Management Reform: Implementation of the National Performance Review's Recommendations
Released: 1994-12-05T00:00:00

Letter

Observations About NPR Implementation

The recommendations NPR made in its September 1993 report address an amalgam of issues and propose a range of solutions. Some of the recommendations could be implemented relatively easily (e.g., “create an interagency regulatory coordinating group”); others will take years to put in place (e.g., “fully integrate budget, financial, and program information”). Some of the recommendations were very broad (e.g., “redefine and restructure OPM’s functional responsibilities”); others were more specific (e.g., “establish a hardrock mine reclamation fund”). Some recommendations cut to the core of how government operates (e.g., “improve legislative-executive branch relationship”); others, while important, were on relatively tangential topics (e.g., “establish federal firearms license user fees to cover costs”). Because of these differences, we assessed NPR’s progress recommendation by recommendation. Although we present some summary statistics, the diverse scope of the recommendations should be kept in mind in interpreting NPR’s overall progress.

Most Recommendations Acted Upon, but Few Fully Implemented

At least some action had been taken to implement 355 (93 percent) of the 384 NPR recommendations when we completed our analysis. Of these,

15 (4 percent) had been fully implemented;

143 (37 percent) had been partially implemented;

193 (50 percent) were acted upon in some manner (e.g., legislation was introduced or the agency was in the process of making suggested changes), but the action had not proceeded to the point that we considered any of the recommendations’ goals to have been achieved; and

6 (2 percent) were acted upon in a manner generally consistent with the recommendations’ purposes, although not in the manner NPR suggested.

Of the remaining 27 recommendations, no action had been taken to implement 18 (5 percent), and we had insufficient information to judge the status of 9 recommendations (2 percent).

Mode of Recommendation Implementation Varied

A variety of types of actions have been taken to attempt to implement the NPR recommendations. The most common type was action by a particular agency or set of agencies; of the 384 recommendations, at least 292 were acted upon in this manner. The second most common mode of action was legislative activity; bills were introduced regarding at least 169 recommendations and legislation was enacted regarding at least 83 recommendations. At least 86 recommendations were acted on via executive orders, presidential memoranda/directives, or other types of presidential action.

Some Implementation Actions Began Prior to the NPR Report

Actions were already under way to implement a number of the recommendations before the recommendations were made in the September 1993 NPR report. For example, one of the actions NPR recommended to improve federal regulatory systems stated that regulatory agencies should “rank the seriousness of environmental, health, or safety risks.” However, as the NPR accompanying report noted, the Environmental Protection Agency published a rank-order listing of environmental risks in 1987. In some cases, the NPR recommendations themselves recognized that such actions were already under way. For example, the Department of the Treasury recommendation to “increase IRS collections through better compliance efforts” said NPR “supports the current efforts of the IRS . . . to improve voluntary compliance and other efforts to collect taxes already owed to the federal government.” Thus, NPR cannot claim total credit for the implementation of some of the recommendations. However, in some cases the designation of an issue as an NPR recommendation did seem to stimulate action in areas that had been relatively dormant. For example, the repeal of the wine and flavors tax credit had been recommended in the past, but since NPR made its recommendation, legislation has been drafted to repeal the credit.

GAO Generally Agrees With Most NPR Recommendations

In our December 1993 report on NPR, we said that NPR emphasized many of the basic themes that we have stressed for years and that we generally agreed with most of its recommendations. Our reassessment of NPR’s recommendations in light of the release of accompanying reports for most of the NPR issue areas and the completion of additional GAO work has generally confirmed that level of agreement. We now “agree” or “generally agree” with more than three-fourths (295) of the 384 NPR recommendations.

However, in a few cases our reconsideration resulted in our disagreeing with recommendations. Whereas we disagreed with only one NPR recommendation in our December 1993 report, we now disagree with three recommendations: (1) that to allow power marketing administrations to recover more operating costs would “increase electrical power revenues” at the Department of Energy (DOE04), (2) to “create a boundary-spanning workforce development council” at the Department of Labor (DOL09), and (3) to allow the Small Business Administration to “guarantee loans made by banks to nonprofit intermediaries” (SBA05). We still have insufficient information to comment on another 86 recommendations.

Many Recommendations With Potential Savings Have Not Been Implemented

A number of the recommendations that NPR said would yield substantial budget savings between fiscal years 1995 and 1999 have not been implemented. These recommendations, and the savings NPR said would accrue during this period, include those to improve Social Security Administration disability claims processing (HHS06)—$4.01 billion, redirect Department of Energy laboratories to post-Cold War priorities (DOE06)—$2.15 billion, institute and collect user fees on the Food and Drug Administration’s inspection and approval processes (HHS10)—$1.44 billion, and administer the employment and training requirements for food stamp recipients more effectively and efficiently (USDA05)—$1.04 billion.

We agree or generally agree with all of these recommendations, but none of them has been even partially implemented. The Congressional Budget Office has not independently assessed the potential budget savings associated with these recommendations, so it is not clear whether NPR’s savings estimates are accurate. Consensus is needed regarding which NPR recommendations hold the greatest promise for significant budget savings. Prompt action should then be taken to consider those recommendations.

Many Management Issues Not Addressed by NPR Recommendations

The 384 NPR recommendations touch upon a wide range of issues in need of improved management. However, many critical management issues were not discussed in NPR’s report. For example, although the NPR recommendations were related to 13 of the 18 GAO-designated high-risk areas and 34 of the 84 OMB-designated high-risk areas, the recommendations did not touch upon such high-risk issues as the Farmers Home Administration’s farm loan programs, defense weapon systems acquisition, defense contract pricing, defense inventory management, program monitoring at the Department of Education, nuclear safety or waste storage and disposal at the Department of Energy, grantee systems and financial controls at the Employment and Training acquisition systems at the Federal Aviation Administration (FAA), and direct and guaranteed loan programs at the Department of Veterans Affairs.

The NPR recommendations also did not address nearly three-fourths of what we consider the most important management problems in 23 federal agencies. For example, in addition to many of the high-risk areas discussed previously, problem areas not considered by NPR include lack of effective controls over Department of Defense disbursements, weak internal control procedures and inadequate managerial information systems within the Food and Drug Administration, inadequate project management and planning of the Department of Energy, shortfalls in FAA’s airline inspection program.

Identifying these management issues that were not addressed by the NPR recommendations does not mean that the recommendations NPR made are not important or appropriate. Our general agreement with most of the recommendations illustrates our support for the administration’s effort and our belief that the vast majority of the recommendations should be implemented as quickly as possible. We highlight these other issues to demonstrate that full implementation of the NPR recommendations is not all that is needed to improve government management. The issues not covered by the NPR recommendations also represent significant additional opportunities to make the government “work better and cost less.”

Executive- Congressional Partnership, Strong Leadership, and Attention to Agencies’ Capacities Still Needed

In our December 1993 report, we emphasized three themes that we believed were crucial to the long-range success of the NPR effort: (1) the administration must work in partnership with Congress, (2) attention should be paid to agencies’ capacities to take on the additional responsibilities NPR envisions, and (3) sustained attention is needed from top political and career leadership. Events during the past year have confirmed the importance of these issues.

According to NPR staff, 173 of the 384 recommendations require legislative action in order to be fully implemented. However, at least tacit approval by Congress is necessary to implement virtually all of the recommendations. Executive-congressional cooperation has been evident regarding certain issues, such as procurement reform, expansion of financial management initiatives throughout the government, and authorization for employee buyouts to allow agencies to downsize. However, more efforts toward executive-congressional cooperation are needed. At least 106 of the 173 recommendations NPR said required legislative action have not been implemented.

Even in those areas in which the executive and legislative branches worked together, they sometimes disagreed over goals or approaches. For example, while Congress authorized buyouts as a means of downsizing the federal workforce, it also limited staff reductions in certain agencies and occupational categories—actions that officials at the Office of Management and Budget (OMB) said make it more difficult to achieve the overall downsizing goals. We believe that, to implement some of the more contentious and difficult changes NPR recommended, Congress and the administration must develop mutually agreed on goals and implementation strategies. The administration and Congress need to do more joint problem solving if NPR recommendations are to continue to be implemented.

We also remain concerned about whether agencies have the processes, systems, and qualified staff needed to perform their current missions, let alone take on the additional responsibilities NPR envisions in a downsized, decentralized, and deregulated environment. The downsizing of the federal workforce that NPR envisioned has begun. OMB estimates that 71,000 full-time equivalent positions were eliminated by the end of fiscal year 1994. Further reductions over the next 4 years are expected to bring the federal workforce to its lowest level since the mid-1960s. However,

NPR’s original goal of cutting more than 250,000 positions from the federal workforce was not the result of careful workforce planning; agencies’ workforce reductions, in many cases, have not been preceded by the implementation of changes in work processes that NPR said would enable the cuts to occur;

11 of 30 agencies we surveyed earlier this year said that they had not targeted the buyouts they used to encourage downsizing on the “management control” positions NPR said should be reduced; and some agencies have not ensured that critical skills needed for program performance and the prevention of mismanagement are not lost in their downsizing efforts.

We support efforts to move to a smaller, more efficient government. However, we believe that any staff reductions should be done strategically, with outcome-based strategic goals and sound workforce plans being the cornerstones of agencies’ downsizing strategies. We also believe that agencies must reengineer outdated systems and structures and enhance the quality of the remaining staff to ensure that downsizing does not diminish program performance and increase the potential for fraud, waste, and abuse. Without such changes, it will not be possible to achieve many NPR objectives or correct other federal management problems. Reductions in staff without careful workforce planning and without making the changes in existing work processes that can permit those reductions to occur may even exacerbate existing problems and place the overall NPR effort in jeopardy.

Finally, it is clear that, as the Vice President said, full implementation of many of the NPR recommendations will take years. Therefore, agencies’ political and career leaders must take a strong role in creating and guiding these long-term management improvement efforts. The performance agreements signed by eight departmental secretaries are examples of the type of leadership needed and are good first steps in this endeavor. Agreements that concentrate on the agencies’ desired outcomes can serve as guides for performance improvement. However, twice that number of other departmental and agency executives were supposed to have signed such agreements but have not yet done so. Also, most of the agreements signed thus far lack the specificity needed to ensure effective guidance for agency downsizing initiatives. Commitment and leadership by senior career executives are also critical to the success of the NPR effort, especially when one considers that the median tenure of senior political appointees is about 2 years. Career managers can provide the long-term focus needed to institutionalize NPR’s reforms that political executives’ more limited tenure does not permit.

Reinvented Government Requires a Change in Management Focus

The NPR report’s recommendations were organized around four general principles: cutting red tape, putting customers first, empowering employees to get results, and cutting back to basics. Some progress has been made toward each of these principles. For example, recent changes in the federal procurement system will reduce some of the red tape involved in federal agencies’ acquisition systems. A number of federal agencies have made public commitments to improve customer service, and OMB has streamlined the clearance process for agencies’ voluntary customer surveys. The Department of Housing and Urban Development has eliminated its regional offices in an effort to improve accountability between headquarters and field office staff. However, it is not always clear whether the red tape that is to be eliminated also serves a useful purpose, who agencies’ customers are, whether accountability and internal controls will remain when employees are empowered, and what nonbasic programs should be eliminated.

NPR performed a service in highlighting many problems that needed to be addressed and recommending solutions to these problems. However, to be successful in the long run, NPR will need to sharpen its focus and bind the recommendations together into a more coherent framework that can better permit the government reform movement to take root and flourish.

The needed framework is one that will produce a basic change in the way government agencies and programs are managed by the executive branch and overseen by Congress. Today, government management primarily focuses on efficient use of inputs (e.g., the number of dollars or staff allotted to an agency), adherence to legislative or agency-developed rules, and the accomplishment of outputs (e.g., the number of inspections completed or the number of claims processed). Good managers are viewed as those who wisely manage their resources, follow agency procedures, and perform the requisite number of output-based tasks. A reinvented government, while not ignoring input and process measures, should focus more on the accomplishment of programmatic results. For example, in addition to being concerned about the number of staff assigned to an issue or the number of enforcement actions taken, those interested in effective government management should also focus on whether the agency’s mission (e.g., safer streets, effective collection of taxes, reduced infant mortality) is being accomplished.

A number of NPR recommendations were intended to achieve more results-oriented management. For example, NPR recommended that the

Agency for International Development reengineer management of its projects and programs to emphasize program results (AID06);

Federal Emergency Management Agency create results-oriented incentives to reduce the costs of a disaster (FEMA03);

Department of Labor shift the focus of the unemployment insurance benefits quality control program from error measurement to a constructive use of results (DOL21);

National Aeronautics and Space Administration’s measurement of technology transfer focus on results, not just levels of activity (NASA02); and

Environmental Protection Agency establish measurable goals, performance standards, and strategic planning (EPA07).

Although these recommendations were results oriented, the NPR report did not clearly emphasize that these types of changes should be the centerpiece of management reform. As the Brookings Institution’s study of reinventing government said, the long-term success of NPR requires “a force at the center of government . . . to focus government on results and avoid having the reform spin off into scores of different, unconnected directions.”

Several Factors Needed to Change Management Focus

Our work indicates that several factors are necessary to make the transition to a reinvented, results-oriented government. First, agencies’ goals must be clearly stated in outcome-based terms and means developed to measure progress toward those goals. Second, decisionmakers must have information—programmatic, financial, and operational—to allow them to know whether agencies’ goals are being achieved and systems to bring that information to decisionmakers in a timely manner. Finally, and perhaps most importantly, structures and processes need to be established and used to reinforce the focus on outcome-based management.

The legal imperatives needed to bring about a great deal of government reinvention are already in place. The Government Performance and Results Act of 1993 (GPRA) requires federal agencies to develop strategic plans by fiscal year 1998; prepare annual plans setting performance goals beginning with fiscal year report annually on actual performance toward achieving those goals, with the first report due in March 2000.

As a result of these requirements, greater emphasis should be placed on the results or outcomes of government programs. The intent of GPRA is to improve the efficiency and effectiveness of federal programs and services by requiring that managers set program performance goals and measure results. Federal managers may also propose waivers of certain administrative requirements that hinder their ability to achieve these goals in return for increased accountability for results. As will be discussed later, Congress should be involved in the process of setting agencies’ goals and developing appropriate performance measures.

Another source of the information needed about government performance should be the annual audited financial statement required under the Chief Financial Officers (CFO) Act. Without this information, legislative and executive branch leaders have been crippled in their ability to control costs, evaluate performance, or implement performance management improvements such as those envisioned in GPRA. The Government Management Reform Act of 1994 recently expanded the CFO Act’s requirements to cover the entire operations of all 24 CFO Act agencies and to require a consolidated financial statement of executive branch agencies beginning in fiscal year 1997. We strongly support these changes.

As noted previously, outcome-based management and reinvented government also require the development of and investment in information systems to collect and transmit programmatic and financial information to decisionmakers. The federal government’s record of successfully implementing critical information systems to support cost reduction and service improvements is poor. For years, agencies have experienced unacceptable rates of project failure, delay, and overspending and shown little evidence of returns on the public’s large investment in this area. Only with major shifts in the strategic processes through which information and technology assets are managed will the possibilities offered by modern information technology be realized. The best practices used by leaders in the field of information technology can provide valuable lessons to government in this regard.

Outcome-based goals, accurate performance data, and state-of-the-art information systems are of little value unless they are used by decisionmakers. Therefore, leaders in both the executive and legislative branches of government must also focus on achieving results. OMB and Congress, like agency managers, have historically focused on inputs, processes, and outputs. However, changes currently under way at OMB have the potential to alter that focus in the executive branch. The reorganization of the agency under the banner of “OMB 2000” and the associated melding of the management and budget roles of the agency represent an opportunity for OMB to focus on management and programmatic results during the budget process. If this change is accomplished, agencies may be expected to state, in outcome-based terms, what can be expected given certain budgetary levels. Agencies could then be held accountable for producing specific results from their programs. How implementation of OMB 2000 occurs may have a great impact on the success or failure of results-oriented management.

Similar changes are needed in the authorization, appropriation, and oversight activities of Congress. For example, some agencies’ missions are legislatively defined in multiple and sometimes conflicting ways. As a case in point, the Agency for International Development (AID) currently has nearly 40 legislative missions, from agricultural development to furthering human rights. These varied missions create confusion as to what Congress intends AID to accomplish and make it difficult to hold the agency accountable for accomplishing its objectives. For AID to clearly state and accomplish its mission, Congress needs to clarify its legislative underpinnings.

Also, although some congressional oversight has focused on agencies’ performance, a great deal of Congress’ attention has been devoted to the process of management rather than on the results of management. NPR clearly envisioned changes in that focus when it recommended that Congress reduce “overitemization” in appropriation accounts and align those accounts with programs (BGT03), eliminate employment ceilings and floors by allowing agencies to manage within their budgets (BGT04), reduce procedural restrictions such as those on the Department of Housing and Urban Development’s sale of multifamily properties (HUD02), and reduce the number of congressionally mandated reports (SMC06).

One reason for Congress’ focus on agency processes has been the general absence of reliable performance data. The implementation of GPRA and the expansion of the CFO Act should help alleviate this problem and can serve as the means by which Congress can better focus on results. However, the development of performance data and their use by Congress are mutually reinforcing. The long-term success of GPRA and the movement to a new mode of government management and accountability depends on Congress having the requisite data and moving from a focus on inputs, outputs, and procedural issues to an emphasis on establishing clear agency missions and goals and focusing on outcomes and results.

The experiences of various states and foreign countries that are among the leaders in management reform suggest that a movement to results-oriented management will not be easy or quickly accomplished. We also realize that outcome-based measures of government performance are more appropriate and are more easily set in some areas than in others. While the challenges are difficult, we believe that the potential benefits from a change in government management are great and we are encouraged by the initial progress that has been made.

Objectives, Scope, and Methodology

Our primary objectives in this assignment were to (1) assess the implementation of the NPR recommendations 1 year after their publication and (2) to reassess our December 1993 comments regarding those recommendations in light of the publication of NPR accompanying reports and our additional audit work. To accomplish the first objective, we used our completed and ongoing work to place each of the 384 NPR recommendations into 1 of the following 6 implementation categories: (1) Fully Implemented. The entire recommendation and/or all action items in a related accompanying report have been fulfilled. (2) Partially Implemented. The recommendation and/or associated action items have been implemented in part but not in total. (3) Not Implemented—Action Taken. No part of the recommendation or associated action items has been implemented, but some action has been taken to implement the recommendation and/or the action items. For example, if legislation has been introduced that would address the recommendation but has not been enacted into law, we categorized the recommendation as “not implemented—action taken.” (4) Not Implemented—No Action Taken. No part of the recommendation or associated action items has been implemented, and no action has occurred toward the implementation of the recommendation or the action items. (5) Insufficient Information. Insufficient or conflicting evidence prevented us from determining the status of implementation. (6) Other. Implementation action has occurred that, while not responsive to the letter of the recommendation, is generally consistent with its purpose.

We contacted agency officials identified by NPR as responsible for each recommendation and determined what had been done to implement the recommendations. Where appropriate, we also obtained any available documentation of action to implement the recommendations. Unless otherwise noted, the data on implementation of the NPR recommendations were gathered as of September 7, 1994—the 1-year anniversary of the NPR report.

We could assess the implementation status of only one of the recommendations directed toward the intelligence community because the Director of Central Intelligence would not provide the necessary information. The implementation status of some recommendations in other areas were difficult to assess because they called for changes in areas that had not been previously measured or for which measures do not exist. For example, one of the recommendations called for enhanced public awareness and participation in the rulemaking process. Without generally agreed upon measures of public awareness or participation and ways to measure changes before and after the recommendation was made, accurate assessment of the recommendation’s implementation is impossible. In these cases, we noted the basis for our conclusions.

To accomplish our second objective, we used our completed and ongoing work to place each NPR recommendation in one of four comment categories. Those categories and their definitions are as follows: (1) Agree. We agree with the recommendation both in general and in all the particulars. (2) Generally Agree. We generally agree with the recommendation but have some qualifying views or reservations. (3) Disagree. We disagree with the recommendation. (4) Insufficient Information. We have no basis for taking a position on the recommendation because we have not done work in the specific area addressed by the recommendation or the recommendation was too vague for us to comment.

The report is organized in the same manner as the NPR report’s recommendations. The first 22 sections of the report focus on NPR recommendations that were directed toward federal agencies, and the last 16 sections focus on recommendations regarding crosscutting government systems. Within each section there is an overall summary, a GAO contact for all the recommendations in that section, and a discussion of each recommendation. That discussion includes (1) the recommendation and any associated action items, (2) our comments regarding the recommendation, (3) our view of the recommendation’s implementation, and (4) a listing of related GAO products. No action items are listed in sections for which an NPR accompanying report had not been issued by September 7, 1994.

We did not review the NPR’s estimated savings from implementing its recommendations. The Congressional Budget Office already has analyzed some of the NPR recommendations from that perspective. We also did not review the status of approximately 130 “reinvention labs” that have been developed in federal agencies. We plan to discuss these labs in a forthcoming report. Neither did we examine other activities that NPR said was occurring that were not related to their September 1993 recommendations. Our comments regarding each recommendation are based on the wording of the recommendation and any associated action items, not on how the recommendation is being implemented.

Agency Comments

Since this report is primarily based on our issued reports and testimonies, we did not obtain comments from the Office of the Vice President and federal agencies. In many cases, comments from agencies and our evaluations of those comments are contained in the reports cited. We did, however, discuss this report’s contents with senior NPR officials, who suggested some changes that we took into consideration. Overall, they agreed with our findings.

We are sending copies of this report to other congressional committees; the Vice President; and the Director, Office of Management and Budget. Copies will be made available to other interested parties upon request.

If you have any questions about the issues discussed in this report, please contact the appropriate GAO official listed in the sections accompanying this letter.