentation involve organiza-
tional changes, because OMB lacks a centralized unit charged with
raising and assessing government organizational issues. OMB has
not had such a focal point since 1982 when it eliminated its Orga-
nization and Special Projects Division.

Turning, to our second point this morning, the record of OMB
stewardship of management initiatives suggests that creating and
sustaining attention to management improvement is a key to ad-
dressing the government’s long-standing problems. In the past, as
we have been discussing, management issues often remained
subordinant to budget concerns and timeframes; and the leverage
that the budget could offer to advance management efforts was not
directly used to address those efforts. The experiences to date sug-
gest that certain factors are associated with successful implementa-
tion of management initiatives regardless of the specific organiza-
tional arrangement.

First, as you noted in your opening statement, Mr. Chairman,
top management support ‘and commitment from within OMB and
the White House is o! critical. This support, however, is not the
only way that we can provide sustained focus on governmentwide
management issues within OMB, the agencies, and throughout the
resource allocation process.

Second, a strong link to the budget process can be a key factor
in gaining serious attention for management issues. In that regard,
reforms such as the Government Performance and Results Act,
seek to improve decisionmaking by explicitly calling for perform-
ance plans to be integrated with budget requests. Irrespective of
the location of this leadership, management initiatives must be re-
flected in and supported by the budget. In fact, we would suggest
that no single organizational arrangement by itself guarantees that
this integrated decisionmaking will happen.

Third, collaboration with agencies through such approaches as
task forces and interagency councils has emerged as an important
central leadership strategy in developing policies that are sensitive
to implementation concerns and gaining consensus in consistent
followthrough.

Fourth and finally, support from Congress has proven to be crit-
ical in sustaining interest in management initiatives over time.
Congress has, in effect, served as the institutional champion for
many management initiatives, providing a consistent focus for
oversight and reinforcement of important policies. Congress’, and in
particular this subcommittee’s, attention to the year 2000 problem,


14

with that to some extent. I don’t in other places. While I think we
can make much better use of our resources, earmarking, which is
traditional in the Congress in order to get their priorities done, is
not looked upon as most managers as good management.

In many cases, restrictions that are put in place. For example,
the Congress will go and make some very good changes in legisla-
tion on credit reform; then will tell the Department of Agriculture
that they can’t implement those exact changes that the Congress
just legislated. And you know we can put together a whole list of
those examples.

Then I think there’s a lack of interest by the oversight commit-
tees and many times up in the Congress with improved manage-
ment with the exception of this subcommittee and the committee
on the other side, Governmental Affairs. Most committees simply
don’t really care about improved management. It is not sexy. It
doesn’t get you reelected. There’s not a lot of P.R. involved in it.
And the only time that you find a Cabinet officer being brought up
to a committee chairman and a little hell being raised because of
the fact he or she is not managing the department well is when
there is a scandal.

Well, that’s not good management. Management is a daily, yearly
process.

Last, I would say that past administrations, including my own,
didn’t always have their act together and didn’t always support
management improvement as well as they should have. There is
seldom much priority for management reform in the OMB staff of
around 500 FTE’s with a budget of around $60 million. Naturally,
they pay attention to the wheel that is squeaking the loudest, and
that normally is the President or a Cabinet officer or a Member of
the Congress on a budget issue. Therefore, they can have all the
best intentions in the world, but the budget gets the immediate ac-
tion; and management does take second place in many cases. I
would also say there are diffuse responsibilities and resources for
management throughout the agencies and throughout the executive

ranch.

In summary, I'd say it’s clear that a governmentwide manage-
ment process and perhaps a reorganization is needed, but responsi-
bility for this effort has got to have congressional support. It’s got
to have what I would call a fairly substantial long-range overhaul
in the way the executive branch and the legislative branch inter-
face. Otherwise, it’s just going to be moving boxes around and fur-
ther diffusing of responsibility.

Thank you very much, Mr. Chairman.

Mr. Horn. Well, we thank you for your very precise statement.

I think you have one typo here that may I suggest you might
want to correct it?

On your written version when you—fourth paragraph, you say
zero-based budgeting under President Nixon. I believe it was under
President Carter who campaigned on this issue, because he had
done it as Governor of Georgia. So I think you would want to
change that for the written record.


32

Programming-Budgeting-System and Management By Objectives, suffered when they were

not integrated with routine budget presentations and account structures.”

‘Third, effective collaboration with the agencies-through such approaches as task forces
and interagency councils-has emerged as an important central leadership strategy in both
developing policies that are sensitive to implementation concerns and gaining consensus
and consistent follow-through within the executive branch. In effect, agency
collaboration serves to institutionalize many management policies initiated by either
Congress or OMB. In our 1989 report on OMB, we found that OMB's work with
interagency councils were successful in fostering communication across the executive
branch, building commitment to reform efforts, tapping talents that exist within agencies,
keeping management issues in the forefront, and initiating important improvement.
projects. One example of this collaboration is the continuing success of CFOs and the
CFO Council in leading agencies in addressing a wide range of financial and related
management issues, such as their work, in concert with OMB, on a strategic plan to

upgrade and modernize federal financial management systems.

Finally, support from the Congress has proven to be critical in sustaining interest in
management initiatives over time. Congress has, in effect, served as the institutional

champion for many of these initiatives, providing a consistent focus for oversight and

16


39

STATEMENT BY RONALD C. MOE
CONGRESSIONAL RESEARCH SERVICE

HOUSE COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION AND TECHNOLOGY

"Office of Federal Management Act of 1998"

MAY 12, 1998

Mr. Chairman, thank you for inviting me to testify before your Committee on
the proposed Office of Federal Management Act of 1998, H.R...‘ This bill
would provide for the reorganization of the present Office of Management and
Budget (OMB) into two equal, separate offices; an Office of Budget and an Office
of Federal Management. Both Offices would be in the Executive Office of the
President and both Directors would report directly to the President.

Office of Management and Budget Today

Previous hearings and reports by this Committee have addressed the question:
Is the Office of Management and Budget (OMB) as presently organized performing
its managerial responsibilities in an effective manner? After many hours of
testimony by OMB officials, both past and present, and by outside observers and
scholars, the answer to this question appears to be in the negative. Arguably, the
management interests, properly defined, of the President, the executive branch
generally, and Congress are not being fully served by the current organization of
OMB." In the words of Subcommittee Chairman, Stephen Horn:

The capacity available to the President in the Office of Management
and Budget has steadily declined and now barely exists, despite a
competent Director of OMB and a Deputy Director for Management,
whose talents in this area are underutilized. Federal management
organization, oversight authority, and general influence have been
consistently overridden by recurring budget crises and budget cycle
demands, despite conscientious intentions to give "Budget" and
“Management” equal voice within OMB...

" See: U.S. Congress, House, Subcommittee on Government Management, Information
and Technology, Federal Budget Process Reform, Hearings, 104" Congress, 2"! session
(Washington: GPO, 1996). U.S. Congress, House, Committee on Government Reform and
Oversight, Making Government Work: Fulfilling the Mandate for Change, H.Rept. 104-435,
104" Congress, I* session (Washington: GPO, 1995).


64

First, the OMB leadership is increasingly preoccupied with the
complexities of the budget and related economic issues, leaving lit-
tle time for the management role. An OFM would be free of this
problem and would give the President an opportunity to place man-
agement leadership in men and women whose experience is in
management, not economics.

Second, the budget fosters tunnel vision, which makes it difficult
for OMB to address the crosscutting issues which affect a large
number of departments, agencies, and laws that Mr. Moe has men-
tioned. In some instances, because OMB does have very able and
dedicated men and women, it has been able to overcome this con-
straint, as in the recent interagency planning for a national drug
control strategy which I think is good. But the fact that from time
to time they are able to overcome these structural difficulties of
OMB is not a reason for failing to greatly increase their manage-
ment potential by removing these obstacles through an OFM.

ird, the 12-month budget cycle tends to give undue weight to
annual budget targets as compared with long-term investments
that provide more economies over the long run, thereby contrib-
uting to difficulties such as developing the type of computer system
and modernization made possible through other technological im-
provements that are so badly needed to modernize government op-
erations.

The domination of budget issues has contributed to weakening
agency capacities to prevent waste, fraud, and abuse. I recall how
this factor contributed directly to the disasters that befell HUD
over a Period of years and the furniture scandals in GSA.

We should dispel the myth, and it is a myth, that the manage-
ment staff and Executive Office of the President must have the le-
verage of the budget in order to gain the attention of the agencies.

It was my experience, as was also true of Harold Seidman, my
predecessor, that the more we could distance our staff from the

udget process the greater our effectiveness, and the greater our
impact in the vast majority of cases, including financial manage-
ment.

Several responsibilities I found useful in heading the earlier
management staff and which should be incorporated in an OFM in-

ude:

One, drafting and coordinating the President’s Executive orders,
very important; two, coordinating legislation dealing with organiza-
tion and management; three, drafting and clearing the President’s
reorganization plans; four, participation in the daily planning
meetings of the top White House staff; five, participation in the de-
sign of new programs to ensure their workability; six, assignin,
OFM staff to ensure coordination and expedited action by the fiel
operations of various agencies. This field focus of an office of man-
agement is very important. Seven, greater attention to helping
agencies strengthen their own capacity for effective management,
as Mr. Moe has mentioned; eight, monitoring of agency perform-
ance to address problems at an early stage. If this early warning
system had been retained, I believe wewould have headed off most
of the later HUD and S&L debacles. Nine, leadership in stream-
lining intergovernmental operations; ten, tracking followup of GAO
findings and congressional requests; and, eleven, an outreach to en-


35

Mr. Horn. I should have introduced Mr. Posner with you. I
didn’t know how you were going to be grouped this morning.

Mr. Posner is Director of Budget Issues, Accounting and Informa-
tion Management, U.S. General Accounting Office.

Any off-the-cuff remarks you want to make to reinforce you and
your colleague’s statement?

Mr. PosNER. Just one, to followup on a testimony I gave before
your subcommittee in October. That as OMB has moved toward
what we might call a more decentralized environment for manage-
ment, the integrated approach of OMB 2000, it makes the results-
oriented perspective and the strategic planning and annual per-
formance plan of GPRA, even more critical for O. itself to adopt,
because it is a privacy way that OMB can target and communicate
clear management goals and objectives, both to itself and to the
Congress. We have been analyzing those plans over time.

One particular area that we focused on in the OMB 2000 review
and we are continuing to focus on, is whether OMB has articulated
specifically enough of an agenda for its own internal management
ol hats capacity to address these kinds of issues that you're talking
about today.

Mr. Horn. Well, thank you very much.

Our last witness on this panel, unless we have another guest
here, Dr. Ronald C. Moe, is a specialist, Government Organization
and Management, Congressional Research Service.

I think 7 minutes, Ron, we are fone, to see if you can hold to
that; and then we're going to divide the rest of the time between
the ranking minority member and myself.

Mr. Moe. Thank you, Mr. Chairman, for inviting me to testify
before your committee on the proposed Office of Federal Manage-
ment Act of 1998. It is appropriate at the outset to note that the
opinions expressed here are my own and do not represent those of
my employer, the Congressional Research Service.

in my extended written remarks for the record I have attempted
to trace the intellectual and political history of the debate over
whether or not two subject fields, budget and management, are
best served by being in one agency or separated in two agencies.

If I understand correctly the view of this subcommittee and its
chairman, this debate has been largely settled in favor of providin;
the President with two equal, separate offices, one for budget ant
one for management. You requested witnesses therefore to be more
concerned about the future than the past.

Specifically, you would like to inquire as to what an OFM would
look like, what resources it might use profitably to promote long-
term institutional capacity and interests of the President and, less
directly but no less critically, the legitimate interests of Congress
in quality executive branch management. I will use my remaining
time, therefore, to offer some observations about the future of an
up and running OFM and what functions it might perform.

Many of these functions are already assigned explicitly and im-
plicitly to OMB but are either performed minimally or not at all

ecause of budget and personnel restrictions.

What would this new OFM look like? Well, in the briefest form
as provided in the draft bill, which lists all the functions to be per-
formed, it would be an office with between 250 and 300 personnel,


67

meshed most of the OMB budget and management personnel together. For over 25
years I have believed that the management functions should be removed from OMB
and placed in a separate Office of Federal Management.

Virtually every one of my predecessors in BOB, dating back to the early 1940s, as well
as most of my successors in the chief management post at OMB, share this view. In
1983 I had the opportunity to chair a panel of the National Academy of Public
Administration on the state of government management. This panel was asked by
federal departments and independent agencies to recommend ways in which to revitalize
the federal government and simplify its operation. One of the principal panel
recommendations was the establishment of an Office of Federal Management. My
reasons for supporting an OFM are as follows:

gadership Preoccupied with the Budget

With the passage of time, the federal budget has become more and more complicated.
Programs have multiplied in number and increased in complexity as they are called
upon to address issues that are intended to address domestic problems that are ever
changing in a dynamic society. Today, the budget is intertwined with economic issues,
many of which have both domestic and international components. The OMB leadership
is necessarily caught up in a never ending series of budget related issues on which
OMB is constantly in touch with the department and agency heads, many of which
require presidential attention. Within this budget dominated pressure cooker, there is
little time and energy left for the top OMB officials to address management issues.
Further, because the budget is such a critical activity, the president understandingly
looks for budget or economic experience in choosing OMB directors, not managerial
knowledge or skills.

An Office of Federal Management would equip the President with top level
management leadership highly qualified in the field of management. And they would
be able to devote their full time and energy in making government work better.

The Budget Fosters Tunnel Vision

BOB and OMB have deservedly been given very high marks for having budget
examiners (now members of resource management units) who are extremely talented.
They are among the very best in government, and they function well under short
timetables and extremely heavy pressures. However, the work of each examiner is
focused largely on only a few programs which are closely related. They become
thoroughly familiar with the budgetary impact of actions on those groups of programs.
This serves the President well on matters relating to the budget and in assessing what
program objectives can be achieved. Implementation of the Government Performance
and Results Act is an important example where this program knowledge has been of
great value in addition to the more traditional budget activities.

Dwight Ink May 12, 1998 Page 3 of 8


45

7

when there are not applicable general management laws or when those that exist have
been permitted to atrophy or, conversely, become cumbersome or obsolete through
extraneous amendments or technology.

Responsibility for the drafting and updating of management laws will,
presumably, be a major responsibility of the OFM. The political clout associated
with this responsibility should not be underestimated. OFM will be a major player
in setting the "rules of the game" for agency management and will constitute an
institutional source of expertise and memory in service to the President. Thus, an
OFM consisting of experienced generalists who have spent much of their career in
executive branch management could be a cadre of strength for both the President and
Congress.

Have general management laws, viewed both singularly and collectively, been
designed to promote a consistent and comprehensible theory of management
appropriate to the distinctive requirements of the governmental sector? Or, are the
general management laws, viewed comprehensively, largely the sum total of many
singular laws intended to achieve different and occasionally conflicting ends? Are
there too many laws, or too few? Do they balance standards of legal accountability
with the needs of agency management discretion? Are the laws and the regulations
promulgated pursuant to them under the continuing supervision of, and subject to,
periodic revision by central management agencies accountable directly to the
President? Or, do the laws reflect a gradual presidential retreat from active
management responsibilities? Do the laws encourage agency leadership to proceed
largely on its own, seeking waivers form coverage and accommodations with other
agencies, private contractors, and Congress? What interest does Congress have in
current management laws? Do they provide opportunities to enhance the capacity of
agency leadership to implement laws and policies, or opportunities to insure greater
agency sensitivity to congressional committees? In short, Presidents, and less
directly although equally critical, Congress, have a stake in the quality of the general
management laws.

At Hearings of this Committee in 1996, ("Federal Budget Process Reform"), one
segment was devoted to Sections 2 and 6 of the Omnibus Budget Act that would
have provided for the reorganization of the present Office of Management and
Budget into two equal separate offices, an Office of Budget and an Office of Federal
Management, a proposal not unlike the one we are discussing today. At that time the
subject of general management laws was raised. The Chairman asked if there was
any official listing of acts of a general management character. I responded in the
negative. He subsequently requested CRS to develop such a listing with analysis of
each act. Mr. Chairman, in June 1997, CRS published a compendium on the general
management laws applicable to the executive branch.'* It is our current intention, if

© U.S. Library of Congress, Congressional Research Service, General Management
Laws: A Selective Compendium, ed. Ronald C. Moe, CRS Rept. 97-613 (Washington: CRS,
1997). This report should be read in companion with: U.S. Congress, Senate, Committee
on Governmental Affairs, Office of Management and Budget; Evolving Roles and Future
Issues, Prepared by the Congressional Research Service, S. Prt. 99-134, 99" Congress, 2”
session (Washington: GPO, 1986).


87

organizatior: | and managerial systems capacity to assure efficient and effective
government : =rvice delivery and program performance. This is hardly the kind of
sustained m> iagerial assistance that the President needs.

Asa_onsequence of these developments in OMB, the need for an independent
Office of Fe: :ral Management (OFM) as an institutional management arm of the
President ha been recognized and understood by virtually every management authority
ever to take . serious look at the issue. During my staff service for the Governmental
Affairs Com: ittee on the other side of Capitol Hill and as a student of Federal
managemen ‘or some 35 years, I've had the good fortune to meet every person who has
held the pos: ion equivalent of Associate Director for Management in the national budget
agency sincc ihe time of the late Donald Stone at the BOB in the late-1930s and 1940s. 1
believe it is curate to report that every veteran of that position in OMB and its
predecessor yency has come, without exception, to the conclusion that the management
policy funct: :n cannot be performed with any adequacy in OMB.

Wher: Congress first considered creation of an Office of Federal Management more
than a decad:: ago, that legislation was stymied by the well perpetuated myth that an
OFM withou! budgetary powers and sanctions would lack the “clout” to carry out its
was not obvious then, it must surely be now that it is OMB's very

mission. I
preoccupatic. 1 with blunt, top-down budget “clout” that has obscured and devalued
performance »f its critical management functions.

The ‘ yportance and influence of an effective management staff in the Executive
Office of th: President is not derived from budgetary power; it is the result of provisions
and requiret_>nts found in a battery of Federal management laws, including: the Budget
and Accoun’ ag Act, 1921; Administrative Procedure Act, 1946; Federal Tort Claims Act,
1946; Freedim of Information Act, 1967; Federal Procurement Policy Act, 1974;
Injunctive Relief Act, 1976; Sunshine in Government Act, 1976, Intentional Tort
Amendment Act, 1976; Inspector General Act, 1978; Ethics in Government Act, 1978;
Paperwork Reduction Act, 1980; Prompt Payment Act, 1983; Federal Managers
Financial Intgrity Act, 1984; Competition in Contracting Act, 1984; Privacy Act, 1984;


8

the executive branch, and to assist in the design and implementa-
tion of governmentwide strategies aimed at enhancing the ability
of Federal agencies to carry out their statutory missions.

This understanding of management also allowed us to consider
such qualified or specialized forms as procurement, paperwork, fi-
nancial, and intergovernmental management, among others.

The preparation of our review of BOB/OMB internal reorganiza-
tions, as source note citations indicate, was based upon library re-
search; that is, the examination of published scholarly studies and
official government literature. This is an important limitation for
our presentation. For example, we did not consult internal BOB/
OMB records or conduct any interviews with present or former
BOB/OMB officials. Moreover, I might note, the quantity of public
literature describing and assessing BOB/OMB internal reorganiza-
tions is limited.

Our review of BOB/OMB internal reorganizations has been deliv-
ered to the subcommittee for its use. We would like to take this op-
portunity to reiterate the observations we offer at the end of that
review and to respond to such questions as you may have regarding
it.

Dr. McMurtry will present our observations.

Mr. Horn. Dr. Virginia McMurtry is a specialist in American Na-
tional Government at the Congressional Research Service. Wel-
come.

Ms. McMurtry. Thank you. Good morning, Mr. Chairman and
members of the subcommittee.

We have six observations on the basis of our study.

First, the BOB/OMB has experienced an ever-changing struc-
turing of management responsibilities. Since 1950, these reconfigu-
rations seem to occur with greater frequency. Over the years, the
internal structure has tended to alternate between two basic pat-
terns: a bifurcated structure with separate sides for management
and budget staff; or the other approach, a programmatic structure
with the budget examiners and management staff integrated in
various functional units.

Second, the BOB/OMB has become responsible for various kinds
of management—administrative, intergovernmental, personnel uti-
lization, procurement, paperwork/information, statistical, regu-
latory, and financial, among others. These appear generally to have
increased with the progression of years after 1960.

The BOB/OMB has met these responsibilities in various ways—
for example, analyses and evaluations, coordination and clear-
ance—all with, of course, shifting resources.

Third, especially since the early 1960’s when PPBS—or the plan-
ning-programming-budgeting system—was introduced throughout
the executive branch, BOB/OMB has been required by succes-
sive administrations to adopt and adapt to a variety of changing
arrangements for planning and budgeting. While these frameworks
generally shared an orientation toward objectives and outcomes,
each system entailed some modifications of BOB/OMB management
capacity, sometimes for brief periods of only a few years.

‘ourth, considering the management-budget relationship within
BOB/OMB, it appears that budget authority has largely been


CREATING AN OFFICE OF MANAGEMENT

TUESDAY, MAY 12, 1998

House OF REPRESENTATIVES,
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room
2154, Rayburn House ice. Building, Hon. Stephen Horn (chair-
man of the subcommittee) presiding.

Present: Representatives Horn and Kucinich.

Staff present: J. Russell George, staff director and chief counsel;
Bob Alloway, professional staff member; Matthew Ebert, clerk; and
Faith Weiss, minority cor

Mr. Horn. The Subcommittee on Government Management, In-
Gur hearing today hag to do with the Office of M t

ir lay lo wit of Management pro-
posal in the executive branch by which we would se; ite the
_—Management—from outside the current Office
ment and Budget.

There is little debate over whether the executive branch of the
Federal Government needs better management. It does. It has
nothing to do with party. It has nothing to do with ideology. It has
to do with complexity and the increasing demands for management
questions to be asked that are tremens ly important if you are

sident of the United States or just a citizen that wants good
government.

There are two basic alternatives for management in the Federal
Government: to leave the management sibilities in the Office
of Management where they currently reside or move general man-
agement responsibilities to a new ice of Management in the Ex-
ecutive Office of the President with a Director reporting to the
President. OMB would become the Office of Budget, with its Direc-
tor continuing to report to the President.

This is not a question of theory. It is a question of Bracticality.
Certainly it is within the power of the President and Director
of the ice of Management and Budget to bring about serious
management improvements within the present structure. They are
free to treat management as a priority. But knowing that, in prac-
tice, management is not always made a top priority, we must set
a structure that endures. ich 01 izational alternative, we,
must ask, is more likely to be successful when we have a President
and a Director of OMB who do not treat management as a top pri-
ority?

@M


42

4

Unfortunately, in the view of some scholars and practitioners of government
management, when budget and management institutions and personnel are combined,
short-term budgetary values and priorities necessarily displace longer-term
management values and priorities. Long-term management issues and proposals
often lack immediate political appeal and thus the intellectual capital so necessary for
institutional growth and creativity is sacrificed to the appeal of a short-term,
immediate "savings."

The net result of years of stressing budgetary over management values has
produced a situation where whole major fields of governmental activities are
essentially "unmanaged" from a central managerial perspective. Government
corporations and enterprises, for instance, are being created sui generis with little
central review in the executive branch to insure conformance with statutory and
customary standards of organization, operations and accountability. Today,
Performance-Based Organizations (PBOs) are being promoted by the Vice President
and the NPR notwithstanding the absence of clear statutory authority to create such
bodies and the absence of criteria and standards for financial accountability agreed
to by Congress.'° Throughout the whole "reinventing" process there has been an
effort to exempt agencies and programs from the supervision of general management
laws (e.g., personnel acts) and from congressional oversight.'' Increasingly, the
management of the executive branch is disaggregated, uneven in execution, and often
subordinated to budgetary priorities.

Are the Governmental and Private Sectors Alike?

The underlying premise of much of the "reinventing government” exercise is
that the governmental and private sectors are alike and best managed according to
certain generic business sector principles (e.g., "customer satisfaction"). The
entrepreneurial management model outlined first in Osborne and Gaebler'’s popular
book, Reinventing Government," and later in Vice President Al Gore's National
Performance Review Report," seeks to replace the "old, broken way" with the "new

» Alasdair Roberts, "Performance-Based Organizations: Assessing the Gore Plan,”
Public Administration Review, S7(November/December, 1997): 465-78.

" Donald F. Kettl has detected a bias in the "reinventing goverment" exercise. "First,
‘reinventing government’ seeks the transfer of power from the legislative to the executive
branch. In the Vice President's report, Congress is notable principally for its rare
appearance. When it does appear, it is usually as an unindicted co-conspirator responsible
for undermining effective management. The NPR criticizes Congress for micromanagement
and for unpredictable budgetary decisions. Almost all of what the NPR recommends, in
fact, requires that Congress give up power.” "Beyond the Rhetoric of Reinvention: Driving
Themes of the Clinton Administration's Management Reforms," Governance, 7(July 1994),
p. 309.

" David Osbome and Ted Gaebler, Reinventing Government: How the Entrepreneurial
Spirit is Transforming the Public Sector from Schoothouse to State House, City Hall to
Pentagon (Reading, Mass.: Addison-Wesley, 1992).

U.S. Executive Office of the President, National Performance Review, From Red
Tape to Results: Creating Government That Works Better and Costs Less (Washington:
(continued...)


73

Mr. Horn. Let me next go to Mr. Joseph Wright, who is chair-
man and CEO of AMTEC Incorporated and a former Director of the
Office of Management and Budget.

Mr. WRIGHT. Thank you, Mr. Chairman. I’d like to submit my
testimony for the record and just make a few comments, please.

Mr. Horw. It is automatic with all witnesses.

Mr. WRIGHT. First of all, I appreciate you bringing us together
again with my friends, Mr. Ink, Light, and Gilmour. You have
some old management war horses here at this table; we have been
together a long time.

nlike what one of the former witnesses said, not all the Pro-
gram Associate Directors and the head of OMB were kids. I’ve
spent 7 years there, and toward the end of it I was very old.

I was also the liaison with the Grace Commission at that time;
and, as you recall, they recommended setting up an Office of Man-
agement. I disagreed with that, Mr. Chairman, at that time. As my
testimony states, however, I believe that something should now be

lone.

But, I’m not so sure it’s a reorganization only. I believe reorga-
nization without ‘changing the process by which the executive
branch deals with not only itself but with the Congress is some-
thing that will result in numerous reports that the chairman will
have to read but perhaps not a lot of change. So, therefore, I would
like to discuss this in a wider context.

Management in the Government, I have found, is extraordinarily
difficult. There is really no well-respected, governmentwide man-
agement process in place.

Let me give you three observations:

Of the processes that we have to manage the Federal Govern-
ment, the budget process is probably one of the most well defined,
as I would say the management process should become so. The
budget process is not just the budget. It’s policy communication
from the agencies and the President to the Congress and back. It
is centralized within the Office of Management and Budget to carry
it out.

The congressional committee structure is organized to receive the
communication, and that is very important, Mr. Chairman. With
the management process you have the Governmental Affairs and
Government Operations Committees. You don’t have a committee
structure across the board on your oversight committees to receive
management information in an orderly way.

I would also say the tracking and disagreement resolution proc-
ess of the budget process is in place and, while we may disagree
with it, everybody knows the rules. We don’t have that in the man-
agement process.

Next, congressional support over the years for management im-
provement has been unclear and sometimes inconsistent. We have
a great deal of legislation dealing with only parts of the manage-
ment process that has been passed over the years, but very seldom
has an entire management process been put in place that brings
all this legislation, regulation, authorities, and resources together.

Next, there are restrictions that the Congress actually puts in
place against good management. Now it has been suggested before
that we should not run the Government like a business. I agree


82

that such an office be built from the remnants of the old management division, the Office of
Information and Regulatory Affairs, the Office of Federal Procurement Policy, the Office of
Personnel Management, and, with due respect for the difficulties involved, the General Services
Administration.

If budget was the hoped-for driver in the original Ash Council design for OMB, acquisitions,
personnel, and information technology would be the drivers for the new OFM. I am less troubled
today than I once was about the loss of power that would come with the separation from budget. In
fact, there is almost no evidence that the connection ever helped on management. Indeed, the history
of financial management reform suggests otherwise. If there was ever an opportunity to prove the
Ash Council's theory that the two sides could work together, surely financial management reform
was it. What could be more dear to a budget analyst's heart than the proper expenditure and
accounting of federal appropriations? In reality, most budget analysts are neither interested nor well
schooled in just how financial management relates to their work. They are trained to allocate money
wisely, not account for it thoroughly. Once the money leaves their hands, it is time to start budgeting
for the next fiscal year.

1 do not believe that management would disappear from public view in an OFM. Management will
always be a back-page story, if itis a story at all. But that is not the issue. Whether management
is exciting or boring, it is essential to the faithful execution of the laws. Much as we can admire all
the work involved in the National Partnership for Reinventing Government (nee National
Performance Review), and much as we should all reject needless thickening of the hierarchy, an
OFM would provide the needed senior oversight to make the reforms stick. It is very much an idea
whose time has come.


CREATING AN OFFICE OF MANAGEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS
SECOND SESSION

MAY 12, 1998

Serial No. 105-178

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

oe

U.S. GOVERNMENT PRINTING OFFICE
52-020 WASHINGTON : 1999

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-058307-1
3





30

fragmentation concerns." This effort may be hampered if efforts to resolve problems of

program overlap and fragmentation involve organizational changes, because OMB lacks a
centralized unit charged with raising and assessing government-organization issues. OMB
has not had such a focal point since 1982 when it eliminated its Organization and Special

Projects Division.

SUSTAINING IMPROVEMENTS IN FEDERAL MANAGEMENT

Mr. Chairman, the record of OMB's stewardship of management initiatives that we have
highlighted today suggests that creating and sustaining attention to management
improvement is a key to addressing the federal government's longstanding problems. In
the past, management issues often remained subordinated to budget concerns and
timeframes, and the leverage the budget could offer to advance management efforts was
not directly used to address management issues."? The experiences to-date suggests that
certain factors are associated with the successful implementation of management

initiatives, regardless of the specific organizational arrangement.

anaging [ ts: Using the Act to Address gmentation and
Prograin Overlap (GAO/AIMD-97-146, Aug. 29, 1997) contains an annotated bibliography of
GAO work on mission fragmentation and program overlap.

Managing the Government: Re
(GAO/GGD-89-85, May 4, 1989).

4


89

Of fundamental importance to the organization of an effective OFM is a
combination of the full array of managerial policy functions in one relatively small,
independent office within the Executive Office of the President, reporting directly to the
President. The range of such functions is extensive, including among others: human
resources management and staffing, government organization (including government
corporations and government sponsored enterprises), procurement and real property
policy and systeris, financial (accounting, reporting, cost, cash, and credit) systems,
auditing, inspection, and investigation, information and technology management,
regulatory and paperwork review and reform, grants management and intergovernmental
relations, Freedom of Information Act and Privacy Act compliance, program and
management systems evaluation, general privatization and public-private partnerships
policy, productivity enhancement, and management research. While these functions are
diverse, they are almost inevitably interrelated, which argues against hiving off particular
functions, however important — financial management or information management, for
example — as isolated separate functions with separate and independent offices of their
own. But this is not to suggest that major operating agencies such as the Office of
Personnel Management and the General Services Administration be loaded into an Office
of Federal Management. Not only would they overwhelm OFM's critical management
policy functions with massive day-to-day operations, they would also be inconsistent
with the policy-advisory, coordination, and review roles of EOP agencies on behalf of the
President.

Finally, in an era when Congress has become deeply involved in the
implementation of literally hundreds of agency-administered programs to the point that
many can be said to be “co-inanaged” by Congress and the Executive Branch, it is
essential that an OFM have a reporting relationship with Congress. What is proposed in
the discussion-draft bill now before this Subcommittee is not a mere special projects
agency, but an OFM with overall staff responsibility for a huge array of integrated
management policy functions. While OFM's critical and primary relationship is with the
President, this office should also be charged with regularly informing the Congress of its


84

I suggest to you, as Ronald Moe has already done, that the influ-
ence of an effective management staff in the Executive Office of the
President is not derived from budget: power. It comes, rather,
from the battery of laws that you and the Congress have enacted,
what we generally refer to as the general management laws.

Actually, there are many of them, as has been reported here,
that each one of them has a bit of clout on its own. None of them
is particularly dependent upon budgetary power. On occasion,
they’re interrelated; but the powers, say, over regulatory reform for
regulatory coherence or even to shape regulatory power is found in
the Paperwork Reduction Act, not in the Budget and Accounting
Act. And so it goes.

There are many tools there for management staff to work with.
But central coordination and oversight then of general manage-
ment laws is strengthened, not weakened, by their implementation
in a separate management agency apart from the highly politicized
environment of the Federal Budget Office.

Of more subtle importance, and this has been mentioned too, a
sustained commitment to improvements in management systems
and finance information, technology, regulation, procurement sim-
ply requires a long-term view, an agency with a commitment to
management improvement over the long haul not just for the cur-
rent budget cycle or in response to the immediate or intermediate
budget shortfall. An OFM, as you have proposed it in the discus-
sion bill before this body, is not a mere short-term management
agency. It would contain all of the tools for management that
would and could shape changes in reforms in management sys-
tems.

Having said that, let me say further that I don’t suppose that an
Office of Federal Management, even a well-staffed, organized and
directed one, would be a panacea for what ails Federal manage-
ment systems and programs. I think it could and would elevate
those concerns for public management to a higher level and would
provide an institutional source of advice as a counterpart to budg-
et-source advice, advice to the President on management concerns.

With that, Mr. Chairman, I stand ready for questions.

Mr. Horn. I thank you for that very thorough and succinct state-
ment. You've boiled a lot of this down, and I appreciate that.

(The prepared statement of Mr. Gilmour follows:]


12

© Since the reconstitution of the BOB in 1970, the resulting OMB has, during
the succeeding years, experienced an expansion of non-career middle
managers and, consequently, a more complex and extended hierarchy between
the most senior leaders of OMB and first line staff. Moreover, specialized
entities, such as the Office of Federal Procurement Policy and the Office of
Information and Regulatory Affairs, have been grafted onto the OMB. The
result, as Paul Light noted in his 1995 study, Thickening Government, is an
OMB that “grew both taller and wider over the ensuing decades” since 1960.

e Finally, the recent experience with the implementation of the Government
Performance and Results Act would seem to provide an opportunity to
reexamine and reconsider the OMB’s management role and the most suitable
structure for fulfilling the management responsibilities now vested in OMB.
However, CRS takes no position on establishing an Office of Federal
Management.

Thank you. We would be happy to respond to questions.


54

physical sciences there is such a thing as an implicate order in
which certain structures are inherent or embedded throughout the
entire structure. There is a holographic theory, if you will, about
how one wave can represent an entire interference pattern.

What I am wondering, speaking of the management functions of
government, isn’t it true | management is implicate in budget
and budget is implicate in management, no matter what systems
you set up? You can divide them, you can merge them, you can
make them simultaneous, you can bifurcate them, but the fact is
that it is—basically, they are doing many of the same functions
whether they like it or not?

Ms. McMurtry. You are suggesting that, because of overlapping
relationships between the two, that, in some sense, they are in-
se) ble ultimately? I didn’t follow all your analogies.

ir. Kucinicu. I am suggesting that, but I am also suggesting
that, simultaneously, you cannot divorce budget from management
and management from budget. That if you were to have a budget
without management, you lose money; and if you were to have
management without a budget, you can’t keep track of the money.

So when you are talking about the Federal Government, what I
am interested in your response, both from a theoretical construct
and a practical application, how do you make this leap to separate
the two? I’m just curious how that could be done without making
some inherent disconnect which degrades the function of both?

Ms. McMurtry. Clearly, over the years, there have been various
ways of trying to package the interrelationships. I certainly would
not want to suggest that it would be possible to separate them com-
pletely. I think the testimony of various witnesses this morning
suggests that there would be continuing interrelationships whether
you establish a separate office or whether you retain the basic
structure at present, with more minor modifications.

Mr. KucINIcu. So if there is a separate office established—and,
again, I am just listening to this for the first time and I have a
great respect for Mr. Horn and his views—if you establish this sep-
arate office, there is still going to be an overlap, is there not?

Ms. McMurtry. There is going to be some overlap, I think, of
the work to be done because, as you say, there are interrelation-
ships between budget and management. However, this is seen in
various other areas of the government; yet we have separate Cabi-
net departments devoted to particular policy areas, even though we
also need to have interagency councils with broader perspectives to
address crosscutting issues and problems.

Mr. Kucinicu. I am interested in a moment, Mr. Mihm, because
I do want to ask you a similar question.

Some things work well on paper and in theory; and in practice
there are other things that come in, intervening variables if you
will, that are not easily contemplated in design. Politics, for exam-
ple. There are a number of these structures that can work well
until you bring politics into a management structure, and then sud-
denly the structure changes. You put politics into a budget struc-
ture, things disappear. One day, whole structures can suddenly be
demanded, be put into place. It changes the dynamic relationship
between management and budget.


96

to, for example, go out and draft government cooperation legisla-
tion, talk to everybody involved that has an idea in this area, this
kind of thing.

And what I see in this is that the President simply doesn’t have
the tools available to him to share with his Cabinet and with agen-
cy heads when they have major problems in some of these depart-
ments that are management problems. It should be the in-house
consulting firm, which is what that old Bureau of the Budget was,
that they did have a lot of bright people. They were career people.
They were generalists, largely. They could move into a situation on
behalf of the President.

That’s what’s going to make the thing work. Let’s face it. If the
President doesn’t want anything to happen, it won’t happen. If the
President wants something to happen, it will happen. But, right
now, he doesn’t have anybody he can really call on on the manage-
ment side.

You can go contract with Arthur D. Little or McKenzie or who-
ever it is, and that’s interesting. I remember very well that Presi-
dent Eisenhower did make that contract, either during the transi-
tion period after the November 1952 election——

When I was Assistant to the Secretary of Labor at the end of the
administration, 1959 and 1960, one day Secretary Mitchell opened
a drawer in his conference room which used to be the Secretary’s
office. He couldn’t stand any office that large so he turned it into
a conference room, and he said, “Here, Steve, take that McKenzie
and Co. study.” He says, “You can keep it.” He said, “None of us
has ever read it.”

And so much for consultants that are paid money on manage-
ment. It’s because the Secretary had in mind his own ideas, and
he was the first Secret of Labor that ever managed that Depart-
ment, and the others been great political figures or out making
speeches. He had headed all civilian personnel in the Pentagon in
the Second World War. That was 1 million people, and he knew
what he was talking about in labor relations.

At the end of the administration, George Meaney and 500 of
America’s leading labor leaders gave him a white tie banquet, if
you would. I have never been to one of those before or since. I

ess that’s higher class than black tie. The President of the
Gnited States came over to thank him, as did the leaders of Amer-
ican labor.

So here was a guy that knew something about management. He
didn’t need a bunch of outside consultants. He just did it. Well, not
everybody has that experience. He’d had it for 25 years. The prob-
lem is, how can the President get better performance out of many
Cabinet officers who have no experience? If they had been a Gov-
ernor, great, they know what goes on. They know the difficult situ-
ations you have to deal with in dealing with a legislature and so
forth.

So I just am curious. Can this be done with 20 people, 40 people,
50 people? I realize they got a few things in there now that are just
routine that used to be in the office or the Division of Statistical
Services, whatever that was called, that cleared these surveys and
that kind of stuff. I realize that takes a few bodies. But what’s your
feeling on that as to the —


75

Mr. WRIGHT. Thank you very much, Mr. Chairman. Now you un-
derstand why I’m part of this group rather than the historians.

Mr. Horn. I lived through a few of these things.

[The prepared statement of Mr. Wright follows:]


36

one-half the personnel being shifted from the current OMB. Thus,
the new staff office for the President could be functioning at full
strength with about 125 to 150 additional appointees, most of the
latter likely to be personnel transferred from agencies.

In short, this small office will be responsible for the proper func-
tioning of the management laws and directives covering the entire
executive branch. In no way should or could OFM be considered the
principal decisionmaking unit within the executive branch. Specific
departmental and agency decisions are not to be bucked up to an
OFM for resolution. Rather, the OFM is intended to be a staff office
with responsibility to promote and protect the President’s interests
in the management of the executive branch.

In the time remaining, may I suggest five fields of responsibility
to be addressed by a properly designed and funded OFM?

First, the oversight of the general management laws collectively
and individually; second, transition management; third, serve as an
early warning system; four, serve as the source of institutional
memory; and, fifth, the promoter of management capacity building.

First, oversight of the management laws.

General management law, as used in this testimony, is a term
of art referring to those crosscutting laws regulati e activities,
procedures and administration of all agencies of Government ex-
cept where exempted. The quality of general management laws is
a crucial factor in maintaining the integrity and accountability of
the executive branch to the President and, ultimately, to Congress.
General management laws are contracts between the President and
Congress.

General management laws come in various guises. They may be
dramatic in their coverage and impact, such as the Administrative
Procedure Act, Budget and Accounting, Paperwork Reduction,
Freedom of Information Act. Or they may be of relatively low visi-
bility, although low visibility is not necessarily with low impor-
tance, as the experience of the Federal Advisory Committee Act,
the Government Corporation Contro] Act and the Prompt Payment
Act indicate.

In the previous hearing in 1996, Mr. Chairman, you requested
that a list be made of these general management laws; and in June
1997, CRS published for your committee an analysis of all the
laws—not all, you can always come up with more, depending on
how you count it. We are talking about 80 or so laws that have
general applicability across the government for which, at this point,
no one has comprehensive responsibility for.

In recent years, a number of additional management laws, such
as the Federal Manager’s Financial Integrity Act, have been en-
acted, each supported and justified on its own definition of a prob-
lem but often with what some observers believe little consideration
of its probable impact upon other related general management acts.

Responsibility for the drafting and updating of management laws
will presumably be a major responsibility of OFM. The political
clout associated with this responsibility should not be underesti-
mated. OFM will be a major player in setting the rules of the game
for agency management and will constitute an institutional source
of expertise and memory in service of the President.


48

10

c. The Director shall be responsible for developing criteria and
standards to be met prior to the submission of legislation or
establish new or reorganize existing Government corporations,
enterprises, and other entities with a government interest.

d. Facilitate interagency cooperation and assist in developing
effective coordinating mechanisms throughout the Government.

It would appear from this provision that this will be the core Office to view
Federal management from a presidential perspective. This will be a cadre of career
generalists who will be available to design, organize, and reorganize the
organizations of the executive branch according to general policies set out by the
Director. This Office will perform many of the functions once performed by the
Administrative Management Division of the Bureau of the Budget during the 1940s
and 1950s.'* The evidence is fairly persuasive that the management of the executive
branch from a presidential perspective is in its third decade of decline'?
notwithstanding the claims of the National Performance Review that management
now claims top priority.”

Congress as Co-Manager

The purpose of executive branch management is to implement the laws passed
by Congress. This statement of the purpose of government management is
fundamental to order under our Constitution. As a matter of direct delegation under
Article I, Congress makes the laws, establishes offices and departments, and
appropriates necessary funding. The missions and priorities of agencies are
determined by law, not by the President or by the departments heads, either
collectively or separately.

While comity and cooperation among Congress, the President, and the agencies
are the bases for most relationships between the branches, the authoritative element
in the relationship is clear. Management of the executive branch, both in terms of
process and behavior, is ultimately dependent upon Congress and the law. Moreover,
Congress (individual members, committees, institutional subordinates, and staff) is
deeply involved in setting and overseeing both the broad dimensions and detailed

TM Frederick Mosher, A Tale of Two Agencies: A Comparative Analysis of the General
Accounting Office and the Office of Management and Budget (Baton Rouge: Louisiana State
University Press, 1984), National Academy of Public Administration, Two Presidents: The
Bureau of the Budget and Division of Administrative Management, 1939-1952. Occasional
paper by Charles F. Bingman (Washington: NAPA, 1992).

"° For a discussion of the purported presidential retreat from managerial leadership of
the executive branch, see: Alan Dean, Dwight Ink, and Harold Seidman, "OMB's 'M' Fading
Away," Government Executive, 25(June 1994): 62-64. Light, The Tides of Reform, chapter
6. Mark L. Goldstein, "The Flickering M in OMB," Government Executive, 22( March
1990): 26-32.

2 U.S. Office of the Vice President, National Performance Review, "Businesslike
Government: Lessons Learned from America’s Best Companies," (Washington: National
Performance Review, 1997). David Osborne and Peter Plastrik, Banishing Bureaucracy:
The Five Strategies for Reinventing Government, (Reading, MA: Addison-Wesley, 1997).


53

Mr. Horn. I now yield 15 minutes to the ranking minority mem-
ber for questioning of the witnesses.

Mr. Kucinicu. ik you, Mr. Chairman.

I would like my first question to go to Mr. Mihm.

You, in your testimony, talked about the inability to account for
billions of dollars in Federal property. Now however, since we are
essentially talking about an idea that would cause the functions of
OMB to be split, how would that affect that particular problem?

Mr. Mino. Let me first agree with what I think is the thesis of
your question, sir, and that is that the fundamental responsibility
for management is in the agencies. Agency managers are respon-
sible for the management within their own agencies. And so the
problem of the lack of audi financial statements is not fun-
damentally an OMB responsibility nor would it be an Office of Fed-
eral Management responsibility.

Our point in continuing to look at the problems with agencies’
audited financial statements is to underscore that pressing man-
agement issues exist. Financial management, information tech-
nology and the other concerns that we present would exist irrespec-
tive of the organizational arrangement. It is not something—we
don’t want to imply that if you go to an——

Mr. KucINIcH. the GAO takes no position on what structure
is more efficient?

Mr. MiHM. No, we haven’t done the body of work that would
allow us to say one structure is more efficient than the other. Rath-
er, we focused on what the factors are that would have to be

resent irrespective of which organizational structure you use.
Those factors were the ones outlined in our testimony. Things like
top management support. You would have to find some way of link-
ing up to the budget. You would have to look for some way of—
well, you would have to have continued congressional commitment.
Working thrqugh interagency groups would be a key to success as
wel

Mr. Kucinicu. Mr. Posner.

Mr. Posner. If I could just add, one of the things that kind of
humbles us in a way in prescribing organizational design is that
OMB, for some years before the 1990’s, had a separate branch on
financial management where they pushed some of these issues; and
that branch, frankly, was fairly i appointing in pursuing an effec-
tive financial management reform agenda. They did not have the
support to pursue audited financial statements. They were not sup-
portive of congressional initiatives in this area; and we were very
disappointed, in the 1980's, for example, about that.

That turned around in 1990 when Congress passed the CFO act
and created the Office of Financial Management in OMB. There
was a leadership team that emerged in OMB that was committed
to these initiatives, and we have made some progress partly as a
result of that and as a result of the congressional intensity and in-
terest in this problem.

This reinforces what Mr. Mihm said that all of these other fac-
tors have got to be in line for an organizational design to work ef-
fectively. t’s the point.

Mr. Kucinicu. Dr. McMurtry, as I’m listening to all of this testi-
mony today, there are a few things that occurred to me. In the


49

particulars of programs, processes, procedures, work rules, and management of
performance standards. In one policy area after another, what were once broad,
unspecified statutory delegations of power to the executive have been laced with
nearly countless requirements, limits, directions, prohibitions, personnel restrictions,
deadlines, hammers, "no-expenditure" clauses, and other means of asserting direct
congressional access to detailed policy development and program administration.

Robert S. Gilmour and Alexis Halley, after reviewing ten case studies of
administrative management issues, concluded:

[T]he relationship between Congress and the executive branch... leads
to the overall conclusion that the Congress observed in these cases was not
only an active and authoritative overseer but also a thoroughly involved
participant -- a co-manager -- with (or sometimes in spite of) the executive
in directing the details of policy implementation and program execution.
The cases collectively suggest that the term congressional co-management
of policy implementation and program execution characterizes the
transition from a congressional reliance on post-audit oversight of
executive branch performance to pre-audit congressional program controls
and direct congressional participation with the executive branch in the full
scope of policy and program development and implementation..... The
cases also suggest that congressional co-management is as much a result
of actions in the executive branch as it is a result of actions in the
legislative branch.”

In the private sector, there are compliant boards of directors which occasionally
challenge the policies and decisions of management, but they can in no way be
compared to the supervision provided agency management by Congress. Repeatedly,
outside "CEOs" brought in to "reinvent" or "re-engineer" this program or that agency
along private sector lines are shocked to find that they must meticulously obey laws
and regulations and are answerable to Congress for their actions. This congressional
involvement is not aberrational behavior nor is it a political strategy employed by an
“imperialistic" Congress. Because of Congress's immense legislative powers to
organize and control the orientation, even the very existence of every aspect of
executive branch management, Congress has always had the potential -- frequently
realized in contemporary practice -- to be a veritable co-manager of policy and
program implementation. Whenever there is a vacuum in executive branch
leadership, and these vacuums have increased in number and scope in recent years,””

*! Robert S. Gilmour and Alexis Halley, eds. Who Makes Public Policy? The Struggle
for Control Between Congress and the Executive (Chatham, NJ: Chatham House Publishers,
1994), p. 335.

® Breakdowns in executive branch leadership are often the center of congressional
attention. For example, in 1990, the Department of Housing and Urban Development
(HUD) was undergoing management problems with respect to one of its major programs.
William M Diefendorfer Ill, Deputy Director of OMB for Management, described OMB's
management oversight of the executive branch as "moribund." "We had one person looking,
at the management side for all government." With respect to the management problems at
(continued...)


78

Mr. Horn. Now we have our friend from Philadelphia, Dr. Paul
Light. He made the train or the plane, as the case may be, al-
though I’ve known of cases where people have taken horses from
Philadelphia, but that was a long time ago. The Pew foundation
can do better than that.

Mr. LIGHT. Well, I appreciate you asking me back. As always, I’m
here as a private citizen and scholar and not as a representative
of Pew Charitable Trusts.

Tm here reluctantly, not under subpoena, to support the concept
of an Office of Federal Management. I start out that way because
I have opposed the idea for quite some time.

I don’t know why I opposed it. Perhaps I didn’t want to be too
closely identified with Dr. Ink and others in the National Academy
of Public Administration. Those of us in the public management
field kind of characterized Dwight Ink, ‘Atan Dean, Harold
Seidman, Ron Moe as kind of the Public Administration water tor-
ture. They have been drip, drip, dripping on OFM for a good 15
years now, and I’m here to tell you—well, I’m here to tell you
they’ve worn me down, and I may not-—

ir. HorN. I’m a fellow victim.

Mr. LiGHT. I finally gave in and decided to support it just to get
the dripping to stop.

I do think it is an idea whose time has come, and perhaps that’s
where we all have arrived. We have had a series of really Hercu-
lean efforts by administrations over the years to strengthen man-
agement, most notably the Ash Council reforms of the late 1960’s
and early 1970’s which, of course, Dwight Ink was involved and he
wrote the reports, and I continue to plagiarize from him heavily.

And we have seen good deputy directors of one kind or another
come and go, Joe Wright being one of them. Joe Wright had sub-
stantial management experience before he went to OMB. He cut
his teeth as Assistant Secretary for Administration at Agriculture
in the Nixon years and did a fine job.

Tm fond of pointing out that when he was over at Agriculture he
couldn’t stand the concept of an inspector general, but when he got
to OMB he kind of fell in love with the idea. And that’s a classic
example of where you stand depends on where you sit. At OMB,
as a manager responsible for building management and attacking
fraud, waste, and abuse, the notion was how do we work with the
IGs to harness their considerable energy and staff to do some good?

At any rate, I came to this reluctant conclusion because, after ob-
serving OMB struggle with this for the last 12 or 15 years, we can
see that it’s just not working. We love to have OMB using the
budget as a tool to incent better management performance. It’s not
happening. It’s very rare.

Let me give you my four basic reasons for having concluded that
we ought to do this, and they don’t all include the constant pres-
sure from Dwight Ink and his colleagues.

First of all, we continue to see a lack of attention, durable atten-
tion, to management.

Second, despite the promised link between budget and manage-
ment that Richard Nixon talked about in 1969 and 1970, he placed
management first in the title. It was the Office of Management and
Budget, in spite of Senate objections to that title. The Senate want-


88

Chief Financial Officers Act, 1990; Government Performance and Results Act, 1993;
Government Management Reform Act, 1994; Information Technology Management
Reform Act, 1996; among many other, less important Federal manageinent statutes.

The central coordination, oversight, and control of the general management laws is
strengthened — not weakened — when their implementation is managed by a Federal
agency apart from the highly politicized environment of the Federal budget office. If
powerful incentives are needed in the service of managerial upgrading and reform, they can
be found among the controls already exercised (without need for budgetary leverage) by
the Office of Information and Regulatory Affairs (OIRA) and the Office of Federal
Procurement Policy (OFPP), now situated in the Office of Management and Budget and
which should be transferred to the OFM. The writing of presidential Executive Orders
should also be transferred to the OFM, and OMB Circulars redesignated as OFM
Circulars. And, if these agency incentives are insufficient, Congress can casily add more to
bolster OFM persuasiveness as a matter of law.

Of even greater, if more subtle importance to the performance of Federal
management is the increase in resources, expertise, and sustained commitment to
improvements in managerial systems for Federal finance, information, technology,
regulation, and procurement. Once removed from a budgetary control culture, an OFM
can become a petitioner and co-claimant with other agencies for the attention and
resources needed for manayement systems improvement. As anyone involved with
attempts to upgrade and coordinate government financial or information systems can
appreciate, even on a relatively small scale such reforms are time and resource
consumptive in the extreme. They also require staff expertise and sustained dedication to
objectives that are not often available to a single agency, either in-house or through private
contractors. In the past such efforts in the Office of Management and Budget have largely
been undertaken as episodic "special projects." Establishment of an OFM holds the
prospect of combining management policy functions in ways that will promote integrated

management system improvements of broader application and with greater continuity.


43

5

entrepreneurial management" unencumbered by so-called red tape. "Effective
entrepreneurial governments," the report asserts, "cast aside red tape, shifting from
systems in which people are accountable for following rules to systems in which they
are accountable for achieving results." This call to "cast aside red tape” is, on the
surface, an appealing idea that has few straightforward opponents. However, one
person's “red tape" often turns out to be another person's "fundamental right." "Red
tape" is generally employed as a metaphor for laws, executive orders, regulations,
and directives, the system that entrepreneurs argue is obsolete and broken.

The traditional theory of public administration, in contrast to the contemporary
entrepreneurial theory of governmental management, is based on the premise that the
governmental and private sectors are fundamentally distinctive. They are not alike
in their essentials and the applicability of business school axioms to government
agency management is problematical at best. The foundation of governmental
management, according to the traditionalists, is to be found in public law, not in
behavioral theories of management. The fact is that the private and governmental
sectors are based on fundamentally different streams of legal doctrine: one
traditionally rooted in judge-made common law, protecting rights and asserting duties
in the relations of private individuals; the other founded on the body of the
Constitution and the Bill of Rights and articulated by a truly enormous body of
statutory, regulatory, and case law to ensure continuance of a republican form of
government and to protect the rights and freedoms of citizens at the hands of an all-
powerful state.

Public law is the under-appreciated "cement" that binds the separated powers
of the administrative state, ensures political and legal accountability of its officials,
and restrains abuses of administrative discretion and conflicts of interest.

With respect to management, the distinctions between the sectors are manifest.
"The distinguishing characteristic of governmental management, contrasted to
private management, is that the actions of governmental officials must have their
basis in public law, not in the pecuniary interests of private entrepreneurs and
owners or in the fiduciary concerns of corporate managers.""* The hierarchical
structure found in the executive branch is designed more to ensure accountability for
managerial actions than to promote control over employees. The value of
accountability to politically chosen leaders outranks the premium placed on efficient,
low-cost service. It is less a question of pursuing one value at the expense of the
other, however, than it is a matter of precedence in the event of conflict.

Under the traditional public law theory of management, what are the purposes
of agency management? (1) The purpose of agency management is to implement

®(...continued)
GPO, 1993).
“ Did., pp. 6-7.

'S Ronald C. Moe and Robert S. Gilmour, "Rediscovering Principles of Public
Administration: The Neglected Foundation of Public Law," Public Administration Review,
55(March/April 1995), p. 138, (Italics in the original.)


CONTENTS

Hearing b held on May 12, 1998 ..
Ink, Dwight A., president emeritus, Institute of Public Administration,
and formerty’ ssistant Director for Executive Manaj ment, Bureau
of the and Office of Management and t; oseph Re.
Wright, get an and CEO, AMTEC Inc., and formerly
of fanagement, and Budget; Paul C. Light, director, Public Paley Be Pro.
gam, the PEW Charitable Trust, and formerly Senate Governmental
fairs Stan and Robert. s. Gilmour, director, Institute of Public and
Urban. Affairs, Gaiversity of Connecticut, and formerly Senate Govern-
Ralyea Hareld ©. specialist” American’ National 6 é
a t, American National Government, Congres-
alonsl Research Service, accompanied by Virginia McMurty, specialist,
American National Government, Co: Research Service; J.
Christopher Mihm, Associate Director on ET Management and Work-
force Issues, U.S. General ‘Accounting Office; Paul L. Posner, Director,
Budget Issues, Accounting and Information Management, U.S. General
Office; and Ronald C. Moe, specialist, Government, Organi-
Sccoun ‘Management, Cor ional Research Service .
Letters, statements, etc., submitted for the reco
Gilmour, Robert S., director, Institute ‘oP ae and Urban Affairs, Uni-
versity of Connecticut, and formerly Senate Governmental Affairs Staff,
prepared statement of.....

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

Ink, Dwight A, president emeritus, Institute of ic Administration,
and formerly int Director for Executive Management, Bureau
of the Budget and Office of Management and Budget, prepared state-
ment of ae

"ol » itable
“Prot s and formerly Senate Oe oly eRe Staff, prepared state-
ment of

» lanagem¢
ietkiores Tssuee, U.S. General Accounting Office; Paul L. Posner, Di.
rector, Budget Issues, os {Accounting and Information Management, U.S.
General Accounting repared statement of
Moe, Ronald C., ing, Offic t, Government Organization
Congressional Research Service, prepared statement of ..
Relyea, Harold C., specialist, American National Governm
ional Research Service, accompanied by Virginia McMur McMurty, specialist,
‘American National Government, Congressional pre-
pared statement of ..

Woght, Joseph R., chairman and CEO, AMTEC Inc., and formerly Direc-
tor, Office of Management and Budget, prepared statement of

a)

10
16


66

Mr. Chairman and members of the Committee:

I am pleased to have this opportunity to testify on the question of whether an Office of
Management should be established. I have had the privilege of testifying on numerous
management issues since my first hearing in 1948, but none has dealt with a proposal
which, in my judgment, has as much potential for improving the operation of the
federal government as would the establishment of an Office of Federal Management in
the Executive Office of the President. believe this step is long overdue.

Over the years we have seen a number of reorganizations in the former Bureau of the
Budget and the Office of Management and Budget designed to make the management
arm of the President more effective. Particularly disappointing has been those
reorganizations which have combined the most of the management staff with the budget
staff in. These actions have improved the sensitivity of resource allocation work to
management considerations for a limited time, but they robbed the BOB and OMB of
their ability to address the more fundamental management problems. The 1973
consolidation, for example, left no OMB capacity to offset the budget driven decisions
to veto the GSA plans to reform its contract management, thereby contributing directly
to the furniture scandals that erupted.

None of the numerous reorganizations has resulted in fully meeting the needs of the
President, or the expectations of congress, and only rarely have these potentials even
been approached. Alan Dean often points out that if after losing a horse race, the
trainer is changed and the horse loses again, the jockey is then changed and the horse
loses again, the next race is on a muddy field and the horse still loses, it is logical to
conclude that the owner needs a different horse. We need a different organization to
provide the federal government with the type of management leadership required to
meet today's needs.

My comments are based in part on my experience in heading several bureaus and
agencies over the years, in part on having chaired several presidential task forces
striving to bring about reforms, and in part on having headed the Office of Executive
Management (EOM), which was the management portion of the Bureau of the Budget
(BOB). I was also the first to head most of the management functions of the Office of
Management and Budget (OMB) which replaced BOB. As a result, 1 was in a unique
Position to assess the strengths and weaknesses of OMB compared to BOB, as well as
the limitations of both. Our history of reorganizing these two agencies to strengthen
management is not encouraging.

As head of the OEM, I was assigned the lead role in urging Congress to agree to the
establishment of the OMB, an approach I began to regard as a mistake within months
after it came into being. As in the case of BOB, and contrary to my hopes at the time
it was established, the management role in OMB has been far too dominated by the
budget process. This is especially true since the OMB 2000 reorganization which

Dwight ink May 12, 1998 Page 2 of 8


52

14

by which he means the growth in layers of management in departments, ill serves the
President and the nation. “Leadership is not measured by the number of people the
President brings into office or the number of helpers at the top and middle of
government.”

The presidency as an institution has and retains its capacity to protect its
interests on political matters. This is not the case, however, with respect to matters
of executive management.” The contemporary presidency has been steadily losing
its capacity to lead the executive branch on a day-to-day basis, in large measure
because of the absence of a supportive institutional presence to project and protect
the President's interests in government operations. It is not enough for management
purposes to rely on the budget process with its short-term deadlines and spending
biases. Nor can ad-hoc groups tied to some unit within the Executive Office (e.g.,
National Performance Review; President's Management Council) substitute for
permanent management lecvership, properly defined and understood. The challenge,
however, is not only how best to equip the President with the institutional support he
needs, but to convince Presidents that they need such institutional support.

Conclusion .

The contemporary President, just as much as George Washington, is chief
manager of the executive branch and cannot escape judgment regarding that
stewardship. His choice is not whether to manage; but how to manage. Whether by
intention or neglect, recent Presidents have, arguably, been ineffective managers, and
the negative results have been cumulative. Presidents need to recognize anew the
distinctive character of their constitutional responsibilities to insure that the laws are
faithfully executed.

The foremost tool by which a President can manage and hold accountable the
world’s most complex social system is through high quality, conceptually sound,
general management laws and their administration by the current OMB or by an
OFM as proposed in this legislation.

To build a competent government requires a long-term commitment, one lasting
cover several presidencies and one transcending partisanship and political philosophy.
Such a commitment can be met only with strong institutional support, the kind of
support that advocates of an OFM believe to be possible. There is nothing romantic
about the desire for competent government. Competent government is simply a
necessity if the United States is to retain its pre-eminent status into the twenty-first

century.

% Paul Light, Thickening Government: Federal Hierarchy and the Diffusion of
Accountability (Washington: The Brookings Institution, 1995), pp. 181-82.

” Ronald C. Moe, "At Risk: The President's Role as Chief Manager," to appear in The
Managerial Presidency, 2” ed., James Pfifiner, ed. (To be published by Texas A&M
University Press, 1998).


101

call on when he thinks he has some real program problems, and
the early warning is a good example.

I remember Hubert Humphrey and I talking about that in the
late 1960’s on a TV show we did. And early warning is exactly
what a good executive needs and somebody to tell him the bad
news or tell somebody that can do it—the White House Chief of
Staff perhaps.

But, some of you mentioned, the legislative clearance function.
That is absolutely essential for both the Office of Budget and the
Office of Management, and that has been the way Presidents have
imposed their will. They’re the people that were elected, not the
staff. And when you say is it in accord with the program of the
President or isn’t it? And if they want to get something done, they
can do something in that message to the Congress.

Mr. WRIGHT. Mr. Chairman, first of all, I totally agree with your
goals and objectives—have for many years. You know, you could ac-
tually make the Office of Budget report to the Office of Manage-
ment. The budget is simply how much does it cost to get your man-
agement goals done. That’s a different idea.

And now I’m going to have everybody mad at me over at my old
agency. But I totally agree with your objectives. I think it’s just the
way that you get the process done and that the President needs
that.

Mr. Horn. That’s why I thought Nixon’s thing was a good
chance. But, for the reasons said here, there’s a culture there and
there’s pressures there that they aren’t going to get into manage-
ment problems when it’s enough difficulty for the day, a good 18-
hour day for a lot of those individuals down there, a very fine
group, that it just isn’t working. That is the problem.

Mr. INK. Mr. Chairman, I had responsibility for drafting that
Nixon reorganization plan. I had responsibility for selling it to Con-
gress. And there were some Members of Congress, including the
chairman of this full committee, who said I was wrong, and I was
wrong. It was not the way to go.

Mr. Horn. Confession is good for the soul. If Mao was only here,
we would be out in the field.

Anyway, thank you all for coming; and we appreciate it. I thank
my colleague.

Let’s just thank the staff that arranged this.

J. Russell George, the staff director and chief counsel of the sub-
committee; Bob Aloway on my left, your right, the professional staff
member specifically responsible; Matthew Ebert, the clerk; Mason
Alinger, the staff assistant.

For the minority, Faith Weiss, the counsel; Earley Green, staff
assistant; and Jean Gosa, clerk for the minority.

And our court reporters, Joe Strickland and Judi Mazur.

And we thank you all.

[Whereupon, at 12:21 p.m., the subcommittee was adjourned.]

fe)


26

Raines Rules make a difference will depend on how well and how consistently they are

applied.

Enhancing Information Securi

‘To address widespread wealmesses in federal information security, the CIO Council,
under OMB's leadership, has taken some significant actions, which include designating
information security as one of six priority areas and establishing a Security Committee.
‘The Committee, in turn, has developed a preliminary plan for addressing various aspects
of the problem and taken steps to increase security awareness and improve federal
incident-response capabilities. However, much more needs to be done to monitor agency
performance in this area and to ensure that the various management, policy, technical,
and legal aspects of information security are effectively addressed. Continuing reports of
information security problems are disturbing because federal agencies rely on automated
systems and related security controls to support virtually all of their critical operations
and assets and to ensure the confidentiality of enormous amounts of sensitive data. Our
recent audit of the government's fiscal year 1997 financial statements identified serious
information security weaknesses at all 24 CFO agencies. Moreover, we are finding that
most agencies have not addressed enhancing information security in their fiscal year 1999

performance plans.

10


22

issues and coordinate their activities with the statutory offices.’ In fiscal year 1997, OMB

obligated $56 million and employed over 500 staff.

‘THE EFFECTIVENESS OF OMB'S MANAGEMENT LEADERSHIP HAS BEEN UNEVEN

During the past 3 years, OMB has focused increased attention on management issues, but
there is much more that needs to be done. Today, we will highlight some of those issues
that have been both of particular concern to this Committee and the subject of our recent

work.

Greater Attention to Financial Management Issues

OMB's DDM and the OFFM, in concert with the CFO Council, have led governmentwide
efforts to focus greater attention on financial management issues. OMB has played a
pivotal role in fostering ongoing financial management reforms ranging from improved
financial systems and reporting to new accounting standards. We are seeing positive
results from OMB's efforts. For example, eight agencies obtained unqualified opinions on
their fiscal year 1997 audited financial statements, and OMB set a performance goal for it

to assist 21 of the 24 CFO Act agencies to obtain unqualified and timely audit opinions on

: Change g From the
Reorganization (GA\  GGD/AIMD- 96-50, Dec = ron and IMB 2006
From the Reorganization of th cof M: (GAO/T-GGD/AIMD-96-
68 Feb 7, 1996)

6


34

Mr. Chairman, this concludes our statement. We would be happy to answer any questions

that you or other Members of the Subcommittee have at this time.

(code 410318/935272)

18


58

in the White House with the deficit problem that tended to over-
whelm other matters, including some budge’ concerns as well as
management. I think that, with changes for the better, the deficit
situation ist in the last year or two, this could create a climate
to allow for attention to management, whatever the structure, as
well as to other budgetary issues that perhaps deserve more atten-
tion than they received when the overriding concern was reducing
the deficit. So in the recent past, I would point to that.

Mr. Horn. Mr. Mihm.

Mr. MiuM. I’m going to pick one of the issues, sir, that was high-
lighted in a letter I recen ly sent over to you and Mr. Kucinich; and
that is dealing with OMB’s circular A-76, contracting out. There
has been very little activity in Federal agencies, civilian agencies
in recent years. In fact, 9 or 10 agencies haven't had any FTE’s
studied over the last half dozen or 80 years. This is an example of
an issue that, if it is not at the forefront of the budget agenda, has
a tendency to be subsumed and not get the attention that it de-
serves.

Mr. Horn. Mr. Posner.

Mr. Posner. I'll bring PP, one that I think probably is a success
story, the OMB Capital Planning Capital Programming Guide,
where I think they melded together some congressional mandates
from the Federal Acquisition form Act and the Clinger-Cohen
Act to create a guide that was very proactive. Unlike State and
local governments, the Federal agencies had never prepared a cap-
ital acquisition plan; and now they are preparing a 5-year capital
acquisition plan for the first time. I think that shows what can
happen in the intersection of budget and management in a fairly
creative way.

Mr. Horn. Dr. Moe, besides the examples that you gave, do you
have any other examples you would like to us where one
pushed out the other?

Mr. MoE. I’m not sure that anyone at OMB ever sat down and
said, “I want to push out management.” But management is not
part of the OMB culture. The problem is that the right questions
are rarely asked.
onTM Kucinicu. I can think of a lot of labor unions that have done

it.

Mr. Mog. What I have to suggest to you is that the culture for
proper management of the Federal Government, oddly enough, has
to be basically a legal culture. It is not run by economic axioms out
of a business school.

As you proliferate these general laws—and this is what every
agency-you gre this to agency heads. OMB, I might add, has no
such list. And you say, these are the laws you have to follow. This
is what you have to do for starters.

Well, it’s very impressive. I think we could do a lot of work over
a period of years with an OFM saying: “Look, you now have an op-

rtunity to come up here and redesign these laws for the future.

jot as penalty laws, not as adding still another report, but as a
creative instrument for the fulfillment of our administrative re-
quirements.”

So the answer is, I don’t even think it crosses their radar screen
very often. And they would, of course, argue, yes, management has


16
Chairman Horn:

Thank you for inviting me to testify before the Subcommittee on Government
Management, Information and Technology on the creation of the Office of Federal
Management. | apologize, in advance, to the Subcommittee for not presenting a more
complete testimony in writing, but my travel schedule has not permitted me to do this.As
you may know, | spent many years during the 1970's and 1980's working to improve the
management of our Federal Government and will be more than happy to discuss these
efforts as well as recommendations for improvements with the Subcommittee.

In your letter inviting me to testify today, you stated that “the effectiveness of
Management in the Office of Management and Budget (OMB) is a long-standing
problem.” If that is indeed the case, then I must take partial responsibility for being part
of that problem since | was Deputy Director of OMB from 1982-1988, and was President
Reagan's last Director of the agency.

During those years, as in most Administrations, the OMB Director tended to focus on
budget issues and the Deputy Director supported those efforts as well as focused on
management improvement. President Reagan, however, had an unusual interest in
trying to improve the management of the US Federal Government and looked at OMB
as his agency to implement this initiative(s).

The Subcommittee will, | am sure, study past attempts to improve the management of
the Federal Government and OMB's role in this effort. We at OMB did the same in the
early 1980's, including reviews of: 1) zero-based budgeting under President Nixon, 2)
the Management By Objectives (MBO) efforts under President's Nixon and Ford, 3) The
Program Review process as part of OMB's budget reviews under President Ford, 4) the
reorganization efforts of President Carter, 5) regulatory reform under President Reagan
through the Paperwork Reduction Act, 6) management reviews by the Government
Accounting Office, 7) recommendations of the President's Private Sector Survey on
Cost Control (PPSSCC or The Grace Commission), and 8) others.

As a result, OMB under President Reagan set up management reviews as part of their
budget review process with the agencies; established the President's Council on
Management Improvement (PCMI) made up of the Assistant Secretaries of
Administration in the agencies to implement management improvements; strengthened
the President's Council on Integrity and Efficiency (PCIE) made up of the Inspectors
General in the agencies to identify management improvements in support of their efforts
to reduce waste, fraud and abuse; issued a Management Report with each annual
budget; installed the first government-wide Chief Financial Officer: initiated
standardization and consolidation of government-wide financial accounting, payroll and
personnel systems; installed the first government-wide ATM and lock box system for
cash management; began the use of credit cards for government employee expenses
and purchases; worked with the Congress to improve credit management and controls;
and many more initiatives,


28

earlier deadlines. At the current pace, it is clear that not all mission critical systems will
be fixed in time, and additional attention therefore needs to be given to those systems

that serve the highest priorities.

Reviewing Regulations

We also have found that improvements are needed in the process used to review and
clear regulations. We have testified on the inadequacies of OMB's efforts to meet
congressional paperwork reduction goals? Also, OIRA does not attempt to set priorities
for agencies’ regulations on the basis of risk (e.g., the number of lives saved or injuries
avoided). Concerns have been raised by experts in regulatory issues that federal
regulations are not sufficiently focused on the factors that pose the greatest risk and that,
as a result, large amounts of money may be spent to accomplish only a slight reduction in

risk.'° Using these same resources in other areas that pose higher risks could yield

significantly greater payoffs.

Paperwork R GGaorracps7. 114,
June 4, 1997); is 3e Met (GAO/T-
GGD/RCED-96-186, June 5, 1996).

For example, see Tammy O. Tengs and John D. Graham, "The Opportunity Costs of
Haphazard Social Investments in Life-Saving," in Robert W. Hahn, ed., Risks, Costs, and
Lives Saved (New York: 1996).

12


94

Mr. Kucinicu. So these matters that you just pointed out, are
these things that the structure exists for OMB to address?

Mr. INK. These are things that OMB theoretically should be ad-
dressing but is very, very difficult to address under the current sys-
tem, under the current structure.

Mr. LiGHT. I mean, if you look at this list or you look at the stat-
utes that are out there, there is no shortage of priorities or statutes
ordering OMB and the Government to pay attention to things like
debt collection or financial management improvement. You've got a
ton of statutes. This committee passes statutes regularly reminding
agencies that we told them last year to do X and Y and Z.

I mean, what’s missing on that list is political will within OMB
to pay attention to these issues. If you’re in OMB, the way you get
ahead organizationally is on the budget side. It’s not a career-ad-
vancing agency to pay attention to management. That’s not where
the payoht is. There’s organizational politics who want to put poli-
tics back into it. There’s organizational politics against manage-
ment. It’s not the favored ——

Mr. Kucinicu. But the political will, as you describe it, how does
it generate within m: rs? It has to come from elected officials
in a democratic society, does it not, if we’re using more of a strict
definition of the word political.

Mr. LIGHT. You need a President, you need a Vice President, you
need senior staff who care about management. Now the problem
right now is that, even if you had a President or a Vice President,
I think we do, who care about management, they can’t get what
they need from OMB. They create a ramp organization off to the
side of OMB which is responsive and fast and cares about the polit-
ical issues that the Vice ident cares about right now. He’s not
using OMB as the main engine for reinventing.

And I think, whatever you think about reinventing, whether you
like it or don’t like it, you wouldn’t go to OMB to get that kind of
muscle. It just doesn’t exist inside OMB, and it doesn’t get the at-
tention it needs.

Mr. Kucinicu. Let’s flip this for a moment back to Mr. Ink. If
you decouple budget and management——

Mr. INK. Organizationally.

Now in my testimony——

Mr. KucinicH. But where is the integration then? How do you
integrate if there is not a formal joining?

Mr. INK. As was mentioned earlier this morning, there is noth-
ing—no Government function or activity is totally discrete and
functions totally by itself. Even your national security activities
and your domestic activities have a great deal of interface. Eco-
nomic issues cut totally across the line. Almost everything is af-
fected by everything else in some sense.

So the question is not whether you isolate one function from an-
other. The question is the extent to which they have individual
leadership and have individual leverages that they can use. The
Office of Federal Management and Office of Federal Budget, would
have to work closely together in a number of issues, of which I
would say GPRA is maybe the best example.

Mr. Kucinicu. I would like to ask one more question.


9

used—or threatened—to accomplish—or seriously pursue—manage-
ment objectives, but not vice versa.

ifth, in the years since 1970 when the BOB was reconstituted
as the Office of Management and Budget, OMB has experienced an
expansion of noncareer middle managers and, consequently, a more
complex and extended hierarchy between the most senior leaders
of O] and first-line staff. Moreover, specialized entities such as
the Office of Federal Procurement Policy and the Office of Informa-
tion and Regulatory Affairs have been grafted onto the OMB. The
result, as Paul Light noted in his 1995 study, “Thickening Govern-
ment,” is an OMB that grew both taller and wider over the ensuing
decades since 1980.

Sixth and finally, the recent experience with the implementation
of the Government Performance and Results Act would seem to
provide an opportunity to reexamine and reconsider the OMB’s
management role and the most suitable structure for fulfilling the
management responsibilities now vested in OMB. However, CRS
takes no position on establishing an Office of Federal Management.

Thank you. We would be happy to respond to your questions

later.

Mr. Horn. Well, we thank you both. It is a marvelously succinct
statement. It means you spent a lot of time. Anyone can write 20-
page statements, but you put it very succinctly on the evolution.

1 i prepared statement of Mr. Relyea and Ms. McMurtry fol-
lows:


17

But OMB was not able to work with the Congress and the agencies to establish a
“permanent management process” that resulted in effective planning, accurate analysis
and tracking of the cost effectiveness of goverment programs, and accountability for
results. At OMB, we knew that this was our responsibility within the Executive Branch
but often could not agree internally on how it could be accomplished. And we seldom
got any assistance from the Congress in this effort where management improvement
normally did not enjoy a high-priority except in a “crisis” situation or where a scandal
occurred at a specific agency or program.

The PPSSCC actually recommended in the early 1980's that an Office of Federal
Management be formed in the Executive Office of the President. OMB did not agree
with this recommendation because we felt that management initiatives without the
“power of the budget” would not be effective and would not be carried out in the
agencies. Instead, as mentioned eartier, we established management reviews as part
of every agency's budget review annually at OMB. Given enough time, this process
perhaps could have become institutionalized but it was discontinued along with the
annual Management Report to the Congress in 1989. Since then, there has been a
‘splintering of management improvement efforts throughout the Govemment as a result
of Vice President Gore's Reinventing Government initiative, a new Deputy Director at
OMB for Management, a legislated Chief Financial Officers at OMB and the agencies,
etc. As a result, there is less centralized responsibility for management improvement in
the Federal Govemment and there certainly is no “permanent management process” in
place to enable the President and the Congress to home confidence that the tax payers’
money is being spent as wisely as possible,

So something, Mr. Chairman, should finally be done to correct the situation and
institutionalize the process of management improvement in a government that is as
large and pervasive as ours here in the United States. And this should be done in an
organized manner by the Congress rather than the “perceived” efforts of the past.
Perhaps it is very difficult to do in a “political environment,” but | congratulate the
Chairman and the Subcommittee on focusing your efforts on this very worthwhile cause
and will be more than happy to answer any questions and assist in this effort in any way
that I can.


83

Mr. Horn. Dr. Gilmour, we’re delighted to hear from you and
please proceed.

Mr. GitmMour. Thank you, Mr. Chairman and members of the
subcommittee.

I confess that I had less resistance than Paul Light to the water
torture. I succumbed to it back in the early 1980's after seei
what happened in that Period of time with management as oppos
to budget as the era of deficits came upon us.

One of the things that interested me then and still does is the
difference between the public and private sectors. Now, of course,
it’s back in vogue that Government should be more businesslike.
But one area of great difference and that is in the attention paid
to management by the two sectors.

In the private sector, there are literally billions of dollars spent
on management training, retraining, organizational devices, and
other techniques. In the public sector, we tend to take these things
for granted. Management just happens.

I suppose this is largely because Government is so much more
input-driven, interest in where the dollars are going to come
from, where they're going to go, a lot less interested in results. A
results orientation demands that managers manage and be respon-
sible for those results. Perhaps that structures a great divide.

But with a lessened interest in management per se, as those of
us who are scholars look at all this we have tended for a long time
to look to the President for managerial leadership, knowing full
well that, even if we do that, management reforms and improve-
ments, if they’re to be had, must really come from the agencies.

But for so many activities in management where there are cross-
cutting, cross-agency needs, crosscutting systems that have to be
rationalized and integrated, it’s again to the President that we
look; and we have looked almost the first to OMB or, before then,
to the Bureau of the Budget for leadership, and, to a large extent,
we found it.

I have had an opportunity to meet, and to visit with every person
who has been responsible for the management function in OMB
and BOB before that, going back to Don Stone, the late Don Stone,
in the 1930’s and 1940’s. I’ve been impressed that each of them has
come to the same conclusion, usually after they left the BOB or
OMB, and that is that management simply can’t be effectively at-
tended to in the Nation’s budget office. It sometimes takes a while,
but all of them, in addition to those of us who are just academics
and being dripped upon by our community, have come to the same
conclusion.

A little more than a decade ago Congress first considered the
idea of an OFM, an Office of Federal Management separated from
OMB. At that time, the legislation over on the other side of Capitol
Hill was stymied by—well, for a number of reasons, but in major
part because of one single issue and that’s the issue of clout.

You've already he: it today, that, without budgetary power,
management on its own, in a separate office, simply couldn’t be ef-
fective in persuading agencies, on behalf of the President or other-
wise, to institute followthrough on the necessary reforms for better
management practice.


When President Nixon put a stress on the “M" - Management - component
and renamed the Bureau of the Budget the Office of Management and Budget, |
thought: “At last the management needs of the Executive Branch will get attention.
With budget clout, those in Cabinet departments and independent agencies will
improve their orientation so the clients - the taxpayers — will have better service.”
Today, the Congressional Research Service will present the history of these “Staff”
‘and “Line” configurations over time.

Iwas wrong. Senior civil servants and political appointees in the 1970s,
1980s, and the early 1990s kept telling me: “Steve, it is not working.” | began to
ask more critical questions. In this hearing, we will consider the pros and cons of
separating management from the budget process. Experts have repeatedly argued
that budget pressures drive out management issues. We have several experts with us
today who have actually lived “budget versus management” battles in the Executive
Office of the President. They will share their insights and recommendations on how
best to organize for the M, management, to be regularly improved during the coming
decades of the twenty-first century.

hope my friends in the Office of Management and Budget, both current and
past senior officers, understand that we are not criticizing their dedication, good
intentions, or hard work. Our intention in creating the Office of Management is to
make it easier for the dedicated public servants to succeed, and therefore to improve
significantly the quality of general management throughout the Executive Branch. We
now tum to a discussion of the best way to accomplish that, not for one or two
years, but for generation atter

We have two panels of witnesses today:

Panel One:

Dr. Harold C. Relyea, Specialist, American National Government, Congressional
Research Service

Dr. Virginia McMurtry, Specialist, American National Government, Congressional

Research Service

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

U. S. General Accounting Office

\ecounting
Flonald C. Mos, Specialist, Government Organization and Management, CRS

Panei Two:

Dwight A. Ink, President Emeritus, Institute of Public Administration, formerly
Assistant Director for Executive Management at OMB

Joseph R. Wright, Chairman and CEO, AMTEC Inc., formerly Director of OMB

Dr. Paul C. Light, Director, Public Policy Program, The Pew Charitable Trust; formerly,
Senate Governmental Affairs staft

Professor Robert S. Gilmour, Director of Institute of Public and Urban Affairs,
University of Connecticut, formerly Senate Goverment Affairs staff


81

capabilities to support its budgetary and financial management system priorities. They believed that
if they conducted enough financial management improvement projects, this would equal a
management philosophy.”

The Clinton administration mostly completed the dismantling in 1994 with yet another
reorganization, This time the entire management division was split up, with half the staff shuffled
to the budget side of the agency. As OMB director Leon Panetta acknowledged at the time, “Critics
of these recommendations may say that the efforts to ‘integrate’ management and budget will end in
merely bigger budget divisions, whose management responsibilities will be driven out by daily fire-
fighting on budget issues. We believe this criticism is based on a false premise that ‘management’
and ‘budget’ issues can be thought about separately.” There is no doubt, of course, that budget and
management are intimately related, but to reduce management to mere budget is to narrow
management to mere bean-counting.

Whether the M and B can work together is not the key question here. Whether presidents have
access to a central staff that can both advise them on the cross-cutting issues that affect all
departments and agencies, while providing central oversight of critical trends is. It has become
fashionable of late to eschew all things central in favor of decentralization and devolution. No doubt
there is great value in giving departments and agencies greater freedom to pursue management
solutions unique to their missions. That does not mean, however, that government should abandon
core operating principles such as merit hiring and standardized financial controls. The federal
government actually has enormous experience with highly decentralized management solutions,
which is precisely why we have hundreds upon hundreds of separate financial management systems
that cannot talk to each other, and why we spend billions reinventing the wheel of information
technology. I think we would mostly agree that the federal government needs more, not less,
centralization of its financial management systems, and more, not less, oversight of the faithful
execution of laws such as the Government Performance and Results Act. Simply stated, there are
some areas where one size must fit all. At the risk of calling upon too many ghosts of management
reforms past, the first Hoover Commission called this “decentralization under centralized control.”
Faithful execution of the laws requires the president to maintain an active presence in every agency,
particularly when the laws clearly establish government-wide requirements. Unfortunately, the
dismantling of the OMB's management division and the parallel weakening of the Office of
Personnel Management has blinded the president's ability to assure that faithful execution.
Notwithstanding the commitments of the handful of people left in the old management division, the
M in OMB exists in label only.

Truth in labeling also requires that | acknowledge my own opposition to the OFM concept over the
years. Like so many others in the public management field, I believed that the budget side of OMB
provided the needed muscle for management. Over the past ten years, I have slowly changed my
mind as the OFM changed from being an idea whose time had not yet come to an idea that cannot
come soon erfough. I will leave it to others to advise this Subcommittee on the specifics of what
such an office should do and how to assure that the president pays at least minimal attention to the
occupant of what should be an Executive Level I presidential appointee. I would argue, however,


92

Mr. INK. I would argue the opposite. I have served in both career
and political roles. I've headed agencies and bureaus. I’ve worked
out of the White House. What we’re talking about here provides a
much broader outreach to the various segments of society, much
broader outreach beyond Washington than the budget process,
which tends to focus pretty much here in Washington. It reaches
out to the various political components of the country.

I would say that the way it has worked best, the management
part of the Bureau of the Budget and OMB has worked best even
when we're talking about political leadership when it has been able
to develop bipartisan approaches. The majority of the management
issues that we're talking about really should have a bipartisan so-
lution. I think you achieve that much more easily outside the de-
bate that is necessarily involved in the budget process as well as
developing this outreach, as I say, much beyond Washington which
you can get through an Office of Federal Management.

Mr. Kucinicu. I don’t dispute that there should be a bipartisan
relationship in this. When I look at the remarks in Mr. Light’s tes-
timony quoting President Nixon—and I look at where he said that
preparation of the budget as such would no longer be the domi-
nant, overriding concern; improvement of Government organiza-
tion, information and management systems will be a major func-
tion of the Office of Budget and Management Act.

Now, that was his intention. I look at the output—model cities
in HUD, HUD-related debacles where tens of millions if not hun-
dreds of millions of dollars just disappeared, the entire Federal
grant program a disaster—they were talking management then.

ere was an emphasis on management.

So I’m just wondering—and I will say that there are a number
of things that happen in terms of the management of various Fed-
eral programs which were salutary during those years, and so
T’m—just to respond, I want to get staff up here. I want to draw
your attention to a chart that’s entitled OMB’s Priority Manage-
ment Objectives; and the chart lists 11 governmentwide manage-
ment priorities which I think you're all familiar with.

Mr. INK. I can’t see them from here.

Mr. Kucinicu. Why don’t we move it up, OK? Because I’m going
to put my glasses on, too.

ir. INK. Thank you.

Mr. Horn. Split the difference so we can see it, too.

Thank you. OK.

Mr. KucInicu. OK.

As you look at these—OMB’s priority management objectives—
and let’s emphasize management here for a moment. Would any of.
you gentlemen care to respond to these questions? Would any of
you add to this list of management priorities things that are not
already there and do these priorities look reasonable?

I want to get back to some practical considerations here. What’s
OMB missing? We might benefit from your expertise at this mo-
ment by asking you to address any specific problems that you
might be able to give us a snapshot of in OMB’s long-term manage-
ment planning. What are they missing right now?

Mr. INK. Well, one of the things they’re missing, which I think
is pretty fundamental, is how all this impacts on people, how it im-


60

growing awareness of this as the recent appointment of Mr.
skinen’s group that will be looking to work with agencies quite
directly in bringing along the agencies.

Mr. Horn. This committee began that issue in April 1996. We
began with quarterly reports.

When Dr. Raines became Director of OMB, we were delighted
that he took over the quarterly reports, and we worked together.
That was the first breath of fresh air I had found in OMB on this,
someone that cared as director.

Now what we see is the first action the President took, despite
letters from the chairman and ranking minority member a long
time ago, was in February of this year, and the first time we got
a real human body as coordinator of this effort, a very fine, able
person in, Mr. Koskin en, was in March of this year. Seven quarters
are left to deal with a massive problem that will cost billions more
than their $2.3 billion recommendation that we prod out of them
through the appropriations route for the fiscal year we’re in. Now
they've changed that and moved it up.

ey had no apparatus to really deal with this on a management

basis. This is a management problem, as we've said from day one,

not a technological problem. It’s a management problem in how you
eal with this.

So I was just curious when you said it gave them some praise,
when I find it unbelievable when one knows what the problem is
in April 1996 and does nothing until February 1998. it strikes
me as a strange way to run a government.

Mr. Muum. OMB was late getting to the issue; and, to the extent
that we are compliment , it’s in the efforts that OMB has taken
in recent months. I would quite agree with you that that was at
the urging of Congress. As the year 2000 has come closer and the

of the work that’s ahead of us has become clearer, OMB has,
mentioned, shed their optimism and they now seem to be get-

ting ¢ ther.

. Horn. A major effect on our economy and, major effect on
the stock markets. I hear constantly people are going to take their
money out or people are not going to fly and all this stuff.

And you've got a lot of doomsayers. I’m not one of them. I think
we can solve the problem.

But we have to do more than quarterly reports. We have to orga-
nize, and I know Mr. Koskinen has gone around to talk to Cabinet
officers, deputy secretaries, the chief operating officer. I think
that’s wonderful. It should have been done 2 years before, and even
then we'd be lucky just because things take time to get done.

Mr. Posner. This gets to what Mr. Moe said before. One of the
functions of institutionalized management presence, wherever it
lies—GAO, this subcommittee, or in the executive office—is early
warning. We've tried to take that on, and, frankly, we would have
liked to have seen more rapid progress and recognition.

Mr. Horn. Yes, I suggested that early warning idea to President
Nixon in 1969. Because, you know, during the nd World War
the Bureau of the Budget had three field offices in the United
States. Con; readily scooped them up and took it away from
them after the Second World War, maybe during it.


56

passed by Con; , not to maximize the equity return to owners.
And increasingly what management does, like with the Govern-
ment Corporation Control Act, if we had somewhere to do it we
wouldn’t be creating new little government corporations under lit-
tle laws that you only hear about after the fact.

Increasingly, agencies are being required to raise more money on
their own, and they want to use it themselves to bypass the appro-
priations process. In other words, there is a whole lot of
disaggregation going on in the government. We don’t have prin-
ne Ko Di als lack of ability?

- KUCINICH. Disaggregation equals of accountability?

Mr. Mog. Absolutely. And that’s their goal.

Let me explain by analogy. When the National Performance Re-
view t, came in, they said that the distinction is not valid. They
believed that government and business are alike and should be run
like General Electric.

But they didn’t do one interesting thing. They didn’t put what
they called management improvement into OMB. They took it
across the street into a se| te nonstatutory office. They said, we
don’t want anything to do with OMB managers, although they
couldn’t find many man: ent generalists at OMB, but they did
look. And they said, we don’t want it connected with the budget.
Because if we have it connected with the budget, we are not fone
to get anything done. They already had a separate Office of Fede:
Management, but it wasn’t official

Mr. Kucinicu. I am very intrigued by your presentation in that,
and I understand what you say, the meaning of what—when you
say management is institutionally separate from the budget, I
think that is part of—is that part of your thesis?

Mr. MOE. Yes, budget is one of the elements of management. It
may be the single most important—maybe. But the fact is, the cul-
ture that is created to have a proper Office of Budget is one in
which short-term goals are what it is sup, to be about. On the
other hand, a management office, properly designed, is a capacity-
building, long-term issue. When we want 10-year improvement
through GPRA and we give it to an office in which there is high
turnover and really no one reading the reports in any depth except
GAO, then you have a situation——

Mr. KucINicH. Sometimes we read things, too. I am going to bet
money that Mr. Horn reads all of them.

Mr. MoE. Well, that is possible. He is the exception to many of
the generalizations that we offer.

But what I’m saying is that the distinctions between the two are
real. They come. out in the form of the laws. They come out in the
form of the culture that is created.

The fact that there are two separate offices, I would e, in-
creases the likelihood of a quality resolution of any issue because
both offices serve the President. And the President can say, well,
what do you think on this and get the budget view, what do you
think on the management; and he is much better informed than if
the only person he talks to is a budget-oriented person. Because we
always put a budget-oriented person in charge of OMB. That is
their primary responsibility.


18

OMB HAS WIDE-RANGING MANAGEMENT RESPONSIBILITIES

OMB was established under presidential reorganization authority in 1970, in large part to
increase the attention given to management issues in the federal government. OMB is the
lead agency for overseeing a framework of recently enacted financial, information
resources, and performance planning and measurement reforms designed to improve the
effectiveness and responsiveness of federal agencies. This framework contains as its core
elements financial management improvement legislation, including the Chief Financial
Officers (CFO) Act of 1990, the Government Management Reform Act of 1994, and the
Federal Financial Management Improvement Act of 1996; information technology reforms,
including the Paperwork Reduction Act (PRA) of 1995 and the Clinger-Cohen Act of 1996;

and the Government Performance and Results Act of 1993 (the Results Act).

The CFO Act mandated significant financial management reforms and established the
Deputy Director for Management (DDM) position within OMB. In addition to serving as
the government's key official for financial management, the DDM is to coordinate and
supervise a wide range of general management functions of OMB. These functions
include those relating to managerial systems, such as the systematic measurement of
performance; procurement policy; regulatory affairs; and other management functions,
such as organizational studies, long-range planning, program evaluation, and productivity

improvement.


aT

9

enabling statutes, are transferred to the Director of OFM for redelegation to one or
another of the Associate Directors. The Offices in question are:

1. The Office of Information and Regulatory Affairs (44 U.S.C. 3503)

2. The Office of Federal Procurement Policy, as established under section
(a) of the Office of Federal Procurement Act (41 U.S.C. 404(a))

3. The Office of Federal Financial Management (31 U.S.C. 501)

The apparent rationale for this transfer of authority to the Director of OFM is
to insure that lines of accountability are clear and that the OFM is not "balkanized"
into small fiefdoms. Political accountability necessarily assumes legally based
hierarchical reporting structures. Generally speaking, public administration theory
and practice discourage the direct assignment of legal authority to a subordinate
within an agency. As the Hoover Commission Report succinctly stated in 1949:
"Under the President, the heads of departments must hold full responsibility for the
conduct of their departments. There must be a clear line of authority reaching down
through every step of the organization and no subordinate should have authority
independent from that of his superior."””

Areas of Management Concern

The bill provides that the Director take necessary steps to insure that the
following areas of concern are administered with professional competence. As it
happens, there are six areas of concern listed, a number equal to the number of
Associate Directors. It appears that this was intentional but it is worth noting that the
manner in which this provision is written indicates that the assignment of these areas
of concern is purely a decision of the OFM Director. The six areas of concern are:
(1) Government Organization; (2) Financial Management; (3) Human Resources
Management; (4) Regulatory Review; (5) Management Development; and (6)
Procurement, Grants-in-aid, and Logistics Management.

What follows, for discussion purposes, is the first set of provisions included
under Functions of the Office.

D. The Director shall take necessary steps to insure that the following areas
of concern are administered with professional competence.:
1. Government Organization

a. Review Governmentwide organizational structure on a
continuing basis, periodically reporting to the President and
Congress and the state of Government organization and of
proposals to improve the performance and efficiency of Federal
programs.

b. Oversee the overall operations and management of Government
corporations, Government-sponsored enterprises, quasi-
governmental entities, and other institutions with a Government
interest.

‘7 U.S, Commission on the Organization of the Executive Branch of the Government,
Hoover Commission Report (New York: McGraw-Hill, 1949), p. 24.


51

Leveling the Playing Field

Why have recent Presidents retreated from their management responsibilities?
In addition to the larger philosophical issues raised by the heroic vision of a
politically-centered presidency,“ recent Presidents seem to have been influenced as
well by other, less heroic, factors in their decision to remain one step removed from
executive branch management. First, and possibly foremost, Presidents and their
aides perceive little political advantage accruing from their managerial role.
Presidents are not elected for their managerial skills and assume that most of the
government pretty much moves of its own volition without their active leadership.
White House aides are quick to point out that the costs of managerial improvements
tend to be immediate while the benefits tend to be in the future, in someone else's
administration.

Management is not a field that interests most incumbent Presidents as it
involves both abstract theory and detailed application. President seek not so much
to manage the executive branch through properly conceptualized management laws
and trained professional managers as to control government through short-term
political appointees. For the most part, political appointees are inexperienced as
governmental managers, often uninformed on the substance of their subject field, and
tend to pursue their own agendas. They are expected to be loyal to the
Administration in power, rather than committed to their agency and its programs.
Attempting to initiate and maintain a capacity-building management strategy with
deep levels of political appointees, whose tenure is likely to be short (often quite
short) and whose career objectives may lie outside the agency and generally outside
the government is likely to be an exercise in frustration

Writing in 1989 on the subject of political appointments and their impact on
management,, the National Commission on the Public Service (Volcker Commission,
after its chairman, Paul A. Volcker), concluded that the total number of presidential
appointees was excessive and counterproductive to the ability of the President to
meet his administrative responsibilities.”*

The utility of this politically appointed management cadre to the institutional
presidency and the executive branch generally is problematical at best. Paul Light
recently observed that the "thickening" of leadership ranks in the federal government,

TM Richard Neustadt, Presidential Power: The Politics of Leadership (New York: John
Wiley and Sons, 1960).

25 The Volcker Commission concluded: "[The] growth in recent years in the number
of presidential appointees, whether those subject to Senate confirmation, noncareer senior
executives, or personal and confidential assistants, should be curtailed, Although a
reduction in the total number of presidential appointees must be based on a position-by-
position assessment, the Commission is confident that a substantial cut is possible, and
believes a cut from the current 3,000 to no more than 2,000 is a reasonable target... The
mere size of the political turnover almost guarantees management gaps and discontinuities,
while the best of the career professionals will leave government if they do not have the
challenging opportunities at the sub-cabinet level.” National Commission on the Public
Service, Leadership for America: Rebuilding the Public Service (Washington: National
Commission on the Public Service, 1989), p. 7.



80

Lam delighted to appear before this Subcommittee to discuss the creation of an Office of Federal
Management. As the Chairman may know, I have become a reluctant supporter of the idea. 1
‘emphasize reluctant because I would prefer that the Office of Management and Budget (OMB)
‘embrace its full authorities to lead departments and agencies toward higher performance. The Ash
Council's design for a unified approach to budget and management is as appropriate today as it was,
when the Bureau of the Budget was transformed into the Office of Management and Budget in 1970.

Although the hope was that the link between budget and management would strengthen both, the
Ash Council actually believed that management would do more to strengthen budget than vice versa.
The decision to put management first in the new title was quite deliberate and actually withstood
some congressional criticism. As Richard Nixon argued in his transmittal message to Congress,
“preparation of the budget as such will no longer be its dominant, overriding concern.” Instead, he
argued,

Improvement of Government organization, information and management systems
will be a major function of the Office of Management and Budget. It will maintain
a continuous review of the organizational structures and management processes of
the Executive Branch, and recommend needed changes. It will take the lead in
developing new information systems to provide the President with the performance
and other data that he needs but does not now get. When new programs are
Jaunched, it will seek to ensure that they are not simply forced into or grafted onto
existing organizational structures that may not be appropriate.

Unfortunately, the M in OMB never took that lead. The new management division had barely been
in place for three years when it was reorganized again, marking the beginning of a three-decade
period of nearly constant turmoil as OMB shuffled and reshuffled responsibilities again and again.

By the 1980s, as Congressional Research Service scholar Ronald Moe argues, the division was in
abject disarray. Eight different associate directors headed the division during the Reagan and Bush
years, during which at least six different realignments of the operating units took place. The once
proud “organizational studies” unit that had spurred so much productive reform in the 1950s was
renamed the “organization and special projects” division in 1981, then eliminated in 1982, as
financial management and accounting reforms began to grow out of OMB concern with the basic
systems and structure of government. By 1993, the division consisted of just (wo units--one for
government operations (personnel, evaluation, and general services), the other for financial
management reform. Even though Congress elevated the associate director for management to the
deputy director rank, the turnover continued. President Clinton's first deputy director for
management, Phillip Lader, was gone in less than a year.

The point of this short history is simple: management simply does not flourish in OMB. Despite its
promised renascence, the M in OMB had been decimated over the past two decades. The
management staff fell from 224 full-time employees in 1970 to 111 in 1980 and 47 in 1988. “During
the 1980s,” writes Ronald Moe, “OMB systematically subordinated its remaining management



13

Biographical Profiles

Virginia A. McMurtry is a Specialist in American National Government with
the Congressional Research Service of the Library of Congress. She received her
B.A. (With honors) from Mount Holyoke College and her M.A. and Ph.D. from the
University of Wisconsin, Madison, all in political science. She was a research fellow
at the Brookings Institution and taught at the university level before joining CRS in
1974. While at CRS, Dr. McMurtry has prepared many studies for Congress on a
variety of subjects, including the formulation and implementation of the federal
budget, the Office of Management and Budget, sunset measures and other budget
process reform proposals, federal financial management issues, and relations between
the President and Congress. Her ongoing CRS research involves the Line Item Veto
Act and the Government Performance and Results Act. She is a regular lecturer in
the CRS seminar series on the Federal Budget Process and previously served as head
of the Legislative and Budget Processes Section. Outside of CRS, her most recent
work, “The Impoundment Control Act of 1974: Restraining or Reviving Presidential
Power?” appeared in Public Budgeting & Finance (Fall 1997).

Harold C. Relyea is a Specialist in American National Government with the
Congressional Research Service of the Library of Congress. An undergraduate of
Drew University, he received his doctoral degree in government from The American
University. Since joining CRS in 1971, he has produced a number of major studies
for Congress, including analyses of the office and powers of the President, executive
branch organization and management, congressional oversight, and various aspects
of government information policy and practice. He currently serves as the head of
the executive and judiciary section of the CRS Government Division, is a member
of the CRS Systems Security Team, and was formerly the editor of the CRS Review.

In addition to his CRS duties, Dr. Relyea has authored numerous articles for
scholarly and professional publications in the United States and abroad. His most
recent books include Silencing Science: National Security Controls and Scientific
Communication (1994), Federal Information Policies in the 1990s (1996), and The
Executive Office of the President (1997). He has served on the editorial board of
Presidential Studies Quarterly since 1978 and Government Information Quarterly
since its founding in 1984.


55

I am just wondering—why I think this is very important to con-
sider what the respective roles are of what OMB does to look at
the history of how it was created and why it was created, I’m just
wondering, as we weigh what appears to be divisible functions of
management and budget, if those divisions aren’t really more theo-
retical than practical.

Mr. RELYEA. May I respond to you this way? I think if there is
one thing that we struggled with and one thing that leapt out of
this historical review is that there are various kinds of manage-
ment. If anything, for BOB/OMB, the trucks would back up and
dump more and more different types of management on them over
the years. Administrative management, as the term is often used,
means what my colleague, Dr. Moe, is referring to where it is al-
ways pyramiding management so that the President is at the top.
He’s the overall manager of the executive branch.

A little different kind of management might be intergovern-
mental management. And here I think is a point that you're trying
to get at. For a management agency simply to deal with its sister
agencies at the Federal level might not be adequate when, in fact,
it is the money that we now are often allocating to the State or
local level for administration and it might escape the attention or
the control of a purely management type of agency. So, yes, there
you want management and budget tied together. Follow the money,
as it were.

Mr. Kucinicu. And as you follow the money, isn’t it true that im-
portant aspects of many reform agendas are inherently budgetary
in nature?

Mr. RELYEA. Sure, they can be. They certainly can be. And I
think to come full circleh—

Mr. Kucinicu. The cost of government operations. If you provide
financial flexibility to permit resources to be used more effectively,
financing things like that?

Mr. RELYEA. And, as I say, you come full circle. Congress is going
to follow the money in its oversight capacity of making certain that
things are working properly, too. It is a check on management. So,

again——

Mr. KuciNiIcH. Would that be true with respect to the Depart-
ment of Defense?

I have a question for Mr. Moe here. I actually appreciated very
much your testimony about the difference between public and
the private sectors’ inherent differences. I think that much of what
you have written in that regard ought to be widely read by the
devotees of the theory that says that government ought to be run
like a business. Because, while that sounds fine in practice, where
we use the term business as a euphemism, in fact, there are con-
stitutional juirements in government and certain regulatory
frameworks which do not fit well into a corporate setting.

That having been said, how do you divorce political consider-
ations from what I think would be—you know, this wonderful sche-
matic that you would Propose?

Mr. MoE. As one who starts from the premise that you can orga-
nizationally distinguish between budgetary and management
issues, my comment on the distinction you are bringing up is this:
The purpose of government management is to implement the laws


2

In the 77-year history of the Bureau of the Budget and its suc-
cessor, the ‘ice of Management and Budget, there have been a
number of internal reorganizations to put greater focus on manage-
ment. Sometimes the management specialists were centralized in
a staff configuration. Sometimes the management specialists were
decentralized into a line configuration. That is integrated with the
budget examiners who have responsibility for review of the various
budget functions.

When President Nixon put a stress on the “M” component and
renamed the Bureau of the Budget the Office of Management and
Budget, I thought, “At last the management needs of the executive
branch will get attention.” With budget clout, those in Cabinet de-
partments and independent agencies will improve their orientation
so the clients, the taxpayers, will have better service.

Today, the Congressional Research Service will present the his-
tory of the staff and line configurations over time. Despite my ex-
citement when President Nixon did make this reorganization, I
turned out to be dead wrong. Senior civil servants and political ap-
pointees in the 1970’s and the 1980’s and early 1990's, regardless
of the party in power, kept telling me, “Steve, it is not working.”
I began to ask more critical questions.

In this hearing, we will consider the pros and cons of separating
management from the budget process. Experts have repeatedly ar-
gued that budget pressures drive out management issues.

We have several experts with us today who have actually lived
budget versus management battles in the Executive Office of the
President. They will share their insights and recommendations on
how best to organize for the “M,” management, to be regularly im-
proved during the coming decades of the 21st century.

I hope my friends in the Office of Management and Budget, both
current and past senior officers, understand that we are not criti-
cizing their dedication or their good intentions or their hard work.
Our intention in creating the Office of Management is to make it
easier for the dedicated public servants to succeed and, therefore,
to improve significantly the quality of general management
throughout the executive branch.

We now turn to a discussion of the best way to accomplish that
not for 1 or 2 years, but for generation after generation.

We have two panels of witnesses today.

Panel one will have Dr. Harold Relyea, specialist, American Na-
tional Government, Congressional Research Service; Dr. Virginia
McMurtry, specialist, American National Government, Congres-
sional Research Service; J. Christopher Mihm, Associate Director,
Federal Management and Workforce Issues, U.S. General Account-
ing Office; Paul L. Posner, Director, Budget Issues, Accounting and
Information Management, U.S. General Accounting Office; and
Ronald Moe, specialist, Government Organization and Manage-
ment, Congressional Research Service.

On panel two we have some very distinguished ex-administrators
who have lived through this problem: ight A. Ink, president
emeritus, Institute of Public ‘Administration, formerly Assistant Di-
rector for Executive Management at the Office of Management and
Budget; Joseph H. Wright, chairman and CEO of AMTEC, Inc., for-
merly Director of Office of Management and Budget; Dr. Paul C.


12

government in serving the public and the ways in which government can ease burdens it
places on our citizens. Otherwise, I see no point in having an OFM.

As with any organization, the effectiveness of an OFM depends heavily on the caliber
and qualifications of its leadership. The legislation must stress the need for
professional experience and qualifications, And 1 would hope that the Senate
confirmation process would also emphasize this need 1 believe that private
management experience would be very helpful, and prior government management
experience essential.

It is important that the head of an OFM have access to the President when needed, but
there would not be a need for the frequency of discussions with the President that other
major components of the Executive Office of the President require.

As I indicated at the outset, I believe an OFM would be a very important step forward
in improving the effectiveness of government and reducing the amount of waste and
number of scandals which dismay taxpayers and undermine public confidence in
government. I believe the modern presidency requires the management leadership
which an OFM can provide, and I believe the Congress would also find it very helpful
in carrying out both its legislative and oversight roles.

I would be happy to respond to questions.

Dwight Ink May 12, 1998 Page 8 of 8


Increasing Year 2000 Compliance

Agencies’ computer systems’ Year 2000 compliance remains a concern, and serious
vulnerabilities remain, although OMB, the President's Council on Year 2000 Conversion,
and the CIO Council all have focused attention on increasing compliance. Ensuring that
computer systems are Year 2000 compliant represents the widest-scale system and
software conversion effort ever attempted.” As the year 2000 grows closer and the
breadth of the work that remains has become known, OMB has shed its initial optimism
and the federal government's response to the crisis has increased. For example, at the
urging of Congress, OMB issued guidance requiring agencies to develop contingency plans
for critical core business processes and supporting systems.’ More recently, OMB
provided additional guidance stating that these contingency plans can be carried out in
accordance with GAO's contingency planning guide.’ The establishment of the President's
Council on Year 2000 Conversion provides an opportunity for the executive branch to
take further key implementation steps to avert disruptions to critical services, as we
outlined in our recent report.’ To date, however, progress has been slow, and agencies!

schedules often leave no room for delay. Many major departments have already missed

>Year 2000 Computing Crisis (GAO/T-AIMD-98-101, Mar. 18, 1998).

Progress on Year 2000 Conversion, U.S, Office of Management and Budget, as of
February 15, 1998

i i is: Business ( \l_ Conti ing, Exposure
Draft (GAO/AIMD-10.1.19, Mar. 1998).

“Year 2000 Cor i Ww f Str
Leadersmp and Partnerships (GAO/AIMD-98-85, Apr. 30, 1998).

1


70

agencies and have an impact. I see the budget as a crutch used by those who for one
reason or another do not have other more positive means of gaining the cooperation of
the agencies.

As we moved away from this budget crutch, I found other elements of our EOM role
much more effective in our ability to provide management leadership on behalf of the
President. . First, was our responsibility for the drafting of presidential executive
orders, subject to legal review by the Department of Justice. Second, was the fact that
the Office of Legislative Reference delegated to our Office of Executive Management
the coordination of legislation dealing with organization and management. Third, our
office drafted and coordinated clearance of the president's reorganization plans.
Fourth, was the fact that I participated in the daily 7:30 White House planning meetings
involving the key White House, OMB, CEA, and congressional office personnel.
Fifth, was our participation in the design of new programs to help ensure their
workability. Sixth, was our leadership role in establishing and sustaining various
interagency groups. Seventh, was the attention we paid to the field where most of the
federal employees are located, and most of the interface with the public takes place.
We established regional councils and I assigned OEM individuals to spend roughly two
thirds of their time in the field making sure that these councils expedited actions rather
than serving as simply one more level in governmental process that were already too
complex. The New Federalism streamlining, led by OEM, brought joint written
commendations from all the Big Seven public interest groups representing state and
local governments.

Eighth, was the extent to which we were able to secure agency cooperation through the
professional competence of our staff. This also earned respect in Congress, where we
were invited to testify many times and worked closely with the congress in much the
same way Harold Seidman had previously done. I should also add that we were always
available to the press, but preferred to stay out of the limelight, believing that the
departments and agencies should be given the credit for their progress in advancing the
president's agenda or implementing new legislation.

Ninth, and especially important, was our emphasis on assisting departments in
strengthening their own capacity to manage their organizations and programs.
Although we tried hard to move away from the unavoidable "control" characteristics of
much of the budget process. we followed the progress of agencies closely, and
reviewed major agency management problems with each department head or deputy.
Had this type of agency management awareness been maintained by OMB in subsequent
years, the HUD and S&L problems would have been addressed much more quickly
with considerable savings in taxpayer money and less erosion of public confidence in
government.

A summary of OMB management initiatives during its first years can be found in the

1996 book entitled The Nixon Presidency which contained a chapter called Nixon's
Version of Reinventing Government. This Committee has several copies.

Dwight Ink May 12, 1998 Page 6 of 8


63

at least thumb through them over the years and learn some of that
history which I think is very relevant to a discussion in this area.

So I thank you all for coming, and we're going to now move to
panel two.

OK, we've got Dr. Ink, we have Mr. Wright, we have Dr. Light,
and we have Professor Gilmour.

Gentleman if you'll raise your right hands.

[Witnesses sworn.]

Mr. Horn. All four have affirmed the oath.

We will begin with Dwight Ink, known to most in this room by
his extensive background in public administration, president emer-
itus of the Institute of Public Administration, formerly Assistant
Director for Executive Management at OMB, and numerous other
jobs under various Presidents of both parties.

r. Ink.

STATEMENTS OF DWIGHT A. INK, PRESIDENT EMERITUS, IN-
STITUTE OF PUBLIC ADMINISTRATION, AND FORMERLY AS-
SISTANT DIRECTOR FOR EXECUTIVE MANAGEMENT, BU-
REAU OF THE BUDGET AND OFFICE OF MANAGEMENT AND
BUDGET; JOSEPH R. WRIGHT, CHAIRMAN AND CEO, AMTEC
INC., AND FORMERLY DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET; PAUL C. LIGHT, DIRECTOR, PUBLIC POLICY
PROGRAM, THE PEW CHARITABLE TRUST, AND FORMERLY
SENATE GOVERNMENTAL AFFAIRS STAFF; AND ROBERT S.
GILMOUR, DIRECTOR, INSTITUTE OF PUBLIC AND URBAN
AFFAIRS, UNIVERSITY OF CONNECTICUT, AND FORMERLY
SENATE GOVERNMENTAL AFFAIRS STAFF

Mr. INK. Thank you, Mr. Chairman and members of the com-
mittee.

I am pleased to testify on the question of whether an Office of
Federal Management should be established. This step, I believe,
would improve the operation of the Federal Government, is badly
needed, and is long overdue.

Over the years, we have seen a succession of reorganizations in
the former Bureau of the Budget and the Office of Management
and Budget designed to make the management arm of the Presi-
dent more effective. None of these has resulted in really meeting
the needs of the President and the public.

My comments represent my own personal views. They are based
in part on my experience in heading several bureaus and agencies
responsible for both jnanagement and budget, part on having
chaired several Presidential task forces on management reform,
and part on having headed the Office of Executive Management in
the former Bureau of the Budget and also heading most of the
management functions of the Office of Management and Budget
after first having had the lead executive office role in urging Con-

ss to agree to its establishment. This was a mistake because the

MB has been just as dominated by the budget pressures as was
the old Bureau of the Budget and at times even more so.

In my written testimony I list several reasons I believe the budg-
et focus limits the extent to which OMB can provide the manage-
ment capability the President and Congress need.


20

During the past 50 years, a number of presidential advisory groups have recommended
changes designed to strengthen the Office's central management leadership. In response
to the recommendations of one of these groups, the Ash Council, the Bureau of the
Budget was reorganized in 1970 and renamed OMB, thereby signaling the intent to
heighten the management focus in the agency. However, the creation of OMB did not
ensure that an institutionalized capacity for governmentwide management leadership
would be sustained, nor did it establish how OMB should balance its budget and
management responsibilities. As a result, observers have continued to debate how to best
ensure that management issues can be effectively considered within the context of-yet
without being overwhelmed by-the budget process. Some observers have advocated
integrating the two functions, while others have proposed the creation of dedicated

offices or a separate agency to provide governmentwide management leadership.

Prior OMB reorganizations, reflecting these different points of view, have alternated
between seeking to more directly integrate management into the budget review process
and creating separate management offices. Previous congressional and OMB attempts to
elevate the status of management by creating separate management units within OMB
sought to ensure that an adequate level of effort was focused on management issues.
Underscoring its concern that management issues receive appropriate attention, Congress
established the DDM position to provide top-level leadership to improve the management

of the federal government.


37

Thus, an Office of Federal Management consisting of experienced

neralists who have t much of their career in executive
ranch management could be a cadre of strength for both the Presi-
dent and Congress.

Let me briefly mention the other contributions that an OFM
would make but which are not being made very vigorously today.

Transition management. Unlike any other democracy, the United
States provides for a thorough replacement in the top management
of the executive branch with each change of administration. The
persons selected for top positions are often Persons who, whatever
their business success might have been in the private sector, tend
to be inexperienced in Federal Government management. Success
in Federal management requires that new skills learned and
considerable immersion in the statutes, both substantive and proce-

Throughout our history we have little or no formalized transition
training or actions centrally run for the top and middle manage-
ment. The philosophy has been to rely upon on-the-job training and
political loyalty to sustain these new managers. The OFM would be

with developing a coherent training program for top-level

appointees and overseeing the programs followed by the individual

departments and agencies for mid-level political and career ap-
intees.

po’ .

Third, OFM would provide an early warning system. Vast com-
plex administrative systems will always encounter management
problems. If management success is defined in terms of the number
of management problems resolved and filed away, then success will
prove elusive.

The key to success in government management, however, is tied
to the quality of the response to problems. All too often, a problem
in an agency goes undetected or, if detected, unaddressed use
it is not in the interest of the incumbent political appointees or ca-
reer managers to investigate or change policies. it is needed
here is an OFM whose mandate is across the board and which is
charged to ask managerially tough questions so that problems will
not be aired for the first time in a congressional hearing.

Institutional memory would be OFM’s next contribution. The Ex-
ecutive Office of the President and especially the President’s per-
sonal office have little institutional memory. The time horizon for
most political appointees in these top positions is very short. Ap-
pointments are largely viewed by the appointee as resume
enhancers for jobs outside government. This being the case, ap-
pointees wonder why invest time in learning the history of my in-
stitution?

The values of institutional memory cannot be quantified. But,
without it, an institution is doomed to reinvent the wheel and to
make unsophisticated and often legally questionable decisions.

Today, gress and its support agencies, especially the General
Accounti ice, are the source of most institutional memory for
the President and his staff line offices; and this situation needs to
be changed.

Finally, OFM’s fifth function is management capacity building. It
is often assumed that the OFM proposal is intended to bring an-
other element of control over the Department and agency leader-


57

So, anyway, I think the offices can be split. I think the kind of
consultation and the advice that the President needs will be better
served by two offices than one.

Mr. KUCINICH. Again, I am interested in your testimony. Maybe
translated into something that would be more pedestrian, in a way
your paradigm would be like dual erector sets where things are put
in place and you have a structure that actually you can identify
every 2 or 4 years as being that structure.

I think a more realistic model might be that of Silly Putty, and
it keeps changing and being re-formed by the political process.

Mr. MOE. You will notice in the proposal that the irman dis-
tributed as a preliminary draft bill that, except for the two top po-
sitions which would be political appointees, the six associate direc-
tors and other offices would be career people. Now, you can still
bring someone in from the outside, but those are career positions;
and it is anticipated, particularly when you have a transition from
one party to another, that that’s where the continuity will reside.

Mr. KucINICH. I remember—I will wrap this up . Chairman,
but I remember having a conversation with President Carter years

o; and he was talking about being President, about the difficulty
of his job was giving a decision and passing it through the chain
of command. And sometimes what he wanted to get Gone couldn’t
get done, and he was the President of the United States.

So what occurs to me in terms of what you’re advocating—and
I see much of it meritorious, conceptually—is that when you put
something in place and say that’s going to stay in place, there’s a
little whiff of something that’s not so democratic about that. And
that, even though you are a strong adherent of democratic prin-
ciples, I can see from your testimony.

So, in, as we talk about these concepts we also have to be
aware that government is a dynamic organization; and, as such,
that dynamic can change according to the will of the people. Be-
cause, even above the ident, the people are really at the top
of that apex, just by the way.

Mr. Horn. Very well put.

I am yielding myself 15 minutes. I know the next panel will get
into this in depth, but I would like any ideas you have of where
management either pushed out budget in its history or did budget
primarily push out management?

Do you want to go down the line? Do you have any great exam-
ples of that historically?

Mr. RELYEA. My recollection is, from our historical review, that
it was very clear by 1950 that budget was dominant; and it re-
mained that way for quite a while due to a variety of factors such
as Presidents who didn’t give a hoot about management or direc-
tors of the Bureau who were much more economically inclined—
they were from the banking world and so forth. So management
largely just drifted away. It tried to come back in such guises as
the buzz phrases like PPBS and this type of thing, but never quite
made it.

Mr. Horn. OK, you have given an example.

Dr. McMurtry, do you have an example to give?

Ms. McMurtry. I think that, particularly in the decade of the
1980’s and early 1990’s, there was a preoccupation in Congress and


23

their annual financial statements for fiscal year 1999. In the 1997 Federal Financial
Management Status Report and Five-Year Plan, OMB and the CFO Council discussed
accomplishments and future plans in eight priority areas, such as improving financial
management systems and implementing the Results Act. OMB also worked with the
Department of the Treasury and GAO as part of the Federal Accounting Standards
Advisory Board to create a comprehensive set of accounting and cost accounting
standards that establish a framework for financial reporting and accountability. In
addition, as we reported on March 31, 1998, the federal government prepared
consolidated financial statements that have been subjected to an independent audit for

the first time in the nation’s history.’

Despite this progress, we were not able to form an opinion on the reliability of the
consolidated financial statements because of serious deficiencies suh as the inability to
properly account for and report billions of dollars of property, equipment, materials and
supplies. These deficiencies are the result of widespread material ihtemal control and
financial systems weaknesses that significantly impair the federal gqvernment's ability to
adequately safeguard assets, ensure proper recording of transaction$, and ensure
compliance with laws and regulations. With a concerted effort, the federal government as

a whole can continue to make progress toward generating reliable firncial information

“Financial Audit: 1997 Consolidated Financial Statements of the United States
Government (GAO/AIMD-98-127, Mar 31, 1998)

7


90

progress, challenges, plans for improvement, systemic resource needs, specific managerial
weaknesses, and potential trouble spots.

[hold no illusion that an Office of Federal Management — even a very well
organized, staffed, and directed one — will be the panacea for what ails Federal
management systems and programs, or that it will elevate the concern for public sector
management to that which prevails in the private sector. But the establishment of an
independent OFM will provide relevant and coherent managerial advice to the President
apart from the political fallout from projections of the latest budgetary shortfall. Creation
of a well designed OFM also offers at least the possibility that both the President and
Congress will be alerted to important management concerns and problems so as to be able

to respond to them before they reach crisis proportions.


44

6

the laws passed by Congress as elected representatives of the people. (2) The
President is the chief executive officer of the executive branch and Commander-
in-Chief of the armed forces and as such is responsible for the proper execution
and administration of the laws. (3) Executive branch managers are held legally
accountable by reviewing courts for maintaining procedural safeguards in
dealing with both citizens and employees and for conforming to legislative
deadlines and substantive standards. Additional requirements for presidential and
agency management under the public law theory may be stated, but the point is clear:
law is the foundation of public management.

General Management Laws as "Political Clout"

"General management law," as used in this testimony, is a term of art referring
to those cross-cutting laws regulating the activities, procedures, and administration
of all agencies of government, except where exempted by category of organization
or by provision in their enabling statute. The quality of the general management laws
is a crucial factor in maintaining the integrity and accountability of the executive
branch to the President and, ultimately, to Congress.

General management laws are intended to provide appropriate uniformity and
standardization for government organizations and processes. Uniformity and
standardization by themselves, however, are not the objective of general management
laws. Such an objective would stultify government as "one size does not fit all."
What these laws do reflect, therefore, are the conceptual and legal agreements
between the branches respecting the management of the executive branch. In
functional terms, general management laws are statements of presumption guiding
governmental behavior; that is, certain doctrinal provisions reflected in legal
language stand until and unless an exemption is permitted. Exemptions may be
assigned by a general statute to a category of agency or they may be present in
provisions of the agency's enabling statute. Exemptions from general management
laws may be mandatory or discretionary.

General management laws come in various guises and may be dramatic in their
coverage and impact, as is the case with the Administrative Procedure Act; Budget
and Accounting, Paperwork Reduction, and Freedom of Information Acts, or they
may be of relatively low visibility (although visibility is not necessarily equatable
with importance), such as the Federal Advisory Committee Act; and the Prompt
Payment Act. In recent years a number of additional general management laws,
such as the Federal Managers Financial Integrity Act, have been enacted, each
supported and justified on its own definition of a problem, but often with what some
observers believe to be little consideration of its probable impact upon other related
general management acts.

One purpose of these general management laws, and of the host of additional
similar acts, is to shift the focus of deliberation and decision to the general rather than
the exceptional. The politics of general applicability is a politics by which the
President, central management agencies, and Congress have the authority and
leverage to keep the natural centrifugal forces of administrative practices within
accountable limits. That is, the laws and regulations apply to all agencies, with the
supplicants for exemption carrying the burden of proof. Exceptional politics occurs


85

STATEMENT OF

ROBERT S.GILMOUR
Professor of Political Science
and
Director, Institute of Public and Urban Affairs
The University of Connecticut

Before the

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT AND TECHNOLOGY
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
U.S. HOUSE OF REPRESENTATIVES

on
CREATION OF AN OFFICE OF FEDERAL MANAGEMENT

Washington, DC
May 12, 1998

Mr. Chairman and Members of the Subcommittee:

Asa former practitioner and long-term student of Federal organization and
management, | cannot help but be impressed that one area where the private and public
sectors are profoundly different — in their concern of effective executive management —
is the one in which they ought to be virtually identical. In the private sector literally
billions of dollars are spent in the training and retraining of managerial executives and in
the development of more effective methods, techniques, and organizational arrangements
to achieve corporate objectives. In the public sector the subject is all but taken for
granted. Despite obvious weaknesses in capacity and performance across the Federal
Executive, with literally trillions of dollars annually at stake in the administration of
government programs — clearly, the concern for effective management should be at least
as great as in any private firm. Unfortunately, it is not. With this in view, it is gratifying,
Mr. Chairman, that you have chosen to focus the Subcommittee's attention on improving
government management and, in particular, on the creation and design of a new Office of
Federal Management.


62

Mr. Horn. How about it, Dr. Moe?

Mr. MoE. It has been a long term, so you can’t pinpoint it ex-
actly, but I would contend that it was the decision to make third
level at OMB the pad to be political appointees. They tend to be
young people. It’s not an end of their Federal career at all. They
tend to be very young people, inexperienced to begin with, and then
that’s viewed as a training ground for them to leave.

You know, it’s very hard to be concerned about your year 2000
problem which is an excellent example of what management does
that budget just can’t even put on their radar screen is the fact
that you have to have in top positions in an organization people
who will remain there when the consequences of their decisions are
made. So that they have to say, I’m probably going to be here in
5 years. If I don’t have a 2000, I’m out of luck.

Today, we have perpetual turnover of short termers at the top,
all of whom’s goal appears to be: “Not on my watch.” And so Con-

ss has to become a co-manager and say, yes, on your watch this
is going to happen. And one of the Burposes of an OFM is to pro-
vide at least a modest chance that the kinds of issues that occupy
our attention, such as the year 2000 problem, will be addressed
ry people who have a long-term interest in solving them.
ir. Horn. I think you have some prett; wisdom on that,
and I know we'll hear it from the next panel.

Any views of GAO on that question? If you watched—you two
aren’t old enough really to have gone through—I happen to remem-
ber the ’40s, 50s and ’60s, and so any wisdom you've heard around
the water cooler at GAO about what the old days were like? Let’s
face it, Elmer Staats came over to be a great Comptroller General,
and he was Deputy Director at BOB, and he knew what was going
on in the government when he came over there.

Mr. Posner. I wish—I’m probably older than I look, but I would
say that, over the years, one thing I’ve seen is the emergence of
GAO as kind of a principal institutional source of knowledge about
these management Policies. Whether it has anything to do with
OMB’s rise or fall, I think it has probably more to do with Con-
gress’ growing assertiveness about these problems and increasing
relevance of these problems to the American people.

From our standpoint I think it has been quite gratifying that we
have been able to do things like best-practices guides, like Chris
did one on the executive guide on GPRA, that thousands of copies
get distributed and used by the Federal agencies. Because we’ve
really got a corner on the market, if you will, on that kind of anal-
ysis.

Mr. Horn. Do you have anything to add?

Mr. Mix. I was just going to add that, from my examination of
OMB’s history, Mr. Chairman, that I think the reorganization in
1982 that had led to the elimination of the Organization and Spe-
cial Projects Division—which took out OMB’s institution or central
unit that did crosscutting analysis of government organization—
was a bit of a loss. OMB needs to think about how it is going to
rebuild that capacity.

Mr. Horn. Well, thank each one of you. You’ve had some won-
derful background presentations here that I think all of my col-
leagues, not only on the committee, but I hope in the Congress, will


86

Nearly all of us who have worked to improve government management begin with
the understanding that the most pointed responsibility for excellence in Federal
management rests ultimately with the President as the Nation's Chief Executive. And yet
the real opportunity for achieving excellence in Federal management is to be found in the
agencies, not in the presidency.

The President of the United States is not, as some suggest, like the president of a
large corporation, He is more like the chief executive of a mammoth holding company,
replete with separate, diverse, and sometimes conflicting interests.

Still, there are critical management issues that cut across agency and department
boundaries: The need to find and develop effective managers, to organize for full-
performance service delivery, and to develop and maintain effective overall systems for
human resources and financial management, regulatory coherence, procurement, and for
the management of information and technology

For nearly 60 years we have generally understood that overall leadership for
Federal management can only come from the President. But to provide that leadership, he
needs help. He needs the sustained institutional resources to provide accurate information
and advice and to make sure that the general management laws of the Federal Government
are implemented, as well as the implementation of his own managerial initiatives. This
was the reasoning behind Congress's creation of the Executive Office of the President
(EOP) in 1939, and the understanding that prompted later reorganization of the former
Bureau of the Budget in the EOP as the Office of Management and Budget (OMB) in
1970.

Fundamental managerial roles for which OMB was created began to erode almost
as soon as the word "Management" was added to the name of the Nation's budget office.
Ironically, as several studies have now shown, at a time when greater and greater
managerial responsibilities were delegated to OMB by law, the "managenient side" of
OMB had fewer and fewer resources to shoulder them. Subsequently, management in
OMB has been openly acknowledged to be “budget driven” —-- subservient to mandated
budget targets and position reductions and with little regard for developing leadership of


31

First, top management support and commitment within both OMB and the White House is
often critical to providing a focus on governmentwide management issues throughout
both the budget process and the executive agencies themselves. As our study of OMB
2000 pointed out, management and performance measurement issues gained considerable
attention in the budget formulation process initially because of the clear commitment of
OMB's leadership. However, top leadership's focus can change over time, which can
undermine the follow-through needed to move an initiative from policy development to
successful implementation. Thus, although top leadership's interest is an important
impetus for the initiation of management policies, it alone is not sufficient to sustain

these initiatives over time.

Second, a strong linkage with the budget formulation process can be a key factor in
gaining serious attention for management initiatives throughout government. Regardless
of the location of the leadership, management initiatives need to be reflected in and
supported by the budget and, in fact, no single organizational arrangement by itself
guarantees this will happen. Many management policies require budgetary resources for
their effective implementation, whether it be financial management reform or information
systems investment. Furthermore, initiatives such as the Results Act seek to improve
decision-making by explicitly calling for performance plans to be integrated with budget

requests. We have found that previous management reforms, such as the Planning-


7

Despite increased emphasis on long-term management issues
and commitment by the administration, OMB can and should do
more to improve its institutional capacity to provide appropriate
long-term executive branch management.

It is an evolutionary process, but I believe that, together, we are
headed in the right direction. He: s such as this one today keep
us focused on our common goal of better long-term Government
management. I look forward to the testimony that we will receive
and discussing Federal management.

I welcome all the members of the Panel, and I look forward to
hearing what you have to say. Thank yor

Mr. Horn. I thank you for that very "fine statement. Not seeing
anyone else, we will begin with the witnesses.

Our first one is Dr. Erid C. Relyea, Specialist, American Na-
tional Government, Congressional Research Service.

STATEMENTS OF HAROLD C. RELYEA, SPECIALIST, AMERICAN
NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH
SERVICE, ACCOMPANIED BY VIRGINIA MCMURTY, SPE-
CIALIST, AMERICAN NATIONAL GOVERNMENT, CONGRES-
SIONAL RESEARCH SERVICE; J. CHRISTOPHER MIHM, ASSO-
CIATE DIRECTOR, FEDERAL MANAGEMENT AND WORK-
FORCE ISSUES, U.S. GENERAL ACCOUNTING OFFICE; PAUL L.
POSNER, DIRECTOR, BUDGET ISSUES, ACCOUNTING AND IN-
FORMATION MANAGEMENT, U.S. GENERAL ACCOUNTING OF-
FICE; AND RONALD C. MOE, SPECIALIST, GOVERNMENT OR-
GANIZATION AND MANAGEMENT, CONGRESSIONAL RE-
SEARCH SERVICE

Mr. RELYEA. Thank you.

Mr. Chairman and members of the subcommittee, joining me this
morning is my colleas e Virginia McMurtry, also a senior staff
member at CRS. We you for your invitation to appear here
today for this bearing.

In October of last year, Dr. McMurtry and I began meeting with
subcommittee staff concerning a requested review of inte reor-
ganizations of the Bureau of the Budget [BOB] and its successor,
the Office of Management and Budget [OMB], with a view to the
structuring of BOB/OMB capacity and capability to guide or assess
aspects of management, both governmentwide or by sectors, and in
the Federal Executive departments and agencies.

The timeframe set for the review was 1921 to 1993; that is, be-
ginning with the creation of the Bureau of the Budget and con-
cluding with OMB’s structure on the eve of the arrival of the Clin-
ton administration.

For our research, we recognized that management and adminis-
tration were often used interchangeably, that there was no con-
sistent usage of either term, and, er, that both were some-
times utilized as ambiguous terms of art or fashion.

The governmental focus and historical terms of reference of our
research were much clearer. Subsequently, we arrived at the fol-
lowing understanding of management as we pursued it in our re-
view.

To provide leadership on the President’s behalf in addressing
general problems bearing on the organization and effectiveness 4


46

8

you so direct, to maintain, update, and improve this compendium at the close of each
Congress. This compendium provides an overview of the laws that, for the most
part, would be the responsibility of the new OFM.

Office of Federal Management: Organization

The bill, "Office of Federal Management Act of 1998," provides for the
reorganization of the present Office of Management and Budget into two separate
and equal agencies within the Executive Office of the President; an Office of Federal
Budget (OFB) and an Office of Federal Management (OFM). Each agency shall be
headed by a Director appointed by the President and confirmed by the Senate. Each
agency shall have a Deputy Director who shall be appointed by the President and
confirmed by the Senate. The rank of Director in both agencies shall be at Executive
Level I; the rank of Deputy Director shall be at Executive Level II.

It should be noted that Executive Level I is considered as "Cabinet rank"
although it remains the prerogative of the President to determine if the Directors of
OFB and OFM are to participate in Cabinet deliberations. The current Director of
OMB is designated as Executive Level I and does participate when the Cabinet is
convened.

Generally speaking, this ranking will permit the Director of OFM to deal as an
equal with departmental Secretaries. Given the informal, yet firm, protocols
(‘pecking order") in the executive branch, equals tend to speak only to equals. If the
OFM, or the OFB for that matter, are to be considered more than staff offices in the
Executive Office, it is appropriate that their chiefs have this formal rank.

Associate Directors

The OFM, according to this bill, would have 6 Associate Direcctors appointed
by the OFM Director to Senior Executive Service (SES) General Positions. These
Associate Directors shall be selected from among persons in the SES and shall carry
the rank and compensation of SES Level 6. Such appointees may be reassigned in
accordance with provisions of the Civil Service Reform Act of 1978 (CSRA) (P.L.
95-454).

The intent of this provision in the bill appears to be to emphasize the non-
partisan mission of the agency and the need to develop and reward institutional
competence in this staff office that is close to the President. It is apparently
intended that this Office seek out the best career managers from among the serving
managers in the executive branch. Given the category of Noncareer Executive
Appointment authorized in CSRA, it is still possible, on a case-by-case basis, for the
Director to appoint an Associate Director from persons outside the career service.

Reorganization of Statutory Offices

Over the years and for various political reasons that seemed persuasive at the
moment, three Offices within OMB have been established with direct legal authority
by-passing the Director and assigned directly to subordinate officers. The following
Offices established by statute are abolished and their functions as provided in their


6

Mr. Horn. So if you will stand and raise your right hands.

[Witnesses sworn.]

Mr. Horn. The clerk will note that all five witnesses on panel
one have affirmed.

Let us—let me ask my good friend who has come in—my periph-
eral vision is not good—if he would like to make an opening state-
ment.

Mr. Kucinicu. I try to be shy and unassuming and don’t prevail
on the Chair that much, but I appreciate you recognizing me.

I commend the Chairman for his quality leadership on govern-
ment management reform. As I am sure everyone in this room
knows and everyone in the Congress knows, Chairman Horn has
long been elevating discourse on government management and,
when appropriate, sounding alarms in the halls of Congress; and
for this we are all in this his debt.

Since 1982, Congress and OMB have been working on legislative
initiatives to leverage OMB’s leadership of governmentwide man-
agement. Many of the more management laws which have been

assed since 1990 are still in their early implementation stages.
ese new statutes provide OMB with guidance and additional au-
thority to initiate better management policies and practices at Fed-
eral agencies. The statutes include the Chief Financial Officers Act
of 1990; the Government Performance and Results Act of 1993; and
the Government Management and Reform Act of 1994, among oth-

ers.

In 1989, the GAO studied OMB’s ability to address management
issues. GAO noted in this report, and I quote, while administrative
management processes and structures are important, the essence of
Federal management is policy implementation and delivery of pro-
gram service, unquote.

GAO concluded, quote, OMB needs to change. It needs to work
closer with the agencies to develop a longer term financial and
management strategy and better explain to the President and Con-
gress the consequences of not following the longer term strategy,
unquote.

GAO recommended in 1989 that, quote, teams comprised of
budget examiners and management staff blending program and
management expertise during the budget process are critical to
successfully changing OMB’s approach. Equally important, how-
ever, is the commitment of the President and OMB leadership to
such efforts, unquote.

OMB adopted each one of the GAO’s major recommendations.
Very important to note that. The OMB reintegrated management
functions with budget analysis in 1994 with its OMB 2000 pro-
gram. The OMB 2000 empowered program examiners to address
and evaluate agency management issues. OMB is better able toda:
to work closely with agencies on the management issues throug!
its program examiners.

In 1996, GAO noted that its review of OMB’s budget documents
clearly demonstrated greater attention to management issues by
program examiners and reflected strong commitment of OMB’s top
officials to incorporate the treatment of management issues into
the budget cycle.


40

2

Management of the Federal Government should be a presidential
priority... To enhance the President's management capability, Congress
should establish in the Executive Office of the President a top-level
management and organization oversight office (Office of Management)
headed by an administrator who has direct access to the President”

Defenders of the present OMB organizational structure argue, on the other
hand, that management problems can be addressed only when assigned the "clout"
of the budget. It is the budget process, in their view, that promotes whatever
management improvements are likely to occur, therefore it is essential that budget
and management be located in the same agency. The National Performance Review
(NPR) in 1993? went a step further by rejecting earlier recommendations to rebuild
the management side of OMB‘ and implicitly proposed that OMB cease to have a
separate management component altogether. A subsequent OMB reorganization
("OMB 2000 Review")’ largely implemented the NPR suggestion by integrating the
small remaining staff of the General Management Division along with existing
budget analysts into five Resource Management Offices (RMOs) structured along
budgetary functional lines. Insofar as designated management functions remain in
OMB, they are located in much reduced statutory elements of the agency (e.g., Office
of Federal Procurement Policy).

In defending the 1994 reorganization of OMB, then OMB Director, Leon
Panetta, stated: " Critics of these recommendations may say the effort to ‘integrate’
management and budget will end in merely bigger budget divisions, whose
management responsi will be driven out by daily fire-fighting on budget
issues... We believe this criticism is based on a false premise that 'management' and
‘budget’ issues can be thought of separately."°

The question arises: Is the premise that budget and management issues are
inseparable a valid premise? There is a substantial body of opinion contending, on
the contrary, that not only are budget and management separable in theory, they

2 U.S. Congress, House, Committee on Government Reform and Oversight, Making
Government Work: Fulfilling the Mandate for Change, H. Rept. 104-435, 104" Congress,
1* session (Washington: GPO, 1995), pp. 5, 8.

3U,S. Executive Office of the President, National Performance Review, From Red
Tape to Results: Creating a Government That Works Better and Costs Less (Washington:
GPO, 1993).

“National Academy of Public Administration, Revitalizing Federal Management:
Managers and Their Overburdened Systems (Washington: National Academy of Public
Administration, 1983), U.S. Congress, House, Committee on the Budget, Management
Reform: A Top Priority for the Federal Executive Branch, Committee print, 102" Congress,
1* session (Washington: GPO, 1991).

5 USS. Office of Management and Budget, "Making OMB More Effective in Serving
the Presidency: Changes in OMB as a Result of the OMB 2000 Review," OMB
Memorandum No. 94-16, March 1, 1994.

© Leon Panetta, quoted in "Executive Memo: OMB Management Merger," Government
Executive, 26(April 1994), p. 8.


19

OMB is responsible for providing guidance and oversight for various other laws and
executive orders as well. For example, the Federal Acquisition Streamlining Act (FASA)
requires that executive agency heads set cost, performance, and schedule goals for major
acquisition programs and that OMB report to Congress on agencies’ progress in meeting
these goals. Executive Order 12866 directs OMB to coordinate the review of agencies’
rules and regulations to ensure that they impose the least burden, are consistent between
agencies, focus on results over process, and are based on sound cost/benefit analysis.
OMB also has been responsible since 1967. through its Circular A-76, for carrying out
executive branch policy to rely on competition between the federal workforce and the

private sector for providing commercial goods and services.

iL TO

OMB's perennial challenge is to carry out its central management leadership
responsibilities in such a way that leverages opportunities of the budget process, while at
the same time ensuring that management concems receive appropriate attention in an
environment driven by budget and policy decisions. Concer that OMB and its
predecessor agency, the Bureau of the Budget, lacked the support and institutional
capacity necessary to sustain management improvement efforts throughout the executive

branch has prompted numerous calls for changes in the past.


14

Mr. Horn. We will now go to Mr. Christopher Mihm, a lar
before this committee. We are going to get malpractice or liability
insurance for you over the years. Associate Director of Federal
Management and Workforce Issues, U.S. General Accounting Of-
ice.

Mr. MiHM. Mr. Chairman and Mr. Kucinich, it is an honor to ap-
peas before you again today. My colleague Paul Posner and I will

discussing how the Office of Management and Budget carries
out its management responsibilities.

I want to thank you for agreeing to include our prepared state-
ment into the record; and, as you requested, in the interest of brev-
ity and to move as quickly as we can to the dialog, I will take just
a couple of minutes to hit the high points.

First, we completely agree with the observation in your opening
statement, Mr. Chairman, and as shown by our colleagues from
CRS, that OMB’s perennial challe: is to ensure that manage-
ment issues are effectively considered within the context of, but not
overwhelmed by, the bu dget process. Concern that OMB lacks the
support and institutional capacity necessary to sustain manage-
ment efforts throughout the executive branch continue to prompt
calls for change.

The second point that we would make today is that the effective-
ness of OMB’s management leadership has been uneven. In our
statement, we discuss eight issues that have been both of par-
ticular concern to us at the GAO and to this committee. This morn-
ing, I will highlight jest three of those issues that, in our view, are
most illustrative of the strengths and weaknesses of OMB’s current
approach: financial management, the year 2000 problem, and cross-
cutting issues.

Turning to financial management, OMB, in concert with the CFO
counsel, has led governmentwide efforts to focus greater attention
on financial management issues. We are seeing positive results
from OMB’s efforts, such as the number of agencies able to obtain
unqualified opinions on their audited financial statements. As you
know, Mr. Chairman, this year agencies developed the first consoli-
dated financial statements to be subjected to an independent audit
in our Nation’s history.

However, despite this progress, we still have a very long way to
go. GAO was not able to form an opinion on the reliability of the
consolidated financial statements because of serious deficiencies in
those statements, such as the inability to properly account for bil-
lions of dollars of Federal property. These deficiencies are the re-
sult of widespread internal control and financial system weak-
nesses that significantly impair the government’s ability to ade-
quately safeguard assets, properly ensure recording of transactions,
and ensure compliance with laws and regulations.

Another issue is the year 2000 compliance, which is perhaps the
single greatest area of concern today in managing Federal agencies.
At the current pace, it is clear that not all mission-critical systems
will be fixed in time and that additional attention therefore needs
to be given to those systems that serve the highest priorities.

At the insistence of Congress and as the breadth of the work that
remains has become known, OMB has shed its initial optimism—
and I was here at a number of those hearings, Mr. Horn, where


3

Light, director of the public policy p: , the Pew Charitable
Trust, formerly Assistant to the Senate Governmental Affairs staff;
and fessor Robert S. Gillmour, director of Institute of Public
and Urban Affairs, University of Connecticut, formerly Senate Gov-
ernmental Affairs staff.

I think most of you gentlemen know the routine here, that all
witnesses that appear before us do testify under oath.

We also will automatically put your statement in the record, if
you have filed a written statement, the minute we introduce you
on the particular panel.

We would like you to summarize that record, if you could, in sort
of 7 to 10 minutes at the most; and we would, frankly, like to
spend most of the time on the dialog, since we have had a chance
to read your papers. And they are very fine papers, and all of that
will be printed in the record.

[The prepared statement of Hon. Stephen Horn follows:]


Budget Overrides Critical Management Needs

At times, the focus on meeting the budget targets prevents agencies from taking actions
that are badly needed for better operating effectiveness or the prevention of waste and
abuse. As one example, it contributed to the earlier consolidation of all auditors in the
office of inspectors general in a number of agencies on the theory that having auditors
in more than one organization component of a department is not cost effective. This
has elevated minor cost efficiencies over the ability of departments to avoid waste and
abuse through use of auditors by assistant secretaries for administration in the earlier
toles of auditors in preventing such problems rather than focusing on ferreting out the
reason for scandals once they have occurred. This shift from prevention to "catching
the crook” after the damage occurred is one of a number reasons that HUD changed
from a model department to one that was scandal ridden.

This preoccupation with budget considerations has often discouraged the maintenance
of strong field offices which can better serve the public than can Washington, although
1 would agree that budgetary pressures have been useful in a few cases where small
field offices were no longer needed as modes of communication and transportation
permitted field consolidation.

Credibility of M; L

The Office of Executive Management was established toward the end of the Johnson
Administration and the directorship first filled when Nixon became president. As the
director of this new office, I found that we could more easily undertake government
wide management improvement and reform efforts on behalf of the president. Why
was this so?

Although I was still a part of BOB, my office was perceived as having a greater
measure of autonomy, thereby enabling it to distance itself from the budget process
more than had been possible before. Although I participated in the BOB staff meetings
and was subordinate to both the deputy director and the director of OMB, I found that
the more my office could function independently of the budget operations, the greater
our credibility with the agencies and the more effective we were. Initially, for
example, I encountered suspicion and hostility from Secretary of Defense Mel Laird
who viewed the new office as a new back door device of BOB to cut his budget. It was
not until the secretary was convinced of our operational independence that we were
invited in to help the secretary and his deputy, Dave Packard, with some of the more
vexing management problems the department faced, assistance which Laird warmly
praised as he left office.

Budget Leverage

This experience should help to dispel the myth that management staff in the Executive
Office of the President must have the leverage of the budget to gain the attention of the

Dwight Ink May 12, 1998 Page 5 of 8


24

on a regular basis. Annual financial statement audits are essential to ensuring the

effectiveness of the improvements now under way.

‘Streamlining the Procurement Process

OMB's OFPP has worked to implement FASA and the Clinger-Cohen Act. OFPP has also
been working to streamline the procurement process, promote efficiency, and encourage
a more results-oriented approach to planning and monitoring contracts. OFPP is
spearheading a multi-agency effort to revise parts of the Federal Acquisition Regulation.
For example, a major revision to Part 15 completed last year will contribute greatly to a
more flexible, simplified, and efficient process for selecting contractors in competitively
negotiated acquisitions. OFPP also developed best practices guides to help agencies draft
‘statements of work, solicitations, and quality assurance plans, as well as to aid in
awarding and administering performance-based service contracts. OFPP issued a best
practices guide for multiple award task and delivery order contracting to encourage
agencies to take advantage of new authorities under FASA. In addition, OMB has
encouraged agencies to buy commercial products, conduct electronic commerce, and to
consolidate their ordering to take advantage of the buying power of the federal

government.


10

Harold C. Relyea and Virginia A. McMurtry

Joint Statement
before the

Subcommittee on Government Management,
Information, and Technology
House of Representatives
May 12, 1997

Mr. Chairman and members of the subcommittee, my name is Harold Relyea
and I am a Specialist in American National Government with the Congressional
Research Service of the Library of Congress. I am also the head of the executive and
judiciary section of the CRS Government Division. Joining me is Virginia
McMurtry, who is also a CRS Specialist in American National Government. We
thank you for your invitation to appear here today for this hearing.

In October 1997, Dr. McMurtry and I began meeting with subcommittee staff
concerning a requested review of internal reorganizations of the Bureau of the Budget
(BOB) and its successor, the Office of Management and Budget (OMB), with a view
to the structuring of BOB/OMB capacity and capability to guide or assess aspects of
“management,” both governmentwide or by sectors, and in the federal executive
departments and agencies. The time frame set for the review was 1921-1993, i.e.,
beginning with the creation of the BOB and concluding with OMB structure on the
eve of the arrival of the Clinton Administration and OMB:2000.

The word manage derives from the Latin and French manus, or hand. Its
archaic meaning, according to various dictionaries, is to train a horse, to put it
through its paces. For human affairs, the word connotes controlling, directing,
conducting, guiding, and administering. These words, of course, have different
meanings in different political environments, reminding us that management occurs
in settings other than a democracy, and is practiced for a variety of purposes, the
realization of efficiency and economy being among the most general, but most often
expressed,

For our research, we recognized that “management” and “administration” were
often used interchangeably, that there was no consistent usage of either term, and that
both were sometimes utilized as ambiguous terms of art or fashion. The
governmental focus and historical terms of reference of our research were much
clearer. Subsequently, we arrived at the following understanding of “management”
for the purposes of conducting and reporting the results of our BOB/OMB review,
one formulated previously by CRS colleagues:

to provide leadership on the President’s behalf in addressing general problems
bearing on the organization and effectiveness of the executive branch, and to


ing OMB's Ci 16

OMB's Circular A-76 sets forth federal policy for determining whether commercial

activities associated with conducting the government's business will be performed by
federal employees or private contractors. The A-76 process calls for agencies to contract
for commercial services once they have determined on the basis of cost studies that it
would be cost effective to contract out these services. Agencies’ efforts to undertake cost
studies—with the important exception of the Department of Defense—have declined
significantly in recent years. OMB undertakes only limited efforts to monitor or enforce

compliance with its A-76 guidance or evaluate the success of this process.

Analyzing Crosscutting Issues

Finally, OMB's oversight role across the government can provide the basis for analyzing
crosscutting program design, implementation, and organizational issues. We have pointed
to the need to integrate the consideration of the various governmental tools used to
achieve federal goals, such as loans, grants, tax expenditures, and regulations.
Specifically, we recommended that OMB review tax expenditures with related spending
programs during their budget reviews. In addition, our work has provided numerous
examples of mission fragmentation and program overlap within federal missions, and we

have suggested that OMB take the lead in ensuring that agency Results Act plans address

13


98

occurring. And, like I say, it is much more than reorganization, but
if you would decide to put in an OFM.

ir. HorN. I am going to drop the “F.” That is redundant. The
Office of Management and the Office of Budget.

Mr. WRIGHT. That’s fine—then I would suggest that it not be
that large but it does have the authority to get things done and re-
port to the President and the Congress. You may want to give them
apportionment authority, like we discussed before.

cause, while I’ve heard that clout doesn’t count, Mr. Chair-
man, I’ve got to tell you right now, when I was calling agency
heads to get management improvement done, if I wouldn’t have
been at the Office of Management and Budget, it would have taken
a little longer to get the returned.

Mr. Ink. My experience was the opposite. I had to prove that I
was not associated with the budget in order to get the attention of
the Secretary of State or the Secretary of Defense.

Mr. WRIGHT. Yes, but you controlled office space.

Mr. Horn. I can see where they would say if I talk frankly to
this person they are going to use it against me in the next budget
examiner round. Whereas if you could talk confidentially and they
are working for the President and the Secretary of the particular
department that he has nominated and the Senate has confirmed,
it seems to me they are likely to tell you a little more.

Mr. INK. Not only that, but they are more likely to share with
you their problems at an early stage, before they show up in the

eadlines.

Mr. Horn. Right. The L.A. Times test.

Mr. LicuT. I don’t know how many people you should have, but
I think you can finance the Office of Management with a simple
tax on the contracts that are currently being let for management
analysis across the rest of Government. Ask for 1 percent of the
$10 to $15 billion that is currently being spent on consulting of one
kind or another and you produce a little surplus, actually, on this
activity.

Mr. Horn. That is an interesting idea. I’m sure Mr. Kasich will
be glad to hear about it.

Mr. Gitmour. Mr. Chairman, I don’t have a tax proposal for you.
That is certainly an intriguing one. It strikes me, though, along
with others testifying here, that we are really interested—if we are
interested in management policy, helping the agencies to develop
management policy and moving beyond the agencies to the State
and local governments and other entities that are now doing the
Federal Government’s work, helping them with management pol-
icy, that really suggests a ‘small agency. There are a number of
mandates that you have talked about and your discussion draft has
in setting priorities to go after specific of those.

Mr. Horn. Well, let me just ask you, are there any other issues
you think should be before us that we either haven’t had from an-
other witness or we’ve asked no questions about? Because I'd like
to round this out.

Let’s just go down the line. Dr. Ink.

Mr. Ink. I would hope, as you proceed, that you have an oppor-
tunity to go into greater depth with respect to the outside Wash-
ington dimension of how Government functions and the managerial



91

Mr. Horn. I now yield 15 minutes to my colleague, the ranking
minority member, Mr. Kucinich, for questioning witnesses.

Mr. Kucinicu. Thank you very much Mr. Chairman.

As I’ve heard some of our witnesses testify, particularly Mr.
Light—first of all, welcome to all of you.

Mr. Light, I was listening to your testimony, and it kind of re-
minded me of hearing someone on the beginning of their 10-point
program for reform of budget-driven devotees, and I’m—so, for that
reason, I’m going to focus some of my questions on your testimony
and ask for your response.

You know, it occurs to me that the Federal Government operates
more and more every day in an increasingly complex world; and
Federal agencies are embarking on public-private partnerships,
competing in the private sector, and developing collaborative rela-
tionships with private entities and other governments. Have you
considered that—wouldn’t divorcing management from budget sim-
ply minimize flexibility within agencies and hinder bottom-up ideas
and innovation?

Mr. LiGHT. Actually, I might argue that—how divorcing manage-
ment from budget produces the opposite result, that——

Mr. Kucinicu. How so?

Mr. LicuT. Well, the constant attention to the budget as the driv-
er is distracting from doing the kind of mundane organizational
work that needs to be done to free ideas to flow more slowly up-
ward. We’re consumed with budget as the central issue within
agency life and get distracted from the dirty work, the delayering
that needs to occur, the streamlining of the rural systems that
needs to occur. It can distract us.

I think the notion here is that budget can drive out all other con-
siderations. And as long as you’re spending the money, as long as
you're pushing it out the door, you don’t need to worry much about
the organizational structure or the systems in order to do it wisely.

You know—and when you all ed the earlier panel whether
they know of any situations where management has driven or
budget has driven out management, I think your experience on this
subcommittee with the failures over the years to implement the
debt collection statutes, the efforts to design and implement more
systematic standardized accounting systems—I mean, the notion is,
once we spend the money, we don’t have to worry too much about
it; and I think that’s an issue of the input activity involved in
budget driving out the management activities that occurs as the
spending begins.

Mr. KucinicH. You know, what I seem to be missing in all this
discussion all of you are esteemed and very well-lettered wit-
nesses—is a discussion of the impact of politics. Maybe there’s a
vast divide here between this desk here and that table. But swim-
ming from this side to that side or that side to this side in terms
of careers and functions is quite a task, and there is a political re-
ality that we’re dealing with here.

I can be for good management in concept, but you offer a shift
in paradigm which seems to not encompass the fact that perhaps
we've had structures that, per se, could have worked but were de-
feated by politics.


ll

assist in the design and implementation of governmentwide strategies aimed at
enhancing the ability of federal agencies to carry out their statutory missions.

This understanding of “management” also allowed us to consider such qualified
or specialized forms as procurement, paperwork, financial, and intergovernmental
management.

The preparation of our review of BOB/OMB internal reorganizations, as source
note citations indicate, was based upon library research, i.e. the examination of
published scholarly studies and official government literature. This is an important
limitation for our presentation. For example, we did not consult intemal BOB/OMB
records or conduct any interviews with present or former BOB/OMB officials.
Moreover, the quantity of public literature describing or assessing BOB/OMB
internal reorganizations is limited.

Our review of BOB/OMB internal reorganizations, with a view to the
structuring of BOB/OMB capacity and capability to guide or assess aspects of
management, has been delivered to the subcommittee for its use. We would like to
take this opportunity to reiterate the observations we offer at the end of that review
and to respond to such questions as you may have regarding it.

e The BOB/OMB has experienced an ever changing structuring of management
responsibilities, reconfigurations seeming to occur more and more frequently
with the progression of years after 1950. Over the years, the internal structure
has tended to alternate between two approaches: (1) a bifurcated structure,
with separate sides for management and budget staff; (2) a programmatic
structure, with budget examiners and management staff integrated in various
functional units.

The BOB/OMB has become responsible for various kinds of
management—administrative, intergovernmental, personnel utilization,
procurement, paperwork/information, statistical, regulatory, and financial,
among others—which appear generally to have increased with the progression
of years after 1960. The BOB/OMB has met these responsibilities in various
ways—e.g., analyses and evaluations, coordination, and clearance—with
shifting resources.

e Especially since the early 1960s, when PPBS (or the planning-programming-
budgeting system) was introduced throughout the executive branch, the
BOB/OMB has been required by successive administrations to adopt and
adapt to a variety of changing arrangements for planning and budgeting.
While these frameworks generally shared an orientation toward objectives and
outcomes, each system entailed some modification of BOB/OMB
management capacity, sometimes for brief periods of only a few years.

Considering the management-budget relationship within the BOB/OMB, it
appears that budget authority has largely been used (or threatened) to
accomplish (or seriously pursue) management objectives (but not vice versa).


97

Mr. INK. First observation I would make, it’s easy for that kind
of activity to become too large. I found that we were more effective
when I had 50 professionals than later on when neither Joe Wright
nor I were there, they had something 175 or more.

The government is more complex, however, than it was then. The
technological impact is greater. There has to be a greater capacity
to utilize modern technology than was true when I was there, so
I suspect the 50 professionals I had would not be sufficient today
primarily for that reason. But I would think probably 100 people,
certainly no more than 125.

Mr. Horn. Any other thoughts, Mr. Wright?

Mr. WRIGHT. Mr. Chairman, I would agree with Dwight Ink.

I would say, first of all, I haven’t totally bought into the fact that
it is a good idea to create an Office of Federal Management away
from OMB, but I believe that something has to be done with a
dedicated organization, whether it be part of OMB or elsewhere,
that is responsible to the President and the Congress.

Now, having said that, you have got a real danger of this grow-
ing out of proportion. And the way it would be done, as Dwight
knows, you go and you'd assign 50 people to it, and that agency
would then start bringing in Getailees from each one of the agen-
cies. And so you have a danger here.

Mr. Ink mentioned before that one of the ways to get real man-
agement improvement done is to take it away from OMB. I dis-
agree with that. Because when I was at OMB, I can remember
some of the greatest progress we made in areas that were fairly
boring, like putting in a general ledger system for the financial ac-
counting systems—and everybody will remember when we were
working on that. That took us 6 years, and I’m not so sure it’s fin-
ished today.

But what we did is, we worked very closely with Mr. Boucher at
GAO, and we worked very closely with GSA and with Office of Per-
sonnel Management. This is something that the central agencies
should work together in a coordinated way on a list of priorities
that is agreed upon with the Congress and is reported on a periodic

asis.

Mr. INK. I agree. I would expect this organization to be part of
the joint financial management and improvement program. The Of-
fice of Federal Management would be a part of that, along with
OPM and so on.

Mr. WRIGHT. But whether it be OFM or part of OMB or whatever
it is, Mr. Chairman, I can remember and people are—there are
people here who remember this. I can remember being in front of
this committee—actually, it was the full committee—asked the
committee to mandate our annual management report. And I did
this on the Senate side for 6 years in a row. The year that I left,
that management report was discontinued.

Now, at that stage, there is no question at OMB we didn’t think
we were smart enough to know what should go in that report be-
cause we didn’t exactly understand what the Congress’ priorities
were, and we were asking for help. Now, at this stage, I think
you’re in a position where you can drive from this subcommittee
much of the change in management improvement that’s going to be


65

able the Federal Government to approach program and administra-
tive management from the perspective of States, communities,
businessmen, and families, not just from the traditional perspective
of Washington.

Mr. Chairman, without at least restoring these t; of functions
to an OFM and appointing managerial experienced leadership, an
OFM would not be effective. With them included with the enor-
mous advantage—and it would be an enormous advantage—of an
independent o fice, this would equip the President far better than
we can today.

Td be app: to 0 respond to questions.

Mr. Horn. Thank you very much for that very precise statement.

[The prepared statement of Mr. Ink follows:]


71

A decisive factor in this view that the leverage of the budget is not needed in most cases
of management improvement or reform occurred in 1973 when most of the management
functions of OMB were transferred to GSA rather than eliminating them. I would
never have recommended transfer to an agency with so little political constituency as
GSA, but to my surprise, we found we could then undertake certain government wide
management efforts which were not possible while the functions were co-located with
the budget in OMB. Under the leadership of John Lordan, for example, GSA was able
to determine that between 25% and 35% of funds appropriated for a number of grant-
in-aid programs were

gobbled up in overhead, a significant finding of considerable interest to our taxpayers.
Yet for two years prior to the transfer of financial management from OMB to GSA, we
had been unable to launch this project in OMB because of our inability to get the budget
units to agree on the design of the project. Each budget group had a different concept,
depending in part on their particular group of programs.

Downside of an OFM

Every reorganization has tradeoffs. Even the most persuasive cases for change need to
recognize the downside of proposed changes. In the case of OFM, the greatest
disadvantage I see is the fact that there are a number of areas in which coordination
with the Office of Federal Budget will be required. GPRA is one example. Another
example is any proposed reorganization which involves transfer of substantial authority
from one department to another. In such cases, all the resources of the Executive
Office of the President usually need to combine their efforts in support of the proposed
change.

In recognition of this coordination need from time to time, I wouid include in the
legislation a provision that the new OFB coordinate with OFM on those budget issues
which have significant management implications, and that OFM coordinate with OFB
on management and organization matters having a significant budget impact.

‘Conclusion

Much of the earlier BOB and OMB strength has eroded over the years, although they
never attained the level of influence and effectiveness which I believe could be realized
through an OFM. The current structure has, in my view, greatly handicapped able
OMB management people, such as John Koskinen and others, in serving the President
effectively. It is my understanding that at a later date this Committee will explore in
greater depth what provisions should be included in any proposal for an Office of
Federal Management. . When the Committee reaches that stage, 1 would urge most
strongly that these earlier EOM roles be restored to the new Office of Federal
Management if it is established. OFM has to develop linkages with groups outside
Washington, and outside the federal government to better assess the effectiveness of

Dwight Ink May 12, 1998 Page 7 of 8


16

information management, and financial management has served to
elevate these issues on the administration’s management agenda.
Mr. Chairman, this concludes our statement. Mr. Posner and I
would be happy to-answer any questions that you or Mr. Kucinich
may have.
prepared statement of Mr. Mihm and Mr. Posner follows:]


99

tools and techniques that are needed to make Government function
effectively from the perspective of people out in Long Beach and
around the country, not just from Washington.

Because one of the problems of the budget process is that it tends
to focus on the perspective of Washington. It tends to, I think, re-
duce flexibility and ability to respond to the needs of an ever-
changing, dynamic society.

Second, I don’t worry about the issue of clout, because I think
there is clout. There are a whole series of ways in which manage-
ment can have clout. Some of them are restoring what they used
to have, such as the drafting and clearance of Presidential Execu-
tive orders, the issuance of the orders out of this Office of Manage-
ment, the clearance of text of legislation, the participation in
planning of programs from a managerial standpoint, the work-
ability of proposed programs, the outreach to the field, the outreach
to Congress.

I used to testify before a whole series of committees in Congress,
and when a new director of the Bureau of the Budget came in, it
wasn’t the budget people that introduced him to the chairman of
the Appropriations Committee, it was me on the management side.
Because we on the management side had those kinds of relation-
ships with both the majority and minority leadership in Congress.

Mr. Horn. Want to add anything, Mr. Wright?

Mr. WRIGHT. Mr. Chairman, I would like to put into context of
what the budget process really is. It is a process of communication
between the President and the Congress and back to the agencies.
It is a communication vehicle. It is also how much things cost.

But, beyond that, it’s saying what you want to do, what are your
policies and what are your priorities. And, unfortunately, it takes
on the context of that’s all we do. It’s not all that’s done, and that
happens to have developed into the way that communication is con-
ducted between our branches.

Now, having said that, OMB—and it’s not just because of the fact
that I am from there and I support them—doesn’t always do things
in the best way. But they’re doing what they've been asked to do,
and they’re doing exactly what they have to in responding to the
urgency of the moment.

So I would just suggest, when you are doing this, that you give
OMB a chance to come in and work within a fairly structured set
of goals and give a proposal as to how they would accomplish what
you think should be done. And if you don’t like it you can bring
in panels like this one to e with them. They are used to argu-
ing. They like fights. That’s the way they spend their life.

if you don’t like it, then that’s fine. But I would suggest that a
real option to do that with a beefed-up OMB that knows exactly
what the Congress wants them to do on a long-term basis and
phase it in over 10 years.
eed Horn. Dr. Light, how about that? What do you think about

at?

Mr. LicHT. I’d recommend that you give OMB a choice, either
support the OFM—or OM—or spend, a year on a desert island with
Dwight Ink, and they will come around to your position in a hurry.
T have nothing else to add here.


21

In 1994, OMB reorganized to integrate its budget analysis, manz._-ment review, and policy
development roles, in an initiative called "OMB 2000." This reor, nization was the most
recent of a series of attempts to bolster OMB's management cap. ‘ity and influence. To
carry out its responsibilities, OMB's Resource Management Offict (RMO) are responsible
for examining agency budget, management, and policy issues. Li dng management
reforms to the budget has, at a minimum, provided the opportuni to include
management issues as part of the president's yearly budget review -a regularly

established framework for making decisions.

The RMOs' efforts are supplemented by three OMB statutory offices :reated by Congress:
(1) the Office of Federal Financial Management (OFFM) to guide the establishment of
systems and controls needed for agencies’ financial management; (2) the Office of Federal
Procurement Policy (OFPP) to provide overall direction for executive agencies’
procurement policies, regulations, and procedures; and (3) the Office of Information and
Regulatory Affairs (OIRA) to direct and oversee agencies’ management of information
resources and reduction of unnecessary paperwork. The OMB 2000 initiative reduced the
statutory offices’ staffing levels and transferred their responsibilities for overseeing
agencies’ implementation of many governmentwide management initiatives to the RMOs.'

‘This increased OMB's reliance on RMO managers and staff to focus on management

‘OIRA retained its oversight responsibilities for regulatory and paperwork issues.
5


50

12

direct congressional intervention in the details of administrative management is a
distinct possibility.

Recent Presidents have tended to not accept or appreciate the legitimate
congressional role in executive management and have followed strategies to
circumvent Congress which, for the most part, have resulted in counter-measures by
Congress to protect their prerogatives and limit presidential discretion. In the
absence of a staff agency to remind Presidents of their long-term institutional
interests, President are prone to listen to political aides and indulge in unwise legal
confrontations with Congress. Though Presidents periodically challenge Congress
on some administrative matters, such as the latter's interpretation of appointments
under the Vacancies Act, there has been little comprehensive leadership provided by
the President or OMB on government-wide management problems.

One of the most important and Jeast reported trends in recent decades has been
the shift of initiative over executive branch management from the President to the
Congress. Paul Light observes: "A recurring theme in making the government work
is just who will lead the effort. Congress has clearly been ascendant in reform during
the post- Watergate period, become the most frequent originator of reform ideas."”
Congressional interest in management has increased just as the President's interest
has declined. Various comprehensive management laws (e.g., Inspector General Act
of 1978) have been initiated and carried through by Congress with the President
simply reacting to proposals of others.

In the 1970s Congress strengthened its institutional capacity by up-grading the
General Accounting Office (GAO) and creating both the Congressional Research
Service and the Congressional Budget Office. Taken together, these congressionally
oriented agencies constitute a potentially powerful instrument for affecting the
management of the executive branch. A review of GAO reports and initiatives in the
management field, for instance, reveal and highlight the increasingly defensive
posture provided by OMB. This imbalance of authority and resources, however, is
not necessarily a positive factor in the overall management equation and it is this
imbalance that advocates argue is being addressed in the proposal for an OFM.

2(__ continued)

HUD Diefendorfer stated: "OMB's review of HUD's budget and programs is handled
primarily in one budget branch of five or six examiners. That is presently [1990}. I think
during the period between 1982 and 1988 it was about four or four-and-a-half on average
people in that branch. This is a very heavy workload for five or six people. The staff can
deal with aggregate program data and address major budget policy issues, but not much
more." U.S, Congress, Senate, Committee on Banking, Housing and Urban Affairs,
HUD/MOD Rehab Investigation: Final Report and Recommendations, Comm. Prt. 124,
101* Congress, 2" session (Washington: GPO, 1990), p. 135. Ronald C. Moe, "The HUD
Scandal and the Case for an OFM," Public Administration Review, 5\(July/August 1991):
298-307.

® Light, Tides of Reform, p. 208. Light provides a supporting chart pointing to shifts
in institutional balance between Congress and the President in the pre-1974 and post-1974
periods.


95

Professor Gilmour, in your written testimony you state that
former associate directors, deputies for management uniformly
think that management functions are not adequately addressed at
OMB. And this may indicate that we must improve management
at OMB and we must work to elevate its stature, but it does not
demonstrate that a separate agency for management will be more
effective. Do you believe that they would all support this proposal?

Mr. Gitmour. I think that was the point that, of those that I
met—I think I met them all and had a good chance to chat with
them—all of them have come away from the experience dis-
appointed at what they were able to do.

low much along the lines that you’ve heard from Dwight Ink,
they felt that they were stymied there, were unable to fulfill the
mandate of your legislation. If I might look at your list, I’m sur-
prised it’s as long as it is, given the strengths on what we used to
call the management side of the House left at OMB.

It looks like a long list, gn that strength, and yet it misses
some very major things. I don’t see a thing about organization on
there. Not only are there major problems in government organiza-
tion as we usually think about it but today, having come down here
from Connecticut, I can tell you that last week our State folks were
wrestling with a lot of problems that have been sent back to them
in various agencies.

Our Public Health Agency, our Environmental Protection Agen-
cy, among others, tried to look at a set of questions that have been
pushed back at the States without any particular guidance on what

would characterize as a major organizational problem, organiza-
tion for a set of management problems in intergovernmental rela-
tions. There is simply no one at OMB these days to address those
problems, and the States are certainly not getting advice or assist-
ance from OMB today.

Mr. Kucinicu. Thank you, Dr. Gilmour.

There are—and we didn’t have this on another chart but you are
familiar—interagency objectives as well as agencies’ specific objec-
tives which flow from the objectives that are listed there.

Just the governmentwide performance plan that—I was able to
get preparation for this from the Executive Office and Office of
Budget and Management, fiscal year 1999—lays out not simply the
priority management objectives that are there on the chart but also
interagency objectives that include year 2000, GPRA, financial
management, information technology, and more agency-specific ob-
jectives that have to do with various milestones in Defense, Edu-
cation, Energy, et cetera.

So that’s what I was referring to, and thanks to each of the gen-
tlemen for their very valuable insight on this.

Thank you.

Mr. Horn. One of the problems we will face if this is pursued,
as I think it should be, will be, what the size of this agency be and
do we need to create another agency even if its in the Executive
Office of the President? And I just wonder, based on history, how
effective can they be, given a certain level of personnel?

I realize we've imposed other duties since the management staff
was at its high under Roosevelt, Truman, and Eisenhower. It was
a very small group, as I recall. They were at the President’s service


33

reinforcement of important policies. For example, Congress'—and in particular this
Subcommittee's—attention to the Year 2000 problem, information management, and
financial management, has served to elevate the problem on the administration's

management agenda.

Separate from the policy d

ions concerning how best to organize and focus attention
on governmentwide federal management issues, there are some intermediate steps that
OMB could take to clarify its responsibilities and improve federal management. For
example, OMB could more clearly describe the management results it is trying to achieve,
and how it can be held accountable for these results, in its strategic and annual
performance plans. Many of OMB's strategic and annual goals were not as results-
oriented as they could be. Continued improvement in OMB's plans would provide
congressional decisionmakers with better information to use in determining the extent to
which OMB is addressing its statutory management and budgetary responsibilities, as well
as in assessing OMB's contributions toward achieving desired results. In our 1995 review
of OMB 2000, we recommended that OMB review the impact of its reorganization as part

of its planned broader assessment of its role in formulating and implementing

management policies for the government. OMB has not formally assessed the

effectiveness, for example, of the different approaches taken by its statutory offices to

promote the integration of management and budget issues. We believe it is important
that OMB understand how the reorganization has affected its capacity to provide

sustained management leadership.


17

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss our observations on the Office of Management
and Budget's (OMB) efforts to carry out its responsibilities to set policy and oversee the

management of the executive branch.

Today, we will cover three major points. First, we will provide an outline of OMB's wide-
ranging management responsibilities and note that the question of whether to integrate or
separate management and budget functions has been long debated. Second, we will
discuss the effectiveness of OMB's management leadership which, in our view, has been
uneven. Finally, we will discuss the factors that appear to contribute to progress in
sustaining improvements in federal management. Our observations are made on the basis

of work we are currently doing and have done at federal agencies and at OMB.

‘As you know, OMB supports the president by preparing the president's budget,
coordinating the president's legislative agenda, leading efforts to improve the management
of the executive branch, and providing policy analysis and advice. Congress has also
enacted many statutes that have assigned to OMB a leadership role for a variety of
governmentwide policy and oversight responsibilities in areas such as financial
management, information resources, and general management, as well as for regulatory

and procurement issues.


61

Tm going to yield to Dr. Ink on that bit of fact, and exactly what
I called it was an early warning system.

The President of the United States should know from the—now
they did a little of it in the sense of these regional councils and all
that. I don’t regard that as a very good keep-your-eyes-open oper-
ation. At least I wasn’t impressed by it. But the President needs
to know when something dumb is being done in the Federal execu-
tive branch so he can deal with it.

I finally got veterans paid, I remember. I was then a universit;
president, sent the President a telegram, and, boy, he hit the ceil-
ing with his staff, with the VA administrator—told them, if you
don’t solve it within 24 hours you're out of here. And we got some
rapid action.

fe had 3,000 veterans that never got their check on my campus.
That was known within the bureaucracy. Nothing percolated up
the hierarchy.

That was the same thing we had in the Transportation Depart-
ment of the year 2000. An outstanding woman professional says,
here’s what we've got to do by the year 2000. Nobody listened to
her. Nobody put her thought into the management tree of the De-
partment of Transportation so the Secretary could have said, “Hey,
wait a minute.” Besides the Federal Highway Administration, do
we have any other problems here, like would it affect the Federal
Aviation Administration? Bingo. You know all the lights should
have been jumping all around the Secretary’s office.

This was under Bush. Nobody was organized to get management
questions to the Secretary, the Chief Operating Officer, or the Dep-
uty or Under Secretary. That disturbs me, and I think it should
disturb any President. Heaven knows, it should disturb a Cabinet
officer that the President thinks is keeping that department in
tune so at least he won’t get nasty complaints about it not working.

I guess that’s what I’m wondering, about how many of the execu-
tive agencies have listened to GAO on high-risk best practices?

Now the other thing I’d like to know from your historical review
by our scholars here, we had in the management group in its early
history—the ’30s, ’40s, and ’50s, in particular—we had primarily
career servants in these jobs that a new President—didn’t matter
if they were Republican or Democrat, liberal or conservative—could
draw on these people as professionals. Now when did that type of
career person stop? And what was BOB and OMB? What'’s your un-
derstanding of that history?

Mr. RELYEA. My general understanding is that politization oc-
curred. That is that leadership in the management area began to
shift, in the 1960s.

Mr. Horn. What parts of the 1960’s?

Mr. RELYEA. In the Kennedy years.

Mr. Horn. The Kennedy years.

Mr. RELYEA. Yeah, Kennedy, Johnson. I’m not—as I sit here, I’m
not exactly certain why, but we have had across Government, as
Presidents came and went, this politicization pressure downward
on agency leadership. It may have been nothing more than that.
It has also led to—you heard our comment building on Paul Light’s
work. I think it has also led to this expansion of political leadership
in the middle management area.


=a
‘one NORCO FIT COMORESS Peseeeting
Congress of the United States ——
House of Representatives SS
COMMITTEE ON GOVERIWENT REFORM ANO OversicHT «era
2167 Ravaura House Ornce BuxLoNa =
Wasvmaron OC 20515-6148 SS
“Creating the Office of Management” —
May 12, 1998
OPENING STATEMENT

REPRESENTATIVE STEPHEN HORN (R-CA)

Chairman, Subcommince on Government Management, :
Information, and Technology

There is little debate over whether the Executive Branch of the Federal
Government needs better management. It does. The question is how to bring about
substantial, enduring improvements. Rather than focus solely on today’s particular set
of problems, we would be wise to prepare for the long term. We must look to the
larger picture of organizational structure.

There are two basic alternatives for management in the Federal Government:
to leave general management responsibilities in the Office of Management and
Budget, where they currently reaide, or to move general management responsibilities
to new Office of Management in the Executive Office of the President with a
Director reporting to the President. OMB would become the Office of Budget with its
Director continuing to report to the President.

This is not a question of theory; it is a question of practicality. Certainly it is
within the power of the President and the Director of the Office of Management and
Budget to bring about serious management improvements within the present
structure. They are free to treat management as a top priority. But, knowing that in
practice management is not always made a top priority, we must set a structure that
endures. Which organizational altemetive, we must ask, is more likely to be
successful when we have a President and a Director of OMB who do not treat
management as a top priority?

In the 77-year history of the Bureau of the Budget and its successor, the Office
of Management and Budget, there have been a number of internal reorganizations to
put greater focus on “management.” Sometimes the management specialists were
centralized in a “Staff” configuration. Sometimes the management specialists were
decentralized into » “Line” configuration, that is, integrated with the budget
examiners, who have responsibility for review of the various budget functions.



93

pacts on families, how it impacts on communities, and how it im-
pacts on businessmen. Looking at Government operations from the
perspective of people outside Washington, I think is very impor-
tant. It’s missing here.

Mr. KucINICcH. So it’s your opinion then that this priority man-
agement objective is mostly inside the beltway.

Mr. Ink. I think——

Mr. Kucinicu. Patty cake?

Mr. INK. I think it’s too much focused inside the beltway.

Now there are things inside the beltway that are very important,
and some of those listed are very important. Some of them—debt
collection I recall—are interesting as examples of financial manage-
ment work we were not able to get under way while we were part
of OMB. It wasn’t until we were exiled to General Services Admin-
istration that we were able to really begin work, which Mr. Wright
later went further with.

It wasn’t until we were out of OMB that we could get focus on
how much overhead takes from the money that Congress appro-
priates for major programs. We couldn’t do that in OMB because
of the budget tunnel vision limitations, the inhibitions of the budg-
et t process. We were able to get some of the most important finan-
cial management improvements under way once we got out—totally
out from the Office of Management and Budget.

Mr. Kucinicu. It’s an interesting testimony. I would wonder, Mr.
Horn, has there ever been buttons appearing on Capitol Hill like
free the OMB 200 managers or whatever? It’s an interesting asser-
tion.

Mr. INK. I do not recommend GSA as the location for this func-
tion, you understand. And I thought it was a mistake to put us in
GSA. But the fact is, we found to my surprise and everybody else’s,
that there were things we could do in a weak agency such as GSA
outside the Executive Office that we could not accomplish when we
were too close to the budget process, including financial manage-
ment initiatives.

Mr. Kucinicu. And is this something that you think is inherent?
It has nothing to do with appropriate resources?

Mr. INK. Yes, I think it’s inherent in the budget process—not the
budget examiners who are now program examiners. These are
some of the most talented people you will find anywhere in Govern-
ment, and their perspective and their interests are broader than
the system within which they function.

Mr. Kucinicu. Let’s go back to this priority management objec-
tive. You just would dismiss the whole paradigm, is that what
you’re saying? That this structure doesn’t work because it doesn’t
include people?

Mr. Ink. I wasn’t dismissing it. You asked me if there is some-
thing missing, and I gave you an example of something very impor-
tant that I think is missing.

Another thing that is missing is the kinds of things that Mr. Moe
talked about—all these crosscutting problems and issues and the
crosscutting laws. You don’t have a crosscutting focus any more.
You never had it to the extent that an Office of Federal Manage-
ment would provide, but you have it even less now than you used
to have some years ago.


38

ship. While the control element is always present, it is more accu-
rate to say that the mission of OFM would be to increase the ca-
pacity of managers to manage and agencies to produce.

Capacity building is an ambitious and sophisticated goal. To
build the capacity of government to implement the laws, it is nec-
essary to have OFM evelop and apply sensible management direc-
tives and practices. OFM should write the Executive orders having
to do with management.

The principal objective in creating an OFM, according to its sup-
orters, is to shift the focus of executive branch management away
from control and the budget and toward capacity building. Building

managerial capacity within the executive branch requires not only
an investment in people, resources, and systems, but some sophis-
tication about the nature of management in the governmental sec-

r.

For example, as the executive branch relies more on third-party
delivery of services like private contractors, the management re-
quirements not only do they not subside but they have to go up to
a much higher level of sophistication than is the case when an ac-
tivity is performed in-house.

The assertion that somehow the Federal Government is like a
large private corporation—General Electric for some reason is al-
ways selected as an example—and should be managed like one is
not only misleading but, worse, it’s a myth. Managing complex sys-
tems of laws, organizations, people, and technology under public
scrutiny is a substantially more difficult task than running a busi-
ness; and there is no corporation in this country that has a board
of directors as tough as the Congress of the United States.

So, in concluding, may I say this? Whether by intention or ne-
glect, recent Presidents have generally been ineffective managers;
and the negative results have been cumulative. Presidents need to
recognize anew that their fundamental constitutional responsibility
is to ensure that the laws are faithfully executed, not to encou
managers to ignore them in the form of saying: We want you to be
a risk taker.

The foremost tool by which a President can meet his constitu-
tional responsibilities and hold accountable the world’s most com-
plex political institution is through high quality, conceptual,
sound general management laws. ‘The laws however are not self-
executing. The need for a professional, nonpartisan cadre of man-
agement specialists to implement these laws is critical. Sound laws
and quality personnel are the necessary, although not sufficient,
basis upon which the President and his staff may become full man-
agers of the executive branch.

To build a competent government requires a long-term commit-
ment, one lasting over several presidencies and one transcending

artisanship and political philosophy. Such a commitment can only

met witl strong institutional support, the kind of support that
advocates of an OFM believe to be possible. Competent government
is simply a necessity if the United States is to retain its pre-
eminent status into the 21st century.

Thank you.

Mr. Horn. We thank you.

[The prepared statement of Mr. Moe follows:]


100

Mr. GiLMour. Mr. Chairman, one of the things that has been
mentioned in passing but deserves some underscoring is the impor-
tance of the relationship between the management function in the
Executive Office of the President and the Congress. Congress is so
deeply involved now in implementation—the pejorative term is
“micromanagement.” But in a major study that NAPA did a few
years back it was clear and rather surprising to a number involved
that Congress was deeply involved in management implementation
issues primarily because there were failures in management, and
serious management difficulties. That will always be the case.
Where there is a vacuum, Congress will fill it.

Why not anticipate, then, management difficulties with an Office
of Management? And have that office, in part, reporting—as, in
fact, OMB did report to the Congress on management matters back
in the 1980’s—but report according to priorities, work with the
Congress and with this committee and its counterpart so as to keep
a hand on the pulse of management issues before they become
management crises.

Mr. Horn. Very good.

I had exactly your views, Mr. Wright. I testified on the Budget
Act in 1974, and I’ve known people down there ever since Eisen-
hower, and I’ve known a few Truman holdovers. And it is clear to
me that, while I was an enthusiast for thinking that t putting the
“M” in OMB would solve the problem, it hasn’t happen

It doesn’t matter how many goals you five them. You have got
one big bureaucracy driven by a $5.3 trillion national debt. That
is full-time work. You have got a budget to be balanced every year.
That’s full-time work.

The fact is, the management has just not been there. That is not
one of the priorities. It shouldn’t be. There are completely different
types of people. A President should get to head OMB if manage-
ment is to stay there, because management isn’t doing much, and
they haven’t tackled some of the real problems. Nothing to do with
party or nothing to do with ideologies, as J said earlier.

It seems to me that the President needs to have tools that he can
use to perform his function as the Chief Executive of the United
States, and the President doesn’t have those tools. The question is,
How do we give him those tools?

The Nixon system simply hasn’t worked. And you might have one
or two little teeny weeny things you can cite to me. That isn’t
enough in a complicated Government that has thousands of prob-
lems out there in terms of the implementation, the delivery of pro-
grams for the average citizen.

What we see in New Zealand and Australia, we haven’t done
halfway what they have done. Granted, they are very small govern-
ments. The State of Oregon is doing what we should be doing in
terms of figuring out with various programs, working with agency
heads which would help make sure that peopl at there are
benchmarks; are these programs working or aren’t they? That is
very important.

That is not just a budget question, though. It is a management
question. The budget examiner’s role, we don’t want to mess
around with. But we do want some people that the President can


4)
3

should be separate in practice. In fact, critics of the current OMB and the integration
of management issues and personnel into budgetary processes argue that management
values and issues can only be addressed properly if management is institutionally
separate from the budget.’ The experiment with an integrated OMB is judged by
many to be a failed experiment and that today crucial management and institutional
issues are being addressed in a perfunctory way or not at all.

The distinctions between the budgetary and management cultures are genuine.
The budgetary culture necessarily and properly has a short-term perspective in which
future resource allocation measured in financial terms is critical. It is a highly
politicized process that emphasizes control mechanisms. The crucial variable in the
budgetary process is annual "scoring" which often imposes relatively arbitrary limits
on agency management to meet macro-financial objectives.

Management, on the other hand, is a culture that tends to operate with a long-
term perspective and seeks to maximize the capacity of institutions to perform their
statutory mission. Thus, management may seek to "invest" in management choices
by making long-term, prospective decisions. The principal tool of Federal
management is the 80 or so general management laws which assist or diminish,
depending on the conceptual quality of the laws, the capabilities of agency
management.’ Immediate budgetary interests and constraints are necessarily
influential, but they are only one of the factors that are critical in the management
equation.

7 Dwight Ink, one-time President of the Institute for Public Administration, is someone
who believes that management must be separate from budgetary priorities to be effective.
"Having been responsible for the drafting of the reorganization plan establishing OMB and
having had responsibility for defending that proposed agency before a skeptical Congress,
which I would say in retrospect was a very serious mistake on my part, I have a very special
interest in this subject. I also happen to have headed the management effort under both the
Bureau of the Budget and the Office of Management and Budget... I do not believe that the
M can every truly succeed while part of OMB, and... I have long advocated a separate
OFM.

.e management side has to be able to establish its own agenda in support of the
presidential and congressional policies rather than merely serving in a support role to the
budget process.” U.S. Congress, Senate, Committee on Governmental Affairs, OMB's
Response to Government Management Failures, Hearmgs, 101" Congress, 2nd session
(Washington: GPO, 1991), p. 29.

* According to Paul Light: "[S]enior members of the National Academy of Public
Administration (NAPA) have argued for the creation of an entirely new Office of Federal
Management, the argument being that budget will always crowd out management. Far better
to have the M ignored on its own than completely submerged by budget. After waiting three
decades for OMB to begin the rebuilding, it appears that advocates of a separate office
operating elsewhere in the Executive Office of the President have the winning argument.”
The Tides of Reform (New Haven: Yale University Press, 1997), p. 228.

° U.S. Library of Congress, Congressional Research Service, General Management
Laws: A Selective Compendium ed. Ronald C. Moe, CRS Rept. 97-613 (Washington: CRS,
1997).