CREATING A GOVERNMENT THAT WORKS BETTER & COSTS LESS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97M00518R000600620002-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 181
• Document Creation Date: December 23, 2016
• Document Release Date: October 14, 2011
• Sequence Number: 2
• Publication Date: September 7, 1993
• Content Type: REPORT

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The fiscal impact of Appendix A recommendations (spending reductions plus receipt increases) is $36.4 billion,
as shown in the text of the report. The figures in Appendix A (pp. 134-157) should be corrected as follows:
-- DOD09 should be -$350 million.
The grand totals for spending and receipts should be as follows:
-- Change in Spending: -$28.1 billion -- Change in Receipts: $ 8.3 billion
Numbers reflecting totals in these categories are accurate elsewhere in the report. The changes reflect errors
made in typesetting the Appendix.
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FROM RED TAPE TO RESULTS
CREATING A
GOVERNMENT
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Vice President Al Gore
September 7, 1993
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September 7, 1993
The President
The White House
Washington, DC
The National Performance Review, the intensive, 6-month study of the
federal government that you requested, has completed its work. This report
represents the beginning of what must be, and - with your leadership -
will be, a long-term commitment to change. The title of this report reflects
our goals: moving from red tape to results to create a government that works
better and costs less.
Many talented federal employees contributed to this report, bringing
their experience and insight to a difficult and urgent task. We sought ideas
and advice from all across America: from other federal workers, from state
and local government officials, from management experts, from business
leaders, and from private citizens eager for change. This report benefitted
greatly from their involvement, and we intend for them to benefit from the
reforms we are proposing here.
It is your vision of a government that works for people, cleared of
useless bureaucracy and waste and freed from red tape and senseless rules,
that continues to be the catalyst for our efforts. We present this report to you
confident that it will provide an effective and innovative plan to make that
vision a reality.
Sincerely,
Al Gore
Vice President
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CONTENTS
PREFACE .........................................................................................................................1
INTRODUCTION .............................................................................................................1
(Chapter I CUTTING RED TAPE..... I I
STEP 1: STREAMLINING THE BUDGET PROCESS .....................................................................................14
STEP 2: DECENTRALIZING PERSONNEL POLICY ......................................................................................20
STEP 3: STREAMLINING PROCUREMENT .................................................................................................26
STEP 4: REORIENTING THE INSPECTORS GENERAL ................................................................................31
STEP 5: ELIMINATING REGULATORY OVERKILL ......................................................................................32
STEP 6: EMPOWER STATE AND LOCAL GOVERNMENTS ..........................................................................35
CONCLUSION ........................................................................................................................................41
(Chapter 2 PUTTING CUSTOMERS FIRST.....43
STEP 1: GIVING CUSTOMERS A VOICE-AND A CHOICE ......................................................................44
STEP 2: MAKING SERVICE ORGANIZATIONS COMPETE ...........................................................................54
STEP 3: CREATING MARKET DYNAMICS .................................................................................................60
STEP 4: USING MARKET MECHANISMS To SOLVE PROBLEMS .................................................................62
CONCLUSION ........................................................................................................................................64
Chapter 3 EMPOWERING EMPLOYEES To GET RESULTS ..... 65
STEP 1: DECENTRALIZING DECISIONMAKING POWER ............................................................................69
STEP 2: HOLD ALL FEDERAL EMPLOYEES ACCOUNTABLE FOR RESULTS ..................................................72
STEP 3: GIVING FEDERAL WORKERS THE TOOLS THEY NEED To Do THEIR JOBS ...............................77
STEP 4: ENHANCING THE QUALITY OF WORKLIFE ...............................................................................84
STEP 5: FORMING A LABOR-MANAGEMENT PARTNERSHIP .....................................................................87
STEP 6: EXERT LEADERSHIP ...................................................................................................................88
CONCLUSION ........................................................................................................................................91
(Chapter 4 CUTTING BACK To BASICS ..... 93
STEP 1: ELIMINATE WHAT WE DON'T NEED ........................................................................................94
STEP 2: COLLECTING MORE ................................................................................................................104
STEP 3: INVESTING IN GREATER PRODUCTIVITY ...................................................................................110
STEP 4: REENGINEERING PROGRAMS To CUT COSTS ........................................................................... 112
CONCLUSION .......................................................................................................................................120
CONCLUSION ...................................................................................................................................121
ENDNOTES .......................................................................................................................................125
APPENDIX A: NATIONAL PERFORMANCE REVIEW
MAJOR RECOMMENDATIONS BY AGENCY ..........................................................133
APPENDIX B: NATIONAL PERFORMANCE REVIEW SUMMARY OF SAVINGS ............................. 155
APPENDIX C: NATIONAL PERFORMANCE REVIEW
MAJOR RECOMMENDATIONS AFFECTING GOVERNMENTAL SYSTEMS ..........159
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PREFACE
We can no longer afford to pay more for-and get less from-our government. The answer for
every problem cannot always be another program or more money. It is time to radically
change the way the government operates-to shift from top-down bureaucracy to entrepreneurial
government that empowers citizens and communities to change our country from the bottom up.
We must reward the people and ideas that work and get rid of those that don't.
Bill Clinton and Al Gore
Putting People First'
he National Performance
Review is about change-
historic change-in the
way the government
works. The Clinton
administration believes it is
time for a new customer service contract
with the American people, a new guarantee
of effective, efficient, and responsive
government. As our title makes clear, the
National Performance Review is about
moving from red tape to results to create a
government that works better and costs less.
These are our twin missions: to make
government work better and cost less. The
President has already addressed the federal
deficit with the largest deficit reduction
package in history. The National
Performance Review can reduce the deficit
further, but it is not just about cutting
spending. It is also about closing the trust
deficit: proving to the American people that
their tax dollars will be treated with respect
for the hard work that earned them. We are
taking action to put America's house in
order.
The National Performance Review began
on March 3, 1993, when President Clinton
announced a 6-month review of the federal
government and asked me to lead the
effort. We organized a team of experienced
federal employees from all corners of the
government-a marked change from past
efforts, which relied on outsiders.
We turned to the people who know
government best-who know what works,
what doesn't, and how things ought to be
changed. We organized these people into a
series of teams, to examine both agencies
and cross-cutting systems, such as
budgeting, procurement, and personnel.
The President also asked all cabinet
members to create Reinvention Teams to
lead transformations at their departments,
and Reinvention Laboratories, to begin
experimenting with new ways of doing
business. Thousands of federal employees
joined these two efforts.
But the National Performance Review
did not stop there. From the beginning, I
wanted to hear from as many Americans as
possible. I spoke with federal employees at
every major agency and at federal centers
across the country-seeking their ideas,
their input, and their inspiration. I visited
programs that work: a Miami school that
also serves as a community center, a
Minnesota pilot program that provides
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benefits more efficiently by using
technology and debit cards, a Chicago
neighborhood that has put community
policing to work, a U.S. Air Force base that
has made quality management a way of life.
We also heard from citizens all across
America, in more than 30,000 letters and
phone calls. We sought the views of
hundreds of different organizations, large
and small. We learned from the experience
of state and local leaders who have
restructured their organizations. And we
listened to business leaders who have used
innovative management practices to turn
their companies around.
At a national conference in Tennessee,
we brought together experts to explore how
best to apply the principles of reinventing
government to improving family services.
In Philadelphia's Independence Square,
where our government was born, we
gathered for a day-long "Reinventing
Government Summit" with the best minds
from business, government, and the
academic community.
This report is the first product of our
efforts. It describes roughly 100 of our most
important actions and recommendations,
while hundreds more are listed in the
appendices at the end of this report. In the
coming months, we will publish additional
information providing more detail on
those recommendations.
This report represents the beginning of
what will be-what must be-an ongoing
commitment to change. It includes actions
that will be taken now, by directive of the
President; actions that will be taken by the
cabinet secretaries and agency heads; and
recommendations for congressional action.
The National Performance Review
focused primarily on how government
should work, not on what it should do.
Our job was to improve performance in
areas where policymakers had already
decided government should play a role.
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We examined every cabinet department
and 10 agencies. At two departments,
Defense and Health and Human Services,
our work paralleled other large-scale reviews
already under way. Defense had launched a
Bottom-Up Review to meet the President's
1994-1997 spending reduction target. In
addition, comprehensive health and welfare
reform task forces had been established to
make large-scale changes in significant
parts of Health and Human Services.
Nevertheless, we made additional
recommendations in both these
departments and passed other findings on
to the relevant task force for review.
The National Performance Review
recommendations, if enacted, would
produce savings of $108.0 billion over 5
years. As the table below indicates, $37
billion of these savings come from specific
changes proposed in the agencies and
departments of the government.
We also expect that the reinventions we
propose will allow us to reduce the size of
the civilian, non-postal workforce by 12
percent over the next 5 years. This will
bring the federal workforce below two
million employees for the first time since
1967. This reduction in the workforce will
total 252,000 positions-152,000 over and
above the 100,000 already promised by
President Clinton.
Most of the personnel reductions will be
concentrated in the structures of over-
control and micromanagement that now
bind the federal government: supervisors,
headquarters staffs, personnel specialists,
budget analysts, procurement specialists,
accountants, and auditors. These central
control structures not only stifle the
Clinton/Gore NPR Savings
(FY-1995-1999 $ in Billions)
36.4
STREAMLINING THE BUREAUCRACY 40.4
THROUGH REENGINEERING
PROCUREMENT
5% annual savings in total
procurement spending
INFORMATION TECHNOLOGY
Savings due to consolidation and
modernization of the information
infrastructure
INTERGOVERNMENTAL
Offer fee-for-service option in lieu
of existing administrative costs
(For a fuller description see Appendix A and Appendix B.)
5.4
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creativity of line managers and workers,
they consume billions per year in salary,
benefits, and administrative costs.
Additional personnel cuts will result as each
agency reengineers its basic work processes
to achieve higher productivity at lower
costs-eliminating unnecessary layers of
management and nonessential staff.
We will accomplish as much of this as
possible through attrition, early retirement,
and a time-limited program of cash
incentives to leave federal service. If an
employee whose job is eliminated cannot
take early retirement and elects not to take a
cash incentive to leave government service,
we will help that employee find another job
offer through out-placement assistance.
In addition to savings from the agencies
and savings in personnel we expect that
systematic reform of the procurement
process should reduce the cost of everything
the government buys. Our antiquated
procurement system costs the government
in two ways: first, we pay for all the
bureaucracy we have created to buy things,
and second, manufacturers build the price
of dealing with this bureaucracy into the
prices they charge us. If we reform the
procurement system, we should be able to
save $22 billion over 5 years.
As everyone knows, the computer
revolution allows us to do things faster
and more cheaply than we ever have
before. Savings due to consolidation and
modernization of the information
infrastructure amount to $5.4 billion over
5 years.
Finally, by simplifying paperwork and
reducing administrative costs, we expect to
save $3.3 billion over 5 years in the cost of
administering grant programs to state and
local governments.
Many of the spending cuts we propose
can be done by simplifying the internal
organization of our departments and
agencies. Others will require legislation. We
recognize that there is broad support in
Congress for both spending cuts and
government reforms, and we look forward
to working with Congress to pass this
package of recommendations. As President
Clinton said when he announced the
National Performance Review:
This performance review is not about
politics. Programs passed by both
Democratic presidents and Republican
presidents, voted on by members of
Congress of both parties, and supported
by the American people at the time, are
being undermined by an inefficient and
outdated bureaucracy, and by our huge
debt. For too long the basic functioning
of the government has gone unexamined.
We want to make improving the way
government does business a permanent
part of how government works, regardless
of which party is in power.
We have not a moment to lose. President
Kennedy once told a story about a French
general who asked his gardener to plant a
tree. "Oh, this tree grows slowly," the
gardener said. "It won't mature for a
hundred years."
"Then there's no time to lose," the
general answered. "Plant it this afternoon."
Al Gore
Vice President of the United States
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INTRODUCTION
Our goal is to make the entire federal government both less expensive and more efficient,
and to change the culture of our national bureaucracy away from complacency
and entitlement toward initiative and empowerment. We intend to redesign,
to reinvent, to reinvigorate the entire national government. "
President Bill Clinton
Remarks announcing the National Performance Review
March 3, 1993
ublic confidence in the
federal government has never
been lower. The average
American believes we waste
48 cents of every tax dollar.
Five of every six want
obsolete. It knows how to add, but not to
subtract.
And yet, waste is not the only problem.
The federal government is not simply
broke; it is broken. Ineffective regulation of
the financial industry brought us the savings
and loan debacle. Ineffective education and
training programs jeopardize our
competitive edge. Ineffective welfare and
housing programs undermine our families
and cities.
We spend $25 billion a year on welfare,
$27 billion on food stamps, and $13 billion
on public housing-yet more Americans
fall into poverty every year.3 We spend $12
billion a year waging war on drugs-yet see
few signs of victory. We fund 150 different
employment and training programs-yet
the average American has no idea where to
get job training, and the skills of our
workforce fall further behind those of our
competitors.4
It is almost as if federal programs were
designed not to work. In truth, few are
"designed" at all; the legislative process
simply churns them out, one after another,
year after year. It's little wonder that when
asked if "government always manages to
mess things up," two-thirds of Americans
say "yes."5
"fundamental change" in Washington.
Only 20 percent of Americans trust the
federal government to do the right thing
most of the time-down from 76 percent
30 years ago.I
We all know why. Washington's failures
are large and obvious. For a decade, the
deficit has run out of control. The national
debt now exceeds $4 trillion-$16,600 for
every man, woman, and child in America.
But the deficit is only the tip of the
iceberg. Below the surface, Americans
believe, lies enormous unseen waste. The
Defense Department owns more than $40
billion in unnecessary supplies.2 The
Internal Revenue Service struggles to collect
billions in unpaid bills. A century after
industry replaced farming as America's
principal business, the Agriculture
Department still operates more than 12,000
field service offices, an average of nearly 4
for every county in the nation-rural,
urban, or suburban. The federal
government seems unable to abandon the
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To borrow the words of a recent
Brookings Institution book, we suffer not
only a budget deficit but a performance
deficit.6 Indeed, public opinion experts
argue that we are suffering the deepest crisis
of faith in government in our lifetimes. In
past crises-Watergate or the Vietnam War,
for example-Americans doubted their
leaders on moral or ideological grounds.
They felt their government was deceiving
them or failing to represent their values.
Today's crisis is different: people simply feel
that government doesn't work.'
In Washington, debate rarely focuses on
the performance deficit. Our leaders spend
most of their time debating policy issues.
But if the vehicle designed to carry out
policy is broken, new policies won't take us
anywhere. If the car won't run, it hardly
matters where we point it; we won't get
there. Today, the central issue we face is not
what government does, but how it works.
W need a federal government that delivers
more for less. We need a federal government
that treats its taxpayers as if they were
customers and treats taxpayer dollars with
respect for the sweat and sacrifice that earned
them.
Vice President Al Gore
May 24, 1993
We have spent too much money for
programs that don't work. It's time to make
our government work for the people, learn
to do more with less, and treat taxpayers like
customers.
President Clinton created the National
Performance Review to do just that. In
this report we make hundreds of
recommendations for actions that, if
implemented, will revolutionize the way
the federal government does business.
They will reduce waste, eliminate
unneeded bureaucracy, improve service to
taxpayers, and create a leaner but more
productive government. As noted in the
preface, they can save $108 billion over 5
years if those which will be enacted by the
President and his cabinet are added to those
we propose for enactment by Congress.
Some of these proposals can be enacted by
the President and his cabinet, others will
require legislative action. We are going to
fight for these changes. We are determined
to create a government that works better
and costs less.
A Cure Worse Than The Disease
Government is not alone in its troubles.
As the Industrial Era has given way to the
Information Age, institutions-both public
and private-have come face to face with
obsolescence. The past decade has witnessed
profound restructuring: In the 1980s, major
American corporations reinvented
themselves; in the 1990s, governments are
struggling to do the same.
In recent years, our national leaders
responded to the growing crisis with
traditional medicine. They blamed the
bureaucrats. They railed against "fraud,
waste, and abuse." And they slapped ever
more controls on the bureaucracy to
prevent it.
But the cure has become indistinguish-
able from the disease. The problem is not
lazy or incompetent people; it is red tape
and regulation so suffocating that they stifle
every ounce of creativity. No one would
offer a drowning man a drink of water. And
yet, for more than a decade, we have added
red tape to a system already strangling in it.
The federal government is filled with
good people trapped in bad systems: budget
systems, personnel systems, procurement
systems, financial management systems,
information systems. When we blame the
people and impose more controls, we make
the systems worse. Over the past 15 years,
for example, Congress has created within
each agency an independent office of the
inspector general. The idea was to root out
fraud, waste, and abuse. The inspectors
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general have certainly uncovered important
problems. But as we learned in conversation
after conversation, they have so intimidated
federal employees that many are now afraid
to deviate even slightly from standard
operating procedure.
Yet innovation, by its nature, requires
deviation. Unfortunately, faced with so
many controls, many employees have
simply given up. They do everything by the
book-whether it makes sense or not. They
fill out forms that should never have been
created, follow rules that should never have
been imposed, and prepare reports that
serve no purpose-and are often never even
read. In the name of controlling waste, we
have created paralyzing inefficiency. It's time
we found a way to get rid of waste and
encourage efficiency.
The Root Problem:
Industrial-Era Bureaucracies
in an Information Age
Is government inherently incompetent?
Absolutely not. Are federal agencies filled
with incompetent people? No. The
problem is much deeper: Washington is
filled with organizations designed for an
environment that no longer exists-
bureaucracies so big and wasteful they can
no longer serve the American people.
From the 1930s through the 1960s,
we built large, top-down, centralized
bureaucracies to do the public's business.
They were patterned after the corporate
structures of the age: hierarchical
bureaucracies in which tasks were broken
into simple parts, each the responsibility of
a different layer of employees, each defined
by specific rules and regulations. With
their rigid preoccupation with standard
operating procedure, their vertical chains of
command, and their standardized services,
these bureaucracies were steady-but slow
and cumbersome. And in today's world of
rapid change, lightning-quick information
technologies, tough global competition, and
demanding customers, large, top-down
bureaucracies-public or private-don't
Our people, of course, work hard for their
money.... They want quality in the cars they
buy. They want quality in their local schools.
And they want quality in their federal
government and in federal programs.
Senator John Glenn
Remarks introducing a hearing
on federal planning and performance
May 5, 1992
work very well. Saturn isn't run the way
General Motors was. Intel isn't run the way
IBM was.
Many federal organizations are also
monopolies, with few incentives to innovate
or improve. Employees have virtual lifetime
tenure, regardless of their performance.
Success offers few rewards; failure, few
penalties. And customers are captive; they
can't walk away from the air traffic control
system or the Internal Revenue Service and
sign up with a competitor. Worse, most
federal monopolies receive their money
without any direct input from their
customers. Consequently, they try a lot
harder to please Congressional appropri-
ations subcommittees than the people they
are meant to serve. Taxpayers pay more
than they should and get poorer service.
Politics intensifies the problem. In
Washington's highly politicized world, the
greatest risk is not that a program will
perform poorly, but that a scandal will
erupt. Scandals are front-page news, while
routine failure is ignored. Hence control
system after control system is piled up
to minimize the risk of scandal. The
budget system, the personnel rules, the
procurement process, the inspectors
general-all are designed to prevent the
tiniest misstep. We assume that we can't
trust employees to make decisions, so we
spell out in precise detail how they must do
virtually everything, then audit them to
ensure that they have obeyed every rule.
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D uring Vice President Gore's town hall meeting
with employees of the Department of Housing
and Urban Development (HUD), the following
exchange took place:
Participant: We had an article in our newsletter
several months ago that said - the lead story was `Id
rather have a lobotomy than have another idea. "And
that was reflecting the problem of our Ideas Program
here in HUD.
Many of the employees have wonderful ideas about
how to save money and so on, but the way it works is
that it has to be approved by the supervisor and the
supervisor's supervisor and the supervisor's supervisor's
supervisor before it ever gets to the Ideas Program ...
Many of the supervisors feel threatened because they
didn't think of this idea, and this money is wasted in
their office, and they didn't believe or didn't know it was
happening and didn't catch it. So they are threatened
and feel that it will make them look bad if they
recognize the idea.
Vice President Gore: So they strangle that idea in
the crib, don't they?
Participant: And then they strangle the person that
had the idea.
The slightest deviation prompts new
regulations and even more audits.
Before long, simple procedures are too
complex for employees to navigate, so we
hire more budget analysts, more personnel
experts, and more procurement officers to
make things work. By then, the process
involves so much red tape that the smallest
action takes far longer and costs far more
than it should. Simple travel arrangements
require endless forms and numerous
signatures. Straightforward purchases take
months; larger ones take years. Routine
printing jobs can take dozens of approvals.
This emphasis on process steals resources
from the real job: serving the customer.
Indeed, the federal government spends
billions paying people who control, check
up on, or investigate others-supervisors,
headquarters staffs, budget officers,
personnel officers, procurement officers,
and staffs of the General Accounting Office
(GAO) and the inspectors general.' Not all
this money is wasted, of course. But the real
waste is no doubt larger, because the endless
regulations and layers of control consume
every employee's time.' Who pays? The
taxpayer.
Consider but one example, shared with
Vice President Gore at a meeting of federal
employees in Atlanta. After federal marshals
seize drug dealers' homes, they are allowed
to sell them and use the money to help
finance the war on drugs. To sell the houses,
they must keep them presentable, which
includes keeping the lawns mowed.
In Atlanta, the employee explained, most
organizations would hire neighborhood
teenagers to mow a lawn for $10. But
procurement regulations require the U.S.
Marshals Service to bid out all work
competitively, and neighborhood teenagers
don't compete for contracts. So the federal
government pays $40 a lawn to professional
landscape firms. Regulations designed to
save money waste it, because they take
decisions out of the hands of those
responsible for doing the work. And
taxpayers lose $30 for every lawn mowed.
What would happen if the marshals
used their common sense and hired
neighborhood teenagers? Someone would
notice-perhaps the Washington office,
perhaps the inspector general's office,
perhaps even the GAO. An investigation
might well follow-hindering a career or
damaging a reputation.
In this way, federal employees quickly
learn that common sense is risky-and
creativity is downright dangerous. They
learn that the goal is not to produce results,
please customers, or save taxpayers' money,
but to avoid mistakes. Those who dare to
innovate do so quietly.
This is perhaps the saddest lesson learned
by those who worked on the National
Performance Review: Yes, innovators exist
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within the federal government, but many
work hard to keep their innovations quiet.
By its nature, innovation requires a
departure from standard operating
procedure. In the federal government, such
departures invite repercussions.
The result is a culture of fear and
resignation. To survive, employees keep a
low profile. They decide that the safest
answer in any given situation is a firm
"maybe." They follow the rules, pass the
buck, and keep their heads down. They
develop what one employee, speaking with
Vice President Gore at a Department of
Veterans Affairs meeting, called "a
government attitude."
The Solution: Creating
Entrepreneurial Organizations
How do we solve these problems? It
won't be easy. We know all about
government's problems, but little about
solutions. The National Performance
Review began by compiling a
comprehensive list of problems. We had the
GAO's 28-volume report on federal
management problems, published last fall.
We had GAO's High-Risk Series, a 17-
volume series of pamphlets on troubled
programs and agencies. We had the House
Government Operations Committee's
report on federal mismanagement, called
Managing the Federal Government: A Decade
of Decline. And we had 83 notebooks
summarizing just the tables of contents of
reports published by the inspectors general,
the Congressional Budget Office, the
agencies, and think tanks.
Unfortunately, few of these studies
helped us design solutions. Few of the
investigating bodies had studied success
stories-organizations that had solved their
problems. And without studying success, it
is hard to devise real solutions. For years, the
federal government has studied failure, and
for years, failure has endured. Six of every
ten major agencies have programs on the
Office of Management and Budget's "high-
risk" list, meaning they carry a significant
risk of runaway spending or fraud.
The National Performance Review
approached its task differently. Not only did
we look for potential savings and
efficiencies, we searched for success. We
looked for organizations that produced
results, satisfied customers, and increased
productivity. We looked for organizations
that constantly learned, innovated, and
improved. We looked for effective,
entrepreneurial public organizations. And
we found them: in local government, in
state government, in other countries-and
right here in our federal government.
At the Air Combat Command, for
example, we found units that had doubled
their productivity in 5 years. Why?
Because the command measured
performance everywhere; squadrons and
bases competed proudly for the best
maintenance, flight, and safety records; and
top management had empowered
employees to strip away red tape and
redesign work processes. A supply system
that had once required 243 entries by 22
people on 13 forms to get one spare part
into an F- 15 had been radically simplified
and decentralized. Teams of employees were
saving millions of dollars by moving supply
operations to the front line, developing their
own flight schedules, and repairing parts
that were once discarded.9
At the Internal Revenue Service, we
found tax return centers competing for the
best productivity records. Performance on
key customer service criteria-such as the
accuracy of answers provided to
taxpayers-had improved dramatically.
Utah's Ogden Service Center, to cite but
one example, had more than 50
"productivity improvement teams"
simplifying forms and reengineering work
processes. Not only had employees saved
more than $11 million, they had won the
1992 Presidential Award for Quality.'o
At the Forest Service, we found a pilot
project in the 22-state Eastern Region that
had increased productivity by 15 percent in
just 2 years. The region had simplified its
budget systems, eliminated layers of middle
management, pared central headquarters
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Americans voted for a change last November.
They want better schools and health care and
better roads and more jobs, but they want us
to do it all with a government that works
better on less money and that is more
responsive.
President Bill Clinton
Remarks announcing the
National Performance Review
March 3, 1993
staff by a fifth, and empowered front-line
employees to make their own decisions. At
the Mark Twain National Forest, for
instance, the time needed to grant a grazing
permit had shrunk from 30 days to a few
hours-because employees could grant
permits themselves rather than process them
through headquarters.) i
We discovered that several other
governments were also reinventing
themselves, from Australia to Great Britain,
Singapore to Sweden, the Netherlands to
New Zealand. Throughout the developed
world, the needs of information-age
societies were colliding with the limits of
industrial-era government. Regardless of
party, regardless of ideology, these
governments were responding. In Great
Britain, conservatives led the way. In New
Zealand, the Labor Party revolutionized
government. In Australia and Sweden, both
conservative and liberal parties embraced
fundamental change.
In the United States, we found the same
phenomenon at the state and local levels.
The movement to reinvent government is as
bipartisan as it is widespread. It is driven not
by political ideology, but by absolute
necessity. Governors, mayors, and legislators
of both parties have reached the same
conclusion: Government is broken, and it is
time to fix it.
Where we found success, we found many
common characteristics. Early on, we
articulated these in a one-page statement of
our commitment. In organizing this report,
we have boiled these characteristics down to
four key principles.
1. Cutting Red Tape
Effective, entrepreneurial governments
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. They
streamline their budget, personnel, and
procurement systems-liberating
organizations to pursue their missions.
They reorient their control systems to
prevent problems rather than simply
punish those who make mistakes. They
strip away unnecessary layers of regulation
that stifle innovation. And they deregulate
organizations that depend upon them for
funding, such as lower levels of
government.
2. Putting Customers First
Effective, entrepreneurial governments
insist on customer satisfaction. They listen
carefully to their customers-using surveys,
focus groups, and the like. They restructure
their basic operations to meet customers'
needs. And they use market dynamics such
as competition and customer choice to
create incentives that drive their employees
to put customers first.
By "customer," we do not mean "citizen."
A citizen can participate in democratic
decisionmaking; a customer receives
benefits from a specific service. All
Americans are citizens. Most are also
customers: of the U.S. Postal Service, the
Social Security Administration, the
Department of Veterans Affairs, the
National Park Service, and scores of other
federal organizations.
In a democracy, citizens and customers
both matter. But when they vote, citizens
seldom have much chance to influence the
behavior of public institutions that directly
affect their lives: schools, hospitals, farm
service agencies, social security offices. It is a
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sad irony: citizens own their government,
but private businesses they do not own
work much harder to cater to their needs.
3. Empowering Employees to Get Results
Effective, entrepreneurial governments
transform their cultures by decentralizing
authority. They empower those who work
on the front lines to make more of their
own decisions and solve more of their
own problems. They embrace labor-
management cooperation, provide training
and other tools employees need to be
effective, and humanize the workplace.
While stripping away layers and
empowering front-line employees, they
hold organizations accountable for
producing results.
4. Cutting Back to Basics: Producing
Better Government for Less
Effective, entrepreneurial governments
constantly find ways to make government
work better and cost less-reengineering
how they do their work and reexamining
programs and processes. They abandon the
obsolete, eliminate duplication, and end
special interest privileges. They invest in
greater productivity, through loan funds
and long-term capital investments. And
they embrace advanced technologies to cut
costs.
These are the bedrock principles on
which the reinvention of the federal
bureaucracy must build-and the principles
around which we have organized our
actions. They fit together much like the
pieces of a puzzle: if one is missing, the
others lose their power. To create
organizations that deliver value to American
taxpayers, we must embrace all four.
Our approach goes far beyond fixing
specific problems in specific agencies.
Piecemeal efforts have been under way for
years, but they have not delivered what
Americans demand. The failure in
Washington is embedded in the very systems
by which we organize the federal
bureaucracy. In recent years, Congress has
Principles of the National
Performance Review
We will invent a government that puts people
first, by::
? Cutting unnecessary spending
? Serving its customers
? Empowering its employees
? Helping communities solve their
own problems
? Fostering excellence
Here's how. We will:
? Create a clear sense of mission
? Steer more, row less
? Delegate authority and responsibility
? Replace regulations with incentives
? Develop budgets based on outcomes
? Expose federal operations to competition
? Search for market, not administrative,
solutions
? Measure our success by customer satisfaction
taken the lead in reinventing these systems.
In 1990, it passed the Chief Financial
Officers Act, designed to overhaul financial
management systems; in July 1993, it passed
the Government Performance and Results
Act, which will introduce performance
measurement throughout the federal
government. With Congress's leadership, we
hope to reinvent government's other basic
systems, such as budget, personnel,
information, and procurement.
Our approach has much in common
with other management philosophies, such
as quality management and business process
reengineering. But these management
disciplines were developed for the private
sector, where conditions are quite different.
In business, red tape may be bad, but it
is not the suffocating presence it is in
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government. In business, market incentives
already exist; no one need invent them.
Powerful incentives are always at work,
forcing organizations to do more with less.
Indeed, businesses that fail to increase their
productivity-or that tie themselves up in
red tape-shrink or die. Hence, private
sector management doctrines tend to
overlook some central problems of
government: its monopolies, its lack of a
bottom line, its obsession with process
rather than results. Consequently, our
approach goes beyond private sector
methods. It is aimed at the heart and soul
of government.
The National Performance Review also
shares certain goals with past efforts to cut
costs in government. But our mission goes
beyond cost-cutting. Our goal is not simply
to weed the federal garden; it is to create a
regimen that will keep the garden free of
weeds. It is not simply to trim pieces of
government, but to reinvent the way
government does everything. It is not
simply to produce a more efficient
government, but to create a more effective
one. After all, Americans don't want a
government that fails more efficiently. They
want a government that works.
To deliver what the people want, we need
not jettison the traditional values that
underlie democratic governance-values
such as equal opportunity, justice, diversity,
and democracy. We hold these values dear.
We seek to transform bureaucracies
precisely because they have failed to nurture
these values. We believe that those who
resist change for fear of jeopardizing our
democratic values doom us to a government
that continues-through its failures-to
subvert those very values.
Our Commitment: A Long-Term
Investment in Change
This is not the first time Americans have
felt compelled to reinvent their government.
In 1776, our founding fathers rejected the
old model of a central power issuing edicts
for all to obey. In its place, they created a
government that broadly distributed power.
Their vision of democracy, which gave
citizens a voice in managing the United
States, was untried and untested in 1776.
It required a tremendous leap of faith.
But it worked.
Later generations extended this
experiment in democracy to those not yet
enfranchised. As the 20th century dawned,
a generation of "Progressives" such as Teddy
Roosevelt and Woodrow Wilson invented
the modern bureaucratic state, designed
to meet the needs of a new industrial
society. Franklin Roosevelt brought it to
full flower. Indeed, Roosevelt's 1937
announcement of his Committee on
Administrative Management sounds as if
it were written today:
The time has come to set our house in
order. The administrative management
of the government needs overhauling.
The executive structure of the
government is sadly out of date .... If we
have faith in our republican form of
government... we must devote ourselves
energetically and courageously to the task
of making that government efficient.
Through the ages, public management
has tended to follow the prevailing
paradigm of private management. The
1930s were no exception. Roosevelt's
committee-and the two Hoover
commissions that followed-recommended
a structure patterned largely after those of
corporate America in the 1930s. In a sense,
they brought to government the GM model
of organization.
By the 1980s, even GM recognized that
this model no longer worked. When it
created Saturn, its first new division in 67
years, GM embraced a very different model.
It picked its best and brightest and asked
them to create a more entrepreneurial
organization, with fewer layers, fewer rules,
and employees empowered to do whatever
was necessary to satisfy the customer. Faced
with the very real threat of bankruptcy,
major American corporations have
revolutionized the way they do business.
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Confronted with our twin budget and
performance deficits-which so undermine
public trust in government-President
Clinton intends to do the same thing. He
did not staff the Performance Review
primarily with outside consultants or
corporate experts, as past presidents have.
Instead, he chose federal employees to take
the lead. They consulted with experts from
state government, local government, and
the private sector. But as Vice President
Gore said over and over at his meetings with
federal employees: "The people who work
closest to the problem know the most about
how to solve the problem."
Nor did the effort stop with the men
and women who staffed the Performance
Review. President Clinton asked every
cabinet member to create a Reinvention
Team to redesign his or her department,
and Reinvention Laboratories to begin
experimenting immediately. Since April,
people all across our government have been
working full time to reinvent the federal
bureaucracy.
The process is not easy, nor will it be
quick. There are changes we can make
immediately, but even if all of our actions
are enacted, we will only have begun to
reinvent the federal government. Our
efforts are but a down payment-the first
installment of a long-term investment in
change. Every expert with whom we talked
reminded us that change takes time. In a
large corporation, transformation takes 6 to
8 years at best. In the federal government,
which has more than 7 times as many
employees as America's largest corporation,
it will undoubtedly take longer to bring
about the historic changes we propose.12
Along the way, we will make mistakes.
Some reforms will succeed beyond our
wildest dreams; others will not. As in any
experimental process, we will need to
monitor results and correct as we go. But we
must not confuse mistakes with failure. As
Tom Peters and Robert Waterman wrote in
In Search of Excellence, any organization that
is not making mistakes is not trying hard
enough. Babe Ruth, the Sultan of Swat,
struck out 1,330 times.
I would invite those who are cynical about the
possibility of this change to ask themselves this
question: What would your reaction have
been 10 years ago if someone had said that in
the summer of 1993 American automobile
companies would be making the highest quality,
most competitively priced cars in
the world?
I know my reaction would have been, `No
way. I am sorry, but I've bought too many
clunkers. They can't do it. The momentum
toward mediocrity is just too powerful. "
But that change has taken place. And if an
industry as large and as stodgy as the automobile
industry can undergo that kind of
transformation, then the federal government can
as well.
Vice President Al Gore
Town Hall Meeting,
Department of Energy
July 13, 1993
With this report, then, we begin a
decade-long process of reinvention. We
hope this process will involve not only the
thousands of federal employees now at work
on Reinvention Teams and in Reinvention
Labs, but millions more who are not yet
engaged. We hope it will transform the
habits, culture, and performance of all
federal organizations.
Some may say that the task is too large;
that we should not attempt it because we
are bound to make mistakes; that it cannot
be done. But we have no choice. Our
government is in trouble. It has lost its sense
of mission; it has lost its ethic of public
service; and, most importantly, it has lost
the faith of the American people.
In times such as these, the most
dangerous course is to do nothing. We must
have the courage to risk change.
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CIlnaptex Il
CUTTING RED TAPE
About 10 years ago, two foresters returned from a hard day in the
field to make plans for the coming week. Searching for a detail of agency policy,
they found themselves overwhelmed by voluminous editions ofpolicy manuals,
reports, and binders filled with thousands of directives. One forester recalled the very first
Forest Service manual-small enough to fit into every ranger's shirt pocket, yet
containing everything foresters needed to know to do their jobs.
"Why is it that when we have a problem, " the other forester asked, "the solution is always to add
something-a report, a system, a policy-but never take something away?"
The first replied.- "What if.. we could just start over?"'
U he federal government
does at least one thing
well: It generates red tape.
But not one inch of that
red tape appears by
accident. In fact, the
government creates it all with the best of
intentions. It is time now to put aside our
reverence for those good intentions and
examine what they have created-a
system that makes it hard for our civil
servants to do what we pay them for, and
frustrates taxpayers who rightfully expect
their money's worth.
Because we don't want politicians'
families, friends, and supporters placed in
"no-show" jobs, we have more than
100,000 pages of personnel rules and
regulations defining in exquisite detail how
to hire, promote, or fire federal employees.2
Because we don't want employees or private
companies profiteering from federal
contracts, we create procurement processes
that require endless signatures and long
months to buy almost anything. Because we
don't want agencies using tax dollars for any
unapproved purpose, we dictate precisely
how much they can spend on everything
from staff to telephones to travel.
And because we don't want state and
local governments using federal funds for
purposes that Congress did not intend, we
write regulations telling them exactly how
to run most programs that receive federal
funds. We call for their partnership in
dealing with our country's most urgent
domestic problems, yet we do not treat
them as equal partners.
Consider some examples from the daily
lives of federal workers, people for whom
red tape means being unable to do their
jobs as well as they can-or as well as we
deserve.
The district managers of Oregon's
million-acre Ochoco National Forest have
53 separate budgets-one for fence
maintenance, one for fence construction,
one for brush burning-divided into 557
management codes and 1,769 accounting
lines. To transfer money between accounts,
they need approval from headquarters.
They estimate the task of tracking spending
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 by private sector managers. Their job is to
make sure that every dollar is spent in the
budget category and the year for which it
was appropriated, that every promotion is
consistent with central guidelines, and that
every piece of equipment is bought through
competitive bidding. In an age of personal
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in each account consumes at least 30 days
of their time every year, days they could
spend doing their real jobs.3 It also sends a
message: You are not trusted with even the
simplest responsibilities.
Or consider the federal employees who
repair cars and trucks at naval bases. Each
time they need a spare part, they order it
through a central purchasing office-a
procedure that can keep vehicles in the shop
for a month. This keeps one-tenth of the
fleet out of commission, so the Navy buys
10 percent more vehicles than it needs.4
Or how about the new Energy
Department petroleum engineer who
requested a specific kind of calculator to do
her job? Three months later, she received an
adding machine. Six months after that, the
procurement office got her a calculator-a
tiny, hand-held model that could not
perform the complex calculations her work
required. Disgusted, she bought her own.5
Federal managers read the same books
and attend the same conferences as private
sector managers. They know what good
management looks like. They just can't put
it into practice-because they face
constraints few managers in the private
sector could imagine.
Hamstrung by rules and regulations,
federal managers simply do not have the
power to shape their organizations enjoyed
Never tell people how to do things. Tell them
what you want to achieve, and they will
surprise you with their ingenuity.
General George S. Patton
1944
computers, they are asked to write with
quill pens.
This thicket of rules and regulations has
layer upon layer of additional oversight.
Each new procedure necessitates someone's
approval. The result is fewer people doing
real work, more people getting in their way.
As management sage Peter Drucker once
said, "So much of what we call
management consists of making it difficult
for people to work."6
As Robert Tobias, president of the
National Treasury Employees Union, told
participants at the Philadelphia Summit on
Reinventing Government, "The regulations
and statutes that bind federal employees
from exercising discretion available in the
private sector all come about as a response
to the humiliations, mistakes,
embarrassments of the past." Even though,
as Tobias noted, "those problems are 15, 20,
30 years old," and "the regulations and the
statutes don't change." The need to enforce
the regulations and statutes, in turn, creates
needless layers of bureaucracy.
The layers begin with "staff" agencies,
such as the General Services Administration
(GSA) and the Office of Personnel
Management (OPM). These staff agencies
were designed originally to provide
specialized support for "line" agencies,
such as the Interior and Commerce
Departments, that do government's real
work. But as rules and regulations began to
proliferate, support turned into control.
The Office of Management and Budget
(OMB) which serves the President in the
budget process, runs more than 50
compliance, clearance, and review processes.
Some of this review is necessary to ensure
budget control and consistency of agency
actions-with each other and with the
President's program-but much of it is
overkill.
Line agencies then wrap themselves in
even more red tape by creating their own
budget offices, personnel offices, and
procurement offices. Largely in response to
appropriations committees, budget offices
divide congressional budgets into
increasingly tiny line items. A few years ago,
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for example, base managers in one branch
of the military had 26 line items for
housing repairs alone.? Personnel offices tell
managers when they can and cannot
promote, reward, or move employees. And
procurement offices force managers to buy
through a central monopoly, precluding
agencies from getting what they need, when
they need it.
What the staff agencies don't control,
Congress does. Congressional
appropriations often come with hundreds
of strings attached. The Interior
Department found that language in its
1992 House, Senate, and conference
committee reports included some 2,150
directives, earmarks, instructions, and
prohibitions.' As the federal budget
tightens, lawmakers request increasingly
specific report language to protect activities
in their districts. Indeed, 1993 was a
record year for such requests. In one
appropriations bill alone, senators required
the U.S. Customs Service to add new
employees to its Honolulu office,
prohibited closing any small or rural post
office or U.S. Forest Service offices; and
forbade the U.S. Mint and the Bureau of
Engraving and Printing from even studying
the idea of contracting out guard duties.
Even worse, Congress often gives a single
agency multiple missions, some of which
are contradictory. The Agency for
International Development has more than
40 different objectives, disposing of
American farm surpluses, building
democratic institutions, and even
strengthening the American land grant
college system.' No wonder it has trouble
accomplishing its real mission-promoting
international development.
In Washington, we must work together
to untangle the knots of red tape that
prevent government from serving the
American people well. We must give
cabinet secretaries, program directors and
line managers much greater authority to
pursue their real purposes.
As Theodore Roosevelt said: "The best
executive is the one who has the sense to
pick good men to do what he wants done,
and self-restraint enough to keep from
meddling with them while they do it."
Our path is clear: We must shift from
systems that hold people accountable for
process to systems that hold them
accountable for results. We discuss
accountability for results in chapter 3. In
this chapter, we focus on six steps necessary
to strip away the red tape that so engulfs our
federal employees and frustrates the
American people.
First, we will streamline the budget
process, to remove the manifold restrictions
that consume managers' time and literally
force them to waste money.
Second, we will decentralize personnel
policy, to give managers the tools they need
to manage effectively-the authority to
hire, promote, reward, and fire.
Third, we will streamline procurement,
to reduce the enormous waste built into the
process we use to buy $200 billion a year in
goods and services.
Fourth, we will reorient the inspectors
general, to shift their focus from punishing
those who violate rules and regulations to
helping agencies learn to perform better.
Fifth, we will eliminate thousands of
other regulations that hamstring federal
employees, to cut the final Lilliputian ropes
on the federal giant.
Finally, we will deregulate state and local
governments, to empower them to spend
more time meeting customer needs-
particularly with their 600 federal grant
programs-and less time jumping through
bureaucratic hoops.
As we pare down the systems of over-
control and micromanagement in
government, we must also pare down the
structures that go with them: the oversized
headquarters, multiple layers of supervisors
and auditors, and offices specializing in the
arcane rules of budgeting, personnel,
procurement, and finance. We cannot
entirely do without headquarters,
supervisors, auditors, or specialists, but these
structures have grown twice as large as they
should be.
Counting all personnel, budget,
procurement, accounting, auditing, and
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headquarters staff, plus supervisory
personnel in field offices, there are roughly
700,000 federal employees whose job it is to
manage, control, check up on or audit
others.10 This is one third ofall federal
civilian employees.
Not counting the suffocating impact
these management control structures have
on line managers and workers, they
consume $35 billion a year in salary and
benefits alone.' 1 If Congress enacts the
management reforms outlined in this report,
we will dramatically cut the cost of these
structures. We will reinvest some of the
savings in the new management tools we
need, including performance measurement,
quality management, and training. Overall,
these reforms will result in the net
elimination of approximately 252,000
positions. (This will include the 100,000
position reduction the President has already
set in motion.)
A reduction of 252,000 positions will
reduce the civilian, non-postal work force
by almost 12 percent-bringing it below
two million for the first time since the
1966.12
This reduction, targeted at the structures
of control and micromanagement, is
designed to improve working conditions for
the average federal employee. We cannot
empower employees to give us their best
work unless we eliminate much of the red
tape that now prevents it. We will do
everything in the government's power to
ease the transition for workers, whether they
choose to stay with government, retire, or
move to the private sector.
Our commitment is this: Ifan employee
whose job is eliminated cannot retire through
our early retirement program, and does not
elect to take a cash incentive to leave
government service, we will help that employee
find another job offer, either with government
or in the private sector.
Normal attrition will contribute to the
reduction. In addition, we will introduce
legislation to permit all agencies to offer
cash payments to those who leave federal
service voluntarily, whether by retirement or
resignation. The Department of Defense
(DOD) and intelligence community
already have this "buy-out" authority; we
will ask Congress to extend it to all agencies.
We will also give agencies broad authority
to offer early retirement and to expand their
retraining, out-placement efforts, and other
tools as necessary to accomplish the 12%
reduction. Agencies will be able to use these
tools as long as they meet their cost
reduction targets.
These options will give federal managers
the same tools commonly used to downsize
private businesses. Even with these
investments, the downsizing we propose
will save the taxpayer billions over the next
5 years.
None of this will be easy. Downsizing
never is. But the result will not only be a
smaller workforce, it will also be a more
empowered, more inspired, and more
productive workforce.
As one federal employee told Vice
President Gore at one of his many town
meetings, "If you always do what you've
always done, you'll always get what you
always got." We can no longer afford to get
what we've always got.
R o STREAMLINING THE BUDGET PROCESS
Most people can't get excited about
the federal budget process, with
its green-eyeshade analysts,
complicated procedures, byzantine
language, and reams of minutiae. Beyond
such elements, however, lies a basic,
unalterable reality. For organizations of all
kinds, nothing is more important than the
process of resource allocation: what goal is
sought, how much money they have, what
strings are attached to it, and what hurdles
are placed before managers who must
spend it.
In government, budgeting is never easy.
After all, the budget is the most political of
documents. If, as the political scientist
Harold D. Lasswell once said, politics is
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"who gets what, when, how," the budget
answers that question.13 By crafting a
budget, public officials decide who pays
what taxes and who receives what benefits.
The public's largesse to children, the elderly,
the poor, the middle class, and others is
shaped by the budgets that support cities,
states, and the federal government.
But if budgeting is inherently messy, such
messiness is costly. Optimally, the budget
would be more than the product of struggles
among competing interests. It also would
reflect the thoughtful planning of our public
leaders. No one can improve quality and cut
costs without planning to do so.
Unfortunately, the most deliberate
planning is often subordinated to politics,
and is perhaps the last thing we do in
constructing a budget. Consider our
process. Early in the year, each agency
estimates what it will need to run its
programs in the fiscal year that begins
almost 2 years later. This is like asking
someone to figure out not only what they
will be doing, but how much it will cost
3 years later-since that's when the money
will be spent. Bureau and program
managers typically examine the previous
year's activity data and project the figures 3
years out, with no word from top political
leaders on their priorities, or even on the
total amount that they want to spend. In
other words, planning budgets is like
playing "pin the tail on the donkey."
Blindfolded managers are asked to hit an
unknown target.
OMB, acting for the President, then
crafts a proposed budget through back-and
forth negotiations with departments and
agencies, still a year before the fiscal year
it will govern. Decisions are struck on
dollars-dollars that, to agencies, mean
people, equipment, and everything else they
need for their jobs. OMB's examiners may
question agency staff as they develop
options papers, OMB's director considers
the options during his Director's Review
meetings, OMB "passes back"
recommended funding levels for the
agencies, and final figures are worked out
during a final appeals process.
Early the next year, the President presents
a budget proposal to Congress for the fiscal
year beginning the following October 1.
Lawmakers, the media, and interest groups
pore over the document, searching for
winners and losers, new spending proposals,
and changes in tax laws. In the ensuing
months, Congress puts its own stamp on
the plan. Although House and Senate
budget committees, guide Congress' action,
every committee plays a role.
Authorizing committees debate the
merits of existing programs and the
President's proposals for changes within
their subject areas. While they decide which
programs should continue and recommend
funding levels, separate appropriations
committees draft the 13 annual spending
bills that actually comprise the budget.
Congressional debates over a budget
resolution, authorization bills, and
appropriations drag on, often into the fall.
Frequently the President and Congress don't
finish by October 1, so Congress passes one
or more "continuing resolutions" to keep
the money flowing, often at the previous
year's level. Until the end, agency officials
troop back and forth to OMB and to the
Hill to make their case. States and localities,
organizations and advocates seek time to
argue their cause. Budget staffs work non-
stop, preparing estimates and projections on
how this or that change will affect revenues
or spending. All this work is focused on
making a budget-not planning or
delivering programs.
Ironies riddle the process.
? Uncertainty reigns: Although they
begin calculating their budget 2 years
ahead, agency officials do not always
know by October 1 how much they
will have to spend and frequently don't
even receive their money until well into
the fiscal year.
? OMB is especially prone to question
unspent funds-and reduce the ensuing
year's budget by that amount. Agency
officials inflate their estimates, driving
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budget numbers higher and higher.
One bureau budget director claims that
many regularly ask for 90 percent more
than they eventually receive.
? Despite months of debate, Congress
compresses its actual decision-making
on the budget into such a short time
frame that many of the public's highest
priorities-what to do about drug
addiction, for example, or how to
prepare workers for jobs in the 21st
century-are discussed only briefly, if at
all.
? The process is devoid of the most useful
information. We do not know what last
year's money, or that of the year before,
actually accomplished. Agency officials
devise their funding requests based on
what they got before, not whether it
produced results.
In sum, the budget process is
characterized by fictional requests and
promises, an obsession with inputs rather
than outcomes, and a shortage of debate
about critical national needs. We must start
to plan strategically-linking our spending
with priorities and performance. First, we
must create a rational budgeting system.
Action: The President should begin the
budget process with an executive budget
There are two ways to reduce expenditures.
There is the intelligent way...going through
each department and questioning each
program. Then there is the stupid way:
announcing how much you will cut and
getting each department to cut that amount.
I favor the stupid way.
Michel Belanger
Chairman, Quebec National Bank
May 7, 1992
resolution, setting broad policy priorities
and allocating funds by f anction for each
agency. 14
Federal managers should focus primarily
on the content of the budget, not on the
process. A new executive budget resolution
will help them do that. The President
should issue a directive in early 1994 to
mandate the use of such a resolution in
developing his fiscal year 1996 budget. It
will turn the executive budget process
upside down.
To develop the resolution, officials from
the White House policy councils will meet
with OMB and agency officials. In those
sessions, the administration's policy
leadership will make decisions on overall
spending and revenue levels, deficit
reduction targets, and funding allocations
for major inter-agency policy initiatives.
The product of these meetings-a
resolution completed by August-will
provide agencies with funding ceilings and
allocations for major policy missions. Then,
bureaus will generate their own budget
estimates, now knowing their agency's
priorities and fiscal limits.
Our own Environmental Protection
Agency (EPA) tried a similar approach in
the 1970s as part of a zero-based budgeting
trial run. Although zero-based budgeting
fell short, participants said, two important
advantages emerged: a new responsiveness
to internal customer needs and a
commitment to final decisions. When
participants voted to cut research and
development funds because they felt
researchers ignored program needs,
researchers began asking programs managers
what kind of research would support their
efforts. EPA also found that, after its leaders
had agonized over funding, they remained
committed to common decisions.
Critics may view the executive budget
resolution process as a top-down tool that
will stifle creative, bottom-up suggestions
for funding options. We think otherwise.
The resolution will render top officials
responsible for budget totals and policy
decisions, but will encourage lower-level
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ingenuity to devise funding options within
those guidelines. By adopting this plan, we
will help discourage non-productive micro-
management by senior department and
agency officials.
Action: Institute biennial budgets and
appropriations.15
We should not have to enact a budget
every year. Twenty states adopt budgets for
2 years. (They retain the power to make
small adjustments in off years if revenues or
expenditures deviate widely from forecasts).
As a result, their governors and legislatures
have much more time to evaluate programs
and develop longer-term plans.
Annual budgets consume an enormous
amount of management time-time not
spent serving customers. With biennial
budgets, rather than losing months to a
frantic "last-year's budget-plus-X-percent"
exercise, we might spend more time
examining which programs actually work.
The idea of biennial budgeting has been
around for some time. Congressman Leon
Panetta, now OMB director, introduced the
first biennial budgeting bill in 1977, and
dozens have been offered since. Although
none have passed, the government has some
experience with budget plans that cover 2
years or more. In 1987, the President and
Congress drafted a budget plan for fiscal
years 1988 and 1989 that set spending
levels for major categories, enabling
Congress to enact all 13 appropriations bills
on time for the first time since 1977.
In addition, Congress directed the
Defense Department to submit a biennial
budget for fiscal 1988 and 1989 to give
Congress more time for broad policy
oversight. At the time, Congress asserted
that a biennial budget would "substantially
improve DOD management and
congressional oversight," and that a two-
year DOD budget was an important step
toward across-the-board biennial budgeting.
Administrations have continued to submit
biennial budgets for DOD.
The 1990 Budget Enforcement Act and
the 1993 Omnibus Budget Reconciliation
Act set 5-year spending limits for
discretionary spending and pay-as-you-go
requirements for mandatory programs.
With these multi-year caps in place, neither
the President nor Congress has to decide the
total level of discretionary spending each
year. These caps provide even more reason
for biennial budgets and appropriations. In
Congress, 7 out of 10 members favor a
biennial process with a 2-year budget
resolution and multi-year authorizations.
The time is ripe.
We recommend that Congress establish
biennial budget resolutions and
appropriations and multi-year
authorizations. The first biennium should
begin October 1, 1996, to cover fiscal years
1997 and 1998. After that, bienniums
would begin October 1 of each even-
numbered year. Such timing would allow
President Clinton to develop the first
comprehensive biennial federal budget,
built on the new executive budget
resolution. In off years, the President would
submit only amendments for exceptional
areas of concern, emergencies, or other
unforeseen circumstances.
Biennial budgeting will not make our
budget decisions easier, for they are shaped
by competing interests and priorities. But it
will eliminate an enormous amount of busy
work that keeps us from evaluating
programs and meeting customer needs.
Action: OMB, departments, and
agencies will minimize budget restrictions
such as apportionments and aallotments.16
Congress typically divides its
appropriations into more than 1,000
accounts. Committee reports specify
thousands of other restrictions on using
money. OMB apportions each account by
quarter or year, and sometimes divides it
into sub-accounts by line-item or object
class-all to control over-spending.
Departmental budget offices further divide
the money into allotments.
Thus, many managers find their money
fenced into hundreds of separate accounts. In
some agencies, they can move funds among
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accounts. In others, Congress or the agency
limits the transfer of funds, trapping the
money. When that happens, managers must
spend money where they have it, not where
they need it. On one military base, for
example, managers had no line item to
purchase snowplow equipment, but they did
have a maintenance account. When the
snowplow broke down they leased one, using
the maintenance account. Unfortunately, the
1-year lease cost $100,000-the same as the
frill purchase price.
Such stories are a dime a dozen within
the federal bureaucracy. (They may be the
only government cost that is coming
down.) Good managers struggle to make
things work, but, trapped by absurd
constraints, they are driven to waste billions
of dollars every year.
Stories about the legendary end-of-the-
year spending rush also abound. Managers
who don't exhaust each line item at year's
end usually are told to return the excess.
Typically, they get less the next time around.
The result: the well-known spending frenzy.
The National Performance Review received
more examples of this source of waste-in
letters, in calls, and at town meetings-than
any other.
Most managers know how to save 5 or
10 percent of what they spend. But
knowing they will get less money next year,
they have little reason to save. Instead, smart
managers spend every penny of every line
item. Edwin G. Fleming, chief of the
Resources Management Division of the
Internal Revenue Service's Cleveland
District, put it well in a letter to the
Treasury Department's Reinvention Team:
Every manager has saved money, only to
have his allocation reduced in the
subsequent year. This usually happens
only once, then the manager becomes a
spender rather than a planner.
Managing becomes watching after little
pots of money that can't be put where it
makes business sense because of
reprogramming restrictions. So
managers, who are monitors of these
little pots of money, are rewarded for the
ability to maneuver, however limitedly,
through the baroque and bizarre world
of federal finance and procurement.
Solutions to these problems exist. They
have been tested in local governments, in
state governments, even in the federal
government. Essentially, they involve
budget systems with fewer line items, more
authority for managers to move money
among line items, and freedom for agencies
to keep some or all of what they save-thus
minimizing the incentive for year-end
spending sprees.
Typically, federal organizations
experimenting with such budgets have
found that they can achieve better
productivity, sometimes with less money.
During an experiment at Oregon's
Ochoco National Forest in the 1980s, when
dozens of accounts were reduced to six,
productivity jumped 25 percent the first
year and 35 percent more the second. A
1991 Forest Service study indicated that the
experiment had succeeded in bringing gains
in efficiency, productivity, and morale, but
had failed to provide the Forest Service
region with a mechanism for complying
with congressional intent. After 3 years of
negotiations, Washington and Region 6,
where the Ochoco Forest is located, couldn't
agree. The region wanted to retain the
initial emphasis on performance goals and
targets so forest managers could shift money
from one account to another if they met
performance goals and targets. Washington
argued that Congress would not regard such
targets as a serious measure of congressional
intent. The experiment ended in March
1993.17
When the Defense Department allowed
several military bases to experiment with
what was called the Unified Budget Test,
base commanders estimated that they could
accomplish their missions with up to 10
percent less money. If this experience could
be applied to the entire government, it
could mean huge savings.
Beginning with their fiscal year 1995
submissions to OMB, departments and
agencies will begin consolidating accounts
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to minimize restrictions and manage more
effectively. They will radically cut the
number of allotments used to subdivide
accounts. In addition, they will consider
using the Defense Department's Unified
Budget plan, which permits shifts in funds
between allotments and cost categories to
help accomplish missions.
OMB will simplify the apportionment
process, which hamstrings agencies by
dividing their funding into amounts that
are available, bit by bit, according to
specified time periods, activities, or
projects. Agencies often don't get their
funding on time and, after they do, must
fill out reams of paperwork to show
that they adhered to apportionment
guidelines. OMB will also expedite the
"reprogramming" process, by which
agencies can move funds within
congressionally appropriated accounts.
Currently, OMB and congressional
subcommittees approve all such
reprogrammings. OMB should
automatically approve reprogramming
unless it objects within a set period, such as
five days.
While understandable in some cases,
such earmarks hamper agencies that seek to
manage programs efficiently. Agencies
should work with appropriations
subcommittees on this problem.
Action: OMB and agencies will stop
usingfull--time equivalent ceilings,
managing and budgeting instead with
ceilings on operating costs to control
spending.18
In another effort to control spending,
both the executive and legislative branches
often limit the number of each agency's
employees by using full-time equivalent
(FTE) limits. When agencies prepare their
budget estimates, they must state how
many FTEs they need in addition to how
many dollars. Then, each department or
agency divides that number into a ceiling
for each bureau, division, branch, or other
unit. Congress occasionally complicates the
situation by legislating FTE floors.
Federal managers often cite FTE
controls as the single most oppressive
restriction on their ability to manage.
Under the existing system, FTE controls
are the only way to make good on the
President's commitment to reduce the
federal bureaucracy by 100,000 positions
through attrition. But as we redesign the
government for greater accountability, we
need to use budgets, rather than FTE
controls, to drive our downsizing. FTE
ceilings are usually imposed independently
of-and often conflict with-budget
allocations. They are frequently arbitrary,
rarely account for changing circumstances,
and are normally imposed as across-the-
board percentage cuts in FTEs for all of an
agency's units-regardless of changing
circumstances. Organizations that face new
regulations or a greater workload don't get
new FTE ceilings. Consequently, they must
contract out work that could be done better
and cheaper in-house. One manager at
Vice President Gore's meeting with foreign
affairs community employees at the State
Department in May 1993 offered an
example: his FTE limit had forced him to
contract out for a junior programmer for
the Foreign Service Institute. As it turned
out, the programmer's hourly rate equaled
the Institute Director's, so the move cost
money instead of saving it.
The President should direct OMB and
agency heads to stop setting FTE ceilings in
fiscal year 1995.
For this transition, the agencies'
accounting systems will have to separate
true operating costs from program and
other costs. Some agencies already have
such systems in place; others must develop
financial management systems to allow
them to calculate these costs. We address
this issue in a separate recommendation in
chapter 3.
This recommendation fully supports
the President's commitment to maintain a
reduced federal workforce. Instead of
controlling the size of the federal
workforce by employment ceilings-
which cause inefficiencies and distortions
in managers' personnel and resource
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allocation decisions-this new system will
control the federal workforce by dollars
available in operating funds.
Action: Minimize congressional
restrictions such as line items, earmarks,
and eliminate FTE floors.19
Congress should also minimize the
restrictions and earmarks that it imposes on
agencies. With virtually all federal spending
under scrutiny for future cuts, Congress is
increasingly applying earmarks to ensure
that funding flows to favored programs and
hometown projects.
Imagine the surprise of Interior Secretary
Bruce Babbitt, who a few months after
taking office discovered that he was under
orders from Congress to maintain 23
positions in the Wilkes-Barre, Pennsylvania,
field office of his department's anthracite
reclamation program. Or that his
department was required to spend
$100,000 to train beagles in Hawaii to sniff
out brown tree snakes. Edward Derwinski,
former secretary of Veteran Affairs, was
once summoned before the Texas
congressional delegation to explain his plan
to eliminate 38 jobs in that state.20
Action: Allow agencies to roll over 50
percent of what they do not spend on
internal operations during a fascal year.21
As part of its 13 fiscal year 1995
appropriations bills, Congress should
permanently allow agencies to roll over 50
percent of unobligated year-end balances in
all appropriations for operations. It should
allow agencies to use up to 2 percent of
rolled-over funds to finance bonuses for
employees involved. This approach, which
the Defense Department and Forest Service
have used successfully, would reward
employees for finding more productive
ways to work. Moreover, it would create
incentives to save the taxpayers' money.
Shared savings incentives work. In 1989,
the General Accounting Office (GAO)
discovered that the Veterans
Administration had not recovered $223
million in health payments from third
parties, such as insurers. Congress then
changed the rules, allowing the VA to hire
more staff to keep up with the paperwork
and also to keep a portion of recovered
third-party payments for administrative
costs. VA recoveries soared from $24
million to $530 million.22
If incentives to save are to be real,
Congress and OMB will have to refrain
from automatically cutting agencies'
budgets by the amount they have saved
when they next budget is prepared. Policy
decisions to cut spending are one thing;
automatic cuts to take back savings are
quite another. They simply confirm
managers' fears that they will be penalized
for saving money. Agencies' chief financial
officers should intervene in the budget
process to ensure that this does not
happen.
STIEip 2 DECENTRALIZING PERSONNEL POLICY
0 ur federal personnel system has
been evolving for more than 100
years-ever since the 1881
assassination of President James A. Garfield
by a disappointed job seeker. And during
that time, according to a 1988 Office of
Personnel Management publication:
...anecdotal mistakes prompted
additional rules. When the rules led to
new inequities, even more rules were
added. Over time ...a maze of
regulations and requirements was
created, hamstringing managers... often
impeding federal managers and
employees from achieving their missions
and from giving the public a high
quality ofservice.
Year after year, layer after layer, the rules
have piled up. The U.S. Merit Systems
Protection Board reports there are now 850
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Catch-22
Our federal personnel system ought to place
a value on experience. That's not always
the case. Consider the story of Rosalie Tapia.
Ten years ago, fresh from high school, she
joined the Army and was assigned to Germany
as a clerk. She served out her enlistment with an
excellent record, landed a job in Germany as a
civilian secretary for the Army, and worked her
way up to assistant to the division chief When
the Cold War ended, Tapia wanted to return to
the U.S. and transfer to a government job here.
Unfortunately, one of the dictates contained
pages of federal personnel law-augmented
by 1,300 pages of OPM regulations on how
to implement those laws and another
10,000 pages of guidelines from the Federal
Personnel Manual.
On one topic alone-how to complete a
standard form for a notice of a personnel
action-the Federal Personnel Manual
contains 900 pages of
instructions. The full stack of
personnel laws, regulations,
directives, case law and
departmental guidance that
the Agriculture Department
uses weighs 1,088 pounds.
Thousands of pages of
personnel rules prompt
thousands of pages of
personnel forms. In 1991, for
example, the Navy's Human
Resources Office processed
enough forms to create a
"monument" 3,100 feet
tall-six times the height of
the Washington Monument.
Costs to the taxpayer for
this personnel quagmire are
enormous. In total, 54,000
in the government's 10,000 pages of personnel
rules says that an employee hired as a civil
servant overseas is not considered a government
employee once on home soil. Any smart
employer would prefer to hire an experienced
worker with an excellent service record over an
unknown. But our government's policy doesn't
make it easy. Ironically, Tapia landed a job with
a government contractor, making more
money- and probably costing taxpayers
more-than a job in the bureaucracy would
have paid.
personnel work in federal personnel
positions.23 We spend billions of dollars for
these staff to classify each employee within a
highly complex system of some 459 job
series, 15 grades and 10 steps within each
grade.
Does this elaborate system work? No.
After surveying managers, supervisors
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and personnel officers in a number of
federal agencies, the U.S. Merit Systems
Protection Board recently concluded that
federal personnel rules are too complex, too
prescriptive, and often counterproductive.
Talk to a federal manager for 10 minutes:
You likely will hear at least one personnel
horror story. The system is so complex and
rule-bound that most managers cannot even
advise an applicant how to get a federal job.
"Even when the public sector finds
outstanding candidates," In 1989, Paul
Volcker's National Commission on the
Public Service explained, "the complexity of
the hiring process often drives all but the
most dedicated away." Managers who find
it nearly impossible to hire the people they
need sometimes flaunt the system by hiring
people as consultants at higher rates than
those same people would earn as federal
employees. The average manager needs a
year to fire an incompetent employee, even
with solid proof. During layoffs, employees
slated to be laid off can "bump" employees
with less seniority, regardless of their abilities
or performance-putting people in jobs
they don't understand and never wanted.
Vice President Gore heard many stories
of dissatisfaction as he listened to federal
workers at meetings in their agencies. A
supervisor at the Centers for Disease
Control complained that it can take six to
eight months and as many as 15 revisions to
a job description in order to get approval for
a position he needs to fill. A secretary from
the Justice Department told the Vice
President she was discouraged and
overworked in an office where some
secretaries were slacking off-with no
system in place to reward the hard workers
and take action against the slackers.
A worker from the Agency for
International Development expressed her
frustration at being so narrowly "slotted" in
a particular GS series that she wasn't allowed
to apply for a job in a slightly different GS
.series -even though she was qualified for
the job. An Air Force lieutenant colonel told
the vice president that her secretary was
abandoning government for the private
sector because she was blocked from any
more promotions in her current job series.
The loss would be enormous, the colonel
told Gore, because her secretary was her
"right-hand person". One of the Labor
Department's regional directors for
unemployment insurance complained that
even though he is charged with running a
multimillion a year program, he isn't
allowed to hire a $45,000-a-year program
specialist without getting approval from
Washington.
To create an effective federal government,
we must reform virtually the entire
personnel system: recruitment, hiring,
classification, promotion, pay, and reward
systems. We must make it easier for federal
managers to hire the workers they need, to
reward those who do good work, and to fire
those who do not. As the National
Academy of Public Administration
concluded in 1993, "It is not a question of
whether the federal government should
change how it manages its human resources.
It must change."
Action: OPM will deregulate personnel
policy by phasing out the 10, 000page
Federal Personnel Manual and all agency
implementing directives.24
We must enable all managers to pursue
their missions, freed from the cumbersome
red tape of current personnel rules. The
President should issue a directive phasing
out the Federal Personnel Manual and all
agency implementing directives. The order
will require that most personnel
management authority be delegated to
agencies' line managers at the lowest level
practical in each agency. It will direct OPM
to work with agencies to determine which
FPM chapters, provisions, or supplements
are essential, which are useful, and which
are unnecessary. OPM will then replace the
FPM and agency directives with manuals
tailored to user needs, automated personnel
processes, and electronic decision support
systems.
Once some of the paperwork burden is
eased, our next priority must be to give
agency managers more control over who
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comes to work for them. To accomplish
this, we propose to radically decentralize the
government's hiring process.
Action: Give all departments and
agencies authority to conduct their own
recruiting and examining for all
positions, and abolish all central registers
and standard application forms.25
We will ask Congress to pass legislation
decentralizing authority over recruitment,
hiring, and promotion. Under the present
system, OPM controls the examination
system for external candidates and recruits
and screens candidates for positions that are
common to all agencies, with agencies then
hiring from among candidates presented by
OPM. Under the new system, OPM could
offer to screen candidates for agencies, but
agencies need not accept OPM's offer.
Under this decentralized system, agencies
will also be allowed to make their own
decisions about when to hire candidates
directly-without examinations or rankings
-under guidelines to be drafted by OPM.
Agencies able to do so should also be
permitted to conduct their own background
investigations of potential candidates.
We will make sure the system is fair and
easy for job applicants to use, however, by
making information about federal job
openings available in one place. In place of a
central register, OPM will create a
government-wide, employment
information system that allows the public to
go to one place for information about all
job opportunities in the federal
government.
Next, we must change the classification
system, introduced in 1949 to create
fairness across agencies but now widely
regarded as time-consuming, expensive,
cumbersome, and intensely frustrating-for
both workers and managers.
After an exhaustive 1991 study of the
system, the National Academy of Public
Administration recommended a complete
overhaul of the system. Classification
standards, NAPA argued, are "too complex,
inflexible, out-of-date, and inaccurate,"
First, we must cut the waste and make
government operations more responsive to the
American people. It is time to shift from top-
down bureaucracy to entrepreneurial
government that generates change from the
bottom up. We must reward the people and
ideas that work and get rid of those that don't.
President Bill Clinton
February 17, 1993
creating "rigid job hierarchies that cannot
change with organizational structure." They
drive some of the best employees out of
their fields of expertise and into
management positions, for higher pay. And
managers seeking to create new positions
often fight the system for months to get
them classified and filled.26
There is strong evidence that agencies
given authority to do these things
themselves can do better. Using
demonstration authority under the 1978
Civil Service Reform Act, several agencies
have experimented with simpler systems. In
one experiment, at the Naval Weapons
Center in China Lake, California, and the
Naval Oceans Systems Center, in San
Diego, the system was simplified to a few
career paths and only four-to-six broad pay
bands within each path. Known as the
"China Lake Experiment," it solved many
of the problems faced by the two naval
facilities. It:
? classified all jobs in just five career
paths-professional, technical,
specialist, administrative and clerical;
? folded all GS (General Schedule) grades
into four, five, or six pay bands within
each career path;
? allowed managers to pay market salaries
to recruit people, to increase the pay of
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Recognizing the importance of attracting and
retaining highly qualified professionals in
government service, one of the demoralizing
and frustrating aspects is the fact that we are
retained to do a job but not allowed the
flexibility to carry it out, assume the
responsiblity, and reap the rewards or be
accountable for out actions.
Edith Houston
Town Hall Meeting,
U.S. Agency for International Development
May 26, 1993
outstanding employees without having
to reclassify them, and to give
performance-based bonuses and salary
increases;
? automatically moved employees with
repeated marginal performance
evaluations down to the next pay band;
and
? limited bumping to one career path,
and based it primarily on performance
ratings, not seniority.
Another demonstration at McClellan Air
Force Base, in Sacramento, California,
involved "gainsharing"-allowing
employees to pocket some of the savings
they achieved through cooperative labor-
management efforts to cut costs. It
generated $5 million in productivity savings
in four years and saw improved employee
performance; fewer grievances; less sick
leave and absenteeism; and improved labor-
management relations.
A third demonstration at more than 200
Agriculture Department sites tested a
streamlined, agency-based recruiting and
hiring system that replaced OPM's register
process. Under OPM's system, candidates
are arrayed and scored based on OPM's
written tests or other examinations. In
USDA's demonstration, however, the
agency grouped candidates by its own
criteria, such as education, experience or
ability, then picked from those candidates.
A candidate might qualify for a job, for
example, with a 2.7 college grade point
average. Agencies could create their own
recruitment incentives, do their own hiring,
and extend the probationary period for
some new hires. Managers were far
more satisfied with this system than the
existing one.
Action: Dramatically simplify the
current classification system, to give
agencies greater flexibility in how they
classify and pay their employees.27
We will urge Congress to remove all the
1940s-era grade-level descriptions from the
law and adopt an approach that is more
modern. In addition, Congress should allow
agencies to move from the General
Schedule system to a broad-band system.
OPM should develop such standard
banding patterns, and agencies should be
free to adopt one without seeking OPM's
approval.
When agency proposals do not fit under
a standard pattern, OPM should approve
them as five-year demonstration projects
that would be converted to permanent
"alternative systems" if successful. OPM
should establish criteria for broad-banding
demonstration projects, and agencies'
projects meeting those criteria should
receive automatic approval.
These changes would give agencies
greater flexibility to hire, retain, and
promote the best people they find. They
would help agencies flatten their hierarchies
and promote high achievers without having
to make them supervisors. They would
eliminate much valuable time now lost to
battles between managers seeking to
promote or reward employees and
personnel specialists administering a
classification system with rigid limits.
Finally, they would remove OPM from its
role as "classification police."
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To accompany agencies' new flexibility
on classification and pay, they must also be
given authority to set standards for their
own workers and to reward those who do
well.
Action: Agencies should be allowed to
design their own performance
management and reward systems, with
the objective of improving the
performance of individuals and
organizations. 28
The current government performance
appraisal process is frequently criticized as a
meaningless exercise in which most federal
employees are given above-average ratings.
We believe that agencies will be able to
develop performance appraisals that are
more meaningful to their employees. If they
succeed, these new approaches will send a
message that job performance is directly
linked to workers' chances for promotion
and higher pay.
Current systems to assess on-the-job
performance were designed to serve
multiple purposes: to enhance performance,
to authorize higher pay for high performers,
to retain high performers, and to promote
staff development. Not surprisingly, they
serve none of these purposes well.
Performance management programs
should have a single goal: to improve the
performance of individuals and
organizations. Agencies should be allowed
to develop programs that meet their needs
and reflect their cultures, including
incentive programs, gainsharing programs,
and awards that link pay and performance.
If agencies-in cooperation with
employees-design their own systems,
managers and employees alike should feel
more ownership of them.
Finally, if performance measures are to
be taken seriously, managers must have
authority to fire workers who do not
measure up. It is possible to fire a poor
worker in the federal government, but it
takes far too long. We believe this
undermines good management and
diminishes workers' incentives to improve.
There has to be a clear shared sense of mission.
There have to be clearly understood goals.
There have to be common values according to
which decisions are made. There has to be
trust placed in the employees who actually do
the work, so that they will feel free to make
decisions.
They cannot be treated like automatons or
children bound up in straightjackets and rules
and regulations and told to do the same thing
over and over and over again.
Vice President Al Gore
August 4, 1993
Action: Reduce by half the time
required to terminate federal managers
and employees for cause and improve the
system for dealing with poor performers.29
Agencies will reduce the time for
terminating employees for cause by half. For
example, agencies could halve the length of
time during which managers and employees
with unsatisfactory performance ratings are
allowed to demonstrate improved
performance.
To support this effort, we will ask OPM
to draft and Congress to pass legislation to
change the required time for notice of
termination from 30 to 15 days. This
legislation should also require the waiting
period for a within-grade increase to be
extended by the amount of time an
employee's performance does not meet
expectations. In other words, only the time
that an employee is doing satisfactory work
should be credited toward the required
waiting period for a pay raise.
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STEP 3 STREAMLINING PROCUREMENT
Every year, Washington spends about
$200 billion buying goods and
services. That's $800 per American.
With a price tag like that, taxpayers have a
right to expect prudent spending.
The federal government employs
142,000 workers dedicated to procurement.30
The Federal Acquisition Regulation (FAR)
ontrolling procurement runs 1,600 pages,
with 2,900 more pages of agency-specific
supplements.
These numbers document what most
federal workers and many taxpayers already
know: Our system relies on rigid rules and
procedures, extensive paperwork, detailed
design specifications, and multiple
inspections and audits. It is an
extraordinary example of bureaucratic red
tape.
Like the budget and personnel systems,
the procurement system was designed with
the best of intentions. To prevent
profiteering and fraud, it includes rigid
safeguards. To take advantage of bulk
purchasing, it is highly centralized. But the
government wrote its procurement rules
when retailing was highly stratified, with
many markups by intermediaries. Today
the game has changed considerably. Retail
giants like Wal-Mart, Office Depot and
Price Club are vertically integrated,
eliminating the markups of intermediaries.
Federal managers can buy 90 percent of
what they need over the phone, from mail-
order discounters. Bulk purchasing still has
its advantages, but it is not always necessary
to get the best price.
Our overly centralized purchasing system
takes decisions away from managers who
know what they need, and allows
strangers-often thousands of miles
away-to make purchasing decisions. The
frequent result: Procurement officers, who
make their own decisions about what to
buy and how soon to buy it, purchase low-
quality items, or even the wrong ones, that
arrive too late.
This "secondhand" approach to
purchasing creates another problem. When
line managers' needs and experiences are
not understood by the procurement officer,
the government is unable to make decisions
that reward good vendors and punish bad
ones. As a result, vendors often "game"
contracts-exploiting loopholes to require
expensive changes. For example, in a major
government contract for a computerized
data network a few years ago, a vendor used
slight underestimates of system demand in
the contract specifications as an excuse to
charge exorbitant prices for system
upgrades. In the private sector, a manager
could have used the incentive of future
contracts to prevent such gaming; in the
government, there is no such leverage.
The symptoms of what's wrong are
apparent, too, from stories about small
purchases.
One story that Vice President Gore has
repeated in Washington over the past six
months concerns steam traps. Steam traps
remove condensation from steam lines in
heating systems. Each costs about $100.
But when one breaks, it leaks as much as
$50 of steam a week. Obviously, a leaking
steam trap should be replaced quickly.
When plumbers at the Sacramento
Army Depot found leaking traps, however,
their manager followed standard operating
procedure. He called the procurement
office, where an officer, who knew nothing
about steam traps, followed common
practice. He waited for enough orders to
buy in bulk, saving the government about
$10 per trap. There was no rule requiring
him to wait- just a powerful tradition. So
the Sacramento Depot didn't get new steam
traps for a year. In the meantime, each of
their leaking traps spewed $2,500 of steam.
To save $10, the central procurement
system wasted $2,500.
As the Vice President visited government
agencies, he heard many more stories of
wasteful spending-most of them
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"Ash receivers, tobacco (desk type)..:'
O ur federal procurement system leaves
little to chance.
When the General Services Administration
wanted to buy ashtrays, it has some very
specific ideas how those ashtrays-better
known to GSA as "ash receivers, tobacco (desk
type)," should be constructed.
In March 1993, the GSA outlined, in nine
full pages of specifications and drawings, the
precise dimensions, color, polish and markings
required for simple glass ashtrays that would
pass U.S. government standards.
A Type I, glass, square, 4'/2 inch (114.3
mm) ash receiver must include several features:
"A minimum of four cigarette rests, spaced
equidistant around the periphery and aimed at
the center of the receiver, molded into the top.
The cigarette rests shall be sloped toward the
center of the ash receiver. The rests shall be
parallel to the outside top edge of the receiver
or in each corner, at the manufacturer's option.
All surfaces shall be smooth."
Government ashtrays must be sturdy too. To
produced by the very rules we have
designed to prevent it. Take the case of
government travel.
Because GSA selects a "contract airline"
for each route, federal employees have few
choices. If Northwest has the Washington-
Tampa route, for instance, federal
employees get routed through Detroit. If
Northwest has the Boston-Washington
route, employees have to use Northwest-
even if USAir has more frequent flights at
more convenient times. Workers told the
Vice President of being routed through
thousands of miles out of their way even if
guard against the purchase of defective ash
receivers, the GSA required that all ashtrays be
tested. "The test shall be made by placing the
specimen on its base upon a solid support (a 1
3/4 inch, 44.5mm maple plank), placing a steel
center punch (point ground to a 60-degree
included angle) in contact with the center of
the inside surface of the bottom and striking
with a hammer in successive blows of
increasing severity until breakage occurs."
Then, according to paragraph 4.5.2., "The
specimen should break into a small number of
irregular shaped pieces not greater in number
than 35, and it must not dice." What does
"dice" mean? The paragraph goes on to
explain: 'Any piece 1/4 inch (6.4 mm) or more
on any three of its adjacent edges (excluding
the thickness dimension) shall be included in
the number counted. Smaller fragments shall
not be counted."
it cost them a day's worth of time-and a
day's worth of taxpayers' money. Others
told of being unable to take advantage of
cheap "special fares" because they were not
"government fares." And one worker
showed the National Performance Review a
memo from the Resolution Trust
Corporation explaining that RTC workers
would not be reimbursed for any travel
expenses unless they signed their travel
vouchers in blue ink!
Beyond travel, at every federal agency the
Vice President visited, employees told
stories about not getting supplies and
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equipment they needed, getting them late,
or watching the government spend too
much for them. At the Department of
Health and Human Services, a worker told
the Vice President that no matter how
much his office needed a FAX machine-
and how much time the machine would
save workers-the purchase wouldn't be
possible "without the signature of everyone
in this room." An engineer from the
National Institutes of Health added that in
his agency, it takes more than a year to buy
a computer, not a mainframe, but a
personal computer! At the Transportation
Department, a hearing-impaired employee
told the Vice President of watching with
dismay as her agency spent $600 to buy her
a Telephone Device for the Deaf (TDD),
when she knew she could buy one off the
shelf for $300.
Anecdotes like these were documented in
January 1993, when the Office of Federal
Procurement Policy and the U.S. Merit
Systems Protection Board collaborated on a
survey of the procurement system's
customers: federal managers. More than
1,000 responded. Their message: The
system is not achieving what its customers
want. It ignores its customers' needs, pays
higher prices than necessary, is filled with
peripheral objectives, and assumes that line
managers cannot be trusted.
A study by the Center for Strategic and
International Studies added several other
conclusions. The procurement system adds
costs without adding value; it impedes
government's access to state-of-the-art
commercial technology; and its complexity
forces businesses to alter standard
procedures and raise prices when dealing
with the government.31
There is little disagreement that federal
procurement must be reconfigured. We
must radically decentralize authority to line
managers, letting them buy much of what
they need. We must radically simplify
procurement regulations and processes.
We must empower the system's customers
by ending most government service
monopolies, including those of the General
Services Administration. As we detailed in
Chapter 1, we must make the system
competitive by allowing managers to use
any procurement office that meets their
needs.
As we take these actions, we must
embrace these fundamental principles:
integrity, accountability, professionalism,
openness, competition-and value.
Action: Simplify the procurement
process by rewriting federal regulations-
shifting from rigid rules to guiding
principles.32
The Federal Acquisition Regulation
(FAR), the government's principal set of
procurement regulations, contains too
many rules. Rules are changed too often
and are so process-oriented that they
minimize discretion and stifle innovation,
according to a Merit Systems Protection
Board survey.33 As one frustrated manager
noted, the FAR does not even clearly state
the main goal of procurement policy: "Is it
to avoid waste, fraud, and abuse? Is it to
implement a social-economic agenda? Is it
to procure the government's requirements at
a fair and reasonable cost?"
This administration will rewrite the
1,600-page FAR, the 2,900 pages of agency
supplements that accompany it, and
Executive Order 12352, which governs
federal procurement. The new regulations
will:
? shift from rigid rules to guiding
principles;
? promote decision making at the lowest
possible level;
? end unnecessary regulatory
requirements;
? foster competitiveness and commercial
practices;
? shift to a new emphasis on choosing
"best value" products;
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? facilitate innovative contracting
approaches; and
? recommend acquisition methods that
reflect information technology's short
life cycle.
? develop a more effective process to
listen to its customers: line managers,
government procurement officers and
vendors who do business with the
government.
Action: The GSA will significantly
increase its delegated authority to federal
agencies for the purchase of information
technology, including hardware, software,
and services.34
In 1965, when "automated data
processing" meant large, mainframe
computers -often developed specifically
for one customer-Congress passed the
Brooks Act. It directed GSA to purchase,
lease, and maintain such equipment for the
entire federal government. The Act also
gave GSA authority to delegate to agencies
these same authorities. In 1986, Congress
extended the requirement to software and
support services.
Today, with most computer equipment
commercially available in highly
competitive markets, the advantages of
centralized purchasing have faded and the
disadvantages grown. The federal
government takes, on average, more than
four years to buy major information
technology systems; the private sector takes
13 months. Due to rapidly changing
technology, the government often buys
computers that are state-of-the-art when the
purchase process begins and when prices are
negotiated, but which are almost obsolete
when computers are delivered. The
phenomenon is what one observer calls
"getting a 286 at a 486 price."
Currently, the GSA authorizes agencies
to make individual purchases up to $2.5
million in equipment and services on their
own. The GSA Administrator will raise
authorization levels to $50 million, $20
million and $5 million. These levels will be
calculated according to each agency's size,
the size of its information technology
budget, and its management record. In
some cases, GSA may grant an agency
greater or unlimited delegation.
GSA will also waive requirements that
agencies justify their decisions to buy
information technology items under
$500,000 that are mass-produced and
offered on the open market.
Action: GSA will simpl the
procurement process by allowing agencies
to buy where they want, and testing a
fidly `electronic marketplace. "3s
The government buys everything from
forklifts and snowplows to flak jackets and
test tubes through a system called the
Multiple Award Schedule program, which
includes more than one million separate
items.
Under this program, GSA negotiates and
awards contracts to multiple vendors of
comparable products and services, at
varying prices. GSA then creates a "supply
schedule" for a particular good or service,
identifying all vendors that have won
contracts as well as the negotiated prices. Of
GSA's 154 schedules, civilian agencies must
must buy from 117. In ordering from
schedules, agencies still must comply-in
addition-with the Federal Acquisition
Regulation, Federal Information Resources
Management Regulation, and Federal
Property Management Regulation.
In most cases, we should not limit
managers to items on the supply schedules.
If they can find the same or a comparable
product for less, they should be free to buy
it. Mandatory schedules should apply only
when required by law, to ensure
standardization, or when agencies
voluntarily create team pools that buy in
bulk for lower prices. In addition, GSA
should revise regulations that currently limit
agencies from buying more than $300,000
of information technology items on supply
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schedules, raise them to $500,000 and
provide a higher limit for individual items
costing more than $500,000.
To make supply schedules more user-
friendly, GSA should conduct several pilot
tests. One should test an "electronic
marketplace," in which GSA would not
negotiate prices. Instead, suppliers would
list products and prices electronically, and
agencies would electronically order the
lowest-priced item that met their needs.
Suppliers, at any time, would be able to add
new products and change prices. Such a
pilot would test whether visible price
competition will cut prices and give line
managers easier access to rapidly changing
products.
Action: Allow agencies to make
purchases under $100, 000 through
simplaf ed purchase procedures.3
Under current law, agencies are allowed
to make purchases of less than $25,000 on
their own, using simple procurement
procedures. These small purchases, on
average, take less than a month to complete;
purchases of more than $25,000 normally
take more than three months. If Congress
raised the threshold to $100,000, agencies
could use simplified procedures on another
45,550 procurements-with a total value of
$2.5 billion.
Congress should keep current rules that
reserve small purchases for small businesses
and should improve access to information
on procurements of more than $25,000. To
ensure that small business receives adequate
notice of possible procurements, the federal
government, with OMB as the lead agency,
should adopt an electronic notification
system.
Action: Rely more on the commercial
marketplace.37
The government can save enormous
amounts of money by buying more
commercial products instead of requiring
products to be designed to government-
unique specifications. Our government
buys such items as integrated circuits,
pillows, and oil pans, designed to
government specifications-even when
there are equally good commercial products
available.
We recommend that all agency heads be
instructed to review and revise internal
purchasing procedures and rules to allow
their agencies to buy commercial products
whenever practical and to take advantage of
market conditions.
We will ask the Office of Management
and Budget to draft a new federal
commercial code with commercial-style
procedures, and then ask Congress to adopt
the new code and remove impediments to
this money-saving approach to
procurement.
Action: Bring federalprocurementlaws
up to date.38
There are four federal labor laws
implemented through the federal
procurement process. Each was passed
because of valid and well founded concerns
about the welfare of working Americans.
But as part of our effort to make the
government's procurement process work
more efficiently, we must consider whether
those laws are still necessary-and whether
the burdens they impose on the
procurement system are reasonable ones.
The Davis-Bacon Act of 1931 requires
that each repair or construction contract in
excess of $2,000 for work on a public
building specify that the prevailing area
minimum wage be paid to workers on that
contract. The law was passed because
Congress feared that without it, federal
contracts awarded through a sealed bid
process could undermine local prevailing
wages. While Congress shifted the
government's focus to an open bidding
process in 1984, we acknowledge that
concerns about the impact of government
contracts on prevailing wages are still valid.
Recognizing that the original $2,000
threshold in the law was set more than 60
years ago, we recommend that Congress
modify the Davis-Bacon Act by raising the
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threshold for compliance to $100,000, a
change similar to that proposed by Senator
Kennedy in March 1993.
The Service Contract Act of 1965 has
purposes similar to those of the Davis-Bacon
Act, and applies to service contracts in excess
of $2,500. It requires contractors to pay the
minimum prevailing wage and specified
fringe benefits. To keep contractors from
"locking in" their wage agreements at low
levels, the law imposes a five-year limit on
service contracts and requires new wage
determinations every two years.
We suggest that the five-year limit is
inconsistent with the government's interest
in entering into long-range contracts. We
will urge Congress to increase the limit up
to 10 years while retaining the two-year
wage adjustment requirement.
The Copeland Anti-Kickback Act of
1934 regulates payroll deductions on federal
and federally assisted construction. The law
prohibits anyone from inducing employees
to give up any part of their compensation
and requires contractors to submit weekly
statements of compliance and detailed
weekly payroll reports to the Labor
Department.
We suggest that such detailed reporting is
SrE
an unreasonable burden on federal
contractors, and we will urge Congress to
modify the act. We suggest eliminating
requirements for weekly reports and
requiring contractors instead to certify with
each payment that they have complied with
the law Contractors would also be required
to keep records to prove their compliance
for three years.
The Walsh-Healey Public Contracts Act
requires contractors that supply materials to
the federal government through contracts in
excess of $10,000 to pay all workers the
federal minimum wage, to agree that no
employee is required to work more than 40
hours a week, and to avoid using convict
labor or workers under the age of 16.
Over time, each of the requirements of
the Walsh-Healey Act-with the exception
of the provision relating to convict labor-
has been superseded by other federal
legislation. We therefore urge Congress to
remove the burden of certifying compliance
with redundant laws from federal
contractors. Within 30 days of the repeal of
that law, the President should amend
Executive Order 11755 to include the
convict labor provisions of the Walsh-
Healey Act.
4 REORIENTING THE INSPECTORS
GENERAL
Responding to growing concern
about waste, fraud, and abuse in
government, Congress passed the
Inspector General Act in 1978. This act
and subsequent amendments created the 60
Inspectors General offices that today
employ 15,000 federal workers, including
postal inspectors.
The act was broad in scope, requiring
IGs to promote the efficiency, economy and
integrity of federal programs with auditing
program expenditures, and investigating
possible fraud and abuse.
The inspectors general, who are
independent of the agencies in which they
operate, report to Congress twice a year.
These reports detail how much money IG
audits have recovered or put to better use
and the number of convictions resulting
from their criminal investigations. The IGs
also send the audit reports to the heads of
their agencies and forward investigations for
criminal prosecution to the U.S. Attorney
General.
The Inspector General Act's two central
mandates, combined with the last two
administrations' eagerness to highlight
"waste, fraud and abuse," have shaped the
evolution of the IG offices. The standard by
which they are evaluated is finding error or
fraud: The more frequently they find
mistakes, the more successful they are
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judged to be. As a result, the IG staffs often
develop adversarial relations with agency
managers-who, in trying to do things
better, may break rules.
At virtually every agency he visited, the
Vice President heard federal employees
complain that the IGs' basic approach
inhibits innovation and risk taking. Heavy-
handed enforcement-with the IG
watchfulness compelling employees to
follow every rule, document every decision,
and fill out every form-has had a negative
effect in some agencies.
Action: Broaden the focus of the
Inspectors General from strict compliance
auditing to evaluating management
control systems.39
In a government focused on results, the
Inspectors General can play a key role not
only in controlling managers' behavior by
monitoring it, but in helping to improve it.
Today, they audit for strict compliance with
rules and regulations. In the future, they
should help managers evaluate their
management control systems. Today, they
look for "waste, fraud, and abuse." In the
future, they should also help improve
systems to prevent waste, fraud and abuse,
and ensure efficient, effective service.
Many IGs have already begun to help
their agencies this way. At the justice
S
Department, for example some offices were
inefficient in completing background and
security clearances. The Inspector General's
office examined the problem, then
recommended setting up a central database
to manage the clearance process and warn
officials automatically when they are about
to miss deadlines for completing
investigations. Similarly, the Inspector
General of the Department of Health and
Human Services has long been engaged in
program evaluations to help agencies
uncover inefficiencies. While the Inspector
General's office retains the right to conduct
formal audits and criminal investigations, it
also uses its role as a neutral observer to
collaborate on making programs work
better.
Congress need pass no legislation to
make this happen. Promoting the efficiency
and integrity of government programs was
part of the IGs' original mandate. But such
change will require a cultural revolution
within many IG offices, and we
recommend two steps to help guide such a
change. First-line managers, who are the IG
front-line customers, should be surveyed
periodically to see whether they believe the
IGs are helping them improve performance.
Second, criteria should be established for
judging IG performance.
5 o ELIMINATING REGULATORY OVERKILL
Reinventing our budget, personnel
and procurement systems will strip
away much-but not all-of the
red tape that makes our governing processes
so cumbersome. Thousands upon thousands
of outdated, overlapping regulations remain
in place. These regulations affect the people
inside government and those who deal with
it from the outside. Inside government, we
have no precise measurement of how much
regulation costs or how much time it steals
from productive work. But there's no
disagreement that the costs are enormous.
And on the matter of external regulation, a
1993 study concluded that the cost to the
private sector of complying with regulations
is at least $430 billion annually-9 percent
of our gross domestic product! 40
We must clear the thicket of regulation
by undertaking a thorough review of the
regulations already in place and redesigning
regulatory processes to end the proliferation
of unnecessary and unproductive rules. We
have worked closely with administration
officials responsible for developing a new
approach to regulatory review, and
incorporated that work into the following
action.
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CUTTING RED TAPE
Action: The President should issue a
directive requiring call federal agencies to
review internal government regulations
over the next, years, with a goal of
eliminating 50 percent of those
regulations.41
Can regulations be eliminated? The
answer is yes, as evidenced by promising
experiments in several federal agencies.
In the Management Efficiency Pilot
Program (MEPP) in five of the Department
of Veterans' Affairs regional benefits offices,
the offices were encouraged to do away with
red tape.42 At several benefits offices, 895 of
1,969 regulations were dropped, saving the
staff more than 3,000 hours and $640,000
in one year. And productivity at MEPP
centers increased by 35 percent in one year
(1988-89), more than double the increase at
other centers. A similar effort by five VA
medical centers redirected $13.1 million to
much-needed funding for acute care centers.
An even more sweeping example of a
fresh start in internal regulations comes
from the Air Force, where the Chief of Staff
has established a servicewide program to
streamline the organization and cut out
bureaucracy. Under the Policy Review
Initiative begun in 1992, the Air Force is
replacing 1,510 regulations with 165 policy
directives and 750 sets of instructions. This
effort will cut 55,000 pages of intermingled
policy and procedure to about 18,000 pages
clearly separating policy from procedure.
This deregulation effort, managed by a staff
of 10, is expected to be completed in fiscal
year 1994.
Over the next 3 years, each federal
agency will undertake a thorough and
systematic review of its internal regulations.
Agencies may choose their own strategies
for reaching the goal of reducing internal
regulations by 50 percent.
Action: Improve inter-agency
coordination of regulations to reduce
unnecessary regulation and red tape.43
In 1981, frustrated at the inconsistencies
and duplication among federal regulatory
efforts and their burden on government and
the private sector, President Reagan required
the Office of Management and Budget
specifically, the Office of Information and
Regulatory Affairs (OIRA) to review all
regulations proposed by executive agencies.
With a limited staff, many of whom are
also involved with paperwork reduction
issues, the review process for proposed
regulations can be lengthy. And while a
lengthy review process may be appropriate
for significant rules, it is a waste of time
for others.
We can lick gravity, but sometimes the
paperwork is overwhelming.
In early 1993, Vice President Gore
convened an informal working group to
recommend changes in the regulatory
review process. The working group and the
National Performance Review coordinated
their efforts closely. We endorse the
recommendations of the working group
and the President's executive order, which
will implement those changes and
streamline the regulatory review process.
The order will enhance the planning
process and encourage agencies to consult
with the public early in that process. In
addition, in an effort to coordinate the
regulatory actions of all executive agencies, the
Vice President will meet annually with agency
heads, and the Administrator of OIRA will
hold quarterly meetings with representatives
of executive agencies and the administration.
Improving the regulatory review process
also means being selective in reviewing
regulations. Through this order, the
President will instruct OIRA to review only
significant regulations-not, as under the
current process, all regulations. The new
review process, which will take into account
a broad range of costs and benefits, will be
more useful and realistic.
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To ease the adverse effects of regulation
on citizens, businesses, and the economy as
a whole, the executive order also will require
an ongoing review of existing regulations.
Agencies will identify regulations that are
cumulative, obsolete, or inconsistent, and,
where appropriate, eliminate or modify
them. They will also identify legislative
mandates that require them to impose
unnecessary or outdated regulations.
Action: Establish a process by which
agencies can more widely obtain waivers
from regulations. 44
With the advent of the Government
Performance and Results Act, which
Congress passed in July 1993, we have
begun to acknowledge the important
principle of "flexibility in return for
accountability."
Under the act, some agencies may apply
for waivers from federal regulations if they
meet specific performance targets. In other
words, they will be exempt from some
administrative requirements if they do their
jobs better. The law applies only to internal
regulations and government agencies, but it
also urges wider waivers authority to test the
potential benefits. In the spirit of that
legislation, we seek to expand the concept of
greater flexibility for greater accountability.
The President should direct each federal
agency to establish and publish,in a timely
manner, an open process through which
other federal agencies can obtain waivers
from that agency's regulations-with an
expedited appeals process.
Rules adopting this new waiver process
would state that all future agency regula-tions
would be subject to the waiver process unless
explicitly prohibited. We will also ask
Congress to specify that legislation would be
subject to waivers unless explicitly prohibited.
Action: Reduce the burden of
congressionally mandated reports.45
Woodrow Wilson was right. Our
country's 28th president once wrote that
"there is no distincter tendency in
congressional history than the tendency to
subject even the details of administration"
to constant congressional supervision.
One place to start in liberating agencies
from congressional micromanagement is the
issue of reporting requirements. Over the
past decades, we have thrown layer upon
layer of reporting requirements on federal
agencies, creating an almost endless series of
required audits, reports, and exhibits.
Today the annual calendar is jammed with
report deadlines. On August 31 of each year,
the Chief Financial Officers (CFO) Act
requires that agencies file a 5-year financial
plan and a CFO annual report. On
September 1, budget exhibits for financial
management activities and high risk areas are
due. On November 30, IG reports are
expected, along with reports required by the
Prompt Payment Act. On January 31,
reports under the Federal Civil Penalties
Inflation Report Adjustment Act of 1990
come due. On March 31, financial state-
ments are due and on May 1 annual single-
audit reports must be filed. On May 31
another round of IG reports are due. At the
end of July and December, "high-risk"
reports are filed. On August 31, it all begins
again. And these are just the major reports!
In fiscal year 1993, Congress required
executive branch agencies to prepare 5,348
reports.46 Much of this work is duplicative.
And because there are so many different
sources of information, no one gets an
integrated view of an agency's condition-
least of all the agency manager who needs
accurate and up to date numbers.
Meanwhile, trapped in this blizzard of
paperwork, no one is looking at results.
We propose to consolidate and simplify
reporting requirements, and to redesign
them so that the manager will have a clear
picture of the agency's financial condition,
the condition of individual programs, and
the extent to which the agency is meeting its
objectives. We will ask Congress to pass
legislation granting OMB the flexibility to
consolidate and simplify statutory reports
and establishing a sunset provision in any
reporting requirements adopted by
Congress in the future.
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S
Cho EMPOWER STATE AND
LOCAL GOVERNMENTS
What we usually call
"government" is, in fact, a
tangle of different levels of
government agencies-some run from
Washington, some in state capitals, and
some by cities and towns. In the United
States, in fact, some 80,000 "governments"
run everything from local schools and water
supply systems to the Defense Department
and overseas embassies. Few taxpayers
differentiate among levels of government,
however to the average citizen, a tax is a
tax-and a service a service-regardless of
which level of government is responsible. To
reinvent government in the public's eyes, we
must address the web of federal-state-local
relations.
Washington provides about 16 percent of
the money that states and localities spend
and shapes a much larger share of such
spending through mandates. Much of
Washington's domestic agenda, $226 billion
to be precise, consists of programs actually
run by states, cities, and counties. But the
federal government doesn't always distribute
its money-or its mandates-wisely.
For starters, Washington allocates federal
money through an array of more than 600
different grant programs. Many are small:
445 of them distribute less than $50 million
a year nationwide; some 275 distribute less
than $10 million. Through grants,
Congress funds some 150 education and
training programs, 100 social service
programs, and more than 80 health care
programs.
Considered individually, many
categorical grant programs make sense. But
together, they often work against the very
purposes for which they were established.
When a department operates small grant
programs, it produces more bureaucracy,
not more services. Thousands of public
employees-at all levels of government-
spend millions of hours writing regulations,
writing and reviewing grant applications,
filling out forms, checking on each other,
and avoiding oversight. In this way,
professionals and bureaucrats siphon money
from the programs' intended customers:
students, the poor urban residents and
others. And states, and local governments
find their money fragmented into hundreds
of tiny pots, each with different, often
contradictory rules, procedures, and
program requirements.
Henry Cisneros, Secretary of Housing
and Urban Development, likens federal
grants to a system of pipelines spreading out
across the country. The "water," says
Cisneros, reaches states and localities
Were we directed from Washington when to
sow and when to reap, we should soon want for
bread.
Thomas Jefferson
1826
through hundreds of individual pipelines.
This means there is little chance for the
water to be mixed, properly calibrated to
local needs, or concentrated to address a
specific problem, geographic area, or
population.
In employment and training, for
example, Washington funds training
programs, literacy programs, adult
education programs, tuition grant
programs, and vocational education
programs. Different programs are designed
for different groups-welfare recipients,
food stamp recipients, displaced
homemakers, youth in school, drop-outs,
"dislocated workers," workers displaced by
foreign trade, and on and on.
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At a plant in Pittsfield, Massachusetts,
General Electric recently laid off a large
group of workers. Some workers could get
Trade Adjustment Assistance benefits,
because their jobs were lost to foreign
competition. Others could not; their jobs
fell to defense cutbacks. Because they have a
union, people working in one area began
exercising their seniority rights and
bumping people in other areas. Some
workers bumped from trade-affected jobs to
defense contracting jobs, then lost those a
few weeks later. Under federal regulations,
they could no longer get Trade Adjustment
Assistance. Thus, friends who had spent
years working side by side found themselves
with very different benefits. Some got the
standard 6 months of unemployment
checks. Others got 2 years of
unemployment checks and extensive
retraining support. Try explaining that to
people who have lost the only jobs they've
ever held!
People who run such programs struggle
to knit together funds from three, four, or
five programs, hoping against hope that
workers get enough retraining to land
decent new jobs. But the task is difficult;
each program has its own requirements,
funding cycles, eligibility criteria, and the
like. One employment center in Allegheny
County, New York, has tried hard to bring
several programs together and make them
appear as seamless as possible to the
customers. At the end of the day, to
accommodate reporting requirements, the
staff enters information on each customer at
four different computer terminals: one for
Job Training Partnership Act (JTPA)
programs, one for the JOBS program, one
for the Employment Service, and one for
tracking purposes.
When Congress enacted JTPA, it sought
to avoid such problems. It let local areas
tailor their training programs to local needs.
But federal rules and regulations have
gradually undermined the good intentions.
Title III, known as the Economic
Dislocation and Worker Adjustment
Assistance Act (EDWAA), helps states
respond immediately to plant closings and
36
large layoffs. Yet even EDWAA's most
flexible money, the "national reserve fund,"
has become so tangled in red tape that
many states won't use it. As Congress's
Office of Technology Assessment put it,
"the process is simply too obstacle ridden....
many state EDWAA managers cannot
handle the complexities of the grant
application, and those that do know how
are too busy responding to clients' urgent
needs to write demanding, detailed grant
proposals."
When Congress amended JTPA in 1993,
targeting more funds to those with
"multiple barriers" to employment,
homeless advocates thought the change
would help their clients. After all, who has
more barriers to employment than someone
without an address or phone number? But
the new JTPA formula also emphasized
training over job search assistance. So a local
program in Washington, D.C. that had
won a Labor Department award for placing
70 percent of its clients in jobs-many of
them service sector jobs paying more than
the minimum wage-lost its JTPA funding.
Why? It didn't offer training. It just helped
the homeless find jobs.47
But federal programs rarely focus on
results. As structured by Congress, they pay
more attention to process than outcomes-
in this case, more to training than to jobs.
Even in auditing state and local programs,
federal overseers often do little more than
check to see whether proper forms are filed
in proper folders.
The rules and regulations behind federal
grant programs were designed with the best
of intentions-to ensure that funds flow for
the purposes Congress intended. Instead,
they often ensure that programs don't work
as well as they could-or don't work at all.
Virtually every expert with whom
we spoke agreed that this system is
fundamentally broken. No one argued for
marginal or incremental change. Everyone
wants dramatic change-state and local
officials, federal managers, congressional
staff. As in managing its own affairs, the
federal government must shift the basic
paradigm it uses in managing state and local
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affairs. It must stop holding programs
accountable for process and begin holding
them accountable for results.
? The task is daunting; it will take years
to accomplish. We propose several
significant steps on the journey:
? Establish a Cabinet-level Enterprise
Board to oversee new initiatives in
community empowerment;
? Cut the number of unfunded mandates
that Washington imposes;
Sometimes we need to start out with a blank
slate and say, "hey, we've been doing this for
the last 40, 50 years. It doesn't work. "Lets
throw out everything, clear out minds. .. Let's
have as a goal doing the right thing for the
right reasons, even if it entails taking risks.
Vincent Lane,
Chairman, Chicago Housing Authority,
Reinventing Government Summit
Philadelphia, June 25, 1993
? Consolidate 55 categorical grants into
broader "flexible grants;"
? Increase state and local flexibility in
using the remaining categorical grants;
? Let all agencies waive rules and
regulations when they conflict with
results; and
? Deregulate the public housing program.
The likely benefits are clear:
administrative savings at all levels; greater
flexibility to design solutions; more effective
concentration of limited resources; and
programs that work for their customers.
Action: The President should establish
a Cabinet--level Enterprise Board to
oversee new initiatives in community
empowerment.48
The federal government needs to better
organize itself to improve the way it works
with states and localities. The President
should immediately establish a working
group of cabinet-level officials, with
leadership from the Vice President, the
Domestic Policy Council, and the National
Economic Council.
The Board will look for ways to
empower innovative communities by
reducing red tape and regulation on federal
programs. This group will be committed to
solutions that respect "bottom-up" initiatives
rather than "top-down" requirements. It will
focus on the administration's community
empowerment agenda, beginning with the
9 Empowerment Zones and 95 Enterprise
Communities that passed Congress as part
of the President's economic plan.
In participating communities, for
example, federal programs could be
consolidated and planning requirements
could be simplified; waivers would be
granted to assure maximum flexibility;
federal funding cycles would be
synchronized; and surplus federal properties
could be designated for community use.
Action: The President should issue a
directive limiting the use of unfunded
mandates by the administration.49
As the federal deficit mounted in the
1980s, Congress found it more and more
difficult to spend new money. Instead, it
often turned to "unfunded mandates"-
passing laws for the states and localities to
follow, but giving them little or no money
to implement those policies. As of
December 1992, there were at least 172
separate pieces of federal legislation in force
that imposed requirements on state and
local governments. Many of these, such as
clean water standards and increased public
access for disabled citizens, are
unquestionably noble goals.
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But the question remains: How will state
and local governments pay to meet those
goals? We recommend that Congress refrain
from this practice and that the President's
directive establish that the executive branch
will similarly limit its use of unfunded
mandates in policies, legislative proposals
and regulations.
The directive would narrow the
circumstances under which departments
and agencies could impose new unfunded
burdens on other governments. It also
would direct federal agencies to review their
existing regulations and reduce the number
of mandates that interfere with effective
service delivery. OMB's Office of
Information and Regulatory Affairs (OIRA)
should review all major regulations or
legislation proposed by the executive branch
for possible adverse impacts on states and
localities. Finally, OIRA's director should
create a forum in which federal, state, and
local officials could develop solutions to
problems involving unfunded mandates.
Action: Consolidate 55 categorical grant
programs with finding of $12.9 billion
into six broad `flexible grants"-in job
training education, water quality,
defense conversion, environmental
management, and motor carrier safety.so
This proposal came from the National
Governors Association (NGA) and
National Conference of State Legislatures
(NCSL), which describe it as "a first step
toward broader, more ambitious reforms."
It would consolidate some 20 education,
employment and training programs, with a
combined $5.5 billion in fiscal year 1993
spending; roughly 10 other education
programs ($1.6 billion); 10 small
How Much Do You Get for a 1983 Toyota?
W hat does the price of a used car have to
do with the federal government's family
policies?
More than it should. Caseworkers employed
by state and local government to work with
poor families are supposed to help those
families become self-sufficient. Their job is to
understand how federal programs work. But as
it turns out, those caseworkers also have to
know something about used cars. Used cars?
That's right. Consider this example, recounted
to Vice President Gore at a July 1993
Progressive Foundation conference on family
policy in Nashville, Tennessee:
Agencies administering any of the federal
government's programs for the poor must verify
many details about people's lives. For instance,
they must verify that a family receiving funds
under Aid to Families with Dependent
Children (AFDC) does not own a car worth
more than $1,500 in equity value. To give a
poor family food stamps, it must verify that the
family doesn't owna car worth more than
$4,500 in market value. Medicaid specifies a
range that it allows for the value of a recipient's
car, depending on the recipient's Medicaid
category. But under food stamp rules, the car is
exempt if it is used for work or training or
transporting a disabled person. And under
AFDC, there is no exemption for the car under
any circumstances.
Recounting that story to a meeting of the
nation's governors, the Vice President asked this
simple question: "Why can't we talk about the
same car in all three programs?"
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environmental programs ($392 million);
six water quality programs ($2.66 billion);
and six defense conversion programs
($460 million).
Action: Congress should allow states and
localities to consolidate separate grant
programs from the bottom up.5'
Recognizing the political and
administrative obstacles to wholesale reform
of more than 600 existing categorical grants
in the short term, the National Performance
Review focused on an innovative solution
to provide flexibility and to encourage
result-oriented performance at the state and
local levels.
Our proposal calls for Congress to
authorize "bottom-up" grant consolidation
initiatives. Localities would have authority
to mix funding from different programs,
with simple notification to Washington,
when combining grants smaller than $10
million each. For a consolidation involving
any program funded at more than $10
million, the federal awarding office (and
state, if applicable), would have to approve
it before implementation. In return for such
consolidation, the state and local
governments will waive all but one of the
programs' administrative payments from
the federal government.
When different grants' regulations
conflict, the consolidating agency would
select which to follow. States and localities
that demonstrated effective service
integration through consolidation would
receive preference in future grant awards.
Each of the partners in the
intergovernmental system must work
collaboratively with others-federal, state,
and local-to refine this recommendation.
The details of this proposal will be
negotiated with important state and local
organizations, such as the NGA, the NCSL,
U.S. Conference of Mayors, and the
National League of Cities, before legislation
is drafted. Bottom-up consolidation will be
given a high priority by the administration.
It represents a way to improve state and
local performance without tackling the
thorny political problem involved in
consolidating 600 grant programs,
reconciling thousands of rules and
regulations, and anticipating every possible
instance when flexibility might be necessary.
It puts the burden of identifying obstacles
and designing the best solution where it
belongs-on those who must make the
programs work.
Action: Give all cabinet secretaries and
agency heads authority to grant states and
localities selective waivers from federal
regulations or mandates.52
The National Performance Review is not
intended to be the final word on reinventing
government but rather a first step. This long
overdue effort will require continuing
commitment from the very top to truly change
the way government does business.
U.S. Rep. John Conyers (D. Mich.)
August 28, 1993
For federal grant programs to work,
managers must have flexibility to waive
rules that get in the way. Some departments
have this authority; others don't. Federal
decisions on most waivers come very slowly,
and states often must apply to a half-dozen
agencies to get the waivers they need.
Florida, for example, has a two-year waiver
allowing it to provide hospice care to AIDS
patients under Medicaid. Its renewal takes
18 months. So state officials have to reapply
after only six months. Waiver legislation
should grant broad waiver authority, with
the exception of fair housing, non-
discrimination, environmental, and labor
standards. We will ask Congress to grant
such authority to Cabinet officers. These
waivers, should be granted under limited
circumstances, however. They must be
time-limited and designed to include
performance measures. When each
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experiment is concluded, the granting
agency should decide whether the new way
of doing things should be included in
standard practice.
Action: Give control of public housing
to local public housing authorities with
histories of excellent management and
substantially deregulate the rest.53
Public housing is a classic story of good
intentions gone awry. When the program
began in the 1930s, it was hailed as an
enlightened response to European
immigrants' squalid living conditions in
cities across the country. Through an
enormous bureaucracy stretching from
Washington into virtually every city in
America, the public housing program
brought clean, safe, inexpensive living
quarters to people who could not afford
them otherwise.
Now, however, public housing is even
more troubled than our categorical grant
programs. With its tight, centralized
control, it epitomizes the industrial-era
program: hierarchical, rule-bound, and
bureaucratic. HUD's Washington, regional,
and local offices rigidly control local public
housing authorities, who struggle to help
the very poor.
Frustrated by the failure of public
housing, innovative state and local
governments began to experiment with new
models of developing, designing, financing,
managing, and owning low-income
housing. Successful efforts tailored the
housing to the characteristics of the
surrounding community. Local public
housing authorities began to work with
local governments and non-profit
organizations to create innovative new
models to serve low-income people.
HUD recognizes that local authorities
with proven records of excellence can serve
their customers far better if allowed to make
their own decisions. We and the secretary
recommend that Congress give HUD
authority to create demonstration projects
in which local housing authorities would
continue to receive operating subsidies as
long as they met a series of performance
targets, but would be free from other HUD
control. Individual demonstrations could
vary, but all federal rules would be open for
waivers as long as HUD could measure
performance in providing long-term,
affordable housing to those poor enough to
be eligible for public housing.
In addition, HUD should work closely
with local housing authorities, their national
organizations, public housing tenant
organizations, and state and local officials to
eliminate unnecessary rules, requirements,
procedures, and regulations. In particular,
HUD should replace its detailed
procurement and operating manuals and
design and site selection requirements with
performance measures, using annual
ranking of local housing authorities to
encourage better service and greater
accountability. It should eliminate the
annual budget review, an exercise in which
HUD field staff spend thousands of hours
reviewing and approving detailed budgets
from local housing authorities -even
though the reviews do not influence federal
funding decisions. And it should work with
Congress to change current rent rules,
which create strong incentives for people to
move from public housing as soon as they
find jobs.
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CUTTING RED TAPE
G?nd si@
The changes described above are
ambitious. They will take enormous
effort and enormous will. It will be
many years before all of them take root. But
if they succeed, the American people will
have a government capable of attacking
their problems with far more energy, and far
less waste, than they can today imagine.
We must move quickly because the
bureaucracy, by its nature, resists change. As
Tom Peters wrote in Thriving on Chaos,
"Good intentions and brilliant proposals
will be dead-ended, delayed, sabotaged,
massaged to death, or reversed beyond
recognition or usefulness by the overlayered
structures ...... 54
But the changes we propose will produce
their own momentum to overcome
bureaucratic resistance. As the red tape is
being cut, federal workers will become more
and more impatient with the red tape that
remains. They will resist any reversal of the
process. And they will be strengthened in
their resistance by the steps we propose in
the next chapters.
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(CIlnapttez 2
PUTTING CUSTOMERS FIRST
We are going to rationalize the way the federal government relates to the
American people, and we are going to make the federal government customer friendly.
A lot of people don't realize that the federal government has customers.
We have customers. The American people.
Vice President Al Gore
Town Meeting,
Department of Housing
and Urban Development,
March 26, 1993
11 of us-bureaucrat or
business owner, cabinet
secretary or office
clerk-respond to
incentives. We do more
of what brings us
managers to the same struggle to cut costs
and improve customer service that compels
private managers. We can imbue the federal
government-from top to bottom-with a
driving sense of accountability.
Is it really possible to reinvent
government in this way? Horror stories
about government waste are so abundant
that many doubt its ability to change. For
some, the only solution is to cut or abolish
programs wholesale. In some instances
those cuts make sense and we are
recommending them. But alone they do not
address the problem we face or move us
decidedly toward a government that works
better and costs less.
We propose a different approach. We
must make cuts where necessary; we also
must make our government effective and
efficient. Some programs clearly should be
eliminated, others streamlined. We will
offer many proposals to do both in chapter
4. But reinventing government isn't just
about trimming programs; it's about
fundamentally changing the way
government does business. By forcing
rewards and recognition, less of what
brings us criticism. But our government,
built around a complex cluster of
monopolies, insulates both managers and
workers from the power of incentives.
We must change the system. We must
force our government to put the customer
first by injecting the dynamics of the
marketplace.
The best way to deal with monopoly is to
expose it to competition. Let us be clear:
this does not mean we should run
government agencies exactly like private
businesses. After all, many of government's
functions are public responsibilities precisely
because the private sector cannot, should
not, or would not manage them. But we
can transplant some aspects of the business
world into the public arena. We can create
an environment that commits federal
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public agencies to compete for their
customers-between offices, with other
agencies, and with the private sector-we
will create a permanent pressure to streamline
programs, abandon the obsolete, and
improve what's left.
This process will be neither quick nor
easy. But as it unfolds, a very different
type of government will emerge, one that
is accountable to its true customers-
the public.
We propose four specific steps to
empower customers, break federal
monopolies, and provide incentives for
federal employees to better serve their
customers.
First, we will require that all federal
agencies put customers first by regularly
asking them how they view government
services, what problems they encounter, and
how they would like services improved. We
will ensure that all customers have a voice,
and that every voice is heard.
Second we will make agencies compete
for their customers' business. Wherever
feasible, we will dismantle government's
monopolies, including those that buy goods
and services, acquire and maintain office
space, and print public documents. These
internal monopolies serve their customers-
government workers-so poorly, it's no
wonder those workers have such trouble
serving customers outside government.
Thira where competition isn't feasible,
we will turn government monopolies into
more businesslike enterprises-enterprises
in closer touch with both customers and
market incentives.
Fourth, we will shift some federal
functions from old-style bureaucracies to
market mechanisms. We will use federal
powers to structure private markets in ways
that solve problems and meet citizens'
needs-such as for job training or safe
workplaces-without funding more and
bigger public bureaucracies.
Together, these strategies will enable us to
create a responsive, innovative, and
entrepreneurial government. If we inject
market mechanisms into federal agencies as
we are cutting red tape, we will create new
dynamics-and a new dynamism-
throughout the federal government.
Sri o GWING CUSTOMERS A VoICE
AND A CHOICE
Setting Customer Service Standards
Long lines, busy signals, bad
information, and indifferent workers
at front counters-these are all too
common occurrences when customers come
in contact with their government. Quite
simply, the quality of government service is
below what its customers deserve.
We propose to set a goal of providing
customer services equal to the best in business.
Too many agencies have learned to
overlook their customers. After all, most of
government's customers can't really take
their business elsewhere. Veterans who use
veterans' hospitals, companies that seek
environmental permits, or retirees applying
for social security benefits must deal with
public agencies that hold monopolies. And
monopolies, public or private, have little
sensitivity to customer needs.
So government agencies must do what
many of America's best businesses have
done: renew their focus on customers. Some
are already trying. The Internal Revenue
Service (IRS) and Social Security
Administration (SSA) have taken major
steps to improve their telephone services to
customers. SSA, the U.S. Postal Service
(USPS), and the Department of Veterans
Affairs are developing a combined
government services kiosk, providing a
single point of access for services offered by
the three agencies. The Library of Congress,
the Energy Department, the National
Aeronautics and Space Administration, the
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National Science Foundation, and other
federal agencies have placed their materials
on Internet, a worldwide computer
network.1
Good service means giving people what
they need. To do that, however, one must
first find out what they want-a step few
federal agencies have taken. In the future,
federal agencies will ask their customers
what they want, what problems they have,
and how the agencies can improve their
services.
Knowing what customers want, public
agencies must set clear and specific
customer service standards. When Federal
Express promises to deliver a package the
next day by 10:30 a.m., both customers and
employees understand precisely what that
means. Similarly, when the Air Force's
Tactical Air Command discarded its thick
set of specifications about living quarters for
visiting pilots and adopted a simple
standard-equivalent to "a moderately
priced hotel, like Ramada"-employees
understood exactly what it meant.2
Several federal agencies that frequently
interact with citizens have launched
aggressive customer service initiatives. We
endorse strengthening these initiatives-
described below-and expanding them
across the federal government.
Internal Revenue Service. The IRS, the
federal agency most citizens prefer to avoid,
might seem the least likely to develop a
customer focus. But it's working hard to do
just that.
Four years ago, the General Accounting
Office (GAO) discovered that IRS staff gave
a wrong answer to one of every three
taxpayers who called with a question. Since
then, the agency has improved its accuracy
rate to 88 percent.3 And-in a switch that
signals a basic change in attitude-agency
employees now refer to taxpayers as
customers.
In IRS pilot projects across the country,
employees now have authority to change
work processes on their own in order to
improve productivity. Front-line workers
also have more authority to resolve issues
one-on-one with individual taxpayers. The
agency is fostering competition among its
tax return centers, based on customer
service levels and efficiency at handling the
1.7 billion pieces of paper the IRS receives
each year. Centers that perform better get
higher budgets and workloads, and
employees get promotion opportunities.
The IRS was among the first government
agencies to use 800 numbers and
automated voice mail systems to increase
customer access to information. Today, the
IRS is beginning to survey its customers.
Customer Service Standards: IRS
A s part of the National Performance Review, the
IRS is publishing customer service standards,
including these:
? If you file a paper return, your refund due will
be mailed within 40 days.
? If you file an electronic return, your refund due
will be sent within 14 days when you specify
direct deposit, within 21 days when you
request a check.
? Our goal is to resolve your account inquiry
with one contact; repeat problems will be
handled by a Problem Resolution Office in an
average of 21 days.
? When you give our tax assistors sufficient and
accurate information and they give you the
wrong answers, we will cancel related penalties.
? With your feedback, by 1995 IRS forms and
instructions will be so clear that 90 percent of
individual tax returns will be error-free.
In addition, some centers are serving
customers in truly astonishing ways. One
anecdote makes the point. At the Ogden,
Utah Service Center-a winner of the
Presidential Award for Quality-a down-
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Customer Service Standards:
Social Security Administration
A s part of its participation in the National
Performance Review, the Social Security
Administration will publish nationally and post in
each of its offices, these performance standards:
? You will be treated with courtesy every time
you contact us.
? We will tell you what benefits you qualify for
and give you the information you need to use
our programs.
? We will refer you to other programs that may
help you.
? You will reach us the first time you try on our
800 number.
on-his-luck man hitchhiked from out of
state to get his refund check. As it turns out,
this center doesn't issue checks. But IRS
employees there discovered that a disbursing
center had sent a check to the hitchhiker's
old address and that it had been returned.
They ordered a new check sent to Ogden
and helped the hitchhiker make ends meet
until the check arrived.
In the end, the IRS's efforts could affect
all of us, not only as filers of tax returns but
as taxpayers. If IRS forms are easier to
understand and use, more taxpayers might
file on time. If the IRS develops an image as
a more effective, user-friendly agency, more
taxpayers might decide to file in the first
place. A mere 1-percent increase in
voluntary compliance would add $7 billion
in government revenue each year.4
Social Security Administration. Every
year, more than 47 million Americans come
in contact with the Social Security
Administration, which administers old-age
pensions, survivors' and disability insurance,
and the supplemental security income (SSI)
program. The agency has 1,300 field offices
and receives 60 million calls a year on its
toll-free lines. As the nation's population
ages, the agency faces an ever-increasing
workload. Recently, an inspector general's
report showed that customer satisfaction
had fallen 4 years in a row due to longer
waiting times in offices and increasing
problems in reaching someone on the
phone.5
Fortunately, the Social Security
Administration is strengthening its
customer orientation. When Hurricane
Andrew struck South Florida, where
367,000 people collect social security and
SSI, agency workers took steps to ensure
that senior citizens would know how to get
their checks despite the devastation. Local
offices used television, radio, and
loudspeaker trucks touring the area with
messages in English, Spanish, and Creole.
The agency also hired an airplane to tow a
banner with SSA's toll-free 800 telephone
number over the hard-hit Homestead area.
More generally, the Social Security
Administration recently adopted a
customer-oriented strategic plan, which
includes objectives such as issuing social
security numbers orally within 24 hours of
an application. Besides pinpointing some of
their objectives as standards to reach today,
SSA is publishing all 34 of its objectives and
seeking customer feedback on whether it set
the right targets for service.
U.S. Postal Service. The Postal Service,
which delivered 166 billion pieces of mail in
1992, has begun improving customer
service for a good reason: It has
competition. While most people still use the
Postal Service to deliver first class mail, the
use of private delivery services and
electronic mail is rising quickly.
The Postal Service has decided to meet
its competition head-on. Using focus
groups, the agency identified service areas
where its customers wanted improvement.
It found that people wanted shorter waiting
lines at counters, better access to postal
information, and better responses to their
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complaints. Using these standards to
measure performance, the agency set a long
range goal of "100-percent satisfaction" and
developed a customer satisfaction index to
measure progress toward it.
The agency also is providing incentives
for employee performance: In cooperation
with two postal unions, managers now use
customer satisfaction data to help determine
employee bonuses.
Action: The President should issue a
directive requiring all federal agencies
that deliver services to the public to create
customer service programs that identify
and survey customers. The order will
establish the following standard f or
quality: Customer service equal to the best
in business.6
The President's directive will lay out
principles to govern the provision of
customer services. For example,
organizations should:
? survey their customers frequently to
find out what kind and quality of
services they want;
? post standards and results measured
against them;
? benchmark performance against "the
best in business";
? provide choices in both source of
service and delivery means;
? make information, services, and
complaint systems easily accessible;
? handle inquiries and deliver services
with courtesy;
? provide pleasant surroundings for
customers; and
? provide redress for poor services.
The order will direct all federal agencies
that deal with the public to:
Customer Service
Standards: USPS
A s part of its participation in the National
Performance Review, the USPS will expand its
plans to display these standards in post offices:
? Your first class mail will be delivered anywhere
in the United States within 3 days.
? Your local first class mail will be delivered
overnight.
? You will receive service at post office counters
within 5 minutes.
? You can get postal information 24 hours a day
by calling a local number.
? immediately identify who their
customers are;
? survey their customers on services and
results desired, and on satisfaction with
existing services;
? survey front-line employees on barriers
to, and ideas for, matching the best in
business;
? in 6 months, report results on these
three steps to the President; and
? develop and publish a customer service
plan-including an initial set of
customer service standards-within 1
year.
The customer service plans will address
the need to train front-line employees in
customer service skills. They will also
identify companies that agencies will use to
judge how they compare to the "best in
business." The directive will ask cabinet
secretaries and agency heads to use
improvement in customer satisfaction as a
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primary criterion in judging the
performance of agency managers and front-
line employees.
Action: For voluntary customer surveys,
the ace of Management and Budget
will delegate its survey approval authority
under the Paperwork Reduction Act to
departments that are able to comply with
the act.7
The public's input is crucial to improving
customer service. But current law gives the
Office of Management and Budget (OMB)
power to decide on virtually all agency
requests to solicit information from the
public (OMB can delegate this authority).
This law was designed to minimize onerous
paperwork burdens the federal government
imposes on businesses and citizens. But it
also minimizes the number of times
agencies ask customers about their needs. It
often slows agencies down so much that
they abandon the idea of doing a survey
altogether.
For many agencies, customer surveys are
the single most useful way to measure
performance. If OMB has to approve every
request for a customer survey, however,
neither the directive described above nor the
Government Performance and Results Act,
which the President signed in August 1993,
will work. Citizens do not like to be forced
to fill out forms by their government. But
most Americans would be pleased to receive
a voluntary survey asking how their post
office or social security office could improve
its customer service.
We propose to delegate approval of
voluntary customer surveys to departments
with the ability to comply with the law, and
ensure that they create rapid approval
processes so bottlenecks don't develop at
lower levels.
Customer-driven programs rarely cost
more than others; indeed, productivity
gains in past federal experiments have more
than offset cost increases. At the Ogden
Service Center, the IRS office's new
approach helped workers process 5 percent
more tax returns. When organizations shift
their focus to customers, they act like
Avis-they try harder.
Crossing Agency Boundaries
Unfortunately, even agencies that try
harder find very real obstacles in the way of
putting their customers first. Perhaps the
worst is Washington's organizational chart.
Time and again, agencies find it impossible
to meet their customers' needs, because
organizational boundaries stand in the way.
Sometimes, programs housed in the same
agency are only tangentially related. While
most Agriculture Department programs
relate to food, for instance, its customers
range from farmers who grow it to poor
children whose families use food stamps. At
other times, programs dealing with the
same customers are located in a dozen
different agencies. Rather than make people
jump over organizational boundaries on
their own, we must remove the boundaries
at the point of customer contact. We must
make the delivery of services "seamless."
The traditional solution is to shuffle the
organizational chart. But in Washington,
such proposals set off monumental turf
wars between agencies in the executive
branch, and between committees in
Congress. After years of struggle, one or two
agencies are reorganized - or a new
department is created. Meanwhile, the
nation's problems keep changing, so the
new structure is soon out of date.
In a rapidly changing world, the best
solution is not to keep redesigning the
organizational chart; it is to melt the rigid
boundaries between organizations. The
federal government should organize work
according to customers' needs and
anticipated outcomes, not bureaucratic turf.
It should learn from America's best-run
companies, in which employees no longer
work in separate, isolated divisions, but in
project- or product-oriented teams.
To do so, the government must make
three changes. It must give federal workers
greater decision making authority, allowing
them to operate effectively in cross-cutting
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ventures. It must strip federal laws of
prohibitions against such cooperation. And
it must order agencies to reconsider their
own regulations and tradition-bound
thinking. For example, the Forest Service
found that 70 percent of its regulatory
barriers to new, creative ways of doing
business were self-imposed.'
Despite these barriers, some noteworthy
initiatives are underway. Rural
Development Councils, under the
Agriculture Department's direction, work
with several federal departments as well as
states and localities to better coordinate
rural aid programs. At the Federal Aviation
Administration (FAA), a systems manager
helps coordinate the activities of the FAA,
Defense Department, international aviation
organizations, and various private interests
on matters involving satellites, data links,
and traffic flow management. 9
We should bring the same approach to
other parts of government. The following
examples illustrate the problems we face and
the solutions we must create.
Action: Create a system of competitive,
one-stop, career development centers open
to Ball Americaans.10
Our nation's economic future depends
on the quality of our workforce. Our
individual futures, too, depend on whether
we have marketable, flexible skills with
which to adapt to the changing demands of
new technologies. In a country where the
average worker changes jobs seven times in
a lifetime, those skills are more than
desirable; they are crucial.
Our government invests heavily in
education and training. Together, 14
separate government departments and
agencies invest $24 billion a year, through
150 employment and training programs."
But we do not invest this money well
enough. For one thing, our system is
organized for the convenience of those who
deliver services, not those who use them.
For another, the system lacks competition
and incentives for improvement.
"The United States has a worldwide
reputation for providing its youth extensive
opportunity to attend college," the General
Accounting Office noted recently.
"However, our country falls short in
employment preparation of many
noncollege-youth." Unlike our competitors,
GAO said, we have no national policy to
systematically prepare non-college educated
youth for jobs.12
Our system is badly fragmented. Each
service - from job referral to retraining -
is designed for different people, with
different rules, regulations, and reporting
requirements. Bewildered, often dispirited,
job seekers must trudge from office to
office, trying to fit themselves into a
program. When they find a program, they
may find that they aren't eligible, that it's all
filled up, or that the classroom is across
town.
American workers deserve a better deal.
Nowhere on the government reinvention
front is action more urgently needed or are
potential rewards greater. We envision a
new workforce development system,
focused on the needs of workers and
employers. We will organize it around the
customer - whether an individual or a
business - then provide that customer
with good information about the
performance of different providers and
plenty of choices. If we do this, career
centers and training providers will have to
compete for their customers' business, based
on the quality of their services.
Specifically, we propose one-stop career
management centers across the country,
open to all Americans - regardless of race,
gender, age, income, employment
experience, or skills. (One-stop centers are
also a key feature of the Workforce
Investment Strategy the Labor Department
is developing.) Our centers would offer
skills assessment, information on jobs,
access to education and training -
everything people needed to make career
decisions. The centers would be linked to
all federal, state, and local workforce
development programs, and to many
private ones (which are, after all, the source
of most job-training money). Core services
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such as labor market information and job
search help would be offered free. Some
centers might offer other services, from
comprehensive testing to career counseling
and workshops, on a fee-for-service basis.
These centers would help their customers
get access to funds from any of the 150
programs for which they qualified. To make
this possible, the federal government would
eliminate or waive many rules and
regulations that keep our workforce
development programs separate. The
centers would also be allowed to generate
their own revenues, including fees collected
from employers and employees would could
afford to pay. Any organization, public or
private, would be allowed to seek a charter
to operate one or more one-stop career
centers. The process would be performance-
driven, with contracts renewed only if
centers met customers' demands. The
federal government would establish national
chartering standards for the centers, but
states and local employment boards would
decide which organizations met the
standards.
Today, local organizations such as U S
Employment Service and Service Delivery
Areas get most of their federal funds almost
as a matter of entitlement. They account for
the money, but we do not hold them
accountable for whether they spend it
effectively. We would make funding for
these new centers more competitive,
opening the process to public and private,
nonprofit and for-profit, entities.
We would judge these centers in part by
how many people sought help at them -
on the theory that centers attracting the
most customers were clearly doing
something right. But we would focus as well
on what happened after the customers left.
Did they enroll in meaningful training
programs? Did they find jobs? Did they
keep their jobs? Did they increase their
incomes? Finally, we would give customers
the necessary information to decide the
same thing for themselves: Which training
program would meet their needs best?
We believe that the central problem in
the Employment Service is not the line
workers, but the many rules and regulations
that prevent them from doing their jobs.
Waiver of these antiquated rules will free up
these workers to perform well. In order for
state Employment Services to compete on a
level playing field - particularly after the
negative effects of the last decade of
spending cuts and over-regulation - line
workers must be given the opportunity to
retool. The Labor Department should
ensure that they receive the necessary
training to enable them to participate in the
process.
The biggest single barrier to creating an
integrated system of one-stop career centers
is the fragmented nature of federal funds.
The 150 federal programs have different
rules, different reporting requirements, even
different fiscal years. To synchronize these
- and to break down the walls between
categorical programs - the National
Economic Council should convene a
Workforce Development Council, with
members from the Departments of Labor,
Education, and Health and Human
Services; the Office of Management and
Budget; and other departments and
agencies with employment and training
programs. This council should standardize
fiscal and administrative procedures,
develop a standard set of terms and
definitions between programs, develop a
comprehensive set of results-oriented
performance standards, and improve the
qualitative evaluation of program
performance.
Action: The President shoed issue a
directive that requires collaborative
efforts across the government to
empower communities and strengthen
families.'3
At Vice President Gore's recent
conference on family policy in Nashville,
experts agreed that effective family policy
requires new approaches at the federal, state,
and local levels. We should stop dividing up
families' needs into health, education,
welfare, and shelter, each with its own set of
agencies and programs, many of which
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contradict one another and work at cross-
purposes. Instead, across all levels of
government, we need collaborative,
community-based, customer-driven
approaches through which providers can
integrate the full network of services.
For instance, we spend about $60 billion
a year on the well-being of children. But we
have created at least 340 separate programs
for families and children, administered by 11
different federal agencies and departments.'4
Thus, a poor family may need to seek help
from several departments-Agriculture for
food stamps, Housing and Urban
Development for rental support, Health and
Human Services for health care and chasing
down dead-beat parents. For each program,
they will have to visit different offices, learn
about services, fill out forms to establish
eligibility-and wait.
The system is fragmented and illogical.
In Texas, where the immunization rate
among poor children is about 30 percent,
the state Health Department sought
permission to have nurses who run the
Agriculture Department's Women, Infants
and Children supplemental food program
also give immunization. The Agriculture
Department said no-unless Texas
developed an elaborate cost allocation plan.
Consequently, mothers and children will
have to continue visiting more than one
agency.15
A few years ago, Governing magazine
described a teenage girl who was pregnant,
had a juvenile record and was on welfare.
Between the three problems, she had more
than six caseworkers-each from a different
agency. As one put it: "The kid has all these
people providing services, and everybody's
doing their own thing and Tasha's not
getting better. We need to have one person
who says, `Now look, let's talk about a plan
of action for Tasha."'16 President Clinton's
directive will help remove obstacles that
agencies face in trying to serve Tasha and
others like her.
Action: The President should issue a
directive and propose legislation to
reconstitute the Federal Coordinating
Council for Science, Engineering, and
Technology as the National Science and
Technology Council giving it a broader
role in setting science and technology
policy.l 7
Progress in science and technology is a
key ingredient of national economic
success. President Clinton's A Vision of
Change for America, released in February,
cites studies showing that "investments in
research and development (R&D) tend to
be the strongest and most consistent
positive influence on productivity
growth."18 In an increasingly competitive
world economy, the American people need
the best possible return on federal R&D
investments.
The Federal Coordinating Council for
Science, Engineering, and Technology
(FCCSET) is a White House-managed
team that helps set policy for technology
development. With representatives from
more than a dozen agencies, it develops
interagency projects, such as
biotechnology research and the high-
performance computing initiative.
Unfortunately, FCCSET lacks the teeth to
set priorities, direct policy, and participate
fully in the budget process. It can't compel
agencies to participate in its projects, nor
can it tell agencies how to spend funds. Its
six funded projects will account for just
16 percent of Washington's $76 billion
R & D budget in 1994. At a time of
declining federal resources, experts in
business, academia, and government
recognize the need for one-stop shopping
for science and technology policy.
A new National Science and Technology
Council would direct science and
technology policy more forcefully, and
would streamline the White House's
advisory apparatus by combining the
functions of FCCSET, the National Space
Council, and the .National Critical
Materials Council.
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Action: The President should issue a
directive to give the Trade Promotion
Coordinating Committee greater
authority to control federal export
promotion efforts.19
Unlike most of our economic
competitors, the United States has no
national export strategy. Our export
programs are fragmented among 19
separate organizations-including the
Agriculture and Commerce Departments
and the Small Business Administration. The
U.S. and Foreign Commercial Service, in
Commerce's International Trade
Administration, is the lead agency for trade
promotion overseas. But dozens of other
entities-many within Commerce-also
have trade promotion roles.
Our export programs provide little
benefit to all but our nation's largest
businesses. The economic implications of
such selective assistance are serious.
Exports are among our most effective job-
creating tools. They create about 20,000
new jobs for every $1 billion in exports.
Thousands of small and mid-sized
companies make products attractive for
overseas markets, but are discouraged by
high transaction costs and a lack of
information. According to trade experts,
the United States may be the "world's
biggest export underachiever. 1120
The President's directive will give the
Trade Promotion Coordinating Committee
(TPCC), chaired by the Commerce
Secretary and including representatives from
19 departments, agencies, and executive
offices, broader authority to create
performance measures and set allocation
criteria for the nation's export promotion
programs. Working with the National
Economic Council, TPCC will ensure that
such programs better serve the exporting
community.
1-I
Action: The President should issue a
directive to establish ecosystem
management policies across the
government.21
"For too long, contradictory policies
from feuding agencies have blocked
progress, creating uncertainty, confusion,
controversy, and pain throughout the
region," President Clinton declared at the
Forest Conference held in Portland,
Oregon in April 1993. Shortly thereafter,
the President announced his Forest
Plan-a proactive approach to ensuring a
sustainable economy and a sustainable
environment through ecosystem
management. We recommend extending
the concept of ecosystem management
across the federal government.
Although economic growth has strained
our ecological systems, our government
lacks a coordinated approach to ecosystem
management. A host of agencies have
jurisdiction over individual pieces of our
natural heritage. The Bureau of Land
Management oversees more than 60
percent of all public lands; the Forest
Service manages our national forests and
grasslands; the Fish and Wildlife Service
manages our National Wildlife Refuge
System; the National Park Service oversees
the national parks; the Environmental
Protection Agency implements laws to
regulate air and water quality; the National
Oceanic and Atmospheric Administration
(NOAA) manages marine resources; and
various other agencies run programs that
affect the environment. Different agencies,
with jurisdictions over the same ecosystem,
do not work well together. Even within the
same agency, bureaus fight one another.
At the local level, a hodge podge of
government agencies control activities that
affect the environment. Consider, for
instance, the San Francisco Bay delta estuary.
One of the most human-altered estuaries on
the west coast of North or South America, it
is governed by a complex array of agencies,
plans, and laws. One mile of the delta may
be affected by decisions of more than 400
agencies.22
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The White House Office on
Environmental Policy has convened an
interagency task force of appropriate
assistant secretaries to develop and
implement cross-agency ecosystem
management projects. The Office of
Management and Budget will review the
plans as part of the fiscal 1995 budget
process. In 1994, the assistant secretaries
will establish cross-agency teams to develop
initial ecosystem management plans for
implementation in fiscal year 1995. Also in
1994, the President should issue a directive
that will declare sustainable ecosystem
management across the federal government.
Action: The President should create a
Federal Coordinating Council for
Economic Development.23
The federal government has no coherent
policy for regional development and
community dislocation. Instead, it offers a
fragmented and bureaucratic system of seven
programs to assist states and localities. The
major programs are the Commerce
Department's Economic Development
Administration, the Housing and Urban
Development Department's Community
Development Block Grant Program, and the
Agriculture Department's Rural Development
Administration and Rural Electrification
Administration. The Defense Department,
Tennessee Valley Authority, and Appalachian
Regional Commission run smaller programs.
Thus, states and communities must turn to
many different agencies and programs, rather
than a single coordinated system.
Communities find it hard to get help, and the
dispersion of effort limits overall funding.
Washington's economic and regional
development activities should be
reconfigured to suit its customers-states
and communities. We propose a Federal
Coordinating Council for Economic
Development, comprising the appropriate
cabinet secretaries and agency heads, to
coordinate such activities and provide a
central source of information for states and
localities. The council will provide a
unifying framework for economic and
regional development efforts, develop a
governmentwide strategic plan and unified
budget to support the framework, prevent
duplication in the various programs, and
assess appropriate funding levels for the
agencies involved.
Action: Eliminate statutory restrictions
on cross-agency activities that are in the
public interest 24
A series of legislative restrictions make it
particularly difficult to pursue solutions to
problems that span agency boundaries. For
instance, to put together a working group
on an issue that cuts across agency lines,
one agency has to fund all costs for the
group. Several agencies cannot combine
their funds to finance collaborative efforts.
Rather than discourage cross-agency
operations, the federal government should
encourage them. Congress should repeal
the restrictions that stand in the way of
cross-agency collaboration, and refrain
from putting future restrictions in
appropriations bills. In addition, Congress
should modify the Intergovernmental
Personnel Act to give cabinet members and
those working for them greater authority
to enter into cooperative agreements with
other federal, state, and local agencies.
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STF]P 20 MAKING SERVICE OR TIONS
COMPETE
W bile our federal government has handle their printing, real estate, and
long opposed private support- services. Originally, this approach
monopolies, it has deliberately was supposed to offer economies of scale
created public ones. For instance, most and protect against profiteering and
federal managers must use monopolies to corruption. In an earlier time-of primitive
The Air Combat Command-Flying High
With Incentives and Competition
The military: the most conservative,
hierarchical and traditional branch of the
government and the bureaucracy least likely to
behave like a cutting-edge private company,
right? Wrong.
One of Washington's most promising
reinvention stories comes from the Air Combat
Command. With 175,000 employees at 45
bases across the country, the ACC owns and
operates all of the Air Force's combat aircraft.
Says its commander, General John Michael Loh,
"We manage big, but we operate small."
How? The ACC adopted overall performance
standards, called quality performance measures.
Each ACC unit decides for itself how to meet
them. General Loh then provides lots of
incentives and a healthy dose of competition.
The most powerful incentive is the chance to
do creative work, General Loh told the National
Performance Review's Reinventing Government
Summit in Philadelphia. For instance, the Air
Combat Command allows maintenance workers
to fix parts that otherwise would have been
discarded or returned to the depot for repair
"under the thesis that our people aren't smart
enough to repair parts at the local level." The
results have been astonishing. Young mechanics
are taking parts from B-Is, F-15s, and F-16s-
some of which cost $30,000 to $40,000-and
fixing them for as little as $10. The savings are
expected to reach $100 million this year. ACC
managers have an incentive, too: Because they
control their own operating budgets, these
savings accrue to their units.
General Loh instilled competition by using
benchmarking, which measures performance
against the ACC standard and shows
commanders exactly how their units compare to
others. The ACC also compares its air wings to
similar units in the Army, Navy, and Marine
Corps; units in other Air forces; and even the
private sector. Before competition, the average
F-16 refueling took 45 minutes. With
competition, teams'cut that time to 36 minutes,
then 28.
The competition is against a standard, not a
fellow ACC unit. "If you meet the standard, you
win," says General Loh. "There aren't 50 percent
winners and 50 percent losers. We keep the
improvement up by just doing that-by just
measuring. If it doesn't get measured, it doesn't
get improved."
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recordkeeping, less access to information,
and industrial-era retail systems-it may
have offered some advantages.
But not today. Economists don't agree on
much, but they do concur that monopolies
provide poorer service at higher prices than
competitive companies. Our public
monopolies have brought us higher costs,
endless delays, and reduced flexibility.
Monopolies don't suffer the full costs of
their inefficiency. With nowhere else to go,
customers absorb them. A monopoly's
managers don't even know when they are
providing poor service or failing to take
advantage of new, cost-cutting technologies,
because they don't get signals from their
customers. In contrast, competitive firms
get instant feedback when customers go
elsewhere. No wonder the bureaucracy
defends the status quo, even when the quo
has lost its status.
As for economies of scale, the realities
have changed. The philosophy when these
procurement systems were set up was that if
the government bought in bulk, costs
would be lower, and taxpayers would get
the savings. But it no longer works that way.
As we discuss more fully in chapter 1, we
no longer need to buy in bulk to buy
cheaply. The last decade has brought more
and more discount stores, which sell
everything from groceries to office supplies
to electronic equipment at a discount. The
Vice President heard story after story from
federal workers who had found equipment
and supplies at discount stores-even local
hardware stores-at two-thirds the price the
government paid.
Not all federal operations should be
forced to compete, of course. Competition
between regulatory agencies is a terrible
idea. (Witness the regulation of banks,
which can decide to charter with the state
or federal government, depending on where
they can find the most lenient regulations.)
Nor should policy agencies compete. In the
development of policy, cooperation between
different units of government is essential.
Competition creates turf wars, which get in
the way of creating rational policies and
programs. It is in service delivery that
"It is better to abolish monopolies in all cases
than not to do it in any. "
Thomas Jefferson
Letter to James Madison, 1788
competition yields results-because
competition is the one force that gives
public agencies no choice but to improve.
The Government Printing Office
Perhaps the oddest federal monopoly is
the Government Printing Office.
In 1846, Congress established a joint
Committee on Printing (JCP) to promote
efficiency and protect agencies from
profiteering and abuse by commercial
printers. The JCP sets standards for all
agency activities-including printing,
photocopying, and color and paper quality.
When the Naval Academy wants to use
parchment paper for graduation certificates,
for instance, the JCP must approve the
decision.
The JCP also supervises the Government
Printing Office, the mandatory source of
most government printing-a whopping $1
billion a year. Along with printing federal
publications, the GPO must approve all
privately contracted government printing
jobs. This even includes printing orders less
than $1,000-of which there were 270,000
in 1992. Simply for processing orders to
private companies, GPO charges 6 to 9
percent.
Such oversight doesn't work in an age of
computers and advanced
telecommunications. Desktop publishing
has replaced the traditional cutting and
pasting with computer graphics and
automated design. In private business, in-
house printing flourishes. Small printing
companies specialize in strategic market
niches.
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FROM RED TAPE TO RESULTS o CREATING A GOVERNMENT THAT WORKS BETTER & COSTS LESS
The "government look"
H ere's a sad story about the Government
Printing Office, multiple signatures, and
$20,000 of wasted taxpayer money.
Vice President Gore heard it from an
employee at the Transportation Department's
National Highway Traffic Safety
Administration, which promotes highway
safety. Hoping to convey safety messages to
young drivers, her office tries to make its
materials "slick"-to compete with
sophisticated advertising aimed at that
audience. Sound simple? Read on.
After the agency decides what it wants, it
goes through multiple approvals at the GPO
and the Department of Transportation. In the
process, the material can change substantially.
Orders often turn out far differently than
NHTSA wanted. But under the GPO's policy,
agencies must accept any printing order that the
GPO deems "usable."
"I can cite one example where more than
$20,000 has been spent and we still do not
have the product that we originally requested,"
the employee explained, "because GPO
decided on its own that it did not have a
'government' look. We were not attempting to
produce a government look. We were trying to
produce something that the general public
would like to use."
Action: Eliminate the Government
Printing Offlce's monopoly.25
For all executive branch printing,
Congress should end the JCP's oversight
role. Congressional control of executive
branch printing may have made sense in the
1840s, when printing was in its infancy, the
government was tiny, there was no civil
service, and corruption flourished. But it
makes much less sense today. We want to
encourage competition between GPO,
private companies, and agencies' in-house
publishing operations. If GPO can
compete, it will win contracts. If it can't,
government will print for less, and taxpayers
will benefit.
The General Services
Administration
Among government's more cumbersome
bureaucracies is the General Services
Administration (GSA), which runs a host of
federal support services-from acquiring
and managing 250 million square feet of
office space to managing $188 billion of
real estate, from brokering office furniture
and supplies to disposing of the
government's car and truck fleets.
With its monopoly, GSA can pass
whatever costs it wants on to tenants and
customers. Often it rents the cheapest space
it can find, then orders federal agencies
tooccupy it-regardless of location or
quality. (Occasionally an agency with
enough clout refuses, and GSA ends up
paying to rent empty space.) And this is not
all GSA's fault. Frequently, the agency is
hemmed in by federal budget and personnel
rules. GSA admits that many of its
customers are unhappy. It has already
permitted some agencies to make their own
real estate deals. We propose to open that
door farther.
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Action: The President should end GSA's
real estate monopoly and make the agency
compete f or business. GSA will seek
legislation, revise regulations, and
transfer authority to its customers,
empowering them to choose among
competing real estate management
enterprises, including those in the private
sector.26
Specifically, GSA will create one or more
property enterprises, with separate budgets.
The enterprises will compete with private
companies-real estate developers and
rental firms-to provide and manage space
for federal agencies. Agencies, in turn, will
lease general purpose space and procure, at
the lowest cost, real property services-
acquisition, design, management, and
construction. Such competition should
lower costs for federal office space.
All other federal agencies with real estate
holdings, including the Defense and
Veterans Affairs Departments, will adopt
similarly competitive approaches.
Competition in Support Services
Every federal agency needs "support
services"-accounting, property
management, payroll processing, legal
advice, and so on. Currently, most
managers have little choice about where to
get them; they must use what's available in-
house. But no manager should be confined
to an agency monopoly. Nor should
agencies provide services in-house unless the
services can compete with those of other
agencies and private companies.
Over the past decade, a few federal
entrepreneurs have created support service
enterprises, which offer their expertise to
other agencies for a fee. Consider the Center
for Applied Financial Management, in the
Treasury Department's Financial
Management Service. A few years ago,
Treasury officials realized that many agencies
reporting to their central accounting system
Dialing for Dollars:
How Competition Cut the
Federal Phone Bill
n the mid 1980s, a long-distance call on the
I federal system, which the General Services
Administration manages, cost 30 to 40 cents a
minute, the "special government rate." AT&T's
regular commercial customers normally paid 20
cents a minute. The Defense Department, citing
GSA's rates, would not use the government-wide
system.
Spurred by complaints about high costs and the
loss of customers, GSA put the government's
contract up for bid among long-distance phone
companies. It offered 60 percent of the business to
the winner, 40 percent to the runner up.
Today, the government pays 8 cents a minute
for long-distance calls. More agencies-including
the Defense Department-are using the system.
And taxpayers are saving a bundle.
had problems meeting the Treasury's
reporting standards. Rather than send nasty
letters, they decided to offer help.
The Treasury established a consulting
business. The center includes a small
group of people who offer training,
technical assistance, and even a system for
accounting programs so that agencies need
not own the software. The center markets
its services to government agencies,
aggressively and successfully, competing
with accounting and consulting firms for
agency business and dollars. Its clients
include the Small Business Administration
and the Nuclear Regulatory Commission.
Already, the center's work has reduced the
errors in reports submitted to the Treasury
and reduced agencies' accounting costs.
Opened 2 years ago, the center plans to be
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profitable by 1995; if not, the Treasury will
close it.
Action: The administration should
encourage operations of one agency to
compete for work in other agencies.27
We want to expand the approach
exemplified by Treasury's Center for
Applied Financial Management throughout
government. Just as in business,
competition is the surest way to cut costs
and improve customer service.
Competing with the Private Sector
Forcing government's internal service
bureaus to compete to please their
customers is one strategy. Forcing
government's external service organizations
to do the same is another. In a time of
scarce public resources, we can no longer
afford so many service monopolies. Many
federal organizations should begin to
compete with private companies. Consider
the National Oceanic and Atmospheric
Administration.
Action: The National Oceanic and
Atmospheric Administration (NOAA) will
experiment with a program ofpublic-
private competition to help fu fill its
mission.28
NOAA, a part of the Commerce
Department, maintains a fleet of ships to
support its research on oceans and marine
life and its nautical charting. But its fleet is
reaching the end of its projected life
expectancy. And even with the fleet, NOAA
has consistently fallen far short of the 5,000
days at sea that it claims to need each year
to fulfill its mission. NOAA faces a basic
question-whether to undertake a total
fleet replacement and modernization plan,
estimated to cost more than $1.6 billion in
the next 15 years, or charter some privately
owned ships.
The experience of the U.S. Army Corps
of Engineers, which contracts out 30 to 40
percent of its ocean floor charting to private
firms, shows that the private sector can and
will do this kind of work. Competition
among private companies for these services
also might reduce costs.
Action: The Defense Department will
implement a comprehensive program of
competitive contracting non-core
functions competitively.29
The Defense Department is another
agency in which necessity is becoming the
mother of invention. Facing a swiftly falling
budget, the department literally can't afford
to do things in its usual way-especially
when private firms can perform DOD's
non-core functions better, cheaper, and
faster. Functions such as command,
deployment, or rotation of troops cannot be
contracted, of course. But data processing,
billing, payroll, and the like certainly can.
Private firms-including many defense
contractors-contract out such functions.
General Dynamics, for instance, has
contracted with Computer Services
Corporation to provide all its information
technology functions, data center
operations, and networking. But at the
Pentagon, a bias against out-sourcing
remains strong. Only a commitment by
senior leaders will overcome that bias.
In addition to the cultural barriers at the
Pentagon, numerous statutory roadblocks
exist. In section 312 of the fiscal year 1993
DOD Authorization Act, for example,
Congress stopped DOD from shifting any
more in-house work to contractors. Another
law requires agencies to obtain their
construction and design services from the
Army Corps of Engineers or Naval Facilities
Engineering Command. The
administration should draft legislation to
remove both of these roadblocks. It will also
make contracting easier by rescinding its
orders on the performance of commercial
activities and issuing a new order, to
establish a policy supporting the acquisition
of goods and services in the most
economical manner possible. OMB will
review Circular A-76, which governs
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contracting out, for potential changes that
would simplify the contracting process and
increase the flexibility of managers.
Action: Amend the Job Training
Partnership Act to authorize public and
private . competition for the operation of
Job Corps Civilian Conservation
Centers.30
The Labor Department's Employment
and Training Administration (ETA)
supervises 108 Job Corps Centers, which
provide training and work experience to
poor youth. The ETA contracts with for-
profit and non-profit corporations to
operate 78 of the centers. The department
has long sought to contract out the other
30, now run by the Agriculture and Interior
Departments as Civilian Conservation
Centers. But Congress under the job
Training Partnership Act, has passed
legislation barring such action.
Because they are insulated from
competition, CCC managers have few
incentives to cut costs and boost quality. For
the past 5 years, average per-trainee costs at
a CCC have run about $2,000 higher than
at centers run by contractors. Competition
would force the Interior and Agriculture
Departments to operate the rural centers
more efficiently-or risk losing their
operations to private competitors.
Truth in Budgeting
If federal organizations are to compete for
their customers, they must do so on a level
playing field. That means they must include
their full costs in the price they charge
customers. Businesses do this, but federal
agencies hide many costs in overhead, which
is paid by a central office. Things like rent,
utilities, staff support, and the retirement
benefits of employees are often assigned to
the overall agency rather than the unit that
incurred them. In this way, governmental
accounting typically understates the true
cost of any service.
With a new accounting system that
recognizes full costs-and assigns rent,
utilities, staff support, retirement benefits,
and all other costs to the unit that actually
incurs them-we can determine the true
costs of what government produces. At that
point, we can compare costs across agencies,
make agencies compete on a level playing
field, and decide whether we are getting
what we pay for.
Action: By the end of 1994, the Federal
Accounting Standards Advisory Board
will issue a set of cost accounting
standards for all federal activities. These
standards will provide a method for
identifying the true unit cost of all
government activities.31
Some government agencies have already
moved in this direction. Others have gone
even further. The Defense Department is
experimenting with what it calls a Unit
Cost Budget. It calculates the costs of
delivering a unit of service, then budgets for
the desired service levels.
The Defense Logistics Agency (DLA)
began this experiment, hoping to ease
pressures to contract out its supply depots
to private companies. DLA examined the
cost of receiving and delivering shipments,
then attached a dollar figure to each item
received and another to each item delivered.
All money was then appropriated according
to the number of items shipped or received.
Line items disappeared, incentives grew.
The more boxes a depot shipped or
received, the more money that depot
brought in. For the first time, DLA could
calculate its true costs, compare those of
various installations, and pinpoint
problems. This approach, which enables
managers to set productivity targets, is now
spreading to other military installations.
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N of all public activities should be
subject to competition, as noted
above. In some cases, even service
delivery operations are better off as
monopolies. In the private sector, we call
these utilities and regulate them to protect
the consumer. They are run in a
businesslike fashion, and they respond to
the market. (For instance, they have
stockholders and boards, and they can
borrow on the capital markets.) They
simply don't face competition.
Many governments, including our
federal government, do something very
similar. They create government-owned
corporations to undertake specific tasks.
The Postal Service and Tennessee Valley
Authority are two examples. Such
corporations are free from many restrictions
and much of the red tape facing public
agencies, but most of them remain
monopolies-or, as with the Postal Service,
partial monopolies.
At other times governments subject
public organizations to market dynamics,
stimulate the creation of private enterprises,
or spin off public enterprises to the private
sector. To get the best value for the
taxpayer's dollar, the federal government
needs to use these options more often.
Consider the National Technical
Information Service (NTIS), a once-failing
agency in the Commerce Department that
turned itself around in a brief year's time.
Established to disseminate federally funded
scientific and technical information, NTIS
was, until recently, not meeting its mission.
The agency, which receives no congressional
appropriations, was suffering serious
financial problems, selling fewer documents
each year to its mostly private sector
customers, and charging higher and higher
prices on those it did sell.
Commerce-not surprisingly-
considered abolishing the agency. A year
earlier, the department's inspector general
had concluded that NTIS's reported
earnings of $3.7 million were vastly
overstated, that it suffered $674,000 in
additional operating losses in 1989, and
that its procedures in handling such losses
and cash shortfalls violated government
accounting principles and standards.
Commerce instead decided to turn the
agency around. The effort worked. NTIS's
revenues and sales are both up. Why?
Because the agency was forced to respond to
its customers' unhappiness. NTIS reduced
the turnaround time on its orders, cut
complaints about incorrect orders, and
dramatically slashed the percentage of
unanswered phone calls. Consequently,
most business customers who turned away
in the 1980s have returned. NTIS's
turnaround shows what can happen when
public organizations face the pressure of
customer demands.3z
Other agencies may require a structural
change to enhance their customer service.
Because it's run as a public agency, for
instance, the Federal Aviation
Administration's air traffic control (ATC)
system is constantly hamstrung by budget,
personnel, and procurement restrictions. To
ensure the safety of those who fly, the FAA
must frequently modernize air traffic
control technology. But this has been
virtually impossible, because the FAA's
money comes in annual appropriations.
How can the FAA maintain a massive, state-
of-the-art, nationwide computer system
when it doesn't know what its appropriation
for next year or the years beyond will be?
As a result, the 10-year National Airspace
Plan, begun in 1981, is now 10 years
behind schedule and 32 percent over
budget. Federal personnel rules aggravate
the problems: The FAA has trouble
attracting experienced controllers to high-
cost cities. With no recent expansion, the
system lacks the capacity to handle all air
travel demands. Consequently, airlines lose
about $2 billion annually in costs for
additional personnel, equipment, and excess
fuel. Passengers lose an estimated $1 billion
annually in delays.
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America needs one seamless air traffic
control system from coast to coast. It should
be run in a businesslike fashion-able to
borrow on the capital markets, to do long-
term financial planning, to buy equipment
it needs when it needs it, and to hire and
fire in reasonable fashion. The solution is a
government-owned corporation.
Action: Restructure the nation's air
traffic control system into a corporaationr33
"There is an overwhelming consensus in
the aviation community that the ATC
system requires fundamental change if
aviation's positive contribution to trade and
tourism is to be sustained," one study
concluded earlier this year.34
The ATC's problems can't be fixed
without a major reorganization. Under its
current structure, the system is subject to
federal budget, procurement, and personnel
rules designed to prevent mismanagement
and the misuse of funds. The rules,
however, prevent the system from reacting
quickly to events, such as buying the most
up-to-date technology. In its recent report,
Change, Challenge, and Competition, the
National Commission to Ensure a Strong
Competitive Airline Industry, (chaired by
former Virginia Governor Gerald Baliles),
recommended the creation of an
independent federal corporate entity within
the Transportation Department. We agree.
We should restructure the ATC into
a government-owned corporation,
supported by user fees and governed by a
board of directors that represents the
system's customers. As customer use rises,
so will revenues, providing the funds
needed to answer rising customer
demands and finance new technologies to
improve safety. Relieved of its operational
role, the FAA would focus on regulating
safety. With better, safer service, we all
would benefit. This approach has already
worked in Great Britain, New Zealand,
and other countries.
Action: The General Services
Administration will create a Real Property
Asset Management En t o rp r i s e, separating
GSA's responsibility for setting policy on
federally owned real estate from that of
providing and managing of ce space.35
In asset management, too, government
could take a few lessons from business. We
must begin to manage assets based on their
rates of return. A good place to start is in
the General Services Administration.
The federal government owns assets-
land, buildings, equipment-that are
enormous in number and value. But it
manages them poorly. Like several other
agencies, GSA wears two hats: with one, it
must provide office space to federal
agencies. With the other, it serves as
manager and trustee of huge real estate
holdings for American taxpayers. It cannot
do both-at least not well. Should it
maximize returns for taxpayers by selling a
valuable asset? Or, as the office space
provider, should it require an agency to
occupy one of its own buildings when less
expensive leased space is available?
GSA will create a Real Property Asset
Management Enterprise, solely responsible
for managing federally owned real estate to
optimize the highest rate of return for
taxpayers, while competing with the private
sector and better serving tenants' needs.
Action: The Department of Housing
and Urban Development will turn over
management of its `market rate" rental
properties and mortgage loans to the
private sector.36
The Department of Housing and Urban
Development has a growing workload of
problem multi-family loans and foreclosed
properties. In addition, restrictive rules and
outdated practices hamper its management
of these assets. Rather than more staff,
HUD needs a new approach.
HUD, which oversees the Federal
Housing Administration, owns many loans
and properties it acquired from the FHA
when owners defaulted on their loans.
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These "market-rate" assets-which were
never set aside for low-income people-
have fewer restrictions on disposal than
most HUD-subsidized properties. But in
trying to sell the assets, HUD still faces a
variety of legal and political pressures. If the
department entered into limited
partnerships with real estate firms, it could
retain most profits from any sales and let a
private business entity perform the sales in
the most economically beneficial way.
STEP 4 USING MARKET MECHANISMS
To SOLVE PROBLEMS
Government cannot create a
program for every problem facing
the nation. It cannot simply raise
taxes and spend more money. We need
more than government programs to solve
our problems. We need governance.
Governance means setting priorities,
then using the federal government's
immense power to steer what happens in
the private sector. Governance can take
many forms: setting regulations, providing
financial incentives, or ensuring that
consumers have the information they need
to drive the market.
When the Roosevelt administration
made home ownership a national priority,
the government didn't build millions of
homes or distribute money so families could
buy them. Instead, the Federal Housing
Administration helped to create a new kind
of mortgage loan. Rather than put down 50
percent, buyers could put down just 20
percent; rather than repay mortgages in 5
years, borrowers could stretch the payments
over 30 years. The government also helped
to create a secondary market for mortgages,
helping even more Americans buy homes.
As we reinvent the federal government,
we, too, must rely more on market
incentives and less on new programs.
Worker Safety and Health
Today, 2,400 inspectors from the
Occupational Safety and Health
Administration (OSHA) and approved state
programs try to ensure the safety and health
of 93 million workers at 6.2 million
worksites. The system doesn't work well
enough. There are only enough inspectors
to visit even the most hazardous workplace
once every several years. And OSHA has the
personnel to follow up on only 3 percent of
its inspections.
Action: The Secretary of Labor wall
issue new regulations for worksite safety
and health, relying on private inspection
companies or non-management
employees.37
Government should assume a more
appropriate and effective role: setting
standards and imposing penalties on
workplaces that don't comply. In this way,
OSHA could ensure that all workplaces are
regularly inspected, without hiring
thousands of new employees. It would use
the same basic technique the federal
government uses to force companies to keep
honest financial books: setting standards
and requiring periodic certification of the
books by expert financial auditors. No army
of federal auditors descends upon American
businesses to audit their books; the
government forces them to have the job
done themselves. In the same way, no army
of OSHA inspectors need descend upon
corporate America. The health and safety of
American workers could be vastly
improved-without bankrupting the
federal treasury.
The Labor Secretary already is authorized
to require employers to conduct certified
self-inspections. OSHA should give
employers two options with which to do so:
They could hire third parties, such as
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private inspection companies; or they could
authorize non-management employees, after
training and certification, to conduct
inspections. In either case, OSHA would set
inspection and reporting standards and
conduct random reviews, audits, and
inspections to ensure quality.
Within a year or two of issuing the new
regulations, OSHA should establish a sliding
scale of incentives designed to encourage
workplaces to comply. Worksites with good
health, safety, and compliance records would
be allowed to report less frequently to the
Labor Department, to undergo fewer audits,
and to submit less paperwork. OSHA could
also impose higher fines for employers whose
health and safety records worsened or did not
improve.
Environmental Protection
As governments across the globe have
begun to explore better ways to protect the
environment, they have discovered that
market mechanisms-fees on pollution,
pollution trading systems, and deposit-rebate
systems-can be effective alternatives to
regulation. But while the idea of "making the
polluter pay" is widely accepted in this
country, our governments have not widely
applied it. Many federal, state, and local
regulations rely on an earlier approach to
environmental control: stipulating treatment,
not outcomes. Their wholesale shift to a new
approach will take time.
Action: Encourage market-based
approaches to reduce pollution.38
Many federal agencies, lawmakers, and
environmental groups endorse using market-
based incentives to meet environmental goals.
We propose that both EPA and Congress use
administrative and legislative measures, for
example, the Clean Water Act, to promote
market mechanisms to stop pollution.
One route is allowing polluters to "trade"
pollution rights. This would reward
companies that not only meet legal
requirements-but for the extra mile to reduce
pollution by more than the law requires.
Rather than dictating exactly which
technologies industry should use to reduce
pollution, the government would set standards
and let the market handle the details. The
government could also assess fees based on the
amount and nature of pollution emissions or
discharges. Fees could reflect the quality,
toxicity, and other adverse characteristics of
pollutants.
The federal government has used this
approach before. In the 1970s, the
Environmental Protection Agency (EPA)
distributed credits to companies that cut air
pollution and let them trade credits between
different sources of their own pollution or sell
them to other companies located nearby. In
the 1980s, the EPA used a similar approach as
it forced industry to remove lead from
gasoline. Both efforts were successful: industry
met its targets, while spending billions of
dollars less than otherwise would have been
required. Then, as part of the 1990 Clean Air
Act, the President and Congress agreed to give
credits to coal-burning electric power plants
for their allowable emissions of sulfur dioxide,
to cut down on acid rain. Power plants that
cut their emissions below a certain level can
sell unused credits to other plants. Experts
estimate that this will cut the cost of reducing
sulfur dioxide emissions by several billion
dollars a year.39
Public Housing
Public housing is a classic story of good
intentions gone awry. When the program
began in the 1930s, it was hailed as an
enlightened response to European immigrants'
squalid living conditions in cities across the
nation. Through an enormous bureaucracy
stretching from Washington into virtually
every city in America, the public housing
program brought clean, safe, inexpensive
living quarters to people who could not
otherwise afford them.
For two decades, public housing was a
success. But by the 1970s, it had come to
symbolize everything wrong with the
"liberal" approach to social problems.
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Inflexible federal standards, an overly
centralized administrative structure, and
local political pressures combined to
produce cookie-cutter high-rise projects in
our worst urban areas. Over time, many
projects degenerated into hopeless
concentrations of welfare families beset by
violence and crime.
We spend $13 billion a year on public
housing, but we create few incentives for
better management. In local housing
agencies, managers are hamstrung by
endless federal regulations that offer little
flexibility. Any savings they generate are
simply returned to the government.
Tenants enjoy even less flexibility. With
housing subsidies attached to buildings, not
people, the program's clients have no choice
about where to live. They, therefore, have
absolutely no leverage-as customers-over
the managers.
Action: Authorize the Department of
Housing and Urban Development to
create demonstration projects that free
managers from regulations and gave
tenants new market powers, such as
freedom of choice to move out of old
public housing bualdings.40
We want to let public housing
authorities, through not-for-profit
subsidiaries, compete for new construction
and modernization funds that they would
use to create market-rate housing. The
managers would manage this new housing
free of most regulations, provided they met
performance standards set by HUD. They
would rent to a mix of publicly subsidized
and market-rate tenants. The rents of
unsubsidized tenants would help to finance
the subsidies of assisted tenants.
With portable subsidies, publicly assisted
tenants could look for housing wherever
they could find it. Rather than dependent
beneficiaries, forced to live where the
government says, they would become
"paying customers," able to choose where to
live. Thus, public housing managers would
no longer have guaranteed tenants in their
buildings; they would have to compete for
them.
Concg=nnn
e know from experience that
monopolies do not serve
customers well. It is an odd fact
of American life that we attack monopolies
harshly when they are businesses, but
embrace them warmly when they are public
institutions. In recent years, as fiscal
pressures have forced governments at all
levels to streamline their operations, this
attitude has begun to break down.
Governments have begun to contract
services competitively; school districts have
begun to give their customers a choice;
public managers have begun to ask their
customers what they want.
This trend will not be reversed. The
quality revolution sweeping through
American businesses-and now penetrating
the public sector-has brought the issue of
customer service front and center. Some
federal agencies have already begun to
respond: the IRS, the Social Security
Administration, and others. But there is
much, much more to be done. By creating
competition between public organizations,
contracting services out to private
organizations, listening to our customers,
and embracing market incentives wherever
appropriate, we can transform the quality of
services delivered to the American people.
In our democratic form of government,
we have long sought to give people a voice.
As we reinvent government, it is time we
also gave them a choice.
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CCIinapaez 3
EMPOWERING EMPLOYEES TO
GET RESULTS
Take two managers and give to each the same number of laborers and let those laborers be equal
in all respects. Let both managers rise equally early, go equally late to rest, be equally active, sober,
and industrious, and yet, in the course of the year, one of them, without pushing the hands that
are under him more than the other, shall have performed infinitely more work.
George Washington
When Nature has work to be done, she creates a genius to do it.
Ralph Waldo Emerson
wo hundred years ago,
George Washington
recognized the common
sense in hiring and
promoting productive
managers-and taking
Academy of Public Administration wrote
not long ago, "The federal government now
manages ... some of the most important and
complex enterprises in the world."' But it
does not manage them well.
Admittedly, "management" is a fuzzy
concept, hard to recognize or define. But
poor management has real consequences.
Money is wasted. Programs don't work.
People aren't helped. That's what taxpayers
and customers see.
Inside government, bad management
stifles the morale of workers. The "system"
kills initiative. As Vice President Gore,
responding to the concerns of Transportation
Department employees, put it:
One of the problems with a centralized
bureaucracy is that people get placed in
these rigid categories, regulations bind
them, procedures bind them, the
organizational chart binds them to the
old ways of the past... The message over
time to ... employees becomes: Don't try to
do something new. Don't try to change
authority away from unproductive ones.
One hundred years ago, Emerson
observed that we all share a common
genius, ignited simply by the work at
hand. These American originals defined
the basic ingredients of a healthy, productive
work environment: managers who
innovate and motivate, and workers who
are free to improvise and make decisions.
Today, our federal government's executive
branch includes 14 cabinet departments,
135 agencies and hundreds of boards and
commissions. These entities employ more
than 2.1 million civilians (not counting the
Postal Service), and 1.9 million members of
the military, spend $1.5 trillion a year, and,
directly or indirectly, account for one third
of our national economy'. Their tasks are
both massive and difficult. As the National
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 Vice President Al Gore
Speech to National Performance Review members
May 24, 1993
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established procedures. Don't try to adapt
to the new circumstances your office or
agency confronts. Because you re going to
get in trouble ifyou try to do things
differently. "'
Cutting red tape, organizing services
around customers, and creating
competition will start to generate an
environment that rewards success. Now, we
must encourage those within government to
change their ways. We must create a culture
of public entrepreneurship.
Our long-term goal is to change the very
culture of the federal government... A
government that puts people first, puts its
employees first, too. It empowers them, freeing
them from mind-numbing rules and
regulations. It delegates authority and
responsibility. And it provides for them a clear
sense of mission.
But changing culture is a lot harder than
changing rules and regulations. An attitude
of powerlessness and complacency pervades
the federal workplace. As one veteran of
many government reform initiatives
observed, "Changing government is a bit
like moving the town cemetery. It's much
harder to deal with the feelings it arouses
than with the relocation itself."
The Quality Imperative
Of course, many thought that turning
General Motors around would be
impossible. If you talked to their employees,
the same undoubtedly was true of General
Electric, Motorola, Harley-Davidson, and
scores of leading corporations before they
embraced a new management philosophy.
In the 1970s and 1980s, as technology
began to revolutionize everything and
global competitors began to take away
market share, firms that had grown fat and
happy had to face the facts: This wasn't the
1950s anymore.
These firms quickly discovered that
economists can be wrong: More isn't always
better: better is better. One by one, they
began to pursue a new goal-quality-
and to reorganize their entire businesses
around it.
The quality imperative is simple: Do
everything smarter, better, faster, cheaper. It is
not simple, however, to obey. It means
dismantling the old ways of doing business.
The same tired command hierarchies that
continue to bind government are being
scrapped daily by companies on the rise. In
their place, firms seek new ways to manage
and organize work that develop and use the
full talents of every employee. They want
everyone to contribute to the bottom line-
that is, to produce goods and services that
match customer needs at the lowest cost
and fastest delivery time.
The quality movement has spawned
many proven methods and mantras, each
with its loyal fans: management by results;
total quality management; high-performance
organization; business process reengineering.
But the quest for quality-in performance,
product, and service-unifies them all.
Government has recognized the quality
imperative. In 1987, the U.S. Department
of Commerce instituted the Malcolm
Baldrige National Quality Award. Now the
object of fierce competition, it recognizes
private firms that achieve excellence by
pursuing quality management. In 1988, the
Federal Quality Institute began awarding
the Presidential Award for Quality to federal
agencies that do the same. The Presidential
Award criteria, modeled on Baldrige, set
new standards for federal government
performance. The President should
encourage all department and agency heads
to manage with these criteria in mind.
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Changing the Culture: Power and
Accountability
Companies do not achieve high quality
simply by announcing it. Nor can they get
to quality by hiring the services of the
roving bands of consultants who promise to
turn businesses around overnight. They do
it by turning their entire management
systems upside down-shedding the power
to make decisions from the sedimentary
layers of management and giving it to the
people on the ground who do the work.
This rewrites the relationship between
managers and the managed. The bright line
that separates the two vanishes as everyone
is given greater authority over how to get
their job done.
But with greater authority comes greater
responsibility. People must be accountable
for the results they achieve when they
exercise authority. Of course, we can only
hold people accountable if they know what
is expected of them. The powerless know
The Federal Quality Imperative
T he Presidential Quality Award sets forth
seven principles to identify excellent
government agencies:
? Leadership: Are your top leaders and
managers personally committed to
creating and sustaining your organization's
vision and customer focus? Does your
effort extend to the management system,
labor relations, external partnerships, and
the fulfillment of public responsibilities?
? Information andAnalysis: Do your data,
information, and analysis systems help you
improve customer satisfaction, products,
services, and processes?
? Strategic Quality Planning. Do you have
short-term and long-term plans that
address customer requirements; the
capabilities necessary to meet key
requirements or technological
opportunities; the capacities of external
suppliers; and changing work processes to
improve performance, productivity
improvement, and waste reduction?
? Human Resource Development and
Management: Is your agency's entire
workforce enabled to develop its full
potential and to pursue performance
goals? Are you building and maintaining
an environment for workforce excellence
that increases worker involvement,
education and training, employee
performance and recognition systems, and
employee well-being and satisfaction?
? Management of Process Quality:
Does your agency systematically and
continually improve quality and
performance? Is every work unit
redesigning its process to improve quality?
Are internal and external customer-
supplier relationships managed better?
? Quality and Operational Results: Are
you measuring and continuously
improving the trends and quality of your
products and services, your business
processes and support services, and the
goods and services of your suppliers? Are
you comparing your data against
competitors and world-class standards?
? Customer Focus and Satisfaction: Do
you know what your customers need? Do
you relate well to your customers? Do you
have a method to determine customer
satisfaction?
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they are expected only to obey the rules.
But with many rules swept away, what is
expected from the empowered?
The answer is results. Results measured as
the customer would-by better and more
efficiently delivered services. If the staff in
Our bedrock premise is that ineffective
government is not the fault of people in it.
Our government is full of well-intentioned,
hard-working, intelligent people-managers
and staff We intend to let our workers pursue
excellence.
Vice President Al Gore
Reinventing Government Summit
Philadelphia, June 25, 1993
an agency field office are given greater voice
over how their workplace and their work are
organized, then the customer deserves to
spend less time waiting in line, to receive a
prompt answer-and everything else we
expect from a responsive government.
So how do we change culture? The
answer is as broad as the system that now
holds us hostage. Part of it, outlined in
chapter 1 , lies in liberating agencies from
the cumbersome burden of over-regulation
and central control. Part of it, detailed in
chapter 2 , hinges on creating new
incentives to accomplish more through
competition and customer choice. And
part of it depends on shifting the focus of
control: empowering employees to use their
judgment; supporting them with the tools
and training they need; and holding them
accountable for producing results. Six steps,
described in this chapter, will start us down
that road:
First, we must give decisionmaking
power to those who do the work, pruning
layer upon layer of managerial overgrowth.
Second, we must hold every organization
and individual accountable for clearly
understood, feasible outcomes.
Accountability for results will replace
"command and control" as the way we
manage government.
Third we must give federal employees
better tools for the job-the training to
handle their own work and to make
decisions cooperatively, good information,
and the skills to take advantage of modern
computer and telecommunications
technologies.
Fourth, we must make federal offices a
better place to work. Flexibility must extend
not only to the definition of job tasks but
also to those workplace rules and conditions
that still convey the message that workers
aren't trusted.
Fifth, labor and management must forge
a new partnership. Government must learn
a lesson from business: Change will never
happen unless unions and employers work
together.
Sixth, we must offer top-down support
for bottom-up decisionmaking. Large
private corporations that have answered the
call for quality have succeeded only with the
full backing of top management. Chief
Executive Officers-from the White House
to agency heads-must ensure that
everyone understands that power will never
flow through the old channels again. That's
how GE did it; that's how we must do it as
well.
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EMPOWERING EMPLOYEES TO GET RESULTS
bureaucracy-shaking news: It takes 43
POWER
To people working in any large
organization-public or private-
"headquarters" can be a dreaded
word. It's where cumbersome rules and
regulations are created and good ideas are
buried. Headquarters never understands
problems, never listens to employees. When
the Office of Personnel Management
(OPM) surveyed federal employees, fewer
than half expressed any confidence in
supervisors two layers above them-or any
confidence at all in their organization's
overall structure.4
Yet everyone knows the truth:
Management too often is happily unaware
of what occurs at the front desk or in the
field. In fact, it's the people who work
closest to problems who know the most
about solving them. As one federal
employee asked Vice President Gore, "If we
can't tell what we're doing right and wrong,
who better can?"
The Social Security Administration's
Atlanta field office has shown the wisdom
of empowering workers to fulfill their
mission. Since 1990, disability benefit
claims have risen 40 percent, keeping folks
in the Atlanta office busy. So workers
created a reinvention team. They quickly
realized that if they asked customers to
bring along medical records when filing
claims, workers could reduce the time they
spent contacting doctors and requesting the
records. That idea alone saved 60 days on
the average claim. Even better, it saved
taxpayers $351,000 in 1993, and will save
half a million dollars in 1994. The same
workers also found a better, cheaper way to
process disability claims in cases reviewed by
administrative law judges. Instead of asking
judges to send them written decisions, they
created a system for judges to send decisions
electronically. It's quicker, and it eliminates
paperwork, too.5
Now here's the other side of the coin. A
Denver Post reporter recently uncovered this
B'IT'TEN' n o DECENTRALIZING DECISIONMAI