    [Budget of the United States Government]
    [III. Creating a Better Government]
    [1. Improving Government Performance]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 9]]

                       III. CREATING A BETTER GOVERNMENT

    [[Page 11]]

                      1.  IMPROVING GOVERNMENT PERFORMANCE

      The Federal Government's performance needs to improve. The past
    Administration, Congress, and the General Accounting Office concluded
    that we still have much work to do to improve the management and
    performance of the Federal Government.
      True Government reform must be based on a reexamination of the role of
    the Federal Government. The President has called for an ``active, but
    limited'' Government: one that empowers States, cities, and citizens to
    make decisions; ensures results through accountability; and promotes
    innovation through competition. Thus, the Administration will reform and
    modernize Government on the basis of three objectives to make
    Government:
      Citizen-centered, not bureaucracy centered;
      Results-oriented, not process-oriented; and
      Market-based, actively promoting not stifling, innovation and
              competition.
      This task will not be easy and it will take time. The agenda for
    management reform outlined in the discussion below and in the following
    chapters of the President's Budget is just the first step in the
    process. As a next step, in the next few months the Administration will
    announce a more comprehensive Government reform and management agenda
    that will expand on the initiatives discussed below, and address other
    key reforms.
      Section III, ``Creating a Better Government,'' of this budget is a
    Government-wide Performance Plan with an integrated view of the goals
    and descriptions of program activity as contemplated by the Government
    Performance and Results Act of 1993 (GPRA). Rather than examining
    performance only in individual organizational units (such as departments
    and agencies), the functional presentation in the chapters that follow
    groups together similar programs. The Government-wide Performance Plan
    contains a significant number of key performance goals that serve as a
    window into the agencies' 2002 Performance Plans, which will be sent to
    Congress following the transmittal of the budget.
      Good beginnings are not the measure of success, in Government or any
    other pursuit. What matters in the end is performance. Not just making
    promises, but making good on promises. This will be the standard for
    this Administration--from the farthest field office to the highest
    office in the land--as we begin the process of getting results from
    Government.

    Making Government Citizen-Centered

      Use the Internet to Create a Citizen-Centric Government: The explosive
    growth of the Internet has transformed communications between customers
    and businesses. It is also transforming communications between citizens
    and Government. The President believes that providing access to
    information and services is only the first step in electronic Government
    (e-gov). Citizen-centered Government will use the Internet to bring
    about transformational change: agencies will conduct transactions with
    the public along secure web-enabled systems that use portals to link
    common applications and protect privacy. This will give citizens the
    ability to go online and interact with their Government and with their
    State and local Governments that provide similar information and
    services around citizen preferences and not agency boundaries.
      Create an E-Government Fund: The budget proposes $20 million in 2002
    as the first installment of a fund that will grow to a total of $100
    million over three years to support interagency e-gov initiatives. OMB
    would control the allocation of the fund to support information
    technology (IT) projects in the e-gov arena.

    [[Page 12]]

      Projects that operate across agency boundaries will build off the
    foundation of essential building blocks, including: www.firstgov.gov,
    the online information portal that provides 24 hours a day/seven days a
    week access to all Government online information, searchable by topic
    rather than by agency; and the development of a Public Key
    Infrastructure to implement digital signatures that are accepted across
    agencies for secure online communications.
      The fund will also further the Administration's ability to implement
    the Government Paperwork Elimination Act of 1998, which calls upon
    agencies to provide the public with optional use and acceptance of
    electronic information, services and signatures, when practicable, by
    October 2003. In recent years, funding for interagency e-gov initiatives
    has been obtained, as authorized by law, by passing the hat among
    agencies to support activities of interagency councils. The e-gov fund
    will accelerate the improvements this Administration will make to
    provide for interagency e-gov innovation.

    Making Government Results-Oriented

      Link Budget and Management Decisions to Performance: The Government's
    budget decision-making process allows elected officials--the President
    and members of Congress--to set broad priorities for Government programs
    and their managers through resource allocation. Choices are framed by
    the assessments of these officials about the country's needs for
    education, defense, energy, health, and a host of other national needs,
    within a framework of the resources available.
      Making spending choices and allocating the appropriate resource level
    is an important step, but it is also important for spending to produce
    meaningful results. Performance information is necessary to determine
    the value and success of Government programs in achieving their goals.
    Passage of GPRA elevated the importance of good information on program
    performance, and at the same time signaled dissatisfaction with the
    performance information that has been available in the past.
      The initial years of GPRA implementation have focused on developing a
    performance management framework, accompanied by a growing increase in
    the use of this performance information to support budget decisions.
    However, a systematic integration of budgeting with program performance
    has yet to occur, and GPRA has not been fully harnessed to improve
    management and managerial accountability. Bringing about a better
    linkage between performance and budget information will be a priority of
    this Administration. As a first step, department and agency heads have
    been directed to ensure that their 2002 Performance Plans, which will be
    submitted to Congress in April, also include performance goals for
    Presidential initiatives and for Government-wide and agency-specific
    reform proposals.
      Over the coming year, the Administration will take a number of steps
    to strengthen the linkage between budget decision making and program
    performance.
      Formally integrate performance with budget decisions: Agencies
              will be asked to submit performance-based budgets this
              September for a selected set of programs. For the selected
              programs, agencies will be advised of specific performance
              targets that are compatible with funding levels, and program
              managers will be held directly accountable for managing to the
              targets. In future years, policy officials at all levels in
              the Executive Branch will be expected to set output targets to
              match funding levels for selected programs.
      Develop legislation to enable program managers to be charged
              for support services, capital assets, and employer benefits:
              If program managers are going to be held more accountable for
              the achievement of output targets, they should be given
              accurate information on the cost of their programs and
              flexibility in choosing service providers. At present, program
              managers do not always have information on, or control of, the
              full costs of support services, retirement, and other non-
              direct costs associated with their programs, which can distort
              budget choices. Legislation will be developed this year to
              address this problem by changing the way support services,
              capital assets, and employee benefits are budgeted.

    [[Page 13]]

      Publish detailed performance data: The 2003 Budget will
              include more performance information and the 2004 Budget will
              integrate detailed performance and budget data to establish a
              stronger, more extensive and public link between the agency
              budget requests and performance measurement in the President's
              Budget.

      Ensure Financial Accountability: The President believes that
    Government must ensure a basic level of financial accountability that is
    expected of any company in the private sector. He is holding agency
    heads accountable for obtaining and maintaining unqualified or ``clean''
    opinions on their agencies' annual financial statement audits. More than
    60 percent of agencies currently receive ``clean'' opinions; heads of
    the agencies without clean opinions are expected to attack vigorously
    the long-standing difficulties and record-keeping deficiencies that
    prevent clean opinions.
      Reduce Erroneous Payments to Beneficiaries and Other Recipients of
    Government Funds: Financial accountability also requires assurance that
    Federal funds are being used for their intended purpose and not being
    distributed due to error. The General Accounting Office identified $19.1
    billion in erroneous payments made last year, and noted that the amount
    could be considerably larger. The President will direct agency heads to
    develop more rigorous controls to ensure that Federal funds reach their
    intended recipients at the correct time and in the proper amount.
    Further, he will promote the use of recovery audits and other steps to
    ensure that overpayments are avoided or returned to the Government.
      Use Capital Planning to Improve Performance: Agencies invest more than
    $40 billion in IT to support some 26,000 information systems. Technology
    now affects virtually every aspect of the way the Government operates,
    and IT investments are extremely important to the success of e-gov
    transforming the delivery of information and services. Agencies will use
    capital planning and investment control to promote security and privacy
    in the use of technology and guide the results of this investment, and
    ultimately for ensuring results from other capital assets as well. The
    Government can thus achieve outcomes from IT investments that match
    agency strategic priorities and provide real benefits for the American
    people.
      Eliminate Duplicative and Ineffective Programs: The Federal Government
    spends billions of dollars on programs that are obsolete, ineffective,
    or better performed by the private sector. The Administration will seek
    to redeploy resources from old priorities to make room for new
    Administration priorities by reducing or eliminating funding for
    programs that have completed their mission or that are redundant,
    ineffective, or obsolete.
      Expand the Use of Performance-Based Contracts: Because of expanding
    missions and declining staff, agencies are increasingly relying on
    outside contractors. The Federal Government spends roughly $110 billion
    a year in service contracts. The increase in the amount and type of
    contracting creates the opportunity and the necessity to move toward
    performance-based contracting--where the focus is on the results to be
    achieved, rather than the manner in which the work is performed or the
    ``effort'' involved. Agencies will convert Federal service contracts to
    performance-based contracts wherever possible, saving an estimated $8.3
    billion over five years.
      Incorporate Successful Private Sector Reforms Throughout the Federal
    Work Force: The current civil service system does not do all it should
    to reward achievement or encourage excellence. It also limits the
    ability of agency heads to compete successfully for high-skilled senior
    talent. In an effort to get closer to the customer, American businesses
    have increasingly replaced old, hierarchical organizations with flatter,
    more entrepreneurial ones. To shrink the distance between citizens and
    decision makers who shape Government programs, the Administration will
    incorporate successful private sector reforms throughout the Federal
    work force: flatten the Federal hierarchy; reduce the number of layers
    in the upper echelon of Government; and use work force planning to help
    agencies redistribute higher-level positions to front-line, service
    delivery positions that interact with citizens. The Administration will
    also seek legislation to provide program managers new and expanded work
    force restructuring tools. These actions, combined with improved

    [[Page 14]]

    accountability through better linkage of program performance with budget
    decision making and other reforms, will make the Federal Government more
    nimble and responsive. The Government can also be made more effective.
    These same work force planning tools can help ensure that agencies have
    people with the right skills in the right places in the right numbers to
    deliver programs people care about.

    Making Government Market-Based

      Make e-Procurement the Government-wide Standard: Businesses are
    experiencing significant cost savings by shifting their procurement to
    the Internet. Savings are derived from reduced transaction-processing
    costs, more efficient inventory management, and greater competition from
    vendors lowering prices. In an effort to lower costs and utilize market-
    based solutions wherever possible, agencies will move to paperless
    contracting processes in which information from one step of the process
    is automatically fed to the next step in the process, eliminating the
    need to re-enter data. Procurement data will be linked to financial
    systems, making the payment process both faster and more accurate;
    disposal of excess Government property will become more effective.
    Agencies will also expand use of ``share-in-savings'' approaches, in
    which market incentives reward contractors who can retain a portion of
    any savings that result from innovation.
      Open Government Activities to Competition: Opening Government
    functions to competition to the fullest extent possible is the best way
    to ensure market-based pricing and encourage innovation, while saving
    the taxpayers an estimated $14 billion over five years. Since 1998,
    agencies have been required to inventory their activities that are
    commercial in nature--that is activities that are not ``so intimately
    related to the public interest as to require performance by Federal
    Government employees.'' In the past, agencies have found that when
    competitive bidding is employed, they experience average savings of 30
    percent when a private contractor wins, and 20 percent when the public
    sector wins. Consequently, for these activities, agencies will use an
    open, competitive process (considering both public and private bidders)
    to choose the providers. The competitive process will be studied so that
    it can be streamlined.

    [[Page 15]]

                                        Table 1-1.  Federal Resources by Function
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                             Estimate
              Category               2000    -----------------------------------------------------------------------
                                    Actual       2001        2002        2003        2004        2005        2006
    ----------------------------------------------------------------------------------------------------------------
    NATIONAL DEFENSE:
      Spending:
        Discretionary Budget          300.8       311.3       325.1       333.9       343.2       352.7       362.5
         Authority..............
        Mandatory Outlays:
          Existing law..........       -0.5        -0.4        -0.1        -0.2        -0.5        -0.6        -0.6
          Proposed legislation..  ..........  ..........        0.1         0.2         0.2         0.1         0.1
      Credit Activity:
        Direct loan               ..........          *         0.1         0.1         0.2   ..........  ..........
         disbursements..........
        Guaranteed loans........          *           *         0.1         0.5         0.5   ..........  ..........
      Tax Expenditures:
        Existing law............        2.1         2.2         2.2         2.2         2.2         2.3         2.3
                                 -----------------------------------------------------------------------------------
    INTERNATIONAL AFFAIRS:
      Spending:
        Discretionary Budget           23.5        22.7        23.9        24.4        24.9        25.5        26.0
         Authority..............
        Mandatory Outlays:
          Existing law..........       -4.1        -6.7        -3.5        -3.4        -3.4        -3.4        -3.4
      Credit Activity:
        Direct loan                     1.6         2.3         2.0         0.5         0.2         0.2         0.1
         disbursements..........
        Guaranteed loans........       11.4        11.1        11.5        10.8        10.7        11.6        11.2
      Tax Expenditures:
        Existing law............       16.6        18.1        18.3        18.9        20.0        21.3        22.6
                                 -----------------------------------------------------------------------------------
    GENERAL SCIENCE, SPACE, AND
     TECHNOLOGY:
      Spending:
        Discretionary Budget           19.2        20.9        21.2        21.9        22.4        22.9        23.5
         Authority..............
        Mandatory Outlays:
          Existing law..........          *         0.1         0.1         0.2         0.2         0.1         0.1
      Tax Expenditures:
        Existing law............        3.3         7.7         8.4         7.2         6.6         4.7         3.3
                                 -----------------------------------------------------------------------------------
    ENERGY:
      Spending:
        Discretionary Budget            2.7         3.1         2.8         2.9         3.1         3.2         3.3
         Authority..............
        Mandatory Outlays:
          Existing law..........       -4.0        -3.7        -3.3        -3.2        -3.7        -3.6        -3.6
      Credit Activity:
        Direct loan                     1.4         1.9         2.2         2.5         2.7         2.8         2.9
         disbursements..........
        Guaranteed loans........        0.2         0.1         0.1         0.1         0.1         0.1         0.1
      Tax Expenditures:
        Existing law............        2.0         2.1         2.1         1.9         1.6         1.8         1.9
                                 -----------------------------------------------------------------------------------
    NATURAL RESOURCES AND
     ENVIRONMENT:
      Spending:
        Discretionary Budget           24.6        28.7        26.4        27.0        27.6        27.6        27.4
         Authority..............
        Mandatory Outlays:
          Existing law..........          *        -0.2        -0.1         0.1         0.2         0.1         0.1
          Proposed legislation..  ..........  ..........         -*        -0.1          -*           *         0.1
      Credit Activity:
        Direct loan                       *           *           *           *           *           *           *
         disbursements..........
        Guaranteed loans........  ..........  ..........          *         0.1           *   ..........  ..........
      Tax Expenditures:
        Existing law............        1.5         1.6         1.6         1.7         1.8         1.9         2.0
                                 -----------------------------------------------------------------------------------
    AGRICULTURE:
      Spending:
        Discretionary Budget            4.7         5.1         4.8         5.2         5.2         5.3         5.4
         Authority..............
        Mandatory Outlays:
          Existing law..........       32.0        20.4        13.2         9.8         8.8         8.8         9.1
      Credit Activity:
        Direct loan                    11.0        10.3        10.4         8.9         8.8         8.6         8.9
         disbursements..........
        Guaranteed loans........        5.4         6.5         6.8         6.9         6.9         6.9         6.9

    [[Page 16]]

      Tax Expenditures:
        Existing law............        1.0         1.1         1.1         1.2         1.2         1.3         1.3
                                 -----------------------------------------------------------------------------------
    COMMERCE AND HOUSING CREDIT:
      Spending:
        Discretionary Budget            5.1         0.7        -0.3        -0.1        -0.4        -0.5        -0.5
         Authority..............
        Mandatory Outlays:
          Existing law..........       -1.3        -2.5         6.7         4.7         4.0         4.2         2.9
          Proposed legislation..  ..........  ..........       -0.1        -0.1        -0.1        -0.1        -0.1
      Credit Activity:
        Direct loan                     1.3         1.7         1.6         1.6         1.6         1.6         1.6
         disbursements..........
        Guaranteed loans........      218.7       231.3       250.8       263.2       272.8       282.4       290.0
      Tax Expenditures:
        Existing law............      242.5       254.7       266.7       277.8       289.5       301.2       314.8
                                 -----------------------------------------------------------------------------------
    TRANSPORTATION:
      Spending:
        Discretionary Budget           15.2        18.9        16.8        17.8        18.2        18.6        19.0
         Authority..............
        Mandatory Outlays:
          Existing law..........        2.1         2.2         1.8         2.0         2.0         1.9         1.9
      Credit Activity:
        Direct loan                     0.3         0.4         0.7         1.1         1.5         2.0         2.2
         disbursements..........
        Guaranteed loans........        0.9         0.6         0.4         0.2         0.2         0.2         0.2
      Tax Expenditures:
        Existing law............        2.1         2.2         2.4         2.5         2.7         2.8         3.0
                                 -----------------------------------------------------------------------------------
    COMMUNITY AND REGIONAL
     DEVELOPMENT:
      Spending:
        Discretionary Budget           12.2        11.0        10.4        10.7        10.9        11.1        11.3
         Authority..............
        Mandatory Outlays:
          Existing law..........       -0.8        -0.6        -0.3        -0.7        -0.7        -0.8        -0.9
          Proposed legislation..  ..........  ..........         -*        -0.1        -0.1        -0.2        -0.4
      Credit Activity:
        Direct loan                     1.9         2.2         1.9         1.8         2.0         2.0         2.0
         disbursements..........
        Guaranteed loans........        1.4         2.8         2.4         2.0         1.8         1.8         1.9
      Tax Expenditures:
        Existing law............        1.2         1.4         1.9         2.4         2.4         2.6         3.1
                                 -----------------------------------------------------------------------------------
    EDUCATION, TRAINING,
     EMPLOYMENT, AND SOCIAL
     SERVICES:
      Spending:
        Discretionary Budget           44.4        61.1        65.4        67.1        69.0        70.7        72.3
         Authority..............
        Mandatory Outlays:
          Existing law..........       10.3         9.1        14.3        14.5        14.8        15.3        16.2
          Proposed legislation..  ..........  ..........        0.1         0.3         0.4         0.4         0.4
      Credit Activity:
        Direct loan                    16.4        19.1        16.6        17.5        18.4        19.4        20.4
         disbursements..........
        Guaranteed loans........       26.6        29.5        30.7        32.4        34.2        36.2        38.2
      Tax Expenditures:
        Existing law............       36.0        37.8        38.8        40.4        43.2        45.0        47.5
                                 -----------------------------------------------------------------------------------
    HEALTH:
      Spending:
        Discretionary Budget           33.8        38.9        41.0        45.7        46.9        48.1        49.4
         Authority..............
        Mandatory Outlays:
          Existing law..........      124.5       138.7       152.4       168.9       183.6       199.7       216.6
          Proposed legislation..  ..........        2.5        10.7        13.7        14.6         4.3         0.1
      Credit Activity:
        Guaranteed loans........          *           *           *           *           *           *           *

    [[Page 17]]

      Tax Expenditures:
        Existing law............       91.1        99.8       108.6       117.8       127.5       136.8       147.1
                                 -----------------------------------------------------------------------------------
    MEDICARE:
      Spending:
        Discretionary Budget            3.0         3.4         3.5         3.5         3.6         3.7         3.8
         Authority..............
        Mandatory Outlays:
          Existing law..........      194.1       216.0       226.4       238.6       252.2       270.8       279.4
          Proposed legislation..  ..........  ..........  ..........  ..........  ..........        8.3        12.8
                                 -----------------------------------------------------------------------------------
    INCOME SECURITY:
      Spending:
        Discretionary Budget           31.6        39.5        42.8        45.1        46.7        48.3        49.6
         Authority..............
        Mandatory Outlays:
          Existing law..........      206.5       217.2       228.5       237.0       246.3       258.2       265.5
          Proposed legislation..  ..........  ..........        0.3         0.9         1.0         1.2         1.3
      Credit Activity:
        Direct loan                       *           *           *   ..........  ..........  ..........  ..........
         disbursements..........
        Guaranteed loans........          *           *         0.1         0.1         0.1         0.1         0.1
      Tax Expenditures:
        Existing law............      147.6       153.4       159.1       165.7       172.3       179.1       187.7
                                 -----------------------------------------------------------------------------------
    SOCIAL SECURITY:
      Spending:
        Discretionary Budget            3.2         3.4         3.5         3.6         3.7         3.8         3.8
         Authority..............
        Mandatory Outlays:
          Existing law..........      406.0       430.0       451.6       473.5       498.0       524.3       553.0
      Tax Expenditures:
        Existing law............       24.8        26.0        27.3        28.4        29.7        31.3        33.0
                                 -----------------------------------------------------------------------------------
    VETERANS BENEFITS AND
     SERVICES:
      Spending:
        Discretionary Budget           20.9        22.5        23.5        24.0        24.5        25.1        25.7
         Authority..............
        Mandatory Outlays:
          Existing law..........       26.3        23.0        28.1        29.7        31.3        35.4        34.1
          Proposed legislation..  ..........  ..........          *          -*        -0.1        -0.1        -0.1
      Credit Activity:
        Direct loan                     1.5         1.7         1.7         1.9         2.0         2.0         2.0
         disbursements..........
        Guaranteed loans........       20.2        29.5        29.0        29.6        30.2        30.8        31.5
      Tax Expenditures:
        Existing law............        3.3         3.5         3.7         3.9         4.0         4.3         4.5
                                 -----------------------------------------------------------------------------------
    ADMINISTRATION OF JUSTICE:
      Spending:
        Discretionary Budget           27.1        30.0        29.8        31.9        32.3        32.8        33.5
         Authority..............
        Mandatory Outlays:
          Existing law..........        1.0         0.7         1.5         1.1         2.5         2.5         2.5
                                 -----------------------------------------------------------------------------------
    GENERAL GOVERNMENT:
      Spending:
        Discretionary Budget           12.4        14.0        14.8        15.0        15.4        15.7        16.0
         Authority..............
        Mandatory Outlays:
          Existing law..........        1.0         2.3         1.8         1.8         2.0         1.8         1.8
          Proposed legislation..  ..........  ..........          *   ..........        1.2           *           *
      Credit Activity:
        Direct loan                       *           *           *   ..........  ..........  ..........  ..........
         disbursements..........
      Tax Expenditures:
        Existing law............       67.7        71.3        74.8        78.3        82.1        86.0        88.7
                                 -----------------------------------------------------------------------------------
    NET INTEREST:
        Mandatory Outlays:
          Existing law..........      223.2       206.4       188.1       175.2       161.5       144.6       127.1
          Proposed legislation..  ..........  ..........          *           *           *         0.1         0.1

    [[Page 18]]

      Tax Expenditures:
        Existing law............        0.5         0.5         0.5         0.5         0.6         0.6         0.6
                                 -----------------------------------------------------------------------------------
    ALLOWANCES:
      Spending:
        Discretionary Budget      ..........  ..........        5.3         5.4         5.6         5.7         5.8
         Authority..............
                                 -----------------------------------------------------------------------------------
    UNDISTRIBUTED OFFSETTING
     RECEIPTS:
        Mandatory Outlays:
          Existing law..........      -42.6       -47.7       -51.8       -60.7       -62.4       -56.2       -57.8
          Proposed legislation..  ..........  ..........        2.4         0.3        -8.2        -2.7        -4.6
                                 -----------------------------------------------------------------------------------
    FEDERAL GOVERNMENT TOTAL:
      Spending:
        Discretionary Budget          584.4       634.9       660.6       685.1       702.7       720.1       737.9
         Authority..............
        Mandatory Outlays:
          Existing law..........    1,174.0     1,204.4     1,255.4     1,289.2     1,336.6     1,403.0     1,444.0
          Proposed legislation..  ..........        2.5        13.4        15.2         8.9        11.2         9.6
      Credit Activity:
        Direct loan                    35.5        39.6        37.3        35.9        37.5        38.6        40.2
         disbursements..........
        Guaranteed loans........      284.9       311.6       332.0       346.0       357.6       370.1       380.0
    ----------------------------------------------------------------------------------------------------------------
    * $50 million or less.

    Notes: Tax expenditure proposals are presented in Table S-10.

    The Administration proposes to reverse the misleading budget practice of using advance appropriations simply to
      avoid spending limitations and is requesting sufficient appropriations in 2002 to cover normal funding,
      instead of requesting advance appropriations for 2003. This increases budget authority by $22.7 billion in
      2002 only.