Substantial progress has been made in addressing the nation’s environmental problems since the Environmental Protection Agency (EPA) was created in 1970. Among other improvements, some of our most serious air and water quality problems have been alleviated, dangerous pesticides have been banned, and health threats posed by lead in gasoline and paint have been reduced. However, these strides in environmental protection have come to the nation at a growing cost. For example, the costs of pollution abatement and control have risen significantly—from $64 billion in 1973 to over $121 billion in 1994 (constant 1995 dollars). EPA’s top leadership acknowledges that such resource constraints, combined with (1) the increasing complexity of environmental problems and (2) the limited effectiveness of EPA’s traditional medium-by-medium structure to address the full spectrum of pollution problems in an integrated manner, have forced the agency to fundamentally rethink its approach to environmental protection. Toward this end, EPA is currently experimenting with ways to improve its existing program activities and to lay the groundwork for a new, more flexible, integrated system of environmental protection—one that will allow the agency to deliver the highest quality protection possible in the most cost-effective manner. The passage of the Government Performance and Results Act of 1993 (GPRA) has provided further impetus for the agency to improve its management practices, in part through the requirement that it develop measurable program results. To better understand EPA’s initiatives and strategy to implement them, several congressional committees asked that we provide a broad overview of EPA’s reinvention efforts, focusing on (1) what the initiatives are and how the agency is structured to carry them out and (2) what key issues need to be addressed for these initiatives to have their intended effect. EPA was created in 1970 under an executive reorganization plan that combined various environmental components of other federal agencies. This left EPA without a formal overarching mission and statutory framework to guide its activities. Initially, the agency was charged with the general task of cleaning up environmental pollution—giving early attention to air and surface water. As further environmental needs were identified, the Congress enacted laws to address specific pollution problems. As a result, a dozen or so statutes govern the agency’s activities, and several congressional committees are responsible for environmental issues. However, these statutes are not coordinated or integrated, and in some cases they contain differing approaches and reflect different philosophies. Hence, the agency has no overall system for setting priorities across all environmental problems and for identifying and addressing the most critical environmental needs first. In response to these legislative mandates, EPA has organized its activities around environmental media (such as air, water, or land) and the substances it regulates (such as hazardous waste, pesticides, and toxic substances)—resulting in a structure that closely parallels the statutes that authorize its activities. Each of these program offices focuses primarily on implementing medium-specific or substance-specific responsibilities detailed in these statutes, rather than addressing the full range of pollution sources in a cross-cutting manner. The agency’s medium-specific focus can result in both the intended and unintended transfer of pollution from one medium to another. For example, removing contaminants from public sewage systems or industrial smokestacks can create sludge and waste that can themselves be toxic and lead to further air, water, or land pollution. As a result, EPA and others have acknowledged a need for increased attention to such intermedia transfers to ensure that the agency’s pollution reduction strategies have the best overall impact on the environment. While organizing EPA’s activities in this manner has facilitated the implementation of individual environmental statutes and has reduced or prevented many threats to human health and the environment, it has also created problems for the agency. Most significantly, it has limited EPA’s ability (1) to set risk-based priorities across the full spectrum of environmental problems and target its limited resources to the most pressing of these problems and (2) to take into account the cost and feasibility of various approaches to reduce pollution. It has also impaired the agency’s ability to experiment with innovative and more cost-effective ways to address pollution problems, such as pollution prevention (eliminating or minimizing pollution at its source versus containing it at the end-of-the-pipe) or market-based incentives (such as taxes on pollution or trading emission pollution “rights”). Such approaches give polluters financial reasons to reduce pollution without prescribing the methods for doing so. The current structure has also restricted EPA’s ability to exercise flexibility with regulated entities, states, environmental groups, and other stakeholders in the regulatory process. Since at least the mid-1980s, EPA has taken steps to address the problems associated with its medium-specific structure. For example, then-Administrator Lee Thomas—recognizing that environmental problems are complex and interrelated—directed the agency to manage its programs and activities so that they (1) account for the relative risks posed by environmental problems to help ensure that limited resources are directed to the most pressing environmental needs; (2) recognize that pollution control efforts in one medium can result in a transfer of pollution to another (and, when feasible, that pollution should be eliminated or minimized at its source); and (3) lead to the achievement of measurable environmental results. While our 1988 general management review of EPA credited the agency with taking steps to address these concerns, it urged the agency, among other things, to (1) fill important gaps in its efforts to manage for environmental results (including setting priorities in measurable terms and ranking them to ensure that the most pressing needs are addressed first) and (2) establish more effective partnerships with the states, since they serve as the agency’s key partners in implementing environmental programs. Since that time, GAO, EPA’s Science Advisory Board, the National Academy of Public Administration, and other organizations have all pointed to the need to make significantly greater progress in this direction. In our 1991 report, Environmental Protection: Meeting Public Expectations With Limited Resources (GAO/RCED-91-97), for example, we noted that for EPA to achieve environmental goals with limited resources, it needs to (1) link budget priorities to relative risks to the environment and public health rather than rely on public perceptions of risk; (2) measure changes in environmental conditions rather than measure activities (such as the number of permits issued) to obtain meaningful information on the effectiveness of its investments in environmental protection; and (3) combine traditional and innovative approaches (such as pollution prevention and the use of market incentives) to ensure that the most cost-effective methods for controlling pollution are used. The report observed, however, that EPA was hampered in setting priorities across all environmental problems by the lack of integration among environmental statutes. The National Academy of Public Administration (NAPA) came to similar conclusions in its 1995 report, Setting Priorities, Getting Results. In particular, the report noted that EPA lacks a clear statutory mission because it derives its authority from many different statutes. It also noted, among other things, that the agency needs to encourage innovation among its regulated community (localities, states, and industries) to find the most appropriate methods for achieving environmental protection. EPA has responded to these and similar concerns by taking a number of steps to “reinvent” its approach to environmental protection. For example, the agency launched its Common Sense Initiative (CSI) in 1994 to allow industrial sectors (such as printing and metal finishing) and their key stakeholders to work collaboratively to, among other things, (1) identify opportunities to get better environmental results at less cost; (2) streamline permitting, recordkeeping, and reporting requirements; and (3) provide industry with incentives to develop innovative, cost-effective technologies to meet or exceed environmental standards. EPA has also increased the involvement of stakeholders in its decision-making processes. More recently, in March 1995, EPA launched a more comprehensive effort to fundamentally reexamine and reshape its efforts to protect the environment. As noted in a March 1996 progress report on its efforts to reinvent environmental regulation, the agency is presently undertaking a number of initiatives to apply “. . . common sense, flexibility, and creativity in an effort to move beyond the one-size-fits-all system of the past and achieve the very best protection of public health and the environment at the least cost.” The provisions of GPRA, also known as “the Results Act,” are consistent with the principles of reinvention and reinforce many of EPA’s reinvention efforts. One key provision requires EPA and other agencies to (1) consult with the Congress and other stakeholders to clearly define their missions, (2) establish long-term strategic goals and annual goals that are linked to them, and (3) evaluate their performance on the basis of the goals they have set and report on their success. Rather than focusing on the performance of prescribed tasks and processes, the statute emphasizes the need for agencies to focus on and achieve measurable program results. To address questions about EPA’s current efforts to reinvent environmental regulation, a number of committees asked that we provide information on (1) what the agency’s reinvention initiatives are and how the agency is structured to carry them out and (2) what key issues need to be addressed for these initiatives to have their intended effect. In addressing the first objective, we interviewed EPA officials responsible for the agency’s reinvention efforts, including the Deputy Administrator, the designated Associate Administrator of the future Office of Reinvention, and members of EPA’s Regulatory Reinvention Team. We also interviewed officials in selected EPA program offices (such as the Office of Water; the Office of Prevention, Pesticides, and Toxic Substances; and the Office of Air and Radiation) to better understand how these offices were structured to implement both agencywide and program-specific reinvention initiatives. Following our initial contacts with headquarters officials, we visited three EPA regional offices—in Atlanta, Boston, and Chicago—to obtain insights into how the agency’s regional offices are structured to carry out the agency’s reinvention efforts.