[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
  TO ESTABLISH AN OFFICE OF MANAGEMENT IN THE EXECUTIVE OFFICE OF THE 
                               PRESIDENT

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 4, 1999

                               __________

                           Serial No. 106-70

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
61-821 CC                   WASHINGTON : 2000



                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia            PATSY T. MINK, Hawaii
DAVID M. McINTOSH, Indiana           CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELEANOR HOLMES NORTON, Washington, 
JOE SCARBOROUGH, Florida                 DC
STEVEN C. LaTOURETTE, Ohio           CHAKA FATTAH, Pennsylvania
MARSHALL ``MARK'' SANFORD, South     ELIJAH E. CUMMINGS, Maryland
    Carolina                         DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
ASA HUTCHINSON, Arkansas             JOHN F. TIERNEY, Massachusetts
LEE TERRY, Nebraska                  JIM TURNER, Texas
JUDY BIGGERT, Illinois               THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
JOHN T. DOOLITTLE, California            (Independent)
HELEN CHENOWETH, Idaho


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                      Carla J. Martin, Chief Clerk
                 Phil Schiliro, Minority Staff Director

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois               JIM TURNER, Texas
THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
DOUG OSE, California                 PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                Harrison Fox, Professional Staff Member
                          Mason Alinger, Clerk
            Faith Weiss, Minority Professional Staff Member




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 4, 1999.................................     1
Statement of:
    DeSeve, G. Edward, Deputy Director for Management, Office of 
      Management and Budget; Dwight A. Ink, president emeritus, 
      Institute of Public Administration, former Assistant 
      Director for Executive Management, Office of Management and 
      Budget; Harold Seidman, senior fellow, Center for the Study 
      of American Government, Johns Hopkins University, former 
      Assistant Director for Management and Organization, Bureau 
      of the Budget; and Herbert N. Jasper, fellow, National 
      Academy of Public Administration, former professional 
      management staff member, Bureau of Budget..................     6
    McMurtry, Virginia, Specialist, American National Government, 
      Congressional Research Service; J. Christopher Mihm, 
      Associate Director, Federal Management and Workforce 
      Issues, U.S. General Accounting Office; Paul Posner, 
      Director, Budget Issues, Accounting and Information 
      Management, U.S. General Accounting Office; and Ronald C. 
      Moe, Specialist, Government Organization and Management, 
      Congressional Research Service.............................    71
Letters, statements, et cetera, submitted for the record by:
    DeSeve, G. Edward, Deputy Director for Management, Office of 
      Management and Budget, prepared statement of...............    10
    Horn, Hon. Stephen, a Representative in Congress from the 
      State of California, prepared statement of.................     4
    Ink, Dwight A., president emeritus, Institute of Public 
      Administration, former Assistant Director for Executive 
      Management, Office of Management and Budget, prepared 
      statement of...............................................    28
    Jasper, Herbert N., fellow, National Academy of Public 
      Administration, former professional management staff 
      member, Bureau of Budget, prepared statement of............    38
    McMurtry, Virginia, Specialist, American National Government, 
      Congressional Research Service, prepared statement of......    73
    Mihm, J. Christopher, Associate Director, Federal Management 
      and Workforce Issues, U.S. General Accounting Office, 
      prepared statement of......................................    97
    Moe, Ronald C., Specialist, Government Organization and 
      Management, Congressional Research Service, prepared 
      statement of...............................................    79
    Seidman, Harold, senior fellow, Center for the Study of 
      American Government, Johns Hopkins University, former 
      Assistant Director for Management and Organization, Bureau 
      of the Budget, prepared statement of.......................    21
    Turner, Hon. Jim, a Representative in Congress from the State 
      of Texas, prepared statement of............................    51


  TO ESTABLISH AN OFFICE OF MANAGEMENT IN THE EXECUTIVE OFFICE OF THE 
                               PRESIDENT

                              ----------                              


                       THURSDAY, FEBRUARY 4, 1999

                  House of Representatives,
Subcommittee on Government Management, Information, 
                                    and Technology,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen Horn 
(chairman of the subcommittee) presiding.
    Present: Representatives Horn, Biggert, Ose, and Turner.
    Staff present: J. Russell George, staff director and chief 
counsel; Bonnie Heald, director of information and professional 
staff member; Harrison Fox, professional staff member; Mason 
Alinger, staff assistant; Paul Wicker and Kacey Baker, interns; 
Faith Weiss, minority professional staff member; and Earley 
Green, minority staff assistant.
    Mr. Horn. A quorum being present, the hearing of the 
Subcommittee on Government Management, Information, and 
Technology will come to order.
    Our Federal Government is one of the largest, most complex 
organizations on the planet. The President's budget, released 
this week, records a government with over 1,300 budget 
accounts, 20,000 programs and activities, and 4.2 million 
employees, both civilian and military. Through the years, there 
have been countless attempts to improve its management 
structure. Nearly all have failed to control the government's 
unwieldly and often overlapping functions.
    Today, enlightened Federal management in the United States 
lags far behind other, more progressive countries. In New 
Zealand, for instance, improved management practices have 
reduced government spending from 58 percent of gross domestic 
product in 1990 to a projected 47 percent in 1999. This 
improved management has decreased New Zealand's taxes by nearly 
20 percent, and has dramatically improved government 
performance. I guess we could ask the question: Why can't our 
Federal Government do the same?
    In the last 60 years, three Presidential commissions--the 
Brownlow Committee in 1937, the first Hoover Commission report 
in 1949, and finally, the Ash Council report in 1970--each 
recommended strengthening management within the executive 
branch. If that is to happen, the President needs a core group 
whose professional staff members can advise him and his Cabinet 
officers at his wishes on key management questions.
    In 1998 hearings before the House Subcommittee on 
Government Management, Information, and Technology, several 
witnesses concluded that on a regular basis, OMB's management 
leadership has been subordinated to budget concerns and 
timeframes.
    As many of you know, I was a very strong advocate of adding 
the ``M'' to the Bureau of the Budget and making it the Office 
of Management and Budget. I thought for once we could get the 
budget its clout to have some focus on the management questions 
that often are just thrown under the rug regardless of 
administration. This has nothing to do with Republicans and 
Democrats. This has nothing to do with liberals or 
conservatives. Behavior has been the same. As my friends in the 
senior civil service have been telling me for the last 10 to 15 
years, it isn't working. So we are here today to discuss what 
makes it work and what kind of task group can we have that will 
really get management done.
    Government management problems are regularly ignored 
because short-term policy and spending issues drive out 
valuable, long-term management stewardship.
    Nearly everyone agrees that the executive branch of the 
Federal Government needs better management.
    We can either try--once again--to focus general management 
responsibilities in the Office of Management and Budget where 
they currently reside, or we can move management 
responsibilities to a newly created Office of Management in the 
Executive Office of the President.
    The first choice has been tried and retried with little 
success. The second would give the President two teams of 
advisers: one for budgetary issues and another for management.
    Resistance to the second alternative has been resolute 
because many believe that the clout of the budget can force 
management reform. And as I said earlier, empirical evidence, 
fortified with experience, proves just the opposite. Long term-
employees in the Executive Office, three of whom are here today 
to testify, confirm that within the Federal Government, the 
budget often drives out good management.
    In Theodore Roosevelt's speech on ``New Nationalism,'' he 
provides a road map for effective government management. The 
former President stated: ``No matter how honest and decent we 
are in our private lives, if we do not have the right kind of 
law and the right kind of administration of the law, we cannot 
go forward as a Nation.''
    An Office of Management is a key step to a more efficient, 
effective, and responsive administration of government. My 
friends in the Office of Management and Budget, both current 
and past senior officers, surely understand that their 
dedication, good intentions, and hard work are not being 
criticized. The intent in creating the Office of Management is 
to make it easier for dedicated public servants to succeed and, 
therefore, to improve management throughout the executive 
branch.
    We now turn to a discussion on the best way to accomplish 
that goal.
    I think one of our sort of reference points here is the 
various studies that the Government Accounting Office [GAO], 
has done. And this year, as usual, they have done an excellent 
study and this is ``Major Management Challenges and Program 
Risks, Government-Wide Perspective,'' and just to take up one 
of many, major management challenges and program risks, DOD.
    A lot of these matters should have been dealt with many, 
many years ago. The one that comes to mind more recently is the 
year 2000 problem. That should have happened way back in 1989 
when the Social Security Administration was the first agency on 
its own initiative to face up to what was coming at the end of 
the century.
    And the example I have used so often of the Federal Highway 
Administration where it had been brought to their attention by 
one of their excellent employees and they didn't pay attention 
to it. There was no system for management. This was 1989. This 
has nothing to do with the current administration, but this is 
the type of thing that happens where they don't face up to 
these issues either at the Department level, the Cabinet level 
or the executive branch level. I believe the trouble that we 
are in and the procrastination that occurred over a decade is a 
good example of when the Director of the Office of Management 
should have been knocking on the door of the President and 
saying, ``Look, we have a problem, we need your help and let's 
discuss it.''
    [The prepared statement of Hon. Stephen Horn follows:]

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    [GRAPHIC] [TIFF OMITTED]66907.002
    
    Mr. Horn. We have two panels with us today.
    On panel one, we welcome the Honorable Edward DeSeve, the 
Acting Deputy Director for Management, Office of Management and 
Budget; Mr. Dwight Ink, president emeritus, Institute of Public 
Administration, former Assistant Director for Executive 
Management, Office of Management and Budget; Mr. Harold 
Seidman, senior fellow, Center for the Study of American 
Government at John Hopkins University, former Assistant 
Director for Management and Organization, Bureau of the Budget; 
Mr. Herb Jasper, fellow, National Academy of Public 
Administration, former professional management staff member of 
the Bureau of the Budget.
    And we will wait to introduce panel two. Could we have the 
ones that I have named, Mr. DeSeve, Mr. Ink, Mr. Seidman and 
Mr. Jasper come forward and take the oath.
    [Witnesses sworn.]
    Mr. Horn. Before I start the first panel, I do want to 
introduce the members who are here and ask if they have any 
opening statement. We would be glad to have it at this point.
    The vice chairman, Mrs. Biggert, do you have any comments?
    Mrs. Biggert. No, I don't have any comments. I would like 
to hear the testimony.
    Mr. Horn. The gentleman from California?
    Mr. Ose. No.
    Mr. Horn. The ranking member, if he has a statement, it 
will be put in the record following my own opening remarks.
    Now, let us start with Mr. DeSeve. It is always good to see 
you here, and we would welcome your comments.

STATEMENTS OF G. EDWARD DeSEVE, DEPUTY DIRECTOR FOR MANAGEMENT, 
   OFFICE OF MANAGEMENT AND BUDGET; DWIGHT A. INK, PRESIDENT 
EMERITUS, INSTITUTE OF PUBLIC ADMINISTRATION, FORMER ASSISTANT 
  DIRECTOR FOR EXECUTIVE MANAGEMENT, OFFICE OF MANAGEMENT AND 
BUDGET; HAROLD SEIDMAN, SENIOR FELLOW, CENTER FOR THE STUDY OF 
AMERICAN GOVERNMENT, JOHNS HOPKINS UNIVERSITY, FORMER ASSISTANT 
DIRECTOR FOR MANAGEMENT AND ORGANIZATION, BUREAU OF THE BUDGET; 
   AND HERBERT N. JASPER, FELLOW, NATIONAL ACADEMY OF PUBLIC 
 ADMINISTRATION, FORMER PROFESSIONAL MANAGEMENT STAFF MEMBER, 
                        BUREAU OF BUDGET

    Mr. DeSeve. Mr. Chairman, I would like to submit my 
testimony for the record, and then I have three points that I 
would like to make. And we are going to use some charts over 
here, if you would tell us what the best position for these 
charts is so that the committee can best see them.
    Mr. Horn. We need to move it forward.
    Mr. DeSeve. Let's do that.
    Mr. Horn. Do you have color charts to pass out to us?
    Mr. DeSeve. I am afraid that our budget doesn't take us 
that far. I also want to apologize for my own speaking voice 
which is not normally this timbre.
    What I want to do is make three points today in regard to 
the linkage of management and budget and the imperative that I 
believe will continue the need to link them in the future.
    First, we will be preparing, and I am happy to submit an 
early draft to the committee--this has just been bound today 
and I have extra copies--of the Government-Wide Performance 
Plan. That plan is required by the Government Performance and 
Results Act and it is three sections of the President's budget 
as it was last year, section 3, section 4 and section 6. I am 
going to talk about two of the sections today and use those 
two, section 3 and section 4, to show you what I believe is the 
inextricable linkage between management and budget if you are 
to use budget to lever management.
    You and I disagree on that, and I appreciate your oversight 
because it does keep us on our toes and keep us thinking about 
how to best articulate the relevance of these issues.
    The first chart on the left is one that Director Lew has 
used and Deputy Director Mathews has used recently to 
demonstrate to the general public both the peril that the 
Nation faced during the years, Republican or Democrat, prior to 
this administration and the way in which surplus was reached.
    If the United States had been a European country under the 
Maastricht agreement, it would not have been admitted to the 
European Monetary Union because its deficit as a percent of GDP 
exceeded 3 percent annually during the period.
    As you can see, the receipts averaged 18\1/2\ percent 
during that period and the outlays averaged 21.9 percent. So we 
would have failed the Maastrict test of less than 3 percent of 
GDP. Everyone says it is the wonderful economy that brought us 
to this point.
    This chart demonstrates that it is the decrease in outlays 
as a percentage of GDP as well as the increase in revenues. And 
much of that decrease in outlays can be laid to the oversight 
of this committee and other committees of Congress as they took 
very seriously their responsibilities under the Budget 
Reconciliation Act of the past as well as under the Balanced 
Budget Act. It was carefully crafted to put caps on domestic 
discretionary spending. What that forced agencies to do was to 
manage to those caps so that budget led the need for 
management, and it was almost in lockstep.
    What we see in the center chart is the decline in FTE, 
full-time employment. That is the full time equivalent 
employment during that same period. And the driver here again 
was the notion of scarcity. If we are to constrain our budget, 
we need to continue to constrain and streamline the way 
government works. That budget constraint helped to drive 
management constraint. Management without budget in that case 
would perhaps have led to a line that was more gradual, but 
this Congress committed that there would be more police on the 
streets. It was a substantive decision, and funding those 
police came in large measure from 365,000 fewer FTE, about a 
16-percent decrease during the period 1993 through 1998 
actually.
    Now it will go up slightly this year. Why? Because we are 
hiring a lot of census workers, about 64,000 census workers. 
But the permanent work force will continue its decline while 
the temporary census increase moves it up. So there are 365,000 
fewer FTE on the payroll during the period ended September 30th 
compared to 1993.
    Again we had to manage to that. Each department had to 
manage that budgetary constraint because of the desire to bring 
those two lines together.
    When we go to the far right, we see how the Office of 
Management and Budget has reorganized itself to deal with those 
challenges. The Office of the Director, and this is not a chart 
that I created, I turned to the Budget Resources Division and I 
said, ``Give me the latest chart.'' It is a chart that we use 
all of the time.
    It shows the OMB Director, Deputy Director, and Deputy 
Director for Management are the Office of the Director. On the 
right side are the three statutory offices which by statute 
report to the Deputy Director for Management.
    On the left side are the very important support functions 
of OMB that in a new Department of Management would have to be 
re-created. We would have to have an administrative division. 
We would not have to have a budget review. We would have to 
have some kind of a communications office. We would have to 
have some kind of nexus with the economy, maybe not an Economic 
Policy Office. We would have to have a Legislative Affairs 
Office, and the use of our legislative reference division, 
which sounds innocuous, but that is the clearance process that 
is part of the guts of how OMB operates.
    All of those entities on the left-hand side are 
continuously available for management purposes. I really use 
those folks. Section 3 of the budget talks about economic 
performance, and it is part of the Government Performance Plan. 
I worked very closely with those economists in preparing that 
section and highlighting the performance targets we have for 
the economy and for the deficit.
    On the right-hand side, I supervise those offices. But as 
we try to carry out the responsibilities of OMB--and if I move 
over to the chart, will that be a problem for the stenographer?
    Mr. Horn. There is microphone over there at the end.
    Mr. DeSeve. The reason that I want to do that, these are 
priority management objectives. This is the second year in the 
budget that we have had these. We talked about them to you in 
December when we began the process of creating them. There are 
four different types. The first set are the governmentwide 
priority management objectives.
    The first is Y2K. A year ago at the urging of many--
certainly you and Congresswoman Morella were in the forefront--
the President agreed that it was appropriate to create the 
Office of the President for Y2K conversion. John Koskinen is 
dual hatted, as you probably know. He has a hat at OMB and a 
hat in the White House. The way John and I work is we use each 
of the Program Associate Directors here as the filters for all 
of the budget information and the program information for Y2K. 
They are the gatherers and the filterers of everything that the 
Department does.
    Similarly when I move down to section 3, these are the 
audited financial statements of the government. We have a 
target to have a clean opinion of the governmentwide financial 
statement in a year. I expect to be before you again sometime 
in early April talking about the progress that has been made 
with GAO. Are we finished? No. Has progress been made? Yes, and 
we will testify to that.
    The way that we get that done is we use the resource 
management offices, the RMOs, as our levers. First of all they 
supply the dollars to the IGs for the audits and they nudge the 
departments as they go forward to do better and ask them why 
they are not doing better.
    But the other important factor, as we go through other 
PMOs, priority management objectives, many of them are budget 
driven. Why do we want to improve contract management in DOE? 
To save money.
    Why do we want to strengthen HCFA's management capacity? 
Because we took savings in the budget this year that now we 
have to follow through with management reform.
    Why do we want to implement IRS reform? Because this 
Congress and OMB felt very strongly that the IRS reform is 
needed. We supported legislation. We passed legislation with 
sweeping management changes in salary structures, 
accountability and reporting, putting a citizens' advocate in 
the IRS. How do we do these things? We do them as a result of 
the RMOs, the budget people bringing proposals forward that can 
either save money or improve operations. My job is the part of 
a coordinator.
    When John Koskinen testified that there are 518 people in 
OMB who work on management, he was simply expressing the notion 
that this entire organization is available to him. To bifurcate 
it, take this group out and perhaps some of these folks out and 
to move them away would be to significantly weaken that linkage 
and make more difficult our ability to carry out these, to keep 
the pressure on to keep this going in this direction, and 
ultimately to achieve the performance that we all care about 
which is the nature of the surplus.
    That is my testimony today. I would be happy to take 
questions at this point.
    [The prepared statement and charts of Mr. DeSeve follow:]

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    Mr. Horn. Well, I am going to not only have Members ask you 
some questions, but since we have a distinguished panel of your 
ex-colleagues who have broad experience in five or six or seven 
different administrations, have a dialog here, not just a Q and 
A. When John answered that question that way, I thought he said 
there were 540, so maybe you have dropped a few.
    Mr. DeSeve. It is 518.
    Mr. Horn. My answer was when you have that many people 
involved, it means that you have nothing involved because you 
just can't get the focus on that, and you don't have 500 
people. Roosevelt and Truman and Eisenhower had probably 20 or 
so that knew what they were doing in this area, which didn't 
mean that they didn't call on their colleagues throughout the 
Bureau of the Budget at that time, or call on the Cabinet 
departments or call on outside people, whoever it is.
    But they focused and they knew, they drafted the Marshall 
Plan. They drafted Government Corporation Designs which was a 
new delivery of service, and all of that, and nothing stops the 
two offices from cooperating. They are both part of the 
Executive Office of the President that came out of the Brownlow 
Committee, and it doesn't mean that they are duplicating 
resources. You don't. You work with the budget people. But the 
fact is the ``M'' bit since Nixon has not worked. And if it was 
working, we wouldn't be here today and GAO wouldn't be writing 
reports on management things that haven't been dealt with.
    There is a wonderful, nice group of people there. I am not 
criticizing them. The five resource offices have been around 
since at least the sixties, and they have a lot of skilled 
persons, but their major concern is the budget and not 
management, and that is where we need to have people that know 
something about management and structure and can work on that 
and can give the President that insight.
    The fact is that President Reagan, President Bush, and 
President Clinton did not really get good management advice out 
of that system in the year 2000 situation. Until our hearing in 
April 1996, not much was happening, only Social Security. When 
I surveyed the Cabinet, several of them said, I have never 
heard of the problem--Mrs. O'Leary and Mr. Pena to be exact. 
They had no goals. They had no person in charge or their own 
agencies, and it just went right down the line as a major 
management failure under three administrations.
    Here is Social Security. They are smart. They have always 
have been considered the best run Federal administration in the 
city. They were when I was on the Hill in the sixties, and they 
are still today. So they saw it, and that idea should have gone 
throughout the administration and not had to wait until 
February 1998 to appoint someone in charge. If the President 
had been briefed in 1988-1989, that person would have been back 
there working throughout that decade. Now we have a time crunch 
and we have had much procrastination, but we can't do anything 
about it. The clock moves on, and so now we have to solve the 
problem, maybe in a rush, maybe in a panic. Maybe it is costing 
more money than if we had systematically done it, and those 
things concern me.
    Would any member of the panel like to get into this dialog? 
Mr. DeSeve has to leave in a little while and this will be our 
only chance to have this dialog.
    Mr. Ink. In my testimony I have a number of points.
    Mr. Horn. Move the microphone right up to you because these 
hearing rooms were not designed with any great management 
thought.
    Mr. DeSeve is not going to be able to stay with us. I am 
interested in what your perspective is and what questions you 
would raise, because he isn't convinced that the separate 
management office will help much.
    What can you tell us in a nutshell as to what under 
Roosevelt and Truman and Eisenhower worked, and then it sort of 
slowly went down and there was political intrusion by both 
parties and all of that?
    Mr. Seidman. I think Ed DeSeve's testimony proved the 
point. The two functions are not integrally related to each 
other. What I don't find in his testimony is how you are 
dealing with the basic cross-cutting issues. Their approach is 
focused around agency and agency budgets.
    The function of the management office when I was there was 
primarily providing staff advice to the President and the 
Congress in dealing with these across-the-board issues. Some of 
the things that I was dealing with, for example, included such 
questions as how do you govern the territories and possessions 
of the United States? How do you bring new States into the 
union? Pay comparability. How do you remove the obstacles that 
States and local governments faced in dealing with the Federal 
Government? Working cooperatively with the Governors' 
Conference, with the mayors, these were the kind of things that 
we did. We developed an organizational philosophy and criteria.
    The two different functions are not integrally related. In 
fact it was a handicap for us. We did not need budgetary clout. 
I found clout to be a handicap. One of the things on the 
management side we had to do was establish our independence of 
the budget before we talked. As I pointed out in my testimony, 
you don't get into really a rational debate with someone with a 
club behind their back. I found it was a strength not to have 
clout because it put the burden of proof on us to persuade 
people of what we were proposing.
    [The prepared statement of Mr. Seidman follows:]

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    Mr. Ink. I found the same to be true. I found the more we 
could distance ourselves from being identified with the budget 
process, the greater our strength with the Cabinet members, the 
greater our credibility with the Congress, the greater our 
ability to help the President in advancing initiatives, the 
greater our ability to develop legislative executive 
initiatives and reforms on a bipartisan basis.
    One of the problems is that: Mr. DeSeve is an extremely 
able person, as was John Koskinen, and Jonathan Breal for whom 
I have the greatest respect.
    What we are really saying is that we would like to liberate 
them from the handicaps and limitations of working within the 
budget which is basically a long program, individual program 
alliance. The tremendous pressure associated with the policy 
disputes involved in these budget issues is very time-
consuming. It is very difficult for the very best people to 
break away long enough to address these fundamental management 
issues, particularly those that have a long-term impact that 
don't fit into a 12-month annual budget cycle, which is the 
focus of the budget.
    I think we get a little confused because there are useful 
things going on. There are good initiatives that are being 
undertaken. What we fail to recognize is that the potential is 
much greater than what is going on. The need, in my view, for 
fundamental change is much greater than we recognize today.
    My view of what ought to be done and many people think is 
too radical, and it is if you don't have good management 
underpinning those changes. It has always been my view that you 
can be more creative, more innovative, take more radical steps 
if you follow basic principles of management.
    We need to be training people as we downsize to get them 
better equipped for new roles. The smaller the work force, the 
more important it is that the work force we retain are highly 
qualified and well trained.
    For example, we talk about outsourcing. This chart doesn't 
show the number of people that the taxpayers are now supporting 
through contracts. What it doesn't show either, and neither 
does the GAO report, is the fact that in a number of these 
agencies as we rely more and more upon private companies and 
third-party arrangements to carry out governmental missions, we 
are failing badly in a number of these agencies to retrain 
people and develop people for entirely new roles, that of 
administering third-party government.
    [The prepared statement of Mr. Ink follows:]

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    Mr. Horn. Mr. Jasper, let me get Mr. Jasper in on this in 
terms of any example, and just reacting to the testimony of the 
Deputy Director for Management on that.
    Mr. Jasper. I would like to draw a sharp distinction which 
may help us focus on some of the issues.
    In Mr. DeSeve's prepared statement he suggests that somehow 
or other your proposal would transfer responsibility for GPRA 
to the new Office of Management. That is not necessarily true, 
and it is not written in your draft bill.
    One of the things that we emphasized, and that Harold 
Seidman has just articulated, is that there are a number of 
functions that we call governmentwide organization and 
management. Those are the things that the new office would 
focus on primarily things that are of great importance to the 
President, not to discount the importance of internal agency 
management. And nothing in the bill would reverse the ``OMB 
2000'' reorganization as I see it. The RMOs would continue to 
have responsibility for internal agency management matters and 
budget matters, and thus could achieve most of the objectives 
that Mr. DeSeve spoke about. But what is missing is some focus 
on the government as a whole and the cross-cutting issues that 
have been alluded to.
    [The prepared statement of Mr. Jasper follows:]

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    Mr. Seidman. In 1952 they did the same thing, integrated 
the budget and the management functions, except that they did 
preserve the government organization staff. It was a small 
staff. They provided for Assistant Directors of each budget 
division for management and organization. All of them 
disappeared within 2 years and became budget examiners. And it 
didn't work and without any change in the rules, the Office of 
Management organization grew right back to where it was, to 
perform the functions that it needed to perform, without any 
formal statement of the change in purpose. It just did not 
work.
    Mr. Ink. That same merger that you talked about Harold, as 
I mention in my testimony, directly led to major scandals in 
the General Services Administration. The General Services 
Administration knew that they had a very weak and problem-
ridden procurement system. They moved to reorganize it and set 
it up anew. They persuaded the head of procurement in NASA to 
come over to GSA and head it up and there would be no 
additional cost whatever. But the merger left OMB without 
management capacity, and OMB vetoed the procurement reform. 
Consequently GSA was left vulnerable to the furniture scandals 
that then began to emerge within months after that veto took 
place.
    There are other instances. You look at the earlier down 
trend of HUD, and much of that goes back to a misguided budget 
influence that concluded HUD did not need any auditors in the 
management area, you need them all in the inspector general 
area. Once you do that, and that happened in agency after 
agency, once that happens, then you rob the secretary of a 
department of much of his or her capacity for prevention, and 
the emphasis on preventing fraud and abuse shifts to catching 
the crook after the damage has been done. This I think was a 
major problem that occurred, and it occurred largely because 
the budget dominated the management considerations in OMB after 
the merger.
    Mr. Horn. I agree that deterrence helped win the cold war 
in foreign policy, but in domestic policy deterrence sort of 
got muddied away. That is really what you are saying. If you 
can get that fraud, waste and abuse to have a team that is 
reponsible to the person that the President is holding 
responsible to run a series of programs, if they don't have 
those people on their staff working, it just isn't going to 
happen.
    Let me ask Mr. DeSeve, we seem to be in agreement that we 
must find ways to continually link up management and budget 
within the Executive Office of the President, and I guess my 
question to you is how do you do it organizationally? You say 
that you can easily run to those five resource Directors; you 
should. But nothing would stop the Director of the Office of 
Management from doing the same thing. In fact, you wouldn't 
even need to change offices.
    What we are talking about, though, is getting a focus on 
management questions so he can go bug those five Directors, 
because if the budget has clout, it needs some guidance from 
people who give their attention to management and not just 
budget. The way that we organize government now, under many 
administrations, we say let's squeeze them a little bit and 
give us back a few full-time equivalents. We don't really think 
through how we are delivering these programs.
    Granted, Congress gets into this in some ways; some ways we 
like and some ways we don't like, in terms of the authorizing 
committees. And I won't say that they are always wrong and I 
don't say that they were always right, but they are a factor 
when it comes to Cabinet departments and what you will have 
that Cabinet department do.
    And so I guess I would like your views, Mr. DeSeve, as to 
why would a Director of an Office of Management in the same 
Executive Office of the President, where you can just walk next 
door and coordinate, it doesn't stop these people from working 
together just like you say that you are working together?
    Mr. DeSeve. I have to go back to my own professor of public 
administration, James C. ``Charles'' Worth. I suspect that 
these gentlemen know Jim Charles Worth. Jim was a very gruff 
fellow. He called himself a shiny-pants colonel from one of the 
war procurement agencies.
    And he said, ``Son, you can coordinate that which you can 
control.'' I can coordinate my two hands because I can control 
them. I have a much harder time controlling Mr. Ink's hand, and 
he would take us by the hand and do that.
    Without the unity of control shown in a single Office of 
Management and Budget, it is much more difficult.
    We have heard the perspective of these gentlemen on 
fundamental changes in the nature of management over the last 
80 years or 90 years, and I would like to give you my 
perspective, and I hope that I can do it quickly.
    If we go back to Theodore Roosevelt, we see the things that 
Roosevelt was combating in putting in a personnel system that 
was fundamentally civil service. He was combating the legacy of 
the bootlegging and scandal in the Tweed administration in New 
York, and he then moved on. When we turn to the thirties when 
Gulick and Barnard were beginning the principles of 
administration that were laid out for us in that period. They 
were dealing with the existence and the coming of age of a 
large bureaucratic form of government which had not previously 
existed in the teens, twenties and thirties.
    We are in a fundamentally different era now. We have 
changed how government operates. When you asked me how I 
administer cross-cutting programs, I do it through a network of 
chief financial officers, chief information officers, 
inspectors general and chief operating officers that come 
together continuously. Literally I will get 20 e-mails a day 
from the CIO council, the CFO council, the PMC and so on, and 
they have taken on much of the burden of working together to 
find new priorities.
    One of the things that I didn't talk about in section 4, is 
all of the goals and objectives of those councils, all of which 
I chair. The goals are articulated in section 4. The councils 
are doing much of the work of Y2K. Kate Adams from the Social 
Security Administration is chair of the Y2K committee of the 
CIO council, and she and her colleagues have been laying out 
the pathway. I am the network manager. I make sure that they 
have food, water, and sustenance authority, so in a flow 
control way I cause that to happen.
    This is fundamentally the same change that we have seen in 
computing. We went from mainframe driven to one that is now 
networked-based and distributed processing. So I think we are 
in a brand new era of management where worrying about the shape 
of organizational hierarchies was tremendously important as we 
invented a new bureaucratic society.
    As we move to a much more distributed network society, we 
find a new way of managing, and I think that is where we are 
now. I have a much longer presentation complete with slides 
that I do, and if you would like to see that, I will be happy 
to send it down. But I think we are in a different time and 
place. I think management consists of more than organizational 
structuring. It consists of allocating resources. It consists 
of identifying the possibilities of technology. It consists in 
the kind of customer service that we provide, and it consists 
in tracing the root from political campaigns and the promises 
made there, through the legislative hierarchy into program 
implementation and beyond, into evaluation of the results of 
those programs and back into an articulation to the public of 
what those programs are actually delivering in terms of 
service. All of that is management, not just a smaller view of 
organizational structure.
    Mr. Horn. Well, we agree with you on that. The whole 
purpose of GPRA and others has been to get better delivery of 
service by the executive branch.
    Mr. DeSeve. And GPRA is in the budget; you will prepare in 
the budget and submit with the budget a plan of how your 
results are going to be achieved.
    Mr. Horn. But I would hope they would be in the budget 
because the budget should be based on the goals that Congress 
and the President have given these agencies, and the budget 
should be simply the unifying document where you translate it 
into money to carry out the goals. But the problems come--as 
you know we had major ones on GPRA. It was a new experience for 
a lot of agencies when State government is going through this 
around the country for years, universities have and other 
public entities, and we are only just getting to this in terms 
of the executive branch.
    Now, would you consider yourself the senior management 
officer within the Executive Office of the President, excluding 
the President, obviously?
    Mr. DeSeve. I think the statute suggests that. The Chief 
Financial Officers Act creates the Office of Deputy Director 
for Management, and I believe it suggests that that is the 
case.
    Mr. Horn. How many times have you met with the President in 
the last few months?
    Mr. DeSeve. Six or eight, I would say.
    Mr. Horn. This is eyeball to eyeball?
    Mr. DeSeve. In meetings. I don't have a one-on-one 
relationship with the President.
    Mr. Horn. The Director of the Budget presumably does have a 
one-on-one relationship with the President.
    Mr. DeSeve. It is typical to meet with the President in 
groups. People who need to be there are there.
    Mr. Horn. The chief of staff?
    Mr. DeSeve. The chief of staff, head of the National 
Economic Council, Domestic Policy Council, National Security 
Council. There would be 8 or 10 people around a table.
    Mr. Horn. I realize that there are a lot of things that go 
on in terms of bringing people and cueing them in and cluing 
them in, but it seems to me if you are going to get something 
done, the Director of the Budget in this case, and now 
Management and Budget, has to really say, Mr. President, let's 
sit down and talk about this thing, and you should know there 
are some real emergencies coming down the line and there are 
some things that can blow up in our face.
    The HUD example under Reagan is a very good example while 
that whole apparatus that Brownlow suggested when he talked 
about six administrative assistants who were anonymous, and we 
have never had anyone anonymous in the White House staff since 
then, but nevertheless the President needs to know before 
something blows up and he reads it in the Washington Post and 
the Washington Times in the morning. The Director of the 
Budget, one of the most powerful positions in the government, 
should have that relationship. It seems to me if--has anybody 
talked to him about management in the last 6 months?
    Mr. DeSeve. I certainly have talked to him about management 
in the last 6 months. One of the things that the President did 
very consciously is that he asked the Vice President in the 
Office of the President to bear the primary responsibility, and 
my interactions with the Vice President are much more direct 
and much more frequent. And he has taken that role, just as in 
other administrations the Vice President had other roles that 
the President cared about, and I believe as I communicate to 
the Vice President, we have a dialog going on right now on a 
particular labor management issue where I and the Vice 
President will communicate once or twice a week. He will be 
continuously talking to the President about how the President 
wants to handle that issue. The access that I have to the Vice 
President is unparalleled, and I think it represents the Office 
of the President in that way.
    Mr. Horn. I think the President has made very good use of 
the Vice President, and we all tried to support the National 
Performance Review and hold hearings and all of the rest, but 
that isn't always going to happen, and that is the problem. 
Some Vice Presidents have been squeezed out by Presidents. The 
staff of President Kennedy didn't have much use for or faith in 
Vice President Lyndon Johnson.
    Now, when Lyndon Johnson became President, he did the same 
thing to Humphrey for 6 months, as a matter of fact, as 
Humphrey would tell the story, that the Kennedy staff did to 
him. And that is sort of a very iffy thing, as you know. And 
then, of course, Vice President Bush was well known for going 
to a lot of funerals.
    When I was in the Eisenhower administration, President 
Eisenhower did give Vice President Nixon, besides funeral duty, 
he gave him the Equal Employment Commission and a number of 
other things, but those are specific assignments that the 
President can give a Vice President even though technically 
under the Constitution he is a legislative officer; but he is a 
person in waiting, and I think the President made good use of 
Vice President Gore.
    But that ad hockery is what we are trying to get away from. 
We are trying to get an institutional memory that will go 
between administrations, whether Democratic or Republican 
administrations. Often the succeeding administration of the 
same party has had a completely different approach to some of 
these questions than the preceding administration of the same 
party. So it isn't just partisan; it is just people and how 
they look at large organizations and what they expect to get 
out of it.
    Is it not true that the budget demands often win out over 
management concerns within OMB?
    Mr. DeSeve. You see, I can't separate the two. If you had 
sat with us in our Director's reviews this year, which is the 
time of the year during September, October, and November when 
the fundamental decisions are made, the first page would 
summarize the financial information about the budget. The 
second page would summarize the results expected under GPRA. 
The departmental totals would then be carried. We would then go 
into a series of issue papers. An issue paper, for example, 
would be how do we get a lower spending level in HCFA by 
eliminating some portion of the erroneous payments that need to 
be eliminated? And in that discussion paper, performance 
measures would be used to highlight what we were going to do 
and how we were going to do it. I sat through every review and 
asked all of the questions necessary. But the interrelationship 
is almost unitary between management and budget in those 
conversations.
    Jack Lew, following on Frank Raines, following on Alice 
Rivlin, has taken to a higher level the ability to manage 
particular situations and make sure that in those particular 
situations, especially cross-cutting ones, we have a priority 
management objective verifying that the right person is getting 
the right benefit. We will be using the new hire data base that 
comes from trying to find deadbeat parents, people not paying 
their child support. That is a current data base of 
information. We will be using that to inform the people in 
student loan about how to find some of the deadbeat student 
loan folks. That is a management initiative across a series of 
areas. We will be doing other things like that in the benefits 
area. That stems from wanting to stay within the budgetary 
constraints as they exist. As an abstract management technique, 
it is something that cuts across eight or nine agencies in 
trying to get benefit verification done properly. We use 
certain kinds of IRS data, not confidential taxpayer 
information, but other data. So Jack has been very forceful in 
doing this and has demonstrated these management techniques as 
being terribly important in preparing this year's budget.
    Mr. Horn. I ask Mr. Turner for his round to his heart's 
content, but first let me ask you: How many people from other 
White House offices sat in on those budget reviews? Did the 
head of Environmental Quality, did the chairman of the Economic 
Advisers, did they sit in?
    Mr. DeSeve. We have tried it both ways. During Dr. Rivlin's 
tenure, we had the broader councils in to the conversation, and 
we found that it made it very hard to have them effectively 
deal because they didn't have good information.
    So what we have done this year is disbursed it. We meet 
separately with those councils and bring their views back to 
Director's review, so we can represent the position of the 
Office of Science and Technology Policy about NASA's 
performance goals or Energy's performance goals.
    The same thing with the Department of Environmental 
Protection in managing the Superfund program. We had to make 
some changes this year because the level of funding was not as 
high as we had requested in the prior year, so we had to change 
Superfund goals. In doing that we had to change some of the 
ways that the program was managed. And so what we do is we 
consult prior to the Directors' reviews, get the views of the 
other organizations in the White House and bring those into 
Directors' review. Honestly, it was just taking too long in the 
process to try to bring the other agencies up to speed at the 
table so we do it ahead of time.
    Mr. Horn. But nothing stops a White House Director of equal 
rank to the Director of Budget--like the chairman of Economic 
Advisers, in particular, certainly has a long-standing role 
beginning 1946.
    Mr. DeSeve. Absolutely.
    Mr. Horn. Nothing stops them from coming into those 
Directors' reviews if they are invited?
    Mr. DeSeve. That is correct.
    Mr. Horn. We assume that, but it often doesn't happen.
    Mr. DeSeve. They are seen as cousins, as opposed to 
brothers and sisters.
    Mr. Horn. Have you had a chance to read ``Inside OMB'' by 
Shelley Lynn Tompkin?
    Mr. DeSeve. I have not. I was interviewed for it, I 
believe. I was hoping she would send me a free copy.
    Mr. Horn. As I book collector, I feel the same way.
    But a recent book, ``Inside OMB,'' she says on page 203, 
``Budget management mergers tended to result in budgetary 
pressures overshadowing the efforts of OMB staff to review 
agency management issues.'' That is her summary after talking 
to all of you experts.
    Mr. Ink. And she didn't interview me, by the way.
    Mr. DeSeve. Is there a page where she refers to how 
excellently management is currently handled by Mr. Koskinen and 
Mr. DeSeve? I think there is.
    Mr. Horn. Is she right? Is she wrong?
    Mr. DeSeve. I think she is reflecting the past rather than 
the current state, and the state of the last several years. I 
think she did the research for that book in 1995. I beg off on 
the year.
    Mr. Horn. I think it was fairly recent, the last 2 years.
    Mr. DeSeve. I would stand with my colleagues at GAO who I 
believe will testify later that it is important to keep the 
functions together.
    Mr. Horn. I now yield to Mr. Turner for such time as he 
would like for questions.
    Mr. Turner. Thank you, Mr. Chairman. First I apologize to 
the Chair and this distinguished panel for my tardiness. I was 
at the National Prayer Breakfast, and it tends to run a little 
longer than we expect. I apologize.
    Mr. Horn. You had a delightful speaker this morning. I 
happened to listen on C-SPAN radio, and this is a plug for C-
SPAN, 90.1 on your FM dial. He was hilarious.
    Mr. Turner. I hope the Chair will accept my opening 
statement as part of the record.
    [The prepared statement of Hon. Jim Turner follows:]

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    Mr. Turner. My experience, of course, is not as deep, Mr. 
Chairman, as yours in this issue. Inasmuch as I have not been 
with you on this subcommittee, but for last year, I did have 
some experience in management issues when I was in the State 
legislature. Texas I think in many ways led the Nation in 
performance-based budgeting and in performance reviews. Much of 
the Vice President's initiative on performance or on 
reinventing government came from the State of Texas where our 
State Comptroller, John Sharp, initiated a ``reinventing 
government'' effort for us there.
    I fully appreciate the Chair's diligence in trying to 
improve the management practices of the Federal Government to 
be sure that taxpayers are getting the very best they can for 
every dollar that they pay into the Federal Treasury.
    It does somewhat disturb me, however, to contemplate the 
legislation that we are having the hearing on, in spite of the 
distinguished panel of experts you have assembled, when the 
White House advises us they think that it would be a bad idea 
inasmuch as we know that it is primarily a responsibility of 
the President to execute the laws in an area of separating the 
Office of Management and Budget. Many management changes, as we 
all know, occur from time to time in government and business, 
and if they are not acceptable to those that the change is 
forced upon, they sometimes tend not to work.
    I guess I would like to ask Mr. DeSeve to expand a little 
bit more on the comments that he made earlier because I have 
had the distinct impression, as we moved into this new age of 
performance-based budgeting, that there is in fact a very 
direct link between management and budget issues that does 
represent somewhat of a change from the way that things used to 
be done. If you don't mind commenting on that to be sure that I 
am on the right track.
    Mr. DeSeve. If I may use the analogy of historic eras, I 
believe we have moved from what I call the hunter-gatherer era 
into a fundamentally different era. Budgeting, until recently 
and still in some places is, I will go to the Hill, I will kill 
the beast, I will bring it back to my department. They will 
have more.
    And the department head who is most successful in bringing 
resources home was rewarded. That is the hunter-gatherer 
mentality in budgeting. We are hoping that is changing and 
moving to what I call the agricultural era. I don't think that 
we are in the Industrial Age yet.
    The agricultural era says I will plant my corn in rows. I 
will plan where those rows will be. I will attempt to have a 
surplus to feed my family. That is what GPRA is. It is the 
notion that there is an orderliness to the process of planning 
the output, the crop that you will get, and the outcome, having 
a surplus to feed your family and trade in the village.
    This requires a new set of disciplines. It requires you to 
have a new mind-set in how you approach budgeting. We are 
starting to see that fundamental change in departments and 
agencies. Certainly they want more, but in justifying that 
more, they were beginning again and again to talk about if you 
give me this, I can do that. I can reduce the time that it 
takes to do this, or I can fundamentally change the way that we 
deliver that service. So the relationship is becoming much more 
integral. If we were a company, we would certainly want to 
integrate our production with our financial results so we 
understood our profitability. GPRA is the proxy of that. The 
Results Act is the proxy of that for the Federal Government, 
and it requires a more sophisticated kind of budget analysis 
that is also management analysis at the same time.
    Mr. Turner. Just as a followup on that, in watching our 
experience in Texas, where I served in the State Senate, and as 
we implemented performance-based budgeting ideas, I always was 
impressed that it seems to take some period of time to develop 
a sophisticated set of performance tools, and some of them in 
the early stages seem to be somewhat elementary. I would like 
to get your evaluation on where we are in the Federal 
Government in regard to really developing a sophisticated 
performance-based budgeting system.
    Mr. DeSeve. I would like to make two points. First, I think 
that this committee and Majority Leader Armey, and I have said 
this here before, have been invaluable in causing the focus on 
GPRA to occur. But I think GPRA fundamentally has three things 
that need to be focused on.
    First, the usefulness of the measures for the managers. Can 
they use them in their everyday work to understand how to make 
their operation work better internally and for their clients?
    Second, can they be used in resource allocation? Can they 
be used as appropriators make decisions?
    Third, can they be used to change the fundamental nature of 
programs and the way services are carried out? Can the 
authorizers and the legislative base of those programs be 
fundamentally shifted as a result of having measures available?
    Right now I would assert we are at a point in developing 
the measures where we have a good set of measures in many 
places, but they need to be tested against the legislative 
process of appropriation. We will need to get more and better 
involvement of people like your legislative body in Texas to 
ask the hard questions in the regular order of business.
    Mr. Armey and Mr. Horn have excellent oversight hearings, 
but in some ways it is oversight, not the regular order of 
business, that dominates the Congress. The appropriations 
process and the authorization process are much larger aspects 
of the Congress' life. We are beginning to see performance 
measures in the Higher Education Reauthorization Act last year. 
The use of performance measurement of that act was very 
appropriate, but we really don't see as much as we would like 
to see in the use by the appropriators in the regular order of 
business.
    Part of the argument is that the measures have not been 
good enough. We would ask them to tell us how they would like 
them to be better. We are finding them useful in our own OMB 
processes. We use them more in the OMB process each year. I 
think the measures are getting better. They could get still 
better and be built into the legislation at the front end as we 
do authorization so it is clear.
    One of the successes that we think that we have had is in 
the drug area. The chairman and Mr. Armey have been very 
complimentary to General McCaffrey's cross-cutting measures in 
the drug arena. We are on our third set of measures there, and 
they have great scrutiny in the authorizing process and in the 
appropriating process.
    Mr. Turner. In Texas I served on the Senate Finance 
Committee which did the biannual budgeting, and it seemed to me 
that in the process of developing our State budget, we went 
into a much greater analysis of the performance measures that 
had been developed than seems to occur here in the Congress 
through the appropriations process.
    I must say that I am not on the Appropriations Committee 
and haven't had the opportunity to really go through the 
process, but it seems to me that there could be an improvement 
in terms of linking appropriations decisions to the 
performance-based measures that you work so hard to develop.
    In fact, if the data is useful to you in a management 
sense, that is one thing, but at some point it has got to 
translate over into the appropriations process, and I really 
don't know if that is happening.
    I guess what you are telling us is that you think that we 
need to improve in terms of utilizing the measures that are 
being developed.
    Mr. DeSeve. OMB would never say that appropriators need to 
improve. Let me be very clear about that. We believe that there 
is the opportunity for you to use the measures. We are 
providing the opportunity, but we would never be so bold as to 
say the appropriators should improve the way they do business.
    Mr. Ink. But I would say that.
    Mr. Turner. You would.
    Mr. Ink. Yes, I would.
    Mr. Turner. I do not know if you could quantify where we 
are in terms of developing a sound performance-based budgeting 
system, but it would seem to me that we cannot be too far along 
the road, and that we have a long way to go before we really 
are able to realize the potential of the legislation that we 
passed and develop a performance-based budget at the Federal 
level.
    Is that a fair assessment?
    Mr. DeSeve. You and I are in complete agreement that there 
is a long way to go before performance-based budgeting is the 
order of the day. And agencies need to be not just reassured, 
but prodded by their own appropriators and authorizers in the 
process for them to sharpen their skills at measuring their 
performance.
    Even OMB, as powerful as we are deemed to be, pales in 
comparison to a phone call from an appropriations Chair. They 
certainly want to prepare the President's budget and get all 
the numbers right, but the real action is with the cardinals.
    Mr. Turner. You know, the President's budget laid out the 
adminstration's management priorities, but where are we in 
terms of having the resources for OMB to be able to implement 
those priorities?
    Mr. DeSeve. What we tried to do, and again, that is the set 
right there, the 24 items, what we do is we have a management 
system that tracks those 24 continuously. Most of the work to 
achieve them is either done in the agencies with our helping 
both from the RMO side as well as the statutory office side, 
helping them do it; or in the various offices, the Chief 
Financial Officer's office, the Chief Information Officer's 
office.
    When we talk, for example, about critical information 
infrastructure protection, the National Security Council will 
work through what's called the CIAO, the Critical 
Infrastructure Assurance Office, with the CIOs and the PMC to 
make sure that they have good practices. Under Presidential 
Decision Directive 63, there are plans developed which we 
participate in and the budget folks participate in, along with 
the NSC and each of the agencies.
    So when we have the resources, it is a collective, it is a 
network that comes together that uses various nodes to create 
an overall critical infrastructure network, just as we are 
doing in Y2K. It's very similar to the way we are doing Y2K. 
John Koskinen and staff is fewer than five people, but he 
relies on the chief information officers throughout government 
and then the sectors in the private sector--the electric 
utility sector, the communications sector, the financial 
sector--and he gets their involvement and engagement in helping 
him do the work.
    So we have enough resources to do the work because we find 
ways to use the resources of others and get them moving in the 
right direction. To me that is what management is about. There 
is a whole theory that the best manager is a lazy manager 
because he finds a way to get other people to do his job for 
him. I somewhat subscribe to that theory, although I have to be 
careful about calling myself lazy. I have to be real careful 
about that.
    Mr. Turner. Thank you very much.
    Mr. Horn. The gentlewoman from Illinois and the vice 
chairman, Mrs. Biggert.
    Mrs. Biggert. Thank you, Mr. Chairman.
    I think I am going to enjoy this committee and certainly 
learn a lot about history. I have already had a lot to absorb 
today, and I am afraid I do not know as much certainly as 
probably most of the members who have been on this committee 
about the issue, but I will try and ask some questions that 
will help me and hopefully shed some light on this.
    When you were talking about contractors, it does not show 
the number of contractors. That was a question that was asked. 
What are the contractors that are involved in this issue?
    Mr. Ink. All I was saying is that, in addition to the 
number of Federal employees shown on the chart, there are also 
many contractor people that are funded by the taxpayers. In 
some instances as we decrease Federal employment, we increase 
the number of contractor people to carry out that particular 
program. And all I was saying is that we see a part of the 
equation here in this chart, which is a very interesting one, 
but it does not reflect the total burden on the taxpayers.
    Mr. DeSeve. Let me refer you to a recent article in 
Government Executive Magazine called ``The True Size of 
Government.'' It was written by a gentleman named Paul Light, 
who is at the Brookings Institution, and what he found was 
that, in addition to this work force, there is a very large 
what he called shadow work force, which are the contractors. He 
found that both have been in decline during the administration. 
This number came down and the number of contractors came down 
at the same time. But there is a large work force out there 
that we support in the State and local arena as well with 
Federal dollars that he adds to that also.
    Mrs. Biggert. Do you have any idea how many Federal 
Government management laws there are?
    Mr. DeSeve. I actually have a book that was put together by 
this committee when Mr. Clinger was here that is about that 
thick, and it pertains to most of the management laws. It is 
about that thick. But we also know that there are titles on 
personnel management, other aspects of management, that are not 
in the core volume.
    Mr. Ink. And there are also, of course, many management 
implications in other laws that are not regarded as management 
laws per se.
    Mr. Seidman. They are often written in appropriations acts.
    Mr. DeSeve. Too often found in writing.
    Mrs. Biggert. I do not think I want to read all those.
    One of the CRS specialists, Ron Moe, has put them into five 
major categories: Institutional and regulatory management, 
financial management, budget and accounting, human resources 
and ethics management, procurement and real estate, real 
property management and intergovernmental relations management.
    How do you, as the Deputy Director for Management, make 
sure that the intent of these laws are being implemented?
    Mr. DeSeve. In most cases, when you look at the chart, 
there is a specific reference in the law to the 
responsibilities of something like the Office of Federal 
Financial Management [OFFM], or the Office of Federal 
Procurement Policy [OFPP], or the Office of Information and 
Regulatory Affairs. So the Director of those offices has 
responsibility, for example, for implementing Clinger-Cohen, 
which is the IT, that is in OIRA; or the Paperwork Reduction 
Act, which is in OIRA; or the Chief Financial Officers Act, or 
the Government National Reform Act, which is in OFFM.
    So very often the statute points to the responsibility that 
the individual entity has. Where it does not, we try to use 
again the statutory reference; for example, ethics and waste 
fraud and abuse. The inspectors general are the group as they 
come together in the President's Council on Integrity and 
Efficiency that are most worried about that. So where there 
isn't a specific reference to an office in OMB, we more broadly 
use the government officials who have that responsibility to 
assist us in monitoring and making sure that the statutes are 
carried out.
    Mrs. Biggert. What would be the difference of, like, a 
budget examiner and a management staff member?
    Mr. DeSeve. We have actually have gone away from the word 
``budget examiner'' at this point, although it continues to 
crop up. When you use a word long enough, it is hard to get 
away from it. There are now program analysts along the way.
    You would be hard put to find the difference between people 
in the statutory offices and their counterparts on the budget 
side. The primary difference is, on a day-to-day basis, a 
budget examiner will have organizational segments and budget 
accounts within departments and agencies that they are 
responsible for, whereas someone in one of the statutory 
offices will have a crosscutting function or OMB circular. An 
OMB circular will make your eyes glaze over.
    But let me use the example of David Childs. David is 
actually on the Budget Resources staff, although he does what 
would you call management work. David is our A-76 expert. This 
is a thing the committee has been concerned about, managed 
competition. The committee was very active in the Fair Act last 
year. So David will look across all the departments in a very 
narrow segment of management called managed competition. He 
will interact with his budget colleagues as they bring 
submissions forward under that and provide guidance for it. So 
he will be crosscutting on a fundamental management issue like 
managed competition, and the budget examiner will be dealing 
with the organizational issues.
    They will intersect at various points, so various 
management staffers dealing with A-21, A-110, all the oldies 
but goodies. A-110 is also very current in the news now because 
intellectual research and science has been challenged to 
provide additional data according to A-110. So the people doing 
A-110 work very closely with the people in the science and 
technology community to make sure that it gets done properly.
    Mrs. Biggert. Don't they have very different roles, then, 
and need different skills? If one is a systems--what did you 
call it?
    Mr. DeSeve. Well, you can call it systems, or it can be a 
variety of things. It is a fundamental narrow management area, 
like procurement. Let's use procurement. That is perhaps a 
better example. In the procurement arena, we will have a 
specialist who knows a lot about performance-based contracts.
    We had a circumstance the other day where in FAA, FAA has 
an initiative on performance-based contracts. The people in 
Michael Deich's area, which is one of the RMOs, dealing with 
this, had a very strong point of view. The Department had a 
very different point of view. They called their friends in 
OFPP, the contract area, and said, would you please come in and 
talk to us about how all this works elsewhere outside our 
narrow area. The OFPP people were able to come in and strongly 
support FAA and change the minds of the program examiners in 
that arena once they saw the broader perspective. So one cuts 
this way across the function, the other cuts this way through a 
department, and they meet as needed around these kinds of 
issues.
    Mrs. Biggert. Thank you.
    Mr. Horn. Let me pursue a few questions just for the record 
here.
    What changes would you suggest in the Office of Management 
draft? There is one error here that legislative counsel put in 
that I did not want where he calls it the Office of Federal 
Budget Management. Sorry, knock the Federal out. It is Office 
of Budget, which is what will be basically in the bill. But do 
you have some suggestions to make to us?
    Mr. DeSeve. The only other thing I noted, Mr. Chairman, was 
on page 3, I do not know what the Office of the Chief Financial 
Officer is, item No. 5 in section 1 on page 3.
    Mr. Horn. Who is the one in the current chart of OMB that 
works with the financial officers?
    Mr. DeSeve. The Office of Federal Financial Management, and 
that you have cited as No. 3.
    Mr. Horn. OK, so that is all subsumed under that then.
    Mr. DeSeve. That's correct. Technically, under the statute, 
the Deputy Director for Management is the Chief Financial 
Officer of the Federal Government.
    Mr. Horn. Right.
    Mr. DeSeve. However, the Controller, who is the head of the 
Office of Federal Financial Management, carries out that 
designation by cochairing the CFO council. There is no 
designation of the Office of the Chief Financial Officer.
    Mr. Horn. Should there be?
    Mr. DeSeve. I don't think so. The Controller in OFFM has 
that responsibility.
    Mr. Horn. You also have the chief statistician, don't you, 
in OMB?
    Mr. DeSeve. That's correct. That is Kathy Wallman, and she 
is in OIRA.
    Mr. Horn. But she is not the Director of OIRA, she is part 
of it?
    Mr. DeSeve. That's correct, because OIRA has multiple 
functions. I would say that OFFM has really a single function; 
that is, financial management. That is why the Comptroller also 
functions as the Chief Financial Officer. OIRA has regulations, 
statistics and information and technology subsumed.
    Mr. Horn. Personally I am not particularly interested in 
loading down an Office of Management with a lot of other 
functions, and I would just like your reading of the Office of 
Federal Procurement Policy. Is that appropriate for an Office 
of Management, and what are the reasons you would argue that it 
should stay with the Office of Budget?
    Mr. DeSeve. Having stipulated I am opposed to the Office of 
Management here, I am trying to perfect your draft rather than 
support it.
    Mr. Horn. We look on you as a professional.
    Mr. DeSeve. It is my disclaimer.
    No, I think that the three statutory offices on the right-
hand side of my chart, which you have in No.s 1, 2 and 3, are 
quite appropriate for that purpose.
    Mr. Horn. For management?
    Mr. DeSeve. Yes.
    Mr. Horn. And right now are you the primary official of OMB 
that relates to them?
    Mr. DeSeve. Yes. That again is by statute. If you look at 
the Chief Financial Officers Act, you will see that is the 
case. They meet with me, as my staff, weekly, and then we 
interact continuously on a daily basis.
    Mr. Horn. Now, what is there under your jurisdiction 
besides those statutory offices? Is it simply the crosscutting 
role of bringing the right people together at Department and 
OMB on management questions or what?
    Mr. DeSeve. Again, the other way we work----
    Mr. Horn. Because we also in this draft, the legislative 
counsel felt we had to have the Office of the Deputy Director 
for Managment as you merge it into a separate Office of 
Management.
    Mr. DeSeve. What would happen here is this office would 
staff itself with some of the support functions on the left-
hand side. There is no way you could draw any of those out and 
put them into the management office. Some portion of them would 
have to be made available, or they would have to be recreated.
    Mr. Horn. Well, as part of the Executive Office of the 
President, you have a separate Office of Administration, which 
is also statutory, in the White House that can handle the small 
amount, hopefully, of either personnel transactions or budget 
or anything else.
    Mr. DeSeve. Certainly. I'm not trying to dispute that at 
all.
    The real authority in the Deputy Director for Management is 
also resident in the way he relates across the government, so 
that leaving the authority of chairing the CFO Council, the CIO 
Council, the Executive order authority chairing the PMC, the 
statutory authority chairing the PCIE, as long as all of those 
authorities are in place in addition to oversight of the 
statutory offices, then you have the network that you need to 
do the job.
    Mr. Horn. Is there anything else that we ought to be 
thinking about?
    Mr. DeSeve. Well, I got a call from both Dave Barram, the 
head of GSA, and Janice LaChance, the head of OPM, who are both 
nervous about what this implied for them. So I certainly would 
not want to make them any more nervous by suggesting that.
    I think the only additional item you would want to take out 
is perhaps, when we set up the RMOs, the personnel aspect went 
into the health and personnel arena so that if you were going 
to have an Office of Management, you probably would take that 
out, the personnel issues out, and put them in the Office of 
Management. You would refer to personnel. I think that's the 
only thing that is not there at this point.
    Again, please, I continue in my opposition to this idea.
    Mr. Horn. No, no, I understand that. But obviously, 
management is management and that includes a lot of things such 
as personnel.
    Mr. DeSeve. That's correct.
    Mr. Horn. But here you have, obviously, five resource 
officers that are basically budget oriented and they, too, can 
make suggestions on personnel, I would think. That is up to the 
President really. I am willing to give the President 
flexibility because different Presidents have different 
approaches.
    President Eisenhower walked into the White House, he said, 
my heavens, the only thing around here was the Bureau of the 
Budget practically. They had no real congressional liaison 
staffing. President Truman had gotten two people over and put 
them in the Bureau of the Budget to at least read the 
Congressional Record for him every day and that was sort of the 
start of a liaison. And then President Eisenhower created a 
cabinet that actually he read the minutes and initialled them 
and then they had to report as to have they done it or haven't 
they.
    So if you had a situation like the GAO material, in the 
Eisenhower administration that would have been a cabinet brief 
that would have gone out to all members, they would have talked 
to their people at the department level, they would have come 
back, and he would have gone over this and said, folks, we are 
going to have a 3-month and a 6-month reporting period to see 
that you clean up your act in relation to what the General 
Accounting Office has followed.
    Now, I do not see that happening nowadays. Does it? Am I 
missing something?
    Mr. DeSeve. Yesterday I went through with the President's 
Management Council our tabulation of GAO's high-risk list and 
other management challenges. We do that periodically. I then 
looked at the priority management objectives as they link to 
those challenges. And we monitor many of the high-risk lists on 
a monthly basis.
    When we review either monthly or quarterly the status of 
various of these updates, we also talk about the high-risk 
elements. We get the audits of the agencies in now, which 
didn't exist in Eisenhower's day, and we and GAO actually go 
out and meet with the agencies about how they are doing on 
their audits. Many of the items on the high-risk list will come 
up at the point.
    So we use the PMC, the President's Management Council, as 
that vehicle, as well as the review of the agency's performance 
plans. President Clinton created the notion of the Chief 
Operating Officer in the Department, essentially the Deputy 
Secretary level, and we use them to deal with those issues as 
opposed to the more policy-oriented issues that we have.
    Mr. Horn. Usually it is the under secretary, now called 
deputy secretary, that runs the department while the secretary 
is out spreading the good word. And nobody disagrees with that. 
Let's face it, somebody has got to run the store.
    Mr. DeSeve. And that's the way we respond.
    Mr. Horn. Well, that was true of the Eisenhower 
administration also. The Secretary ran around the country 
explaining administration policy and the good deeds or bad 
deeds of Congress as the case may be.
    Now, do you have any other suggestions for us of such a 
fine constructive nature as you have provided this morning?
    Mr. DeSeve. No, sir. I think I am suggested out.
    Mr. Horn. Does anybody on the panel? Before we leave, we 
will take one question. Because we do not have a gem like you 
often here, Ed.
    Have you a question for the distinguished Deputy Director 
for Management?
    Mr. Jasper. No. I was going to make a suggestion as to what 
is missing from the bill.
    Mr. Seidman. His concept of management is exactly what we 
have. It is the broader concept. With reference to the councils 
and committees, in our experience when everybody is responsible 
for something, then nobody is.
    Now, these councils are useful but I never saw a council 
that really did the kind of creative thinking necessary to 
solve problems. They can advise but somebody has to provide the 
leadership for it to work.
    Mr. Horn. Mr. Ink, do you have any comment for Mr. DeSeve?
    Mr. Ink. Well, you know, I think the networking is useful 
so long as they are not really a decisionmaking group. But I 
want to add, it seems to me that you have developed some 
networking beyond what we used to have in Washington, but I do 
not see it in the field. We used to have a lot of networking in 
the field that dealt with the field offices and with State and 
local governments and interface between State and local 
governments that dealt with how government impacted on 
families, how it impacted on communities and so forth. I don't 
see that happening now.
    Mr. DeSeve. That is a good question. I think many of the 
departments have built their networks locally and not used the 
Nixonian principle of regional offices and field offices. We 
can argue about that probably at another time.
    We decided to deemphasize the regional office and emphasize 
where we could the local office and local contact as well as 
more electronic interaction along the way. And I think the jury 
is still out on how that is going to work, whether you need a 
regional presentation or not.
    We tried to delayer but let the local folks in our 
associations have greater access to headquarters rather than 
working always through the field. That's another structure we 
restructure from time to time. I am not as hard over on that 
one.
    Mr. Ink. I think that is worth looking at. And I would 
argue that it doesn't really depend on whether you have 
regional offices or don't have regional offices. The important 
concept is the communication out in the field and networking 
among the different agencies who have programs that are closely 
related all of which impact on local businesses, on local 
neighborhoods and so forth.
    Mr. DeSeve. I agree with that. I would like to find a 
better model for that.
    Mr. Seidman. When I came into the Bureau, there was an 
identifiable budget season and the examiners were able to spend 
about half the year actively out in their agencies. They were 
out in the field. They were to us a source of information when 
we were doing the management work because they were intimately 
involved.
    It is my understanding that that is not true anymore, and 
that they are pretty much tied to their desks.
    Mr. DeSeve. I would agree with that. What has happened is 
we have had what we call the perpetual budget season. In the 
year where we are then trying to get to this gap closing, 
especially around the Balanced Budget Act of 1997, it has been 
necessary to continuously redo programs and policies to try to 
fit them into an ever-narrowing box and it has been a 
tremendous strain on the budget folks. It is not that they 
don't want to get out in the field. It is just the demands.
    Congress sat last year, and this is not a criticism, sat 
last year through until October on budget issues and we were in 
the process of preparing the 2000 budget and finalizing the 
1999 budget. So there was no break during that time. And the 
hearings were all through the summer.
    Mr. Ink. I agree, it is not a criticism of those people, 
but as that began to develop some years ago, the Office of 
Executive Management then began arranging for people to spend 
most of their time out in the field because the budget 
examiners could no longer do that. This role could be restored 
under an Office of Management.
    Mr. Horn. Well, I agree with both of you on the field 
situation. In the days of modern communication, you do not need 
a regional office, you can get directly at people who are there 
where they could have access on a person-to-person level. And 
we might well hold a hearing on that. We have had a few field 
hearings on regional offices a couple years ago and then we got 
off on the year 2000 bit. But we will get back to that and I 
think you both are right. Thank you very much for spending the 
time. Sorry to hold you up.
    Gentlemen, now we can proceed with you. Do not read us your 
statement is all I ask. We are going to put about 10 minutes on 
this for each person and then Mr. Turner and I or anybody else 
who walks in on either side will ask you some questions. But we 
are interested in having you deal with the draft bill. And at 
this point we knock out ``Federal'' before ``Office of Budget'' 
on page 3. And as Mr. DeSeve suggested, we need to knock out 
the ``Office of Chief Financial Officer.''
    Mr. Jasper. Could I make one suggestion as to something 
that is clearly missing, and it addresses Mr. Turner's question 
in some way. It builds upon the comment you made about the 
ephemeral nature of Vice-Presidential responsibilities.
    Clearly, it will take a while to get this bill through the 
Congress, and if it should pass you would have an effective 
date that is sometime in the future so that there can be an 
orderly transition. I would respectfully suggest that a proper 
effective day for this bill would be early in 2001. So it would 
be the next administration that would have to envision the 
establishment of the Office of Management and appoint the first 
Director. Thus, it wouldn't be at odds with this 
administration's concern about the new office.
    In fact, the NPR, as Mr. Turner knows, borrowed some people 
from Texas. I think he mentioned that, about 10 as I recall. It 
had a staff in the NPR. One incarnation, of close to 250 
persons, more than I believe is the size of the management 
staff reporting to Mr. DeSeve. So there is a nucleus of 
management activity that has been going on outside of OMB. But 
there is no continuity to it because these people are all on 
loan from Federal agencies to the Vice President's NPR. And 
they will go back to their agencies and the NPR will disappear.
    If you had a permanent Office of Management, you could 
think of it as simply institutionalizing the NPR in the next 
administration.
    Mr. Horn. I agree with you. Well, I don't know if I agree 
about the expiration or the beginning point, but I certainly 
agree with you about the need for an institutional memory that 
the President can tap and not have it floating around in pieces 
where you cannot find it, and that is what is missing here and 
that is what got us into that.
    Mr. Seidman. I think one of the suggestions with respect to 
the bill is that the functions be transferred to the President, 
not to the office. This was true initially of the Bureau of the 
Budget and all of its functions were vested in the President. 
This then allows the President to allocate these functions. It 
avoids some of the problems where you have overlap, and I think 
it simplifies some of the problems of organization. Within the 
Executive Office of the President, I believe all the functions 
should be vested in the President so he has the flexibility to 
determine organization structure.
    Mr. Jasper. Of course, as Harold said, it is not only true 
of the Bureau of the Budget but also of OMB; the functions were 
transferred to the President rather than directly to the new 
office.
    Mr. Seidman. I would also comment, since we are having a 
kind of a dialog, there was one thing that was totally absent, 
I thought, from Mr. DeSeve's presentation. Except for the 
Appropriations Committee, he didn't talk about the Congress. I 
don't think you can do this job without congressional support. 
That was basically one of the conflicts in culture, I think, 
between the budget examiner and the management analyst.
    I spent a good deal of my time because of the President 
working with the staff of this committee and the Senate 
committee. You cannot deal with these problems unless you 
involve the Congress. They are interactive. You cannot 
separate. It is part of the process. We don't have separation 
of powers. We have separated institutions sharing power.
    And all of us here, I spent to the horror, frankly, of the 
budget analyst because you didn't present legislation, you 
didn't deal with Congress. That was patently contrary to the 
role of what they did in the budget, which was behind the 
scenes. I would testify from 20 to 30 times a year.
    When they did a self survey that said that within the 
budget side they were outside the mainstream, I said come back 
and look at my calendar. At that time I was supposedly outside 
the mainstream, I had testified 20 times. And as I think Dwight 
would confirm this, we looked at our role in the process of 
budget design, and I mentioned program design is an important 
part of how you do things, you would rise in providing advice 
when called upon to both the Congress and to the President.
    Mr. Horn. Let me ask on that point, because Mr. DeSeve 
mentioned it, there would have to be a duplication of services 
with Office of Management from Office of Budget and that the 
implication was that this would be a parallel system. I do not 
see that. I do not see why you cannot draw on the services 
already operated in the Office of Budget or the White House 
Office of Administration, which is a huge operation now 
compared to what it was 30 years ago. And I think the important 
thing there is to talk for a minute about the Office of 
Legislative Reference historically in the Bureau of the Budget.
    It seems to me, in coordinating on behalf of the President 
to see if the program is in accord with the program of the 
President, they can ask the Director of Management, just as 
they can every cabinet head, and piece it all together in one 
place.
    Mr. Seidman. That was our principal relationship, and 
Dwight will confirm, with the Office of Legislative Reference 
because they are not with the budget division.
    Mr. Ink. What happened was that handling of management 
legislation was in effect subcontracted out to the management 
staff. My Office of Executive Management, for example, actually 
handled the clearance of legislation that related to 
management.
    Also in our work with the Office of Legislative Reference, 
they then farmed out to us the management aspects of other 
legislation that was not basically management in nature. But on 
the management issues, we did the clearing, we did the 
negotiating with Congress on behalf of the President.
    I was the representative of the President in persuading the 
Congress to establish the Office of Management Budget in the 
first place. And by the way, some of the Members of Congress, 
such as Senator Bayh in the Senate, and Chet Holifield, who 
used to chair this committee, said I was wrong. They said 
management was going to be subordinated to the budget, and it 
never will be able to stand on its own. Of course, they were 
right and I was wrong.
    Mr. Horn. Confession is good for the soul.
    Mr. Jasper. As an alumnus of Legislative Reference, as well 
as management at the former Budget Bureau, I would like to 
comment on your question.
    One of the things that has happened with the politicization 
of senior positions in OMB, is there are now, of course, 
Program Associate Directors who are political appointees. The 
Legislative Reference policymaking function has virtually been 
decentralized to the PADs. So what used to be a Government-wide 
coherent view on what made good sense legislatively is now 
subordinated to the programmatic and agency-focused view of the 
Program Associate Directors. So that's a serious problem that 
has arisen since those positions were created. And while the 
functions of Legislative Reference have not diminished, the 
power or the influence of it has, because of this political 
reality.
    Mr. Ink. Related to all this is the fact that so many 
budget issues are heavily laden with political issues. They are 
fiercely fought battles from a partisan political nature. By 
setting up an Office of Management, you free it from those 
kinds of political overtones. So an Office of Management is in 
a far better position to represent the President in terms of 
dealing on a bipartisan basis with Congress.
    Mr. Horn. I remember I used to attend the appropriations 
committees that had general government and the OMB budget was 
in there and usually the House was filled, at least for the 
appearance of the Director of the Budget, because Members here 
had all sorts of beefs to unload on the poor Director when he 
came up on either agricultural policy or something that one of 
the budget examiners has done and they were not interested in 
the management side so much as they were interested in what 
have you done to my people. And whereas they could not take it 
out on the President usually, they took it out on the Budget 
Director.
    Mr. Ink. On a new Presidential initiative, I would always, 
and I think Harold did too, meet jointly with the chair and the 
ranking minority, regardless of which party was in power. I 
would meet with them jointly and go over the President's 
proposal informally before any piece of paper ever came up. I 
would carry back to the President any major suggestions that 
they had, suggestions which the President might or might not 
adopt. But at least there was an opportunity for congressional 
input on a bipartisan basis before the formal proposals came 
up. Every single proposal I've associated with reorganization 
plan passed. Harold passed a lot more than I did.
    Mr. Seidman. Well, that was the policy when I was there. 
And certainly under Presidents Johnson, Kennedy and Eisenhower 
we did not send up anything until we could discuss with 
committees and staff. It was quite conceivable that the Members 
of Congress had some constructive suggestions. We ought to pay 
attention to them. We weren't telling them.
    In fact, one of the things we tried it once to this 
committee and they said, ``Well, you have such a big committee, 
why don't you come up and meet the whole committee.'' I had to 
present to this committee our program for the year, and what we 
considered to be the principal management issues. You have to 
work together.
    Mr. Ink. But this bipartisan cooperative approach has been 
lost, you see. As the budget has been dominated, this 
dimension, which I think is terribly important in terms of the 
effective functioning of our government in terms of the 
legislative and executive branches working together, this has 
been lost.
    Mr. Horn. I think that is a good point.
    Mr. Seidman. One of the things when I came up here I think 
is illustrative of the problems, Congress has been more 
interested in some of the management issues than the executive 
branch. An example is the Office of Federal Procurement Policy. 
That was a branch in my office when I was Assistant Director 
dealing with the questions of procurement and procurement 
policy. When the Bureau was looking for a way of finding 
positions to create these new Associate Directors, what they 
call them, PADs, Program Assistant Directors, on the budget 
side, they dumped the procurement functions on the General 
Service Administration with no positions.
    It was the Congress that put the Office of Federal 
Procurement Policy back in OMB as an independent agency.
    Mr. Ink. That moved over when I went to GSA and the reason 
was the whole management field of responsibilities was going to 
be killed. And finally Mr. Ash decided, rather than killing 
management, he would put it in exile with Mr. Ink over in GSA. 
Fortunately, when I left GSA it came back to OMB.
    Mr. Seidman. The other thing I think we did which 
illustrates what wouldn't happen on the budget side and dealing 
at that time with the intergovernmental problems, which is 
again our systems, many programs are administered through State 
and local governments. We started surveys and I invited the 
Governors Conference, the Conference of Mayors, the Council of 
State Governments, to include people. We sent up joint teams 
out of my office, which had the people from the State and local 
governments on those teams. We had the inputs of both. Those 
would not have happened but on the budget side.
    Mr. Ink. You will find in the record joint letters from the 
heads of the big 7, the mayors, the Governors, the city 
managers, the counties, the State legislatures, complimenting 
this management group on the work that it did in streamlining 
the Federal Government and reducing the negative impact on 
State and local government and on communities. This is an 
example of reaching out to the public.
    What you hear today are some very impressive things with 
respect to the budget. What you do not hear is how government 
affects people and families, what is the burden of government 
on families and people and businesses. That is missing. And you 
find to some extent in the GAO report, the GAO report looked at 
how the 2000 program affected the budget process. It really did 
not look at how it affected the management issues we are 
talking about. And I would hope in the next review that GAO 
makes it can look at not only the budget but also look at the 
management role of OMB.
    Mr. Horn. Any other comments on this dialog?
    Mr. Seidman. Well, the one thing which I think is always 
important is it is not only what you do but how you do it. And 
many programs fail because they are not properly designed.
    The White House and the Congress both looked to us on the 
management side that then existed in the Bureau of the Budget 
for assistance in designing programs. This is another skill. If 
you don't do it right then, you run into problems. Frankly, 
there's sometimes conflicts between what makes administrative 
sense and what makes political sense, which is part of the 
problem.
    Mr. Horn. I think the important point which very few people 
on the Hill now realize is that over 30 and 40 years, we had a 
group of professionals in the old Bureau of the Budget that 
served every President in that period. They were not political 
appointees. These were professionals that worked with whatever 
administration was in power. And that is not true. I guess 
starting with Kennedy there was more politicizing down into the 
bowels of the Bureau of the Budget. And we ought to get a chart 
on that from Mr. Moe.
    Mr. Ink. This would have been invaluable to Mr. Clinton 
early in his administration when he was struggling with health 
care proposals. Having the kind of resources we are talking 
about here, having an Office of Management, they could have 
been a part of the health reform team. Looking at the 
workability of these proposals before they were surfaced would 
have been a tremendous help to Mr. Clinton. But he did not have 
that help. It no longer exists.
    Mr. Seidman. One of the things that Mr. DeSeve did mention, 
with which I agree, is that we have a number of developments 
where we should be looking at their implications to the 
organization and management of the government. Such as the 
technological revolution, the increasing reliance on third 
parties to deliver government services. These are the things 
that we ought to be looking at. I agree that we cannot go on 
the old principles of that of change. Who is doing the 
constructive creative thinking? This requires a different, a 
longer-term perspective.
    As I said, we have a cultural clash here. They are two 
different jobs between the management analyst and the budget 
analyst. One looks at long-term, one looks at the whole. But 
these things are going by the board. I have been raising this. 
We did this when I was there and we did what became the Bell 
report, which was done out of my office and was on contracting 
for research and development, you know, what are the 
implications of this.
    Mr. Ink. I recommend one change if I might.
    Mr. Horn. Sure.
    Mr. Ink. I would like to amend the bill so as to require 
that the appointees to these top positions be men and women 
with successful experience in managing large institutions, 
ideally both public and private sector. I think it is very 
important.
    Mr. Horn. You mean to be either the Director or the Deputy 
Director?
    Mr. Ink. Yes.
    Mr. Horn. How about if you are the head of a major 
consulting firm, like Arthur D. Little, that has had management 
analysis experience, as opposed to simply being the chief 
executive? I am not against that, believe me. As an ex-chief 
executive, I am all for somebody there. But some people have 
also had deep experience in looking at a whole series of 
different types of organizational entities, and should that 
count?
    Mr. Ink. I think it is fine to have it count, but I think 
they also should have had some direct management experience. 
Not just critiquing, not just teaching, but should have some 
direct management experience.
    Mr. Horn. I think back, and you can think back better than 
I do, often when a Republican was President they would put an 
accountant in charge of the Bureau of the Budget. When a 
Democrat was President, they would put an economist or perhaps 
a very skilled politician in that role.
    Mr. Ink. I think that is fine for the budget. But again, 
Mr. DeSeve has been talking all morning about the fine things 
done for improving the budget and I think some of these are 
excellent. I think some of these initiatives that have been 
taken, that Mr. DeSeve has been taking are extremely good in 
terms of improving the budget. What we are talking about today, 
however, are these broad fundamental management issues which 
have such an impact on people.
    Mr. Horn. Does the gentlewoman from Illinois have any 
questions on this? The gentleman from Texas?
    Mr. Turner. No questions.
    Mr. Horn. Well, we thank you. And if there are any last 
points you want to make, please make them.
    Mr. Seidman. We request that our statements be put in the 
record.
    Mr. Horn. It is automatic. On this committee, the minute 
you are sworn in, the statement goes in the record.
    Mr. Jasper. I would like to make one additional observation 
about the NPR as it relates to this whole question.
    The allegation that you ``can't separate management from 
budget'' has of course been demonstrated to be false because 
management has been vested primarily in the Vice President's 
office during this administration.
    Mr. DeSeve noted that his close working relationship with 
the Vice President allows him to essentially have his hand in, 
but he has his hand in something which is being executed 
someplace else. If you look at the reports of the NPR, you will 
find that they cover a wide range of management initiatives 
that ought to be institutionalized, as we discussed earlier.
    Furthermore, if you look at the functions of the DDM as 
established by law in the Chief Financial Officers Act, I count 
some 8 significant management responsibilities which were 
nowhere reflected in his 24 management priorities. So the 
result of this administration's focus on performance-based 
government, as important as that is, is that it has overlooked 
a whole bunch of other statutory responsibilities that the 
Congress explicitly vested in the DDM.
    I would submit that if there were a separate Office of 
Management, it would adhere more faithfully to the strictures 
of the CFO Act other than financial management--which is in a 
different section of the act.
    Mr. Ink. I have two quick comments.
    One, departments and agencies long ago learned that it was 
unwise to merge together the management and budget 
capabilities. You don't find that around the departments. I 
don't know why we are so slow to realize the same principle 
applies to the Executive Office of the President.
    Second, in establishing an Office of Management, while we 
feel very strongly that you not only don't need the leverage of 
the budget, and as a matter of fact in our experience that more 
often was a negative than a plus because it was a forceful 
action rather than a leadership action, nevertheless there are 
tools that would be required in an Office of Management in 
order for it to have stature, in order for it to be effective, 
and these are listed in my testimony.
    Mr. Jasper. I would like to add just one more point. I 
reflected this in my prepared statement. And, given that there 
are members present from both parties, I want to emphasize that 
this is not a political statement, but it is a historical 
statement.
    The unwisdom of using the Vice President for such a 
comprehensive management agenda is underscored by the fact that 
Vice Presidents rarely succeed Presidents. In the 20th century, 
only three sitting Vice Presidents have earned their party's 
nomination and two of them were defeated. So, statistically, if 
one thinks that what is in the Vice President's office is 
working well, the likelihood that it will continue in the 
future is slim, just from the standpoint of probabilities.
    Mr. Ink. Which is different from Mr. Gore providing 
political leadership, which we all feel has been a positive and 
very helpful role, but that is very different from the 
institutional capacity to make the system work.
    Mr. Horn. Point well-taken.
    We thank you gentlemen. You have had some great experience 
and wisdom on this question and we deeply appreciate it. Thank 
you for coming.
    We now move to the last panel. This will be Dr. Harold C. 
Relyea, Specialist, American National Goverment, Congressional 
Research Service; Dr. Virginia McMurtry, Specialist, American 
National Government, Congressional Research Service; Mr. J. 
Christopher Mihm, the Associate Director, Federal Management 
and Workforce Issues, U.S. General Accounting Office; Mr. Paul 
Posner, the Director of Budget Issues, Accounting and 
Information Management, U.S. General Accounting Office; and Dr. 
Ronald C. Moe, Specialist, Government Organization and 
Management, Congressional Research Service.
    You bring a lot of institutional memories to the table. If 
you will rise. Have we got everybody? Who are we missing?
    Ms. McMurtry. Harold Relyea is not going to be able to join 
us.
    [Witnesses sworn.]
    Mr. Horn. The clerk will note all four witness have been 
sworn.
    So why don't we start down the row with Dr. McMurtry and 
give us about a 10-minute summary at the most. Why don't we 
turn the clock on. We would like to have question period time. 
It means a lot to us. Your fine papers are already in the 
record.

STATEMENTS OF VIRGINIA McMURTRY, SPECIALIST, AMERICAN NATIONAL 
  GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE; J. CHRISTOPHER 
  MIHM, ASSOCIATE DIRECTOR, FEDERAL MANAGEMENT AND WORKFORCE 
ISSUES, U.S. GENERAL ACCOUNTING OFFICE; PAUL POSNER, DIRECTOR, 
  BUDGET ISSUES, ACCOUNTING AND INFORMATION MANAGEMENT, U.S. 
   GENERAL ACCOUNTING OFFICE; AND RONALD C. MOE, SPECIALIST, 
GOVERNMENT ORGANIZATION AND MANAGEMENT, CONGRESSIONAL RESEARCH 
                            SERVICE

    Ms. McMurtry. Mr. Chairman and members of the subcommittee, 
my name is Virginia McMurtry and I am a Specialist in American 
National Government with the Congressional Research Service of 
the Library of Congress.
    My colleague, Harold Relyea, also a CRS Specialist in 
American National Government, had planned to participate today 
with me in the presentation of our joint statement. 
Unfortunately, he is unable to be here now due to a home 
emergency. He has asked me to convey his regrets to the 
subcommittee, he really is sorry that he has to miss this 
session. We thank you for your invitation to appear here today 
for this hearing.
    In October 1997, Dr. Relyea and I began meeting with 
subcommittee staff concerning the requested review of internal 
reorganizations of the Bureau of the Budget and its successor, 
the Office of Management and Budget, with a view to the 
structuring of BOB/OMB capacity and capability to guide or 
assess aspects of management, both governmentwide or by 
sectors, and in the Federal executive departments and agencies. 
The timeframe set for the review was 1921-1993; that is, 
beginning with the creation of the BOB and concluding with OMB 
structure on the eve of the arrival of the Clinton 
administration and OMB 2000. The study was transmitted to the 
subcommittee on May 7th, and we subsequently appeared before 
you to discuss it at a hearing last spring on May 12, 1998.
    Last year we offered six observations on the basis of that 
study, and today I want to reiterate those findings and also 
provide some additional comments.
    First, the BOB/OMB has experienced an ever-changing 
structuring of management responsibilities, reconfiguration 
seeming to occur more and more frequently with the progression 
of years after 1950. Over the years, the internal structure has 
tended to alternate between two patterns, a bifurcated 
structure with separate sides for management and budget staff, 
and a programmatic structure with budget examiners and 
management staff integrated in various functional units. The 
current structure of OMB of course reflects this latter 
approach. In 1994, the OMB 2000 reorganization merged the old 
budget examining divisions and most management personnel and 
units into the new resource management offices.
    Second, the BOB/OMB has become responsible for various 
kinds of management: Administrative, intergovernmental, 
personnel utilization, procurement, paperwork/information, 
statistical, regulatory, and financial, among others, which 
appear generally to have increased with the progression of 
years after 1960. The BOB/OMB has met these responsibilities in 
various ways; for example, through analyses and evaluations, 
coordination, and clearance with shifting resources.
    While the accumulation and detailing of these diverse 
responsibilities was intended to strengthen BOB/OMB's 
management role, this legacy is likely to complicate any 
efforts to separate entirely the management duties from budget 
concerns in certain areas, such as intergovernmental and 
financial management.
    Third, especially since the early 1960's, when PPBS, or the 
planning-programming-budgeting system, was introduced 
throughout the executive branch, the BOB/OMB has been required 
by successive administrations to adopt and adapt to a variety 
of changing arrangements for planning and budgeting. While 
these frameworks generally shared an orientation toward 
objectives and outcomes, each system entailed some 
modifications of BOB/OMB management capacity, sometimes for 
brief periods of only a few years.
    Now perhaps a more stabilized planning and budgeting 
situation based upon a statutory mandate is evolving pursuant 
to the Government Performance and Results Act of 1993. The 
first governmentwide performance plan as required by that 
statute was submitted as a part of the President's fiscal year 
1999 budget. Then the second effort of a governmentwide 
performance plan was of course included just released earlier 
this week in the fiscal year 2000 budget submission.
    Fourth, considering the management-budget relationship 
within the BOB/OMB, it appears that the budget authority has 
largely been used or threatened to accomplish or seriously 
pursue management objectives but not vice versa.
    Fifth, since the reconstitution of the BOB in 1970, the 
resulting OMB has during the succeeding years experienced an 
expansion of non-career middle managers and, consequently, a 
more complex and extended hierarchy between the more senior 
leaders of OMB and the first line staff. Moreover, specialized 
entities, such as the Office of Federal Procurement Policy, the 
Office of Information and Regulatory Affairs, and the Office of 
Federal Financial Management have been grafted onto the OMB.
    Sixth, and finally, recent developments may engender a 
reexamination and reconsideration of OMB's management role and 
the most suitable structure for fulfilling the management 
responsibilities now vested in OMB. Experience with 
implementing the Government Performance and Results Act would 
be relevant to such a reassessment.
    In addition, the achievement of a balanced budget in fiscal 
year 1998 for the first time in many years and the projection 
of continuing revenue surpluses might reduce OMB's 
preoccupation with budget concerns prompted by decades of 
Federal budget deficits. CRS, of course, takes no position on 
any particular option Congress may elect to pursue in these 
regards.
    Thank you. I would be happy to respond to questions later.
    [The prepared statement of Ms. McMurtry follows:]
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    Mr. Horn. Well, we thank you for that very thorough report. 
And not only will your testimony but the study that was 
personified by your statement will be put in the record at this 
point.
    We will then go now, I think, to the next specialist from 
the Congressional Research Service. That is Mr. Moe, who has 
been very helpful to the committee over the years; and then we 
will go to the General Accounting Office.
    Mr. Moe.
    Mr. Moe. Thank you, Mr. Chairman, for inviting me to 
testify before your committee on the proposed Office of 
Management Act of 1999. It is appropriate at the outset to note 
that the opinions expressed here are my own and do not express 
those of my employer, the Congressional Research Service.
    In my extended written statement for the record, I have 
attempted to trace the intellectual and political history of 
the debate over whether or not the two subject fields, budget 
and management, are best served by being in one agency or 
separated into two agencies. If I understand correctly the view 
of the subcommittee and its chairman, at any rate, this debate 
has been largely settled in favor of providing the President 
with two equal, separate offices, one for budget and one for 
management. You requested the witnesses to come forth with some 
ideas on what the Office of Management would do in the future.
    However, as I listened to the overall discussion this 
morning, I have thrown out my prepared remarks and I want to go 
on some shaky ground but I think some things need to be fully 
understood in this discussion.
    There is a fundamental debate that is going on at all 
levels of government, but particularly in the Federal 
Government, and it is a debate over the premises of management. 
What is the essential character of management in the 
governmental sector?
    One school, the school supported by OMB and Vice President 
Gore and a host of professors argues, in essence, that business 
and government are essentially alike, both being subject to the 
same behavioral modes. They should use the same titles, that's 
why they are making up titles like CEO. If you have a program 
that works at General Electric, the odds of it working in the 
Federal Government are very high. So that is one school that 
argues on universality of administrative principles.
    The opposing school argues that business and government are 
essentially unalike, distinctive in their norms, with 
surprising little carryover between the sectors. The first 
school argues, that is universality of principles. Government, 
they say, should be run like General Electric. And that's why 
you never hear them discuss Congress.
    Congress, to the new entrepreneurial managers, is a 
nuisance. It is part of the old way, and remember the word 
``old'' in their lexicon is bad; if you give an example that is 
over 3 years old, they will inform you that you are 
representing the old way of functioning.
    Now, the second school argues that, in effect, public law 
is the basis of our management system and that all behavioral 
principles have to be within the construct of the law. The laws 
are passed by Congress. Congress is the board of directors. It 
is Congress that determines the mission of an agency. It is 
Congress that determines its funding, its personnel systems 
across the board. It is Congress that does this.
    Now in the new system, in effect, that they are promoting, 
they want the managerial class to make the missions. That's why 
a lot of this GPRA stuff has to be taken with a grain of salt. 
Performance is not the highest objective in the governmental 
sector; accountability is. In most instances, accountability 
and performance work together very well. But when there is a 
direct challenge, as was the case with the IRS, the IRS was off 
the boards. They were the model agency in terms of collecting 
money and able to measure it. They forgot one thing however, 
that's not the agency's highest job.
    Their highest job is due process and the protection of the 
citizens' interests, and you all came back and forced them to 
go out to the performance system. And I promise that I won't 
bother you with performance and quotas any more.
    So what we have here is a fundamental culture clash. This 
is why the panel here we are talking past each other.
    Let me just mention four small points. One problem facing 
this government is proliferation of general management laws. 
The study that you asked for that we provided in 1997 is being 
updated in 1999, and it goes through the various management 
laws. There is no one overlooking them all. In fact, until this 
came out, if you asked OMB what they were, they would be unable 
to tell you.
    Second, we are facing a situation where the disaggregation 
of government is increasing rapidly. Agencies proliferate or 
are spun off from departments. The civil service systems 
proliferate. It is my understanding that less than half of the 
civil servants remain in the general schedule as each agency 
manipulates its subcommittee on the Hill to have its own 
personnel system and preferably its own special pay system.
    And what you have created with that chart that showed a 
decrease in the permanent employment is totally misleading. 
They decreased the middle managers by that amount, kept the 
same number of political appointees, and we have upgrade not 
only of personnel in the contractor sector but authorities 
going to them.
    I could give you my favorite example of Ginnie Mae. What we 
have here is a situation where the government is 
disintegrating.
    Third, we have an amateur government. We are a government 
run by political executives selected often because they were 
successful on the outside, frequently with no experience in the 
government. They come in for short periods, averaging 18 
months; they leave; and they go out, typically, to a lobbying 
firm here on K Street.
    You will have a hard time even finding any Federal 
employees in the Department of Energy because there is a 10 to 
1 ratio of contractors to employees in that Department. We have 
no comprehensive plan today to attract, train, deploy a 
professional cadre of career civil servants, period. It is 
unbelievable.
    I don't suppose that any other country could function this 
way. I talk to New Zealanders, when they come over here, and 
they see very little of what we have done here could be done 
there, and we don't know if we would ever do it again. They 
have no political appointees in New Zealand. They don't try to 
run their government with amateurs.
    Entrepreneurial versus constitutional models of management. 
That is the issue. The entrepreneurial model is reflected in 
GPRA, and all of the literature that you see that is, for the 
most part, from Harvard Business School. And you will note that 
Congress is rarely, if ever, mentioned.
    The other side are the constitutionalists who say Congress 
is the key. In an entrepreneurial model, the budget is supreme. 
It is the tool of control.
    The constitutionalists argue that the purpose of management 
is to build the capacity of the government to perform the 
people's business.
    Fifth and final, really what we hear that is passing for 
the latest management terms is process triumphant over 
substance. Performance is some sort of God put out there in 
which people argue over how best we can get there. If there is 
one thing that we have learned in this century, it is that the 
life expectancy of the latest reform is getting shorter. Five 
years from now we will be discussing a whole set of new words 
and this sort of thing.
    That doesn't mean that having a Government Performance 
Results Act is a mistake. What it means is that you should 
recognize that it handles only the mid part of management. It 
has not gone up to the level of management that these gentlemen 
were talking about earlier. It is a substitution, a process 
over substance. So what we have is management by ad hoc groups.
    The President's Management Council is not created by law. 
It has, according to Mr. Koskinen, and I heard him personally 
say that we have a 50 percent turnover at one of our rare 
meetings. Therefore, they are caught in a bind. Do they bring 
the last group up to speed or do they go on with half the group 
not knowing what is going on?
    What they are telling you is that the institutional 
capacity of the President to supervise the Federal Government 
hardly exists. I perceive that the top management of the 
government of the United States is not getting better, but is 
getting worse, and that it is the reality. Since the executive 
branch isn't prepared to do anything about it, it is forcing 
Congress.
    One final political comment, if I may. Much of this debate 
is really for an audience of one. That is, to really take on 
management, we have to have a President who wants to think 
about it once in awhile. It never will be his major concern, 
but he has to have an institutional support, not friends and 
neighbors, not part-timers from other departments, but 
institutional support in order for real management corrections 
to be made.
    This being the case, it is very important that whoever is 
running for Congress--for the Presidency, conservative or 
liberal, to be aware of this debate at some level. Because if a 
President comes in and says, ``this is important, I want to run 
the system right.'' Such a President would be the most likely 
to request Congress for this authority and during the honeymoon 
period they would be likely to get it. And so Congress ought to 
be thinking what do we want in this office and what don't we 
want.
    I take a more comprehensive view on this. Nonetheless, it 
is a good reason for you to hold your hearings because your 
hearings provide the record on this issue over the last 4 
years. It is an issue that the next President may decide is 
important, and that is what I think we are doing here.
    Thank you.
    Mr. Horn. We thank you. We always enjoy having contrarians 
on our panel, and you do a great job at that and we thank you 
very much. I know all of the fine documents that you have, we 
will put the general management laws, the selective compendium 
also in as an appendix if the budget isn't completely broken on 
the Committee on Government Reform.
    [The prepared statement of Mr. Moe follows:]
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    Mr. Horn. Let us move now to our friends from the General 
Accounting Office who do very thorough work, just as the 
Congressional Research Service does, and that is Mr. J. 
Christopher Mihm, the Associate Director, Federal Management 
and Workforce Issues.
    Mr. Mihm. Thank you, Mr. Chairman and Mr. Turner. It is an 
honor to appear before you today. My colleague, Paul Posner, 
and I are pleased to be here to discuss OMB's efforts to lead 
the management of the executive branch.
    Our colleagues, Susan Ragland, Denise Fantone, and Lauren 
Alpert were instrumental in helping us prepare our statement.
    As you mentioned, Mr. Chairman, last month we issued a new 
series of reports--and you held up just two of them, but I must 
hold up the whole group--entitled, ``Performance and 
Accountability Series: Major Management Challenges and Program 
Risks.'' We issued separate reports on 20 agencies as well as 
reports providing a governmentwide perspective and an update on 
our high risk series.
    Collectively, the reports show that long-standing 
performance and management challenges continue to hinder the 
Federal Government's efforts to achieve results. The report 
series highlights numerous opportunities for agencies to make 
fundamental improvements in management, performance and 
accountability.
    At the same time, the reports also underscored the pivotal 
role that OMB must play in guiding and overseeing agencies' 
efforts to fix their shortcomings and implement needed changes.
    As you observed in your opening statement, Mr. Chairman, 
and as the discussion with the first panel clearly illustrated, 
OMB's perennial challenge is to carry out its management 
leadership responsibilities in such a way that leverages 
opportunities of the budget process, while at the same time 
ensuring that management concerns receive appropriate attention 
in an environment driven by budget and policy decisions and the 
tight timeframes that those efforts require.
    Our prepared statement detailed OMB's efforts in 11 
separate management issues that have been of special concern to 
this committee and the focus of much of our work. 
Implementation of the Results Act, financial management, the 
year 2000 problem, and implementation of the OMB Circular A-76 
are among the issues that we discuss. We show that, overall, 
OMB has made uneven progress in fulfilling these important 
management responsibilities.
    In the interest of brevity, rather than go through each of 
these issues, this morning we will offer observations in two 
areas that are of particular importance to improving the 
management of the Federal Government.
    First, I will discuss the factors that are necessary for 
successful management improvement. Second, Mr. Posner will 
discuss our prior work on OMB's organization and how the 
Governmentwide Performance Plan prepared under the Results Act 
can be used to articulate a Federal management improvement 
agenda.
    Turning to our first point, the experiences to date suggest 
that certain factors are associated with the successful 
implementation of management initiatives. Building and 
sustaining these factors is important regardless of the 
specific organizational arrangements used to implement 
management initiatives. I will touch on each of these factors 
in turn.
    First, top management support and commitment both within 
OMB and the White House is often critical to providing a focus 
on governmentwide management issues throughout the budget 
process and within agencies. The commitment to achieving a 
clean financial audit opinion that Mr. DeSeve referred to as 
one of the priority management initiatives provides a case in 
point. However, top leadership's focus can change over time, 
which can undermine the follow-through needed to move an 
initiative from policy development to successful 
implementation.
    Mr. Chairman, the point that you made in the first panel 
about the importance of institutional memory, given the 
turnover, is relevant here. This suggests that the top 
leadership support is a necessary but not sufficient factor in 
sustaining management improvements.
    Second, a strong linkage with the budget formulation 
process can be a key factor in gaining serious attention for 
management initiatives throughout government. As you were 
suggesting, Mr. Turner, many of the management policies require 
budgetary resources for their effective implementation, things 
like addressing the Y2K problem or improving human resource 
improvement initiatives as well.
    Furthermore, initiatives such as the Results Act seek to 
improve decisionmaking by explicitly calling for performance 
plans to be integrated within agnecies' budget requests. The 
Results Act is intended to address exactly the type of issues 
that you were raising, Mr. Turner. How do we integrate 
performance planing within agencies as part of the resource 
allocation system? We have found that previous management 
reforms, such as the planning-programming-budgeting-system 
[PPBS], which I know that the chairman has been kind enough to 
instruct us all about, and management by objectives, suffered 
when they were not integrated with routine budget presentations 
and account structures.
    In short, management initiatives need to be reflected in 
and supported by the budget but, I would stress, no single 
organizational arrangement by itself guarantees this will 
happen.
    Third, effective collaboration with the agencies, through 
such approaches as task forces and interagency councils which 
Mr. DeSeve referred as network management, has emerged as an 
important central leadership strategy in developing policies 
that are sensitive to implementation concerns and gaining 
consensus and consistent follow-through within the executive 
branch.
    Finally, support from Congress has proved to be critical in 
sustaining interest in management initiatives over time. 
Congress has served as an institutional champion for many of 
these initiatives, providing a consistent focus for oversight 
and reinforcement of important policies. This subcommittee's 
focus on the Y2K issue has, without question, had a major 
influence in shedding the executive branch's initial optimism 
about the nature and scope of the problem and the executive 
branch's adopting a more aggressive posture to addressing the 
crisis.
    In conclusion, these four factors--top leadership, 
commitment, linkages to the budget process, collaboration with 
agencies, and congressional interest and oversight seem to be 
critical to governmentwide improvement efforts no matter what 
specific organizational arrangement is used.
    With that, I conclude my statement.
    [The prepared statement of Mr. Mihm follows:]
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    Mr. Horn. Mr. Paul Posner is Director of Budget Issues, 
Accounting and Information Management, U.S. General Accounting 
Office. This is a joint statement, and we are delighted to have 
you here since your division has also done some terrific work 
for us.
    Mr. Posner. Thank you, Mr. Chairman. It is a pleasure to be 
here.
    I want to reflect for a few minutes on the work that GAO 
has done.
    In 1989, we did a study of the management of OMB, of their 
effectiveness in carrying out their management leadership 
functions, and we returned to that subject in I think it was 
1995-1996 with the study of OMB 2000. We looked at the first 
year and we assessed how well management issues fared in that 
new, integrated process over there, and we have been kind of 
addressing this very question that you have been raising. And I 
will tell you that, as someone said at a NAPA lunch that I 
attended the other day, we are firmly on the fence. It is not 
particularly comfortable, but we arrive at that uncomfortable 
position honestly.
    Mr. Horn. You know what Theodore Roosevelt called people on 
the fence. Those were the mugwumps. Mug on one side and the 
wump on the other.
    If you don't mind, with those fine studies you mentioned in 
1989 and I think 1996, we would like to have them for the 
record. And Mr. Turner would like a set, and I would like a 
set. And also the staff directors on both sides might like one.
    [Note.--The May 1989 GAO report entitled, ``Managing the 
Government--Revised Approach Could Improve OMB's 
Effectiveness,'' GAO/GGD-89-65 is retained in subcommittee 
files.]
    Mr. Posner. Let me say that we do view the idea of 
integrating management into the budget and vice versa as being 
mutually reinforcing. We have talked to a number of people here 
particularly about the benefit that management gets from being 
associated with the clout of the budget, the fact that the 
budget process is the single signaling device respected by 
management, by managers. And, after all, it is agency managers 
that are the linchpin to improving the way that these programs 
are carried out; and getting their attention is obviously 
critical.
    I will note over the years when we have been studying this 
that even when management has been encompassed at OMB, the 
linkage is problematic and difficult. We looked at 1989, OMB 
had a separate division; and we found that frequently those 
people were often on their own pursuing their own agendas and 
the budget examiners were pursuing theirs and the twain never 
met, so to speak. What we called for there was a closer 
integration so that the budget examiners would take some 
ownership of these management issues, because after that is 
what we felt was important to reinforce these important 
policies.
    But another thing about the integration that is also 
important--budgeting can gain from the integration as well. In 
other words, good budgeting should involve understanding the 
financial management of agencies and the financial position, 
financial statement. Good budgeting should involve a clear 
understanding of the performance measures and indicators that 
agencies are using and their track record.
    Good budgeting, for example, should involve knowing the 
quality of the data that you are getting about the spending 
that agencies are doing. For the first time this year, we are 
subjecting that data to the discipline of the financial audit 
in the 1998 statements, and we are going to get some useful 
information about whether agencies can even keep track of their 
unobligated and obligated balances, essential things to knowing 
what money we have spent, never been audited before.
    I think there is a tremendous spin-off benefit from having 
these management initiatives, from having budget people take 
ownership of these things. I think it improves their ability to 
do budget analysis in some sense.
    Notwithstanding this, Chris has pointed to our work that 
Mr. Turner talked about on performance budgeting where, you 
know, just understanding that linkage has become a very 
difficult question but essential, as we found looking at PPB 
and ZBB and all of the other acronyms over the years. The key 
feature that prompted the volatility and the short lives of 
those initiatives was the fact that they were not firmly linked 
into the budget process that people paid attention to, and we 
are concerned that GPRA may go the same way if appropriators do 
not pay attention to it.
    Having said all of this, the reason why I think it is such 
a difficult issue is because when you place management 
initiation in the budget, as you have heard and to use someone 
else's words, the urgent tends to drive out the important.
    The real question that we raised on OMB 2000, while we 
found some very positive results when Alice Rivlin was there 
and a lot of attention was being paid to these things, we 
raised the question, how sustainable is this? Will an 
initiative that primarily devolves responsibility to these 
things be sustainable over the long term without an 
institutional gadfly or nudges, as Ed DeSeve called them, to 
keep the focus on these things? And that, frankly, is a serious 
question and one that is worthy of much of our time and 
attention.
    I think what has happened in this period as well is that, 
in the absence of a defined focus on management, we have also 
seen what I will call a differentiation of management 
leadership responsibilities. We have seen the President appoint 
an Assistant to the President for Y2K. We have seen the Vice 
President take responsibility. We have seen responsibility spun 
to agency counsels, and we have seen GAO taking some 
responsibilities and issuing executive guides on a variety of 
things. Perhaps that is healthy, but perhaps also it reflects a 
lack of a sustained focus.
    One of the devices, and I will conclude with this, that has 
been developed I think which could be a management leadership 
tool, are the performance plans, particularly the 
governmentwide plan, that OMB has just issued. This plan 
provides a vehicle to address the fragmentation that we point 
to time and time again. So often when we look at things from an 
outcome perspective we have so many programs that are 
considered in isolation, tools that we use to address the same 
problem, whether it is housing or agricultural and through tax 
expenditures and loans, a variety of grant and spending 
programs and the like that are never really thought about in a 
fabric together.
    And what we hope--and, again, we know OMB is perhaps the 
only institutional focus that can do this--is that this plan 
could become a vehicle to bring some attention to these cross-
cutting issues that Mr. Seidman referred to as an essential 
part of management leadership. So we are looking for those 
plans to become that vehicle possibly in the future.
    That concludes my statement.
    Mr. Horn. Any other comments that any member would like to 
make reacting against other panelists' testimony? I regard you 
experts as very expert people. If you didn't like what somebody 
said or if you did like what they said, do you want to 
reinforce it?
    Dr. McMurtry, any comments on your colleagues and their 
ideas?
    Ms. McMurtry. I guess what strikes me, having heard the 
various presentations this morning on the former panel as well 
as this one, I am not sure that we are going to come up with a 
perfect arrangement.
    I think we all agree that management functions are very 
important. They have been packaged various ways over the years 
within BOB and then OMB. Is creating a separate office 
necessarily going to be a cure-all? I don't think so.
    Would having some kind of a statutory office within OMB be 
an improvement? Perhaps. If we leave things as they are, with 
the impact of developments such as the budget coming into 
balance and continuing implementation of the Government 
Performance and Results Act, perhaps if no organizational 
changes occur, things will still improve.
    I guess I am somewhat optimistic at the place we are. I 
didn't expect to be at this place where we had a surplus in 
1999. So from someone who has followed the budget more closely 
than the management side, although I have been interested in 
OMB as an institution, I think it is a fairly optimistic time.
    Mr. Horn. OMB did not get us to a budget with no deficit.
    Ms. McMurtry. This is true.
    Mr. Horn. Regardless of who is in power.
    Ms. McMurtry. I didn't mean to imply otherwise. I was just 
notifying the circumstances now.
    Mr. Horn. How about the General Accounting Office? Any 
comments that you want to make on CRS?
    Mr. Posner. I will defer.
    Mr. Horn. Dr. Moe is not shy. Go ahead.
    Mr. Moe. Well, this is an important issue, and a lot of us 
have institutional constraints. You have the administration's 
view from Mr. DeSeve, who presented it very well.
    I would like to read one little part of the prepared 
remarks I didn't read, and I hope that this raises some 
interesting questions.
    As Paul Light and others have argued, much of government is 
``hollow.'' In an unenlightened attempt to keep the statistics 
of government employment artificially low and to equate this 
statistic with the size of government, thereby meaning if you 
decrease the number of Federal employees, you are decreasing 
the size of government. A high price has been paid for this 
strategy by Congress, the President, the agencies and the 
public.
    At the same time that Federal employees have declined both 
absolutely and relative as a percentage of the work force, the 
work is increasingly assigned to third parties, principally 
private firms with very different perspectives and interests 
than those of the Federal Government.
    Paul Light has recently estimated that 17 million persons 
versus 2 plus million in direct civil employment are part of 
this third party orbit of government. Let's look at one 
instance of the consequences of this current practice of 
equating Federal employment with the size of government.
    The Federal National Mortgage Corporation, better known as 
Fannie Mae, is a privately owned, government-sponsored 
enterprise. Its portfolio is about $1 trillion in mortgage-
backed securities. The president of Fannie Mae received 
approximately $7 million in compensation in 1996. All of the 
other executive employees are paid similarly high salaries.
    Performing a similar function with a half a trillion dollar 
portfolio is the Government National Mortgage Association known 
as Ginnie Mae. Fannie Mae, to perform its functions, has 3,400 
employees. The salary of the president of Fannie Mae is 
considerably larger than the compensation for all Ginnie Mae 
employees put together. Ginnie Mae runs with only 53 employees.
    Why is the Federal Government so much more efficient than 
the private sector? I mean, any time you want to see something 
luxurious, go to the Fannie Mae headquarters. And yet what we 
have is 53 employees running Ginnie Mae, and they want to 
decrease it. It was 72 a few years ago, and I phoned up and 
found that they dropped employment to 53.
    So how is it that we have a half a trillion dollars being 
watched over by so few people? And the answer is that they have 
essentially turned over the management of this function to some 
private firms.
    And if you read the GAO report on Ginnie Mae written in 
1993, there are some very disturbing statistics in there and 
very disturbing quotes. Because, in point of fact, even the 
contractors themselves say we are not being properly 
supervised. So what is the hidden cost when you use employment 
numbers as a measure of size? We are paying a tremendous cost 
in moral hazard as a people.
    This is similar to when 2,500 savings and loans were going 
under. We came up and asked for 43 employees at the Federal 
Savings & Loan Insurance Corporation so they could begin to 
look at these 2,500 insolvent savings and loans. OMB said, no, 
you can't have them because that would disturb our policies of 
cutting back on employees. I have heard people estimate that 
ended up costing us $20 billion to $40 billion because we did 
not have the capacity to go into governmentwide management 
issues.
    Ginnie Mae is a classic case here where we are 
understaffed. They don't have their own legal staff. They 
contract out 4,000 hours of legal work. I don't care how good 
these law firms are, the fact is that, within Ginnie Mae, they 
have very little capability to judge the quality of what they 
are getting back on their legal work because they have no law 
office.
    So there is often a hidden cost to what I view as 
relatively sim-

plistic proposals. What I just said to you does not appear in 
any

of the process programs. You can read GPRA forever and building

management capacity will never come up because to them it is a

numerically driven concept without substance.
    So I find it is not all bad, but I am telling you that it 
is not the complete story and that is presumably why people 
concluded that you will never have the complete story, never, 
as long as management is subordinate to budget.
    Mr. Horn. Mr. Posner.
    Mr. Posner. I want to augment what Ron just said. Because I 
think the more our programs involve third parties, State and 
local governments and the private sector and really doing most 
of what we find important in government, the more management 
makes a difference, but also the more it makes a difference how 
we design these programs. How do we design these incentives to 
encourage or avoid things like moral hazards?
    You look at a program like the student loan program. We had 
a default rate exceeding 20 percent. Was it because we had bad 
management at the Department of Education? It is unclear, but 
we know that we were giving the banks absolutely no interest in 
screening people or collecting these moneys. We had a situation 
where we were encouraging all sorts of, frankly, fly-by-night 
providers to enter the program and serve lower income people 
with ineffective training that gave clients little prospect of 
paying back the loans.
    It was--retrospectively, when you look at how we designed 
it, we couldn't have helped but had an over 20 percent default 
rate. And Congress took that on with Department of Education's 
insight, and managers stepped up and worked in the 
implementation phase, and they redesigned it, and the default 
rate has come down significantly.
    That is a parable of how so many of our programs are really 
run and why these performance problems reflect management, but 
they reflect a lot more than just management.
    Mr. Horn. That is a good point. You have raised a couple of 
interesting issues, and certainly the Congress is partly at 
fault on the thrift situation, and the Congress is also partly 
at fault on the student rate default. Because when they put 
proprietary schools into that mix, that is when the nonpayment 
went up substantially.
    I remember once trying to make a telephone call. I walked 
across the floor and Representative Waters was taking on the 
whole Committee on Education. This was in the Democratic-
controlled Congress of 1993 and 1994. I listened to her; and I 
said, she is right. And so I waded in on her side. And my 
friend Bill Ford, who I had worked with for 20 years in higher 
education when he headed post-secondary ed, he and the 
committee, both parties, they beat us solid because, 
apparently, we had had a lot of interest of the proprietary 
schools in Members of Congress of both parties, and that is 
part of the problem.
    As far as Fannie Mae, I have been wanting to hold a hearing 
on that for a long time. There was a leak once out of my 
committee on just an innocent five words in a report that got 
to them and suddenly seven of the highest paid lobbyists in 
Washington show up on Capitol Hill thinking, ``Gee, they might 
be looking at us in a future year.'' We will be. We will get to 
them. It is amazing, and you have made some very interesting 
points.
    I now yield all the time that he wishes to consume to the 
gentleman from Texas, Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    This has been an interesting discussion; and I was 
certainly interested in your comments Dr. Moe. You don't 
hesitate to state your position, and I found that somewhat 
enlightening, and I appreciate that.
    When you labeled the management model and the 
entrepreneurial model and the accountability model, is that 
basically the way you would describe the two approaches?
    Mr. Moe. Constitutional.
    Mr. Turner. Constitutional.
    The thing that has always impressed me in my years of 
service in elected office is how, oftentimes, we fail to 
appreciate the people in government who are the line managers. 
Because I really believe to be a manager in government is 
probably one of the most difficult management jobs you can ever 
be assigned because, in essence, you are constantly faced with 
that dilemma of those two models.
    It seems to me to be easier to be in the business world and 
be a manager because the bottom line is all you have to worry 
about. You are looking for productivity and profit. In 
government, these two models intersect.
    I am one who has always expressed concerns about the move 
toward privatization because I firmly believe, if government is 
run right, we ought to be able to manage government as 
efficiently as the business world does. But there is a concept 
afoot in this country today that says somehow government is bad 
and that business knows better and that we need to just run 
government like a business and everything will be OK.
    Certainly, we do need to have sound business management 
practices in place in government, but it doesn't necessarily 
mean that government can be run like a business, because we 
know that businesses run on the entrepreneurial model and in a 
democracy and constitutionally based form of government there 
are other interests other than the bottom line that always have 
to be protected.
    Maybe one of the things that we can do to help improve 
government is to be more sensitive, particularly those of us 
who are in elected positions, to not making derogatory comments 
about government as compared to business, and to try to end, if 
we can, the attitudes that prevail in many quarters of our 
country today that government is bad and business is good. We 
need to make both of them good.
    Maybe we need to work harder to try to encourage young 
people to go to some of our schools of public affairs, like the 
Lyndon B. Johnson school that I am familiar with in the State 
of Texas, where we can train managers and make young people 
feel proud to enter into the service of government.
    But, I found your comments enlightening, and I guess the 
conclusion I came to on this is that--and I think several of 
the panelists have stated this position--I am not sure that the 
structure is our big problem. I am not sure that we can even 
say that simply institutionalizing government is the right 
thing to do versus having ad hoc committees, because even in 
the business world sometimes it is that ad hoc group that 
shakes up the institutional structure and makes some 
improvements in the institutional structure.
    One of the good things about our democratic system is that 
as we elect new people and new leaders, they do bring new 
ideas. But we can improve the institutional structure and the 
quality of the people who serve in those positions who 
ultimately are going to make the government work efficiently 
and effectively--not only like a business but also to serve the 
needs of the people that we all collectively agree have to be 
served.
    So maybe there is no easy answer here, but it could be that 
simply through a better effort on our part to enhance the 
importance of the role of government and to clearly enunciate 
what that role is, as you have done, and to talk about the 
contrasting models, that perhaps through that effort we can 
come to some better resolution of some of these management 
issues. Because it is not easy, and actually very difficult.
    I welcome your comments.
    Mr. Moe. To talk briefly about the theoretical dispute that 
you mentioned, oddly enough, it is very difficult to have a 
mesh of the two. That is why they talk past each other as 
models. The fact of the matter is that the fundamental 
management of the executive branch is by the general management 
laws. They provide the rules of the game.
    The rules of the game in the private sector are the 
maximization of equity return to owners. You don't do that, you 
go to jail for fiduciary irresponsibility. But that is not the 
objective in the Federal Government. It is designed to 
implement the laws passed by Congress, wise and unwise.
    When you do not have an agency downtown that is capable of 
sending up to Congress an administrable program or an 
administrable agency, no amount of process management will save 
the day.
    So what has also occurred is that, as the proliferation of 
these general management laws have occurred, you see that book 
explains what every manager in government has to have in front 
of them, these are the laws that I have to follow. So the laws 
are what drive them.
    In order to have in the executive branch an institution 
that takes these laws as seriously as Congress does, you have 
to separate them from the budget. I know that this may sound 
unusual, but budget to me is only one part of management. It is 
the most important single part, but there are other elements to 
the management equation. And those other elements, if they are 
subordinated to the budget, will never get sufficient hearing.
    This is why--for example, GAO reports 25 risk areas this 
year. Notice that is all after the fact. How much time is spent 
on not getting to the risk point? Not very much. I have been 
here for 25 years, and I have never been to a discussion about 
how to properly design an agency of the United States that had 
great influence.
    Structure is important. Proper structure is a necessary but 
not sufficient basis for proper management in the Federal 
Government because accountability remains our highest value. 
That means we may have to sacrifice performance on occasion 
because it is a political decision. You try to keep such trade-
offs to a minimum, but the two sets of values are different.
    For years I believed that we could get what it is that we 
are worried about and change the culture of OMB and not have to 
split. I believed that until but 1986 or so, and then I finally 
concluded it isn't going to happen because the current culture 
of OMB cannot properly address the management issues which is--
this final thing on privatization.
    If you had an Office of Management, presumably one of its 
responsibilities would be to keep track of and to know all 
about the various privatization--itself a term with many 
definitions--activity going on in the country, in the Federal 
Government, up here on the Hill, and be able to aid agencies 
and inform committees about what are some of the rules that we 
have learned historically about how to do a privatization 
correctly, as opposed to incorrectly.
    But we have none of that today. So what we have, in 
essence, is that every agency is told you are on your own to 
make a deal with your congressional committees. This is why the 
FAA got its own civil service system. It went to its 
committees, did not go to the Civil Service Subcommittee, and 
got exempted from title 5 because everybody is on their own.
    This is one of the hidden agenda objectives of the National 
Performance Review. They believe that government should consist 
of numerous organizations all competing with one another to 
offer services to one another, we call this franchising, and so 
forth.
    Basically, there are not many rules on organizational 
management. There is no law, for example, saying that the 
executive branch can create a performance-based organization 
[PBO]. This is just made up. And so what we have here is sort 
of a disaggregation and disintegration of the concept of 
fundamental management, and structure does play a big role in 
any reassertion of our management responsibilities. It isn't 
the whole thing, that is for sure, but I think OMB experiences 
a failure.
    Mr. Mihm. On the notion of accountability that Ron pointed 
out, the point that I would make is that accountability for 
most agencies is something that cuts in many, many different 
directions at the same time and in opposing directions.
    One of the places where the concept that government ought 
to work like business breaks down most directly in my view is 
that, unlike in the private sector, we don't have one bottom 
line. Businesses have profit and market share and these all 
create incentives for certain types of behavior.
    The problem that managers in the public sector face is that 
they have competing sets of priorities from which they have to 
build goals. These competing priorities are embedded in the 
very missions of organizations, that force them to 
systematically create goals that tug agencies in different 
directions.
    In Ron's opening statement, I believe he mentioned the 
situation at IRS. They have to create a goal that, on the one 
hand, deals with the collection of revenues but, on the other 
hand, ensures a directly competing priority to make sure that 
IRS treats taxpayers in a fair and courteous manner. In fact, 
Commissioner Rossotti has mentioned that customer service is 
what the agency is now going to be about. So the notion of 
accountability is very ambiguous at the Federal level.
    One of the good things about the Government Performance and 
Results Act is that it provides a venue through strategic plans 
and annual performance plans for raising these types of issues 
up for discussion, and to make sure that decisionmakers 
understand the various tensions that agencies' operations are 
under.
    We did some work at the EPA a number of years ago, and they 
told us one of the best things about reaching out to 
stakeholders, which is a requirement of the Results Act, was 
not so much that they heard from stakeholders but that they 
educated the public about the different pressures that the EPA 
is under. EPA needs to manage and deal with different 
priorities that are placed on it, such as reducing burden on 
businesses and at the same time protecting health and safety. 
How does it strike the appropriate balance? There is no 
immediate or easy answer for that, and EPA is accountable for 
both.
    Mr. Turner. You mentioned how the Results Act is working, 
and I may be wrong on this, Dr. Moe, but it seems to me when we 
talk about trying to place an emphasis on management 
institutionally, that the National Performance Review effort 
was that very thing. We know that it is not institutionalized, 
and we know that it may not last past this administration, and 
we may not agree with all of the theories that they are 
pursuing, but, in essence, wasn't that what that was? Maybe it 
was not planned and maybe nobody thought through that ``we need 
to emphasize management,'' but that is what that amounted to, 
to place emphasis on management?
    Mr. Moe. It did. It implicitly made the case for a separate 
Office of Federal Management. They knew right off the bat that 
if they took their exercise into OMB, they were dead. They 
didn't draw the right conclusion, however, from their 
experience.
    The proper conclusion should be--my view on this--would be 
that you would have a separate Office of Management to continue 
the activities that we did plus the activities we are talking 
about. However they didn't draw that conclusion.
    So it is sort of up for grabs. The future is sort of up for 
grabs. That is the problem. When you have an institutional 
problem, you should have an institutional response to it. And 
merely asking somebody to do a good job doesn't generally get 
it done and particularly in the government where our laws and 
regulations are relatively strict.
    One reason that it is important to have one agency watching 
over all of these laws--and when you talk about clout, the real 
clout comes from being able to design and implement the general 
management laws, and here is why. It is an intellectual reason.
    The purpose of a general management law is, in essence, a 
contract between the executive branch and the Congress on how 
certain procedures and laws shall be implemented. It remains in 
effect unless an exemption is given by Congress to it. Notice 
what we have done in this situation. We have created the 
politics of generality. In other words, the burden of proof to 
be exempted from some law or exception lies with the agency 
that is seeking it, OK? So in the absence of a persuasive case, 
the government is wholly accountable to OMB and to the 
President through OMB.
    The other politics, and this is the one represented by the 
National Performance Review and that is the politics of 
exceptionalism and that is you have very few general laws and 
you don't have continuing institutions in place. But, in point 
of fact, a thousand flowers shall bloom throughout the 
government, all agencies with their own independent 
compensation systems, and those seeking to have general 
management laws apply across the board have the burden of 
proof. That is why we are here.
    So we are trying in this act to reimpose accountability 
across the board and not have everybody with their own little 
dukedom out there. We have to make a case for this argument. 
That is what we are trying to do here, to restore some overall 
accountability to the President.
    Now, I have to say this. Presidents since Kennedy have 
found the management function to not be politically rewarding. 
They say, if you do something good in management, the benefit 
will accrue to your successor; but if there is a problem with 
it, you get the criticism. So their political advisers say that 
management is not a very profitable thing to get involved with.
    But we have paid a price for that, and that is it is the 
President who has to support those actively who are concerned 
about all these laws. For example, these laws are not related 
very well to each other, you see. In 1933, we passed a law and 
it reflected the values of 1933. We passed another law in 
financial regulation law in 1993 to reflect the values of 1993.
    We don't have anybody there to integrate the laws in a way 
that makes them contemporary. We are a republic and the laws do 
run things and the fact that you try to do everything outside 
the legal system is a weakness and Congress doesn't realize it. 
That is why I believe we do have to have a quality 
constitutional system in which Congress is an active player and 
we don't get caught up in business school jargon.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Horn. I thank the gentleman. There are some excellent 
questions and dialog.
    Let me ask Dr. Moe at this point, and then I will move to 
the GAO. I just have a few more questions.
    You noted, Dr. Moe, that major fields of government 
activities are essentially unmanaged. Would you give examples 
of how this has led to statutory laxity and the neglect of 
standards for organizations, operations and accountability?
    Mr. Moe. I am not sure that I followed your question well.
    Mr. Horn. I can repeat it, because it is a cumbersome 
question.
    You note the major fields of government activities are 
essentially unmanaged. Would you give us some examples of how 
this has led to the statutory laxity and neglect of standards 
for organizations, operations and accountability? Is this a 
matter of statutory laxity or is it just that they don't know 
what they are doing?
    Mr. Moe. There is a sequence for proper management in the 
Federal Government. Notice I am saying Federal Government, 
which is different than GE or a university. At the top rung is 
the law. If you have to design a law that is conceptually 
sound, particularly in programmatic terms, knowing full well 
because of the political process and if you require great 
management perfection you are going to be discouraged, but 
nonetheless you can avoid some of the worst problems because 
history is not something to be ignored, which we have a 
tendency to do, it is something that you build upon. You don't 
need to make the same mistakes over and over again.
    The second level has to do with your central management 
agencies. One of the NPR's major points has been to downgrade 
and to disembowel the central management agencies. That is OMB, 
for example. They are shadow agencies now, and we have a hollow 
central management operation. But central management remains 
the absolute key to ensuring that all of the officials, most of 
which, as I pointed out, are short term political appointees 
are following on the same team. Without it, everybody goes 
their own way.
    So the second element is the quality of your central 
management agencies.
    And the third element has to do with the quality of your 
leadership. It is very difficult to get an 18-month Assistant 
Secretary in a department to get all enthusiastic about a 10-
year improvement program. Incidentally, the National 
Performance Review has never addressed the question of 
political appointees. They apparently want more of them. They 
don't want to cut them, even in relationship to the mid-level 
people.
    So we have here this very large group of people who have 
not been trained for this job, and yet we are asking them to be 
management gurus. Well, the fact that we are going to be 
disappointed shouldn't come as a surprise. There is a 
dysfunction between the needs of the agencies and the quality 
of leadership that we force upon them.
    And a fourth element is the quality of the individual 
agency structure itself. There are many activities that could 
be properly designed, and that is the keyword, government 
corporations rather than appropriated agencies, and they would 
run very well. So we need to recognize that within the 
governmental structure itself there is a wide range of options 
available for us on how to design an agency and its program in 
a way to maximize administrability, but this requires quality 
people in a central location so that each subcommittee on the 
Hill or each agency in government isn't designing itself.
    I always view this as something of a conflict of interest. 
This is where we have assigned the project since, if you got on 
the telephone and tried to phone OMB and asked to speak to 
their expert on government corporations, the odds are that they 
would say that they don't have one. I have phoned them for 
years, and they don't have one. The agencies themselves are at 
a disadvantage in the absence of that type of managerial 
assistance.
    I hope that I answered your question or at least answered 
toward it.
    Mr. Horn. Well, you are warm on that one. There is no 
question about it, that we lack that memory to give them 
options in trying to deliver on a particular program.
    When I was in the administration back in 1959 we had a crew 
that worked with the Congress on, say, the Labor Management 
Disclosure Act of 1959, and we were ready to implement that the 
day that the President signed the law. And we had thought 
through and gotten the basis for having that agency work. But, 
as you say, when you phone up OMB, who is the expert on 
government corporations? Who has had some experience with them, 
and who has looked at the current ones, and are they doing what 
we thought they should do? And that will start with TVA right 
on up.
    Mr. Mihm. We did a report on government corporations 
several years ago, and they directed to us Dr. Seidman. They 
said, go see him in NAPA.
    Mr. Horn. That will look good in the committee report on 
the floor.
    Mr. Posner. Can I add to Ron's response?
    Again, if you are looking at what really matters in terms 
of the implementation of these programs and an interconnected 
environment, it is true that agency matters, structure matters, 
but what equally matters is the rules, the incentives and the 
way we design these things. I do believe that has been kind of 
a neglected area of public policy, public administration.
    I was involved 10 years ago in the U.S. Administrative 
Conference study that produced a guide to grant design for 
Members of Congress. What do you do about something so obscure 
as maintenance of effort which most people are very dimly aware 
of which has a huge impact on whether Federal money is going to 
get where it is supposed to go or not? And when you look at the 
largest programs, most of them don't have a maintenance of 
effort provision or it is outdated. It is no wonder why we are 
not getting the performance we think we should be getting.
    Chris mentioned the notion that we need better information 
about what we are getting, so it is structure, but it is also 
information. I mean, for many, many years GAO has had to become 
the primary data collector of record on things that agencies 
should very well understand and know. IRS didn't have any idea 
who owed them delinquent tax debt. They had no idea how many 
were businesses, how many were individuals and different types, 
and now they are getting better information.
    We had to do samples, very time-consuming work; and what 
you are hopefully going to start seeing is we developed this 
information infrastructure under GPRA and IT is that we are 
going to become better able to understand how our programs are 
linked to the behaviors that we are trying to implement. And 
the interesting questions will get to be the things that Chris 
said--what we really care about, how we are impacting or not 
impacting the behavior, and which of these conflicting goals do 
we want to put priority on. And that is where ``management'' 
becomes part of the policy debate.
    Mr. Horn. I think the point that you are making also here 
is that Presidents are busy people. They have demands from 
every interest group in America, and so do their Cabinet 
officers. But there is no great incentive to have good 
management until the chickens come home to roost, and then you 
have a major scandal, and then everybody scurries around and 
says gee, not me, let's do something about that.
    There is no question if a President starts on it in a 4-
year term--and we have had many Presidents with 4 years and not 
8 years--if you do something worthwhile, credit may go to your 
successor, whether your party or the opposite party, so there 
is no great incentive in that. And the bureaucracy can wait you 
out and say this, too, shall pass.
    I remember PPBS, that was supposed to be across the board 
with Mr. McNamara and later with President Carter, all that 
zero-based budgeting. And they say, folks, this, too, shall 
pass.
    And that is what we are down to. Somewhere we need that 
institutional memory that, even if the President can't spend 
much time on it, he can give some leadership and direction and 
he can let his Cabinet know that he is serious about it. And 
that is essentially how President Eisenhower used a Cabinet. 
Many Presidents haven't even had them in the room.
    Certainly Franklin Roosevelt ran the government in a number 
of unique ways and didn't very much care if his Cabinet ever 
met, but at least his people knew here is what he wanted to 
achieve. And then the question was, how can you most 
effectively and economically achieve it? And until they know 
that the President is serious, nothing much is going to happen, 
no matter who is in the White House.
    Let me ask one last question here of GAO. Has the 
Congressional Budget Act of 1994 strengthened or hindered good 
management? And what, if any, changes do you see in that act 
that should be made? Any thought given to you that----
    Mr. Posner. The Congressional Budget Act?
    Mr. Horn. I testified on it at the time.
    Mr. Posner. Well, I think that there were some information 
provisions, as I recall. It was title VII, and I am not sure 
that that has really had much of an impact at all.
    It reminds me of the Intergovernmental Cooperation Act of 
1968 that mandated that GAO do periodic studies of programs and 
document the various agencies that were at play and recommend 
ways to consolidate and streamline. We did not exactly receive 
deafening interest following that up from our clients here. So 
those things are all well and good.
    I do think that the Congressional Budget Act did set up a 
very interesting structure where the budget committees have to 
assign spending by functions, the 17 broad mission areas, and I 
think that has largely remained an academically interesting 
exercise that does not drive resource allocation. And it gets 
back to the governmentwide performance plan, that somehow we 
need to be focusing on those as our unit of analysis for making 
a decision, and we have not yet succeeded in doing that.
    We focus on discretionary spending, $555 billion. It gets 
divided up among 13 appropriations subcommittees, which is very 
difficult to understand. So the promise of the act in that 
regard as an allocational device across goals that we care 
about as a Nation has yet to be fulfilled.
    Mr. Horn. There is no question that we have a lot of 
problems with that act, although we are stumbling and muddling 
through with it, as the British might say. We certainly could 
do better.
    Let's face it, the aim of both the La Follette and Maloney 
bill in 1946, which didn't last too long either when it came to 
budgeting, and the 1974 act was to try to get the relevant 
people together that make these decisions up here, namely the 
Finance and the Ways and Mean Committees and the various 
appropriations subcommittees and get them to relate to each 
other since one is either going to have to raise revenue and 
the other is going to have to cut spending if you are going to 
have a balanced budget.
    Unfortunately, that isn't the way that the process worked. 
We have a Budget Committee that is sort of out there somewhere 
that has some of these people on it and some other people on 
it. It wasn't a bad idea because the other people presumably 
would try to keep honest the appropriators and the revenuers. 
Yet we don't have the guidance that is needed, and you get sort 
of artificial caps, and you wonder this year if we are going to 
have any caps.
    The Budget Committee has been sort of a political obstacle 
to most Members of whatever party that is in control because 
they have a whole bunch of crazy ideas in there as to how they 
might do this and this. And your opponent throws that at you on 
the stump, and, by George, it is a document of the House, and 
it is your party, whether it is Democratic in the 103d or 
Republican in the 104th, and it really has no real impact. And 
it is the appropriating committees that count, is reality, and 
that is where they are segmented.
    The President took 130 years, I think, for the President to 
have a unified budget. It used to be that the department heads 
sent it to the Secretary of the Treasury, and he put a binding 
on it and shipped it up here. And we, unfortunately, have 13 
subcommittees that we will never be able to get rid of. It 
doesn't happen that easy.
    I suggested 20 years ago, let's have five to match their 
resource areas. The President brings that budget together in 
five major areas. We could do that, too, but nobody is going to 
give up their chairs unless there is a crash somewhere, but it 
is a heck of a way to do business.
    We appreciate all of your wisdom that you have given us. It 
has been very helpful. These have been excellent statements, 
and they will be in the record, and we will refer to them, and 
over the next few months we will put the pieces together.
    I am going to read the staff members into the record.
    I want to thank not only the witnesses but the staff 
members: J. Russell George, the staff director for the 
Subcommittee on Government Management, Information, and 
Technology and chief counsel. Bonnie Heald, our director of 
information is sitting patiently back there wondering where the 
media is. They are not interested in management, right? 
Harrison Fox, to my left, professional staff member responsible 
for this hearing; Mason Alinger, staff assistant. And we have 
two interns here, Paul Wicker and Kacey Baker.
    And then for the minority we have Faith Weiss the 
professional staff member and Earley Green, staff assistant.
    And we have two court reporters, and they are both here at 
the same time: Doreen Dotzler and Ryan Jackson. We thank you 
both. It is tough when we have all of the dialog going back and 
forth, and we appreciate it.
    With that, this meeting is adjourned.
    [Whereupon, at 1:05 p.m., the subcommittee was adjourned.]

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