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Timestamp: 2018-12-16 01:12:29
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Report to the President and Congress from
Pilot Project Nomination Process
Performance Plans and Program Performance Reports
Review of the Pilot Project Nominations and Waivers
Decision Not to Designate Pilot Projects
Performance Budgeting Pilot Projects
Agencies Exempted
Amending the $20 Million Threshold
Developing the Guidance for Strategic Plans
Special Emphasis Reviews
THE FRAMEWORK FOR TAX EXPENDITURE
The schedules in GPRA were initially set in the Summer of 1992, and remained unchanged in subsequent months as first the 102nd Congress, and then the 103rd Congress, considered this legislation. When signed into law a year later on August 3, 1993, the performance measurement pilot project timelines had become compressed and it was impracticable for these pilots to follow a schedule for submission and review similar to that for the performance plans for fiscal year 1999. The fiscal year 1994 performance plan for the pilot projects became a half-year plan covering the period from April 1 through September 30, 1994. Fiscal year 1995 plans would be submitted after Congressional action on the budget was largely done. Fiscal year 1996 plans would be submitted after the President's budget was sent to Congress. (The fiscal year 1999 plans required of agencies throughout the government will be sent to OMB in September, 1997, the equivalent of 6-18 months earlier than the comparable submission schedule for the pilot project annual plans.) These schedule adjustments did not affect the annual program performance reports prepared by these pilot projects.
2. Pilot Project Nomination Process.	The first action taken to carry out GPRA was to begin designating these pilots projects. Two months after GPRA was enacted, OMB Memorandum 94-2 (October 8, 1993) solicited agency nominations of pilot projects. (Attachment A contains a list of all GPRA-related OMB guidance issuances.) This was immediately followed by a memorandum (October 13, 1993) to the agencies from OMB's Deputy Director for Management with additional information regarding these nominations.
While the designations had already doubled the number required by GPRA, OMB invited agencies to nominate additional pilots (OMB Memorandum 94-11, January 31, 1994). These pilots would constitute a second round of designations, and cover fiscal years 1995 and 1996. OMB later sought additional pilots to create a third round of designations. Pilots were particularly sought for major functional activities not covered by the earlier designations.
When the three rounds of performance measurement pilot project designations had ended, all 14 Cabinet departments and an equal number of independent agencies had been designated as pilots. (The Social Security Administration was originally included in the Department of Health and Human Services pilot project designation, but became the 28th agency designated when it became independent of the Department.) The 28 designations included over 70 individual pilots in the departments and agencies. Attachment B is a list of the designated pilot projects by round.
OMB sought to have the pilot projects encompass the great range of functional activities undertaken by different agencies across the government. This scope would be critical to drawing any conclusions on the feasibility of developing and using performance measures in virtually everything the government does. Pilot projects were designated in 28 of the 30 major categories of functional activities. For the two categories in which no pilots were designated -- health care and electric power generation and distribution -- a large set of performance measures already exist and are in use elsewhere.
The list below displays the functional activity categories and the number of pilots designated within each category. The pilots were placed in a category based on the activity primarily done by the pilot. Several pilots are listed in more than one category. These functional activity categories are not the same as the functions and subfunctions appearing in the budget.
Pilots by Functional Activity
3. Designations.	The performance measurement pilot projects became a major initiative of great scope. Approximately a quarter of the entire Federal civilian workforce were covered by the pilots; or, using a different comparison, about ten percent of all civilian, military, and postal employees were covered. In the aggregate, the number of employees in the pilot projects exceeded the total workforce of most national governments, including those that had spent a half-decade or more in moving to a performance-based system of management.
The size of individual pilots ranged from complete agencies to small component organizations. The largest pilots included the entirety of the Internal Revenue Service, Social Security Administration, Defense Logistics Agency, and the Forest Service. Several agencies, for example, the Agriculture and Treasury Departments, covered a large proportion of their programs through individual pilots.
Approximately 10 percent of the individual nominations proposed by an agency to be part of its pilot were not included in the designation. Decisions not to include these as pilots were mainly based on having sufficient coverage of a functional activity by designated pilots; a likelihood that the proposed pilot would not materially contribute to greater knowledge of performance measurement processes; or uncertainty over the substantive scope of the pilot itself. As other individual pilot projects were used in making the designations, no agency was precluded from becoming a pilot because these particular nominations did not become part of the designation.
Over the course of the three year pilot project period, about ten percent of the pilot project designations were withdrawn. The reasons for withdrawing included: reorganization of the component office; an inability to generate performance data from which to set goals and report on actual performance; and program restructuring.
a brief description of the operational processes, skills, and technology, and the human, capital, information, or other resources required to meet the performance goals; and,
For reference, agencies were sent a copy of an Executive branch policy on service contracting and inherently governmental functions. This policy, issued by OMB's Office of Federal Procurement Policy, would guide those agencies who would be aided by non-Federal parties in preparing the pilot project plan or report ( Policy Letter 92-1, September 23, 1992).
Early experience with the performance measurement pilot projects led to a conclusion that all agencies, whether a pilot or not, should begin preparations to meet GPRA requirements well before the September, 1997 date when GPRA comes into effect. Delaying preparations lost the opportunity, afforded by the law's phasing, to experiment with various approaches, gain experience, and expand the amount of performance data.
To advance agency efforts, OMB initiated a series of special reviews for the purpose of developing and using greater amounts of performance information in the budget process. OMB Memorandum 94-26 (August 5, 1994) outlined OMB's intention to use performance data to inform or influence decisions on the fiscal year 1996 Budget. To increase OMB staff understanding and use of performance information, an OMB-wide orientation on performance was held in September, 1994. This marked the first of three OMB-wide discussions covering performance measurement and strategic planning. As part of this first orientation, OMB produced a primer' on performance measurement, containing definitions for different types of measures, attributes of the measures and their application, and illustrative examples of various measures. The primer' as well as other material used for OMB staff was distributed to the agencies for their reference and use (OMB Memorandum 94-33, September 23, 1994).
5. Findings.	The most important conclusion reached on completion of the performance measurement pilot projects is that -- without these pilots and the time afforded agencies across the government to gain practice, understanding, and experience in performance-based management -- there would be little prospect for a successful implementation of GPRA government-wide. The scope and dimension of these pilots affirmed that virtually every activity done by government can be measured in some manner. The measurement may be difficult, it can be imperfect. But very few would concede an inability to measure at all. The performance measurement pilots reflected a volunteered interest in and commitment to this process and these plans and reports by the participating agencies.
Over the course of the three years, improvement was generally seen in the pilot projects' ability to set goals, and measure and report performance against these goals. The improvement was uneven, and not always immediate. Goals often were changed or refined from year to year. While this is to be expected in any pilot project process, it also indicates that the first several years of government-wide implementation will be lumpy as well. Some agencies, often either because of their long-standing use of planning and measurement, or the relative facility in measuring their programs, may appear significantly advanced compared to others. At the beginning of implementation, it would be unrealistic to expect that there will be a uniformly high level of quality of agency plans and reports across the government. With time, and with the ability to compare and adapt successful approaches to performance management and measurement, the overall quality of agency plans and reports should improve significantly.
The pilots also demonstrated basic GPRA concepts. Those few pilots that started without a strategic plan or a sense of strategic direction had a difficult time in defining their performance goals. Without the compass of a strategic plan, uncertainty over where and how to go became a prevalent characteristic.
Frequently, goals in the pilot project plans were, to any practical extent, unmeasurable. These were not expressed in quantitative terms, nor did these goals rely on the alternative form of descriptive statements of a successful and a minimally effective program if a quantitative goal was not appropriate.
Some agencies often substituted the means or processes they would use in achieving a program goal for the program goals. Processes are usually under the direct control of agency managers, and there is often a reluctance to measure what one does not control. Agency staff recurringly voiced concerns over being held accountable for achieving program goals where the actions of other parties will have much greater consequence. Federally funded programs that are administered by States or local governments are a particular area where definition of substantive program goals will be a challenging task for some agencies.
As the process for nominating flexibility pilot projects began, a separate but similar endeavor was well underway. An early priority of the National Performance Review was the creation of Reinvention Labs across the government. These labs sought to re-engineer agency work processes, in part by eliminating burdensome or unnecessary requirements. While many labs emphasized simplifying agency requirements that were self-imposed, approximately a third of all waivers sought by the Labs were from requirements established by other agencies. Receiving a waiver was not predicated on a Reinvention Lab either projecting or reporting the waiver's effect on performance. Waivers associated with being a Reinvention Lab were easier to obtain.
The phasing of the performance measurement pilot projects and the flexibility pilots may have contributed to the relatively small number of nominations and the limited set of waiver requests. Most agencies have concentrated on defining their performance goals, and setting in place the means for measuring their performance against these goals. Without a completed set of performance goals, agency managers cannot assess what waived requirements might contribute to achieving these goals. Agencies continue to develop and refine their performance goals, and until this is largely done, any focus on waivers may be deferred.
6. Decision Not to Designate Pilot Project.	Following agency determinations on the waivers requested by the 14 individual pilot project nominations from the eight agencies, OMB concluded that too few waivers were being authorized to designate any pilot project, and have that pilot serve as a credible test of the managerial accountability and flexibility provisions of GPRA.
Not only were there too few approved waivers, but, by the end of the review, most nominations had no approved waivers. Waiver requests from 11 of the pilot candidates were either denied, mooted because the requirement no longer existed, or authorized outside the GPRA pilot project process. The absence of waivers precluded these nominees from being designated as pilot projects. The National Technical Information Service had one waiver request on which no decision was made, and its other waiver was accommodated outside the pilot project process.
Two pilot projects received multiple approved waivers, the Defense Logistics Agency (DLA) and the Internal Revenue Service (IRS). The DLA had four waivers approved, but these could not be associated with either performance goals or descriptions of program or organizational activities in the agency's performance plan. The IRS also had four waivers approved, and these were similarly of such small scale and effect that no association could be drawn between these waivers and the performance goals and indicators in the IRS annual performance plan. To meet the GPRA requirement that an agency's program performance report include an assessment of the effectiveness of any waiver in achieving a performance goal would have required these two agencies, if designated as pilot projects, to modify their annual performance plan. This modification would have introduced new performance goals at a micro-level, and produced a plan distorted in its presentation of both significant and secondary goals, the latter's appearance warranted only because they are related to a waiver.
OMB concluded that it was better to have no flexibility pilots than to proceed with designations that would be viewed as not being a serious demonstration or test of the managerial flexibility and accountability provisions of GPRA.
The guidance is also likely to request agencies seeking waivers to have their staff work more closely with agency managers to help them define waivers that can make a substantive difference and be used synergistically.
OMB plans to defer the start of the performance budgeting pilot projects by one year. This would reschedule the alternative presentation of the pilot project performance budgets until the fiscal year 2000 budget. A letter sent to the chairmen of the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight discussing this deferral is appended as Attachment C. This deferral affects neither the schedule nor content requirements for agency strategic plans and annual performance plans.
Correlating different levels of performance with different funding levels can be seen as one form of performance budgeting. Performance is measured using a single variable. Another form, outlined in the Senate Committee Report on GPRA envisions the use of multi-variate analysis. In doing this analysis, the performance budgeting pilots would examine the varying performance levels for each measure in a group of measures, and how these levels relate to funding amounts and changes in these amounts. As certain performance levels are emphasized above others, the pilot projects would describe the choices and tradeoffs made in the course of defining the preferred performance levels for a program.
This technique often also known as optimization analysis, is largely beyond the current capacity of many Federal agencies to do.
Agencies designated as a performance budgeting pilot project, and doing multi-variate analysis, should have adequate cost accounting systems. For the programs or operations covered by the pilot projects, the agencies should also possess baseline data for both performance measures and the cost of achieving different performance levels for each measure. This will be needed if agencies are to calculate how marginal changes in funding incrementally affect the performance levels.
A. The Requirements and the Process
OMB is authorized to exempt certain agencies from having to meet the requirements of the Act for strategic plans, annual performance plans, and annual program performance reports (31 U.S.C. S1117). Independent agencies with $20 million or less in annual outlays are eligible for an exemption. On May 16, 1996, OMB issued instructions to agencies on submitting requests for an exemption (OMB Memorandum 96-26). OMB had earlier distributed a draft of these instructions to eligible agencies for their review and comment.
B. Agencies Exempted
Approximately half the agencies requesting an exemption received one. Not every eligible agency sought an exemption; the exempted agencies comprise about a third of the eligible agencies.
The exemption process is not static. As agency resource levels change, they may qualify or lose their eligibility for an exemption. Agencies established in the future may qualify as well. When an agency's exemption ends, they will given a transition period before having to submit the strategic and annual performance plans required by the Act.
C. Amending the $20 Million Threshold
The Committee Report invited OMB to discuss whether an amount higher than $20 million in annual outlays, or some progressive annual adjustment to the amount, is appropriate in establishing eligibility for an agency exemption from GPRA requirements. OMB believes no change in the $20 million amount is needed at this time. All agencies receiving an exemption have annual spending much less than the $20 million qualifying amount. In not exempting agencies with spending nearer $20 million, OMB concluded that these agencies could and should meet the requirements of the Act.
III. STRATEGIC PLANS
A. Developing the Guidance for Strategic Plans
There is no more important element in performance-based management than strategic plans. These plans set the agency's strategic course, its overall programmatic and policy goals, indicate how these goals will be achieved, and are the foundation and framework for implementing all other parts of GPRA. It was critical that guidance covering preparation of these plans be the first task done in proceeding toward government-wide implementation of this legislation.
Nearly three years before strategic plans would be sent to Congress, the process for developing these plans began. On November 18, 1994, OMB sent a memorandum to the heads of selected agencies and the deputy secretaries of Cabinet departments, inviting the agencies to join OMB in a collaborative effort to develop guidance on the preparation and submission of strategic plans. An interagency task group would be established to help prepare this OMB guidance. Relying on an interagency group was not an approach traditionally followed in writing OMB guidance. But, as agency strategic plans were seen primarily as products to be used by the agencies in defining and carrying out their programs, their early and extensive involvement in drafting this guidance would be critical to realizing this end.
The product of the task group and these reviews was the issuance, in September, 1995, of Part 2 to OMB Circular No. A-11, Preparation and Submission of Strategic Plans. Part 2 covered the preparation of strategic plans and their transmittal to Congress and OMB. For many decades, OMB has used Circular No. A-11 to provide agencies with guidance and instructions on preparation and submission of agency budget requests and related budget material. This budget-specific guidance now continues as Part 1 of this Circular. Creating a new Part 2 to this Circular signaled the close linkage existing between GPRA plans and the budget. Providing for early involvement by the agencies and issuing the guidance well in advance of when plans were due were seen as critical pre-conditions to any agency successfully meeting GPRA's strategic planning requirements.
Part 2 was reissued with minor changes in June 1996, and is being reissued in May 1997, with no substantive changes to the strategic planning guidance. As Part 2 covers only the preparation and submission of the initial strategic plan, future guidance will be needed covering requirements for the periodic revision and update of the strategic plan. The lack of any need for change in the guidance reflects the basic soundness of the underlying strategic planning concepts in GPRA.
The strategic plan guidance was designed to provide agencies with substantial flexibility in how plans were formatted and the content presented. Preparation of a plan would be governed by broad parameters, not narrowly-drawn specifications. This would allow agencies of greatly varying size and program responsibility to develop plans that informed the reader, while also serving as an internal guide to agency officials and staff.
Developing a strategic plan should not be a task easily or quickly done. Agencies have followed different paths in developing their plans -- some have started bottom-up, some began top-down, and others have used both approaches, often concurrently. There is no magic route; each agency must find and use an approach that will be successful for that agency.
A model plan was deliberately not prepared, as use of a template might impede agency examination of its role and mission, and development of its goals. As one agency's process might not be successful elsewhere, so also, one agency's plan may not be suitable for another.
B. Congressional Consultation
GPRA requires agencies, when preparing their strategic plan, to consult with Congress, and solicit and consider the views and suggestions of stakeholders, customers, and other potentially interested or affected parties. The Part 2 guidance elaborated on this consultation requirement in two significant ways. First, agencies were instructed to prepare a letter transmitting the completed plan to Congress and OMB, and include in this letter a summary of the general scope and nature of the consultation that was conducted. Second, Part 2 specifies that the transmittal letter also summarize the views of those parties outside the Executive branch disagreeing with the programmatic, policy, or management courses-of-action presented in the completed plan.
On February 25, 1997, the Speaker of the House of Representatives, the Senate Majority Leader, the House Majority Leader, and seven Senate and House Committee chairmen joined in a letter to OMB setting out Congressional expectations for the consultation process under GPRA. This letter, and OMB's March 17, 1997 response to it, became the basis for a second OMB issuance on Congressional consultation. Supplement No. 1 to OMB Memorandum 97-03 (April 14, 1997) appended this correspondence, and contained further instructions on Congressional consultation.
C. Special Emphasis Reviews
Beginning in 1994, OMB has conducted a series of comprehensive reviews focused on performance management and particular aspects of GPRA implementation. These reviews, unprecedented in their nature, have emphasized three main areas: OMB-wide staff training and orientation on performance; strategic plans; and program performance information and measures. Two of the reviews have concentrated on strategic plans: Summer Review in 1996 and the Strategic Assessment that is currently underway.
to assure that agencies are developing plans that meet GPRA requirements, and are aligned with budgets, and other performance- related initiatives going on in the agencies;
to use parts of the strategic plan to frame discussions with the agencies on their proposed annual performance goals;
to identify any steps that should be taken on a multi-agency basis to coordinate and harmonize general goals and objectives in the strategic plans for cross-agency programs and functions.
To prepare for these reviews, an extensive series of OMB-wide staff orientation and discussion sessions were held. From these sessions, OMB developed a set of questions and answers covering the content and policy for strategic and the Summer Review process. These questions and answers were sent to the agencies prior to the start of Summer Review (Supplement No. 1 to OMB Memorandum 96-22, May 31, 1996). OMB further went on to share with the agencies, in advance, OMB's internal instructions for conducting the Review and the questions that agencies might be asked.
After the agency assessments were completed, a letter was sent to the head of each agency participating in the review. The letters outlined a set of findings regarding overall status and progress government-wide, as well as specific comments related to the agency's strategic plan.
The most important conclusion of Summer Review was that most agencies were sufficiently advanced in their planning, and that a sustained, committed effort through the Summer of 1997 should produce plans that meet GPRA requirements. At that mid-1996 point in the development of strategic plans, the effort had become an earnest and substantial undertaking in many agencies.
The Review also identified several areas of concern, which were widespread. These were:
2. Strategic Assessment. Currently ongoing is a strategic assessment of agency goals and commitments. This assessment is being conducted during the Spring of 1997 and is a review jointly being done by the agencies and OMB. A featured part of the strategic assessment is on the agency implementation of GPRA, and the preparation of the strategic plans and the annual performance plans that are due in September. The strategic assessment should generally conclude this June, although follow-through actions from the assessment are expected and will carry through into the future.
IV. THE FRAMEWORK FOR TAX EXPENDITURE ANALYSES
One major set of tax expenditures benefits retirement savings, through employer-provided pensions, individual retirement accounts, Keogh plans and other instruments, such as annuities. These provisions might be evaluated in terms of their effects on boosting retirement incomes and private savings. In considering the provisions' distributional effects, it may be of interest to consider beneficiaries' incomes while retired and over their entire lifetimes.
Individuals also benefit from favorable treatment of employer-provided health insurance. Measures of these benefits could include increased coverage and the distribution of this coverage across different income groups. In principle, the effects of insurance coverage on final outcome measures of actual health (e.g., infant mortality, days of work lost due to illness, or life expectancy) or intermediate outcomes (e.g., use of preventative health care) could also be investigated.
Other provisions principally have income distribution, rather than incentive, effects. For example, tax-favored treatment of social security benefits provides increased incomes to eligible groups; the distribution of these increased incomes may be a useful performance measure. The earned-income tax credit, in contrast, should probably be evaluated both for its effects on labor force participation and its distributional properties.
Housing investment also benefits from tax expenditures, including the mortgage interest deduction and preferential treatment of capital gains on housing. Measures of the effectiveness of these provisions could include consideration of their effects on increasing the extent of home ownership and the quality of housing. The effects of the capital gains provisions in terms of offsetting inflationary gains are also likely to be relevant. Deductibility of State and local property taxes assists with making housing more affordable as well as easing the cost of providing community services through these taxes. Provisions that are intended to promote investment in rental housing could be evaluated for their effects on making rental housing more available and affordable.
A series of tax expenditures also reduce the cost of other forms of investment, both in specific activities -- such as research and experimentation, extractive industries, and certain financial activities -- and more generally, through accelerated depreciation for plant and equipment. These provisions can be evaluated along a number of dimensions. For example, it could be useful to consider the extent of the incentive delivered, by measuring the provisions' effects on the cost of capital (the interest rate which investments must yield to cover their pretax tax costs) and effective tax rates. Another set of measures could reflect the impact of these provisions on the amounts of corresponding forms of investment -- such as research spending, exploration activity, or equipment. A third group of measures could, in turn, consider the provisions' effects on production from these investments -- such as numbers or value of patents, energy production and reserves, and industrial production. Other measures could consider objectives which are less directly attributable but still are ultimate goals, such as assisting the U.S. technological base, energy security, or economic growth.
The Central Intelligence Agency (CIA) is one of several agencies statutorily exempted from having to meet GPRA requirements. Congress asked OMB to assess whether, at some future date, the CIA should be made subject to the Act. OMB consulted with the Agency leadership about this matter, and the CIA agreed to comply voluntarily with the basic provisions of GPRA. No changes to the statute are required to secure this voluntary compliance on the part of the CIA.
VI. AMENDING THE GOVERNMENT PERFORMANCE AND RESULTS ACT
OMB GPRA-RELATED GUIDANCE
M-94-2 (October 8, 1993) Government Performance and Results Act of 1993 (GPRA)
M-94-11 (January 31, 1994) Pilot Projects under the Government Performance and Results Act
M-94-15 (March 3, 1994) Submission of Performance Plans for Pilot Projects (FY 1994 plans)
M- 94-26 (August 5, 1994) FY 1996 Budget Planning Guidance and Use of Performance Information in the FY 1996 Budget Process
M-94-32 (September 23, 1994) Submission of FY 1995 performance plans to OMB
M-94-33 (September 23, 1994) OMB Materials on Performance for pilot projects ( includes primer on performance measures and internal guidance on use of performance information in the FY 1996 budget process)
M-95-01 (October 24, 1994) Submission of Nominations for Managerial Accountability and Flexibility Pilot Projects
M-95-04 (March 3, 1995) Spring Review on Program Performance (included a revised primer on Performance Measurement)
M-95-05 (March 8, 1995) Submission of FY 1996 Performance Plans for Pilot Projects under P.L. 103-62, the Government Performance and Results Act of 1993 (GPRA)
M-95-07 (March 23, 1995) Submission of FY 1994 Program Performance Reports for Pilot Projects under P.L. 103-62, the Government Performance and Results Act of 1993 (GPRA)
M-95-19 (September 14, 1995) Strategic Plans, Budget Formulation and Execution
M-96-18 (March 22, 1996) Submission of FY 1995 Program Performance Reports
M-96-22 (April 11, 1996) Implementation of GPRA (Summer Review and Fall Review)
M-96-22 Supplement 1 (May 31, 1996) Additional information on Summer and Fall Reviews
M-96-22 Supplement 2 (September 9, 1996) Additional information on Summer and Fall Reviews
M-96-26 (May 16, 1996) Exemptions for Selected Agencies from GPRA requirements
M-97-03 (November 12, 1996) Congressional Consultation
M-97-03 Supplement 1 (April 14, 1997) Additional Information on Congressional Consultation
M-97-11 (April 14, 1997) Submission of FY 1996 program performance reports for pilot projects
Social Security Administration # (#subsequently became an independent agency. Pilot designation continued)
I am writing to inform you that we plan to delay, by one year, the start of the performance budgeting pilot projects required by the Government Performance and Results Act (the "Act"). The Committee Report accompanying the Act recognized that implementation would be difficult, and might lead to a need to defer certain provisions.
Delaying the start of this set of pilot projects from fiscal year 1998 to fiscal year 1999 will allow the agencies to concentrate on the more important task of developing their performance plans. Having agencies develop useful performance plans must be our first priority.