[Senate Hearing 106-538]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-538

 
                MEETING THE CHALLENGES OF THE MILLENNIUM

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


                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 29, 2000

                               __________

      Printed for the use of the Committee on Governmental Affairs



                    U.S. GOVERNMENT PRINTING OFFICE
64-553 cc                   WASHINGTON : 2000

_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402



                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
                        Robert J. Shea, Counsel
                      Henry R. Wray, GAO Detailee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                   Susan E. Propper, Minority Counsel
                 Darla D. Cassell, Administrative Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Thompson.............................................     1
    Senator Lieberman............................................     3
    Senator Voinovich............................................     4

                                Witness
                       Wednesday, March 29, 2000

Hon. David M. Walker, Comptroller General, U.S. General 
  Accounting Office, accompanied by Gene Dodaro, Chief Operating 
  Officer
    Testimony....................................................     6
    Prepared statement...........................................    33

                                Appendix

GAO report entitled ``Managing for Results, Barriers to 
  Interagency Coordination,'' March 2000, GAO/GGD-00-106.........    98



                MEETING THE CHALLENGES OF THE MILLENNIUM

                              ----------                              


                       WEDNESDAY, MARCH 29, 2000

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:40 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Fred 
Thompson, Chairman of the Committee, presiding.
    Present: Senators Thompson, Voinovich, and Lieberman.

             OPENING STATEMENT OF CHAIRMAN THOMPSON

    Chairman Thompson. The Committee will come to order, 
please.
    The Committee on Governmental Affairs is holding this 
hearing this morning to discuss the major management challenges 
facing the Federal Government in the 21st Century. We will hear 
from one witness--the Comptroller General of the United States, 
Mr. David Walker.
    Today we will hear the Comptroller General's view on what 
issues provide the greatest challenges for the Federal 
Government. Just last month, he recited an all too familiar 
litany of duplication, waste, fraud, mismanagement, and other 
Federal performance problems in testimony before the Senate and 
House Budget Committees.
    The GAO High-Risk List of those Federal activities most 
vulnerable to waste, fraud, and abuse has gone from 14 problem 
areas in 1990 to 26 problem areas today. Only one high-risk 
problem has been removed since 1995. Ten of the 14 original 
high-risk problems are still on the list today, a full decade 
later.
    Likewise, Inspectors General identify much the same 
critical performance problems in their agencies year after 
year.
    Collectively, these core performance problems cause Federal 
taxpayers countless billions of dollars each year in outright 
waste. They also exact a real toll on the ability of agencies 
to carry out their missions and serve the needs of our 
citizens.
    Despite these good economic times, polls recently showed 
that Americans have little trust or confidence in their Federal 
Government. They want the Federal Government to work, but they 
do not think that it does. Unfortunately, our citizens have 
ample reason for concern. Much of what is done in Washington is 
inefficient and wasteful.
    To address this problem, Congress passed the Results Act, a 
law which is aimed at making government agencies report to 
Congress and the American people about what works and what does 
not. This week, agencies will release their first ever 
performance reports. These will give Congress a real chance to 
judge the effectiveness of the programs it put in place.
    But there are problems with these performance reports, many 
of which mirror the challenges that Mr. Walker will describe in 
his testimony. Agencies do not employ sound financial 
management practices, so they do not have the information they 
need to manage programs on a daily basis. Therefore, much of 
the information in performance reports will not be reliable.
    The Executive Branch manages its human capital in a 
haphazard way. Agencies do not take advantage of the Results 
Act to tie their human capital management practices to the 
goals set forth in their plans. Information technology projects 
in the Federal Government are beset by failure because agencies 
do not plan appropriately, in Results Act documents and 
elsewhere, for their procurement implementation as required by 
the Clinger-Cohen Act.
    The Results Act is a tool to better manage the Federal 
Government, and we need to rely on it more. But poor management 
is not the only problem. Few would dispute that the government 
in Washington cannot do effectively all that Congress has asked 
it to do. The Federal Government of today is a cacophony of 
agencies and programs, many of which are directed at the same 
problems.
    In conjunction with this hearing, we are releasing a report 
by GAO that details the many challenges agencies face when 
coordinating among themselves their duplicative functions. 
According to this report, mission fragmentation and program 
overlap are widespread in the Federal Government, and cross-
cutting program efforts are not well-coordinated.\1\
---------------------------------------------------------------------------
    \1\ The GAO Report entitled ``Managing for Results, Barriers to 
Interagency Coordination,'' March 2000, GAO/GGD-00-106 appears in the 
Appendix on page 98.
---------------------------------------------------------------------------
    In one example, GAO describes 50 programs administered by 
eight Federal agencies that provide services for the homeless. 
Of these 50 programs, 16 programs, with over $1.2 billion in 
obligations, were focused on helping only the homeless. The 
remaining 34 programs, with about $315 billion in obligations, 
were focused on helping low-income people in general, including 
the homeless.
    This is just one of the myriad areas where duplication and 
overlap serve to undermine the missions of the program.
    Clearly, the time has come to take a comprehensive and 
fresh look at what the Federal Government does and how it goes 
about doing it. There is an obvious need to bring some order 
out of this chaos.
    Senators Lieberman, Voinovich, Brownback, Roth, and I have 
introduced legislation which establishes a commission to bring 
the structure and functions of our government in line with the 
needs of our Nation in the new century. The bill has been 
carefully crafted to address not just what our government 
should look like, but the more important question of what our 
government should do.
    Of course, meaningful reform of the Federal Government will 
not come from simply reshuffling current organizational boxes 
and redistributing current programs. We need to conduct a 
fundamental review of what Washington does and why.
    The commission will take a hard look at Federal programs, 
departments, and agencies to ask such questions as: How can we 
restructure agencies and programs to improve the implementation 
of their statutory missions, eliminate activities not essential 
to their statutory missions, reduce the duplication of 
activities; and how can we improve management to maximize 
productivity, effectiveness, and accountability for performance 
results?
    I think much of Mr. Walker's testimony will speak to these 
questions. We look forward to hearing his thoughts on the 
critical challenges facing the Federal Government of the 21st 
Century and what we can do to better prepare for it.
    Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thanks, Mr. Chairman.
    Thank you for convening this hearing, and thanks also for 
your very excellent opening statement.
    I hope this will be the first of several hearings that will 
discuss how we in government can respond to the extraordinary 
changes that are occurring in our society and in our world, 
changes brought about particularly by technological 
advancements, but also by our expanding and increasingly global 
economy, and in a very different way, by the new and diverse 
threats to our Nation and to our world.
    In order for our government to respond best to these new 
challenges, we have got to take a hard look at our structure 
and our organization to see whether, in the new world, in the 
new century, it is serving our purposes, including the new 
purposes that government will have to respond to because of 
changing circumstances and realities in the world.
    I am very pleased that the Comptroller General is here 
today to talk about his plans for ensuring that the General 
Accounting Office can meet the American public's needs during 
this period of dramatic change and also for hearing his ideas 
about how we in government generally, and Congress 
particularly, can meet those needs.
    I hope and I believe he will give us his thoughts on the 
government for the 21st Century Act which Chairman Thompson, 
Senator Voinovich and I and a few others in the Senate have 
introduced, or actually, reintroduced, yesterday.
    In the last century, America made stunning progress on many 
fronts. When you think about it, you can just cite so many--the 
near universal use of telephones and automobiles, major 
breakthroughs in civil rights, understanding the structure of 
DNA. And we suffered through some terrible experiences and 
developments as well, such as the two world wars, some new and 
virulent diseases such as AIDS, and the creation of hazards to 
our lives and our environment that either did not exist or that 
we were unaware of in previous centuries.
    Somebody once said to me: If there is one constant in the 
world, it is change. We know that the 21st Century will offer 
its own remarkable, dramatic changes, and with them, 
opportunities and real challenges.
    Just as our society was profoundly influenced by technology 
in the last century, particularly toward the end, we know that 
changes in the new millennium will be driven by even more 
powerful, and in some ways, fantastic technological 
developments, and those will have a major impact on our country 
and also on our government and the way we organize it.
    So we have an opportunity now, at the beginning of this new 
century, to look at the architecture of our government and its 
processes and to make adjustments which are necessary to 
improve its ability to respond to all of these opportunities 
and challenges. That is what the commission created under the 
government for the 21st Century Act is designed to do.
    We also, as Senator Thompson has indicated, have to 
continue to implement reforms previously passed by Congress, 
such as those required by the Government Performance and 
Results Act, that will help convert and create agencies that 
are high-performing organizations, with clearly-defined 
missions and results-oriented management. These efforts will 
help agencies make better use of their resources, more 
efficient use, and also hopefully help them respond more 
effectively to the subject matter that they are charged with 
dealing with.
    I know that the GAO has been instrumental in evaluating 
agencies' progress in implementing these reforms, and in 
another sense, the GAO is looking inward to determine whether 
its current structure is functioning as well as we would like 
it to, to meet Congress' needs not just today but in the 
future.
    The agency's strategic plan which we will be discussing 
today identifies many of the challenges that will confront 
government in the coming years and sets out a plan for how to 
deal with them.
    So I am very pleased that the Comptroller General is here 
and that he and GAO generally are focusing on these questions 
to help us remain as effective as possible in the future, and I 
look forward to the testimony this morning.
    Thanks, Mr. Chairman.
    Chairman Thompson. Thank you very much.
    Senator Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Mr. Chairman, I want to thank you for 
holding this hearing, and I do not think it could come at a 
better time.
    We have begun a new century, and in less than 10 months, we 
will welcome a new administration. The time is right for us to 
step back and really think about what the Federal Government 
needs to do and what it needs to look like if we are to meet 
the needs and expectations of the American people in the next 
century.
    Mr. Chairman, the Subcommittee on Oversight of Government 
Management was fortunate earlier this month to hear from 
Comptroller General Walker on the importance of human capital. 
He and I share the view that we cannot have a government that 
is ready for the 21st Century if we do not have the work force 
that takes us there.
    Years of neglect have taken their toll on the ability of 
the Federal Government to attract the best and brightest 
employees. Civil servants already working for the Federal 
Government are among the best in the world, but they cannot be 
expected to thrive when they receive inadequate training and 
few incentives for excellence.
    My Subcommittee has undertaken an effort to evaluate the 
human capital policies of the Federal Government and to 
determine how we can better empower Federal employees to do 
their best for the American people. When you look at the 
statistics--by the year 2004, 50 percent of the people in the 
Federal work force could retire--we are in trouble today. The 
real challenge is the quality and the technology that we can 
bring to government. If we do not have quality and if we do not 
have the technology, we are not going to be able to serve and 
do the job we are supposed to be doing for the American people.
    I also want to thank and express my support to Senator 
Thompson for the legislation establishing a commission to 
review the Executive Branch and make recommendations for 
reform. Although I have only been in Washington for a short 
time, I have served as a mayor and a governor, and I know how 
important organization is for the successful accomplishment of 
goals.
    I have been frustrated by the overlap and duplication that 
I have found in Federal agencies and program and, worse, the 
difficulty of getting at the roots of some of these things. For 
example, we have 570 education programs, and surely some of 
those are redundant. I held two hearings in my Subcommittee 
last year to examine the extent to which the Departments of 
Education and Health and Human Services were coordinating these 
programs. To my dismay, GAO testified there was little 
coordination. Health and Human Services and Education are now 
making an effort in this area, but it is just a drop in the 
bucket compared to the pervasive overlap and duplication found 
across the Federal Government.
    I was interested that when we asked GAO to evaluate these 
programs, we were told that no methodology existed by which to 
evaluate them.
    I also think the Federal Government could benefit from some 
fresh eyes looking at its operations and organizational 
structure. When I was governor and as mayor, we set up an 
Operations Improvement Task Force. At the State level, we had 
over 300 people, experts in their field, volunteer 150,000 
hours to look at every nook and cranny of State Government and 
to make recommendations for improvement, including the 
elimination of departments. And I want to say this to my 
colleagues on this Committee, what we are talking about is a 
very, very difficult task. We eliminated two departments and 
eliminated overlap, and it was like pulling teeth to get 
anything done. If you think we can change some of these Federal 
departments with some group coming in and making 
recommendations, without staying on it day in and day out, it 
will never happen.
    The Chairman and I were talking coming back from voting 
this morning, and it is going to take a President who will get 
up early in the morning and go to bed late at night to stay on 
top of it to make some of these changes.
    As an editorial comment, Mr. Chairman, I would like to say 
wouldn't it be nice if in this Presidential election, we could 
be talking about some real problems confronting America, 
including the fact that if we do not get busy, we will be in 
deep trouble in terms of providing the services that the 
American people want and need and functioning in this new 
economy in which we find ourselves.
    So I am looking forward to your testimony, Mr. Walker, but 
I hope everybody understands that a commission with good 
members--the best members--will get nowhere unless it becomes a 
cause celebre for the next President and for this Congress to 
stay on top of it on a regular basis, indicating that we 
understand how important it is for the future of our country.
    Thank you.
    Chairman Thompson. Thank you very much. Mr. Walker.

TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL, U.S. 
GENERAL ACCOUNTING OFFICE, WASHINGTON, DC, ACCOMPANIED BY GENE 
                DODARO, CHIEF OPERATING OFFICER

    Mr. Walker. Thank you, Mr. Chairman, Senators Lieberman and 
Voinovich. I appreciate the opportunity to appear before you on 
this very important topic.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 33.
---------------------------------------------------------------------------
    I would like to note at the outset that Gene Dodaro, who is 
our chief operating officer, is accompanying me. Gene is No. 2 
at GAO, and he has led an extensive team in putting together 
our strategic plan. He has led the day-to-day efforts in 
putting together the plan which providers the framework for my 
testimony today. It is out of recognition for his efforts and 
those of others that he deserves to be here with me.
    Second, I would like to note that this is the first hearing 
I have actually had before this full Committee since being 
confirmed as Comptroller General in October 1998 and that my 
wife, Mary, is observing this hearing. She is the attractive 
brunette in the second row back to my right and your left.
    Senator Lieberman. The attractive and long-suffering 
brunette. [Laughter.]
    Mr. Walker. Well, we have been married for over 28 years, 
Senator----
    Chairman Thompson. It is a good thing there is only one 
brunette in that row. [Laughter.]
    Mr. Walker. As you know, Mr. Chairman, I have a fairly 
lengthy statement that I would like to have submitted for the 
record, and I would now like to summarize that information for 
you.
    Chairman Thompson. Yes, I have read through it over the 
last 3 days. [Laughter.]
    Mr. Walker. Thank you, Senator.
    Up on the right, I would like to draw your attention to 
three charts. The chart on the left deals with managing in the 
new millennium. It presents an outline of my oral remarks this 
morning.
    In the middle is a one-page summary of our new strategic 
plan that was referred to by Senator Lieberman. Obviously, 
there is a lot more detail behind it, but this summary is a 
touchstone for what I am going to be speaking about today.
    The chart on the far right presents an excerpt from the 
report that you mentioned, Mr. Chairman, which is going to be 
released today: ``Managing for Results: Barriers to Interagency 
Coordination.''
    I am also going to use some powerpoint materials as a tool 
to help facilitate our discussion. I think it is only 
appropriate that this Committee be a leader in technology and 
also able to look at cross-governmental issues as we now focus 
on the challenges that face us in the 21st Century.
    With that, I would like to make a few opening remarks 
before I start the powerpoint presentation. Our Nation stands 
at an important crossroads. There have been significant changes 
both from a national security standpoint and from an economic 
security perspective.
    From a national security perspective, the cold war is over, 
and we won. From an economic security perspective, after years 
and years of annual battles over budget deficits, we, at least 
for the short term appear to have slain the deficit dragon. We 
now have both unified surplus and an operating surplus.
    However, we are not out of the woods yet. Our long-range 
budget simulations, as you will see, clearly demonstrate that 
America faces serious fiscal challenges in the future, due to 
known demographic trends.
    In addition, we know that there are rising public 
expectations for government, and yet, lower public opinions of 
government.
    We need to focus at this important crossroads on what 
government does and how government does it. In that regard, the 
six key themes that are outlined in our strategic plan provide 
a framework for discussing where we are and the challenges that 
confront us.
    These six key themes, importantly, have no boundaries. They 
have no boundaries globally, domestically, within government, 
or within GAO. As a result, one of the things that we are 
seeing is a greater need to take a longer, broader, more 
integrated, and more horizontally look across different levels 
of government to address these challenges.
    The first theme is globalization. This graph demonstrates 
that world exports doubled over the past 35 years from about 12 
percent to 24 percent. Foreign investment in the United States 
has increased to over $200 billion. The recent financial crises 
in Thailand, Indonesia, Korea, Russia, and Brazil have served 
to demonstrate how we really are in one world from an economic 
sense and how things that happen all around the globe can have 
significant ripple effects here in the United States.
    From a security perspective, we no longer have a single 
major adversary. We have new, diverse, and diffuse threats to 
our national security. For example, there are a number of 
countries that possess weapons of mass destruction, whether 
they be nuclear, chemical, biological or otherwise. At least 
nine countries have weapons of mass destruction that are of 
concern to the United States. As a result, the United States is 
spending more and more on such matters as anti-terrorism, on 
which we spend at least $10 billion a year and have at least 40 
departments and agencies engaged in related activities.
    The size of active duty personnel for the military has been 
reduced dramatically over the last 10 years. It is down by 
approximately a third. Yet we are now starting to experience 
recruitment and retention problems for a variety of reasons, 
including the tempo, and frequency of deployments, other 
quality of life considerations, and the fact that in our very 
strong economy with very low unemployment, and opportunities 
abound for a variety of individuals, including those in the 
military. Increased spending has been proposed in light of 
years of decline, but we do face a number of other challenges 
with regard to national security.
    From a demographic perspective, since 1950, there has been 
a 50 percent increase in the percentage of the proportion that 
is over 65. The proportion will increase by 70 percent between 
now and the year 2030. This has very serious financial 
repercussions for the solvency and sustainability of 
entitlement programs and also has significant implications with 
regard to the ripple effect on the Federal budget for the 
future.
    Another demographic issue is the dependency ratio--the 
number of workers supporting retirees. In 1955, there were 
approximately eight individuals working for each person over 
65. The ratio is now down to 3.4 to 1, and is expected to 
decline to approximately 2 to 1 by the year 2030.
    The first baby boomer turns 65 in the year 2011, and that 
will represent the beginning of our approching demographic 
tidal wave.
    There are a variety of quality of life considerations that 
we have to focus on. Yes, quality of life has improved for many 
Americans: People are living longer; life expectancy has risen; 
and, people generally are living better. Unemployment has 
fallen to 4.3 percent. However, not all Americans have shared 
in this prosperity.
    Our work force has changed fundamentally. The proportion of 
women and minorities in the work force has grown, and the 
nature of work itself has changed such part-time and flexible 
work arrangements that are becoming prevalent in our society.
    Many challenges remain, such as the increased gap between 
the haves and the have-nots, as evidenced by net worth, and the 
40 million Americans who lack health insurance.
    Prosperity itself, in certain regards, is creating a whole 
set of new stresses. Economic activity increases concerns about 
congestion, safety and environmental quality--urban sprawl 
being one example where all three of these come together. Our 
more technologically-based economy raises concerns about the 
adequacy of our education system to enable us to compete on a 
global basis. Obviously, the ability to balance work and family 
considerations is of increasing concern given the number of 
dual-income and single-parent families.
    On the technology front, the number of internet users 
worldwide has almost doubled in the last 2 years and is 
expected to double again in the next 3 years. Businesses that 
produce computers, software, semiconductors and communications 
equipment have accounted for more than one-third of the entire 
growth in the U.S. economy since 1992. This can not only 
transform our economy, but can also transform the ways that 
government does business and serves our citizens.
    With regard to the fiscal front, this chart demonstrates 
that we have moved from a period of continued deficits to a 
period of projected surpluses. However, these surplus 
projections are based upon assumptions with regard to the level 
of discretionary spending and with regard to the level of 
health care inflation. Because of the inherent uncertainty in 
these assumptions, CBO now has three projections of our 
potential fiscal posture for the next 10 years. A return to 
increases in discretionary spending along the lines of 
historical patterns and an increase in health care inflation by 
a mere one percent a year would transform these surpluses to 
growing deficits. Therefore, we have to view them with a sense 
of caution.
    But what about the longer term? Where do we look in the 
longer term--which is extremely important because of the 
demographic changes occurring in our country and the related 
challenges which must be addressed.
    In this regard, this next chart talks about the composition 
of spending as a percentage of gross domestic product. The line 
that goes across the top horizontally represents the revenue 
coming in to the Federal Government as a percentage of gross 
domestic product. It is about 21.5 percent, roughly. That is 
close to, but not at the historical maximum. One can determine 
the composition of the revenue, but historically, there has 
been a limit to how much the Federal Government has taxed its 
citizenry--or, stated differently, how much its citizenry has 
allowed itself to be taxed.
    The bar underneath that line shows, for 1999, the 
composition of Social Security, Medicare and Medicaid, net 
interest and all other spending. As you can see, there is a gap 
between the revenue line and that bar. Therefore, we have had a 
surplus.
    Unfortunately, if you look ahead and assume that we save 
every dime of the Social Security surplus, but spend the on-
budget surplus through either additional spending, 
``investments,'' tax cuts, or some combination thereof, this is 
what our fiscal future will look like based upon the economic 
assumptions of CBO and based upon the best estimate projections 
of Social Security and Medicare trustees as to the growth of 
those programs.
    By the year 2030, we will significantly haircut 
discretionary spending. By the year 2050, we will not have any 
money for discretionary spending and will not even be able to 
pay interest on what will then be a mounting Federal debt.
    This is of significant concern because discretionary 
spending includes some items that are in the Constitution of 
the United States. I will come back to that.
    There has been a significant change in the composition of 
Federal spending over the last several decades. There has been 
a huge reduction in the percentage of the Federal budget going 
to defense, and this has largely funded the increase in health 
care and other costs.
    How low can defense spending go? What about the escalating 
entitlement costs that constitute mandatory spending? When will 
we begin to address these known demographic challenges?
    As this bar graph shows, there has been a significant 
change in the composition of the mandatory versus discretionary 
portion of the budget. When John F. Kennedy was President, 70 
percent of the Federal budget was discretionary. Today, only 
about 30 percent is discretionary. The proportion has reversed 
and the mandatory portion is projected to increase further, 
which decreases the amount of our future fiscal flexibility in 
the future and the choices and options that future generations 
will have to ask what government can do for them.
    In that regard, what I would now like to do, Mr. Chairman 
is to move onto some other issues. Things have changed 
dramatically in the last several decades, but it is important 
to recognize that many existing departments, agencies and 
programs were started decades ago, based upon past needs and 
wants. These may or may not still make sense today. In fact 
they may or may not be as high of a priority as many of the 
other challenges that we must face in the future.
    We have short-term opportunities to make prudent choices 
about how the surplus is put to use in order to better prepare 
us for the future, and we have a number of long-term challenges 
such as the demographic challenges and associated fiscal 
pressures that we need to begin to address. We have an 
obligation to begin to address those.
    Now is the perfect time to ask what government does, what 
is it appropriate for government to do, and how government 
should go about doing whatever it needs to do.
    There are certain things that only government can do, and 
there are certain things that we must rely upon government to 
do. While certain functions and activities could be privatized, 
there is one thing that can never be privatized, and that is 
the duty of loyalty to the greater good of all rather than the 
individual interests of a few. Only government can do that.
    We need to look, however, at whether these programs still 
make sense for today and tomorrow and, if they do, how they can 
be effectively targeted and managed to maximize performance and 
assure accountability.
    We need to look at existing management reforms and make 
sure they help us to maximize performance and assure the 
accountability of government for the benefit of the American 
people. In the case of the Government Performance and Results 
Act, it must be more than an annual paperwork exercise. It must 
be a framework and a foundation for how government does 
business every day.
    In addition, the CFO Act is a lot more than getting clean 
opinions on the financial statements. Agencies can get clean 
opinions on financial statements by engaging in heroic efforts, 
spending millions of dollars and months, or in some cases even 
a year after the end of the year, to be able to get a clean 
opinion. Yet they may not have the basic information needed to 
make timely and informed judgments day-to-day.
    IT, information technology, is a lot more than Y2K. 
However, Y2K, I would submit to you, is an example of what 
government can do in a positive and constructive fashion if it 
mobilizes and if the legislative and Executive Branches work 
together to successfully address the challenges that face the 
U.S. Government, our Nation, and the world.
    But in order to be able to make these existing management 
reforms become a reality, we are going, among other things to 
have to make human capital, or people, a lot higher priority 
than it has been in the past. In addition, we are going to have 
to effectuate a cultural transformation in government. Many 
government entities today are hierarchial, process-oriented, 
silohed, and inwardly focused. Over time and through a number 
of concerted efforts, we are going to have to convert 
government, in many cases, to being: More partnerial, which 
means more empowerment but more accountability; more results-
oriented, focused on outcomes rather than outputs; more 
integrated, transcending glass walls and boundaries to work 
together to bring together the right skills at the right time 
to get the job done; and, more externally focused on what the 
citizens want and need, than it has been historically.
    As you can see in the next visual, there has been a 
significant decline in the past several years in the number of 
new hires coming into government. Also, as we know, there has 
been a significant reduction in the size of the Federal work 
force. In some cases, this made good sense and was needed. But 
it is not just what is done, it is how it is done. The result 
today is that you have many departments and agencies that 
downsized without considering skills, that froze hiring for 
years, and that cut way back on their training programs in 
order to make their budget work. Many government agencies 
focused on doing what they had to do on Y2K but not on what 
they needed to do to enhance information technology and make it 
an enabling tool for knowledge-sharing and for getting our job 
done more efficiently and more effectively.
    The missing link in results-oriented government is the 
human capital/people dimension. We must have modern human 
capital practices to maximize performance and assure the 
accountability of the Federal Government. We must link 
performance management and reward systems to the strategic and 
performance plans of the respective departments and agencies. 
If you do not do that, you will never get where you want and 
need to be.
    Looking forward, we need to search for new fiscal 
paradigms. We need to look longer with regard to time frames, 
and we need to look for different measures of success, because 
short-term surpluses can be misleading. Because of the 
demographic challenges that we face, many of our challenges are 
going to hit us in 10 to 20 years. Therefore, we need to make 
sure that we are having a longer-range perspective and that we 
are asking ourselves not only what is the impact of proposed 
fiscal actions today, but what is their impact on tomorrow. Do 
they give us greater ability to effectively deal with future 
challenges, or do they further restrict the options that future 
generations will have to make some of their own choices?
    In addition, from a performance perspective, we need to 
change how government does business every day. Also we need to 
focus more on cross-cutting programs and longer-range strategic 
issues. This Committee is perfectly positioned to lead the way.
    I am also pleased to say that the government for the 21st 
Century Act that has been mentioned by all of the Senators 
represents one means to potentially achieve that end. This is 
the time to engage in a comprehensive review of what government 
does and how it does it.
    Whether we have surpluses or deficits, we have a continued 
fiduciary responsibility and stewardship obligation to make 
sure that taxpayers are getting a decent return on their 
investment. We also have a need to make sure that we are 
providing ourselves with additional fiscal flexibility to 
address the known challenges that are on the horizon.
    We at GAO, as Senator Lieberman said, are trying to lead by 
example. We are the leading accountability organization in the 
United States and one of the leading in the world, if not the 
leading. As the agency that reviews others, we have a 
responsibility to be as good or better than others in every key 
area. We are there in many cases. Where we are not, we are 
taking steps to get there, and we are going to stay there. 
Whether it be strategic planning, financial management, 
information technology, or human capital strategy, we have a 
responsibility to lead.
    We are striving to do so: First, because it is appropriate; 
second, because it makes business sense; and, third, it 
enhances our credibility.
    In doing our work, we want to engage in a constructive 
manner with departments and agencies and not just say what is 
wrong. We want to try to help develop tools, techniques, and to 
provide information to help them make things better. We want to 
recognize where progress is being made and to share best 
practices where they exist.
    In closing, we are at an important crossroads in our 
Nation's history. There is a need to learn from the past but 
prepare for the future. This is the perfect time to address 
what government does and how it does it. We must take 
additional steps to maximize the performance and assure the 
accountability of government for the benefit of the American 
people. And hopefully, by doing so, through our collective 
efforts, we will in time be able to help increase the public's 
respect for and confidence in their government.
    Thank you, Mr. Chairman. I am more than happy to answer any 
questions you might have.
    Chairman Thompson. Thank you, Mr. Walker.
    I want to compliment you and Mr. Dodaro for your strategic 
plan and for your testimony today. I joked about the length of 
your testimony, of course, and I know it was meant to be a 
document that we can use, and indeed it is very important, 
because it focuses--you have done what we in government ought 
to be doing all the time, especially those of us in Congress, 
and that is focusing on how we ought to spend our time and the 
problems that deserve our attention.
    I guess the importance of that dawned on me as I was going 
over to vote a few days ago on a ``sense of the Senate'' 
resolution to welcome the farmers to town. That took an hour by 
the time we got over there, we waited--we had to wait on some 
people--and got back and so forth. That is all too typical of 
how we spend chunks of our time around here.
    But in your key themes, you have set forth all of it, all 
the things that we ought to be spending our time on up here. 
Ninety or 95 percent of our time ought to be in these six 
categories:
    Globalization--we all know the ramifications of that. It 
has to do with trade policies, it has to do with technology in 
many respects. That is all a part of it.
    Security--you talked about our conventional security issues 
and now the new threats that we have with the rogue nations, 
and the increased technologies and capabilities that are on the 
horizon. We do not have the big enemy anymore, but we have 
several little ones that are rapidly developing biological, 
chemical, and nuclear capabilities.
    Demographics--that is going to be the tail that is already 
wagging the dog, and the direction in which we are going--
Social Security and Medicare obviously will never go bankrupt. 
We talk in those terms, but it will not happen. What we will do 
is raise taxes on working young people, and we will become a 
Nation where we simply have a younger group of people working 
for the benefit of an increased retired group of people, and 
the Federal Government will be the transfer agent, and we will 
have no money for anything else. That is what is going to 
happen. And at the time these young people get out and start 
working and try to buy their first homes and so on, they are 
going to have astronomical FICA taxes, because the older 
population will have more and more political clout as there are 
more and more of them. So that is the direction in which we are 
headed, and that is what you point out here.
    Technological innovation--Government Performance and 
Accountability--you can distill it down even further; it looks 
to me like everything falls under the category of peace and 
prosperity and people's view of their government, on which 
everything else is based.
    Peace--obviously, the security implications; prosperity--
globalization and trade; demographics and what will happen if 
we do not solve that problem. It all fits into those two 
categories, and underlying all that is people's confidence in 
their own government.
    I guess I think that that is probably the most important 
one, fundamentally. It seems to me that what is happening is 
that in this time of peace and prosperity and this rising 
cynicism--you see it in all the polls and surveys--rising 
cynicism, especially among young people, young people who have 
never experienced a war or a depression or even Watergate or 
any of those other depressing things--cynicism toward 
government is at an all-time high, and a lot of that has to do 
with waste, fraud and abuse issues; a lot of it has to do with 
perceptions of corruption and things like that, which we know 
are not really true, but that perception is out there.
    What concerns me is in the future, when these things turn 
around as they invariably do, and we do not have peace, we do 
not have prosperity, a national leader or a group of national 
leaders will go before the American people and say now we are 
in the soup, we have a problem, we have a crisis--but here is 
the solution--we are Americans, and we can do it together, and 
follow me--who is going to follow anybody in this town with 
this kind of attitude that we have that we can indulge in now 
because everything is OK?
    So that is what you are talking about. You are talking 
about all of it here, and what you have shown here should be a 
training film for anybody coming into government. So thank you 
for spending your time and laying all this out for us.
    I guess my first question is this: You have demonstrated 
the areas that we ought to be concentrating on, and you have 
shown the trends on the one hand. And you have talked about it 
in terms of what government ought to be doing better in terms 
of programs, in terms of management, in terms of people and so 
on. How do those two things interrelate? Specifically, what is 
it about what is happening with regard to globalization, with 
regard to the demographic time bomb that we are facing, with 
regard to the new security threats that we have? What does that 
tell us? Obviously, without all that, we need to be more 
efficient, and we need to deliver services better, and we need 
more responsive programs, better people, and all that. But what 
is it about the world we live in today and the changes that we 
are undergoing now that relates to these government management-
type problems?
    Why is it more important today than it has been in times 
past, and can you give some examples?
    Mr. Walker. I think it is a new ball game, Mr. Chairman. 
While we are the only global superpower today, based upon 
economic, military and political power and the combination of 
those three, we are down from after World War II. At that time, 
we were over 50 percent of the entire global economy. Now we 
are down to a little over 20 percent.
    Things are very much interconnected. We are seeing more and 
more issues that are going to have to be decided on a 
multilateral basis, and more and more issues that are going to 
have to be addressed with State and local governments. In 
addition, there are more and more issues that will transcend 
whatever boundaries we have between departments, agencies, or 
programs.
    I think the world has changed so much, and our position in 
the world has changed----
    Chairman Thompson. Europeans have a bigger demographic time 
bomb than we do, and how they handle that and what happens with 
their economies will impact on us, for example--right?
    Mr. Walker. It will. Unfortunately, while they have a 
greater problem than we do, they are not as transparent about 
it as we are, and are less likely to be able to deal with it as 
quickly as, hopefully, we will.
    I think that what we have to recognize is that it is a new 
paradigm. We have to step back from incrementally addressing 
issues by adding to the baseline, as we currently do. Whether 
it be budgeting, or oversight, or whatever else, rather than 
looking at the incremental differences, we need to step back 
and look comprehensively. We need to ask where we are, where we 
are going, how we are going to get there, what government 
should be doing, and how it should go about doing it. I think 
it is critically important.
    Chairman Thompson. All of that is obviously true in regard 
to what we need to do from the standpoint of the U.S. Senate 
and Congress, and that translates in lots of different ways--
where we spend our money and so forth. But does it really 
relate to the management issues of government? Is it any more 
important now, in light of these changes that are happening, 
that we get a handle on waste, fraud, abuse, mismanagement, and 
inefficiency than it has been in times past?
    Mr. Walker. There are several factors. First, as you 
pointed out, public confidence and respect for government has 
markedly declined since the early sixties. If we are going to 
turn that around, we are going to have to be able to 
demonstrate to the American public that we are doing things 
that need to be done, and that we are doing them well. In 
addition, we are going to have to rise above fraud, waste, 
abuse, and mismanagement. Let me comment on that for a second.
    We should have zero tolerance for fraud, waste, abuse, and 
mismanagement, but they will never be eliminated. The Federal 
Government is the largest, most complex, most diverse entity on 
the face of the Earth, bar none. So we should have zero 
tolerance, and we should do everything we can do to try to deal 
with them.
    On the other hand, we need to be able to change how 
government does business. Basic management reforms are needed 
to strategic planning, financial management, information 
technology, and human capital strategy, and customer service. 
These are how government does business. The return on 
investment for basic management reform is multiple times higher 
than for what we spend on eliminating fraud, waste, abuse, and 
mismanagement. We still have to fight these problems, but we 
also have to focus on fundamental management reforms in the way 
that government does business. Also, we have to get both the 
Executive Branch and the Legislative Branch to look beyond the 
silos, to look above them, and to recognize that many of the 
challenges that these themes relate to transcend borders. They 
are both multi-jurisdictional and multi-geographic.
    Mr. Dodaro. Mr. Chairman, the area of technology gives a 
good example of why you need broader, more integrated 
approaches. For example, one issue that this Committee just 
reported out a bill on is computer security.
    In computer security, people can enter one agency's system 
and get into another agency's system. So one agency can be a 
weak link to being able to enter into other departments' and 
agencies' systems because there are trusted relationships 
between agencies. So each agency has to improve computer 
security themselves, but they also have to work together on an 
integrated basis across government to protect the sensitivity 
of records and to be able to provide assurances to the public.
    Also, there needs to be a broader look at how, in the 
digital age, the government needs to interact directly with 
citizens and provide services in a coordinated fashion. Each 
agency now is dealing with the public in a way that is trying 
to use technology effectively, but the government could be much 
more effective in an integrated basis where the public could 
enter into web-based applications that could easily transfer 
them to related departments and agencies rather than having to 
enter into each department and agency individually.
    So the need for integrated approaches across agencies is 
much more important now, and technology is also making it more 
urgent that, because of the rapid pace of change, government is 
more responsive. The whole question of sales on the internet, 
what to do about electronic commerce--all those issues are 
breaking down, as the Comptroller General said, barriers, and 
because those barriers are being broken down, the Federal 
Government cannot have its own barriers to problem-solving, and 
that is where we see the problem right now.
    Chairman Thompson. So we can really use technology to 
attack the cynicism problem to a certain extent, by being more 
responsive.
    Mr. Dodaro. I think that is integral.
    Chairman Thompson. One more broad general question, and 
then I will move on, and then maybe we can open it up and be a 
little more informal with some give and take.
    Are you familiar with the writings of Jonathan Rausch, 
``Demosclerosis,'' and he has a new one out--he makes the point 
on the broader issues that we talk about, the demographics and 
globalization and any of these major issues, that it is not as 
if we do not understand the nature of the problem. We really 
do. We really know that what you are saying about what is 
facing us is the truth. We have all this cynicism and desire 
for reform in the abstract, but when it comes down to 
specifically doing something, we are so big, and the government 
is so pervasive and has created all these constituent groups 
out there who descend on us to protect what we have given them 
every time we try to change anything. So you have a handful of 
people trying to change one little thing, and it is one of many 
things on their agenda--but you have a great number of people 
out there whom it affects, and it is everything to them, 
whether it be their subsidy or whatever. So that every time 
anybody tries to make a little change, you are running up 
against insurmountable odds, and therefore, nothing ever 
changes, and there is no movement for bigger government, but 
there is really no movement for smaller government, and 
everybody wants to do something about the demographic problem, 
but nobody wants to give up anything, even on trade issues. 
Everything you run into is strong vested interests on each 
side.
    We talk about the people problem here, whether it be 
employees or unions or whatever, even within the government. 
Therefore, we wind up never accomplishing anything in terms of 
change or reform. It is a pretty bleak picture that he lays 
out.
    What do you think about that philosophy and, if you think 
there is some validity to it, how might we break through it?
    Mr. Walker. There are a lot of vested interests, and 
whatever departments or agencies or programs or policies that 
exist, you have people who have interest in assuring that those 
are perpetuated one way or another.
    One of the things needed is a compelling reason to change. 
You have to educate people as to why the status quo is simply 
not acceptable, and therefore, change is imperative.
    Part of that, I believe, has to do with some of the 
challenges that we just talked about. Many of the real 
challenges that we are going to face might not be imminent 
today. We can pay Social Security benefits today, and we can 
pay Medicare benefits today. The infrastructure has not 
crumbled yet. There are a number of areas where we can get by 
today. On the other hand, we are going to have major problems 
in the future if we do not address these challenges.
    One thing we have to do is help people understand that the 
status quo is not acceptable. In some cases, quite frankly, it 
is not just members and people in the Executive Branch--it is 
the public, especially Generation Xers. They are, in my 
opinion, standing on the sidelines way too much when decisions 
are being made that will have major effects on their lives in 
the future.
    And as you properly pointed out, if some of these decisions 
are not made before 2011-2020 with regard to entitlement 
reform, it is going to be even tougher to make them then 
because of the political enfranchisement of certain groups.
    I believe that the one thing that we have not done that we 
can try, Mr. Chairman--and maybe a commission or something else 
would--is to help people understand that the status quo is not 
acceptable and that, therefore, we are going to need to make 
some changes.
    How do we best go about it? There will be winners and 
losers. It is going to require tough work, but if we are 
looking out for the greater good, not just for today but for 
tomorrow, it is something we need to do. It is something that I 
would say is more of a stewardship approach to issues rather 
than an ownership approach to issues, which has historically 
been the case.
    Gene, did you want to add to that?
    Mr. Dodaro. I think that once you convince people to 
change, the real important dynamic is in what framework do you 
decide to make changes. Right now, it is compartmentalized in 
the sense that we look at individual agencies and even within 
individual committees about how to attack problems, when a lot 
of times, the solutions transcend departments.
    Let us take food safety. We have identified a number of 
agencies that are involved with food safety, but they are 
deciding whether they are looking at inspecting meat or some 
other item; there is not a coordinated view. The same thing in 
terrorism. We have identified 40 different agencies that are 
making efforts to counter terrorism. So the framework for 
making decisions, which is part of the intent of establishing 
the Commission on Restructuring Government, is to look at new 
decisionmaking frameworks both within the Executive Branch, and 
I would think also from an oversight standpoint, from the 
congressional side.
    Chairman Thompson. That is one thing we hope this 
commission that we are introducing will do. Someone said that 
people are not willing to give up anything in order for another 
group to get something, but they would be willing to give up 
something for the benefit of their country if they are 
convinced that it is the latter and not the former. So it is up 
to us to articulate that distinction, I think is what you are 
saying.
    Mr. Walker. Yes--the collective best interest.
    Chairman Thompson. Thank you very much. Senator Lieberman.
    Senator Lieberman. Thanks, Mr. Chairman.
    Thanks, Mr. Walker, for a very stimulating testimony. It 
reminded me of what a colleague of mine in the Connecticut 
State Senate used to say to us occasionally, which is that you 
have taken us up onto the mountaintop to look at the green 
valleys below.
    So I am going to go up there for a moment myself and say 
that one of the thoughts that your testimony and your 
conversation with Senator Thompson evokes in me is the 
difficulty and the special obligation that certain people and 
institutions in government have to bring about change.
    In other words, the comparisons to the private sector are 
often too facile, but one thing--and it is apples and oranges, 
so it sometimes does not fit--but one thing that is a fact, 
certainly at a time like this of rapid change, and we have seen 
it all around us, is if you are not adapting, you are not 
applying the tools of the new technology, somebody else will, 
and you are going to lose your market, and therefore you are 
going to be in trouble and maybe have to close up shop.
    So that the market, while it is not a perfect mechanism--
and, as somebody else once said, it is a great mechanism, but 
it has no conscience--leave that aside, it does keep those who 
participate in it sharp and relevant.
    That is not automatically the case with government, because 
we are not subject to normal market mechanisms. Now, sometimes, 
of course, the people whom we serve, the taxpayers, rise up and 
push us to change. But it seems to me there is a special 
responsibility--and to put it another way, there is a special 
pressure on us in Congress who function in some ways as an 
elected board of directors of this vast and, as you said, most 
complicated entity/corporation in the world, and also on those 
like you who have this special oversight and mountaintop 
function to push us in these directions. Then we have to 
confront the power of vested interests which exist everywhere. 
People do not like to change, particularly when they are living 
off the change, but the marketplace and the private sector just 
forces those changes whether people like it or not. It is 
harder to do here.
    As Senator Voinovich said earlier from his experience in 
Ohio, and I can say the same for mine in Connecticut, I 
remember when I was State Senate majority leader, and we had a 
new governor in the mid-seventies, Governor Ella Grasso, and we 
had a budget deficit, and we had to do some tough things 
including raising taxes for a while, but we wanted to prove 
that we were efficient, and we had a reorganization of 
government effort, with a long list of agencies to be either 
reorganized or phased out. And over time, as the bill worked 
its way from committee to the floor, the list grew smaller and 
smaller.
    Chairman Thompson. How many departments did you wind up 
adding? [Laughter.]
    Senator Lieberman. Of course, this was so long ago that it 
is hard to recall, but I have a recollection that one of the 
few agencies was the American and Francophone Cultural 
Commission, which dealt with the support of Franco-American 
culture in Connecticut. I do not know how that ended up there. 
So that is the challenge we face, but you help us, and I think 
the commission that we are talking about will help us by 
creating a center of independent, nonpolitical--and I mean that 
not in a partisan sense, but in the sense of perhaps being too 
responsive to the interests and to point a way ahead.
    I do not know if you want to respond to that monologue, but 
I invite you to if you would like to.
    Mr. Walker. First, I think the commission can be one means 
to an end in trying to look at what government does. There have 
been models in the past where commissions have been effective, 
and there have been models in the past where they have not been 
effective. There were two Hoover Commissions. One of the Hoover 
Commissions focused on good government--how can government do 
what it does better. The other was really inherently more 
policy-focused and much more of a lightning rod.
    To the extent that the commission focuses on how government 
does what it does, that is a ``good government'' issue. It is 
more difficult to talk about what government does, which raises 
vested interests. However, the discussion is needed.
    I do not believe, however, that we should depend totally on 
the commission. There is a lot that can and should be done 
today. For example, Congress can engage in a much more 
constructive partnership with the GAO from an oversight 
perspective in addressing known challenges.
    For example, at least once a Congress or preferably once a 
year, this Committee could examine selected major departments 
and agencies or cross-governmental issues, which this Committee 
is particularly well-positioned to address, in the light of the 
results of our annual audits, the annual performance plans, GAO 
and other strategic plans, our high-risk list, our performance 
and accountability series, and major outstanding GAO 
recommendations. GAO could pull together a compendium of 
information that would provide a powerful basis for effective 
oversight that would focus on the important issues rather than 
necessarily the periodic failures of government that sometimes 
tend to be sensationalized.
    Senator Lieberman. I notice that in your testimony, you 
have laid out a thoughtful recommendation--and picking up on 
what you have just said--for greater government-wide planning 
in order to assure a more coordinated and effective strategy 
for dealing with serious problems. And when you mentioned that, 
you suggested that this Committee might play a role in 
identifying what you call ``cross-cutting performance concerns 
for priority congressional action.''
    What did you have in mind, a similar deal--how do you 
envision the Governmental Affairs Committee performing this 
function?
    Mr. Walker. For example, the Committe could examine issues 
that are inherently cross-cutting, for example, computer 
security in the area of technology, human capital strategy, and 
acquisition reform ensuring that there are effective strategic 
plans that are linked to human capital strategy, performance 
measurements and rewards. The Committee could focus on areas 
that are where you see not only cross-cutting, but where there 
is a linkage between several of them.
    In my view this Committee is uniquely positioned to address 
issues that cross government.
    Chairman Thompson. Computer security is one of those 
situations, I assume.
    Senator Lieberman. Computer security is one of those 
issues, and Mr. Dodaro, I wanted to thank you for giving me a 
segue. You talked about applying computer technology, and I am 
working on a bill on E-Government which I am going to start 
marketing to my colleagues to the left here soon and see if I 
can engage their interest. But that is another government-wide 
possibility which again is happening, obviously, with fantastic 
speed in the private sector. As I am sure you both know, it is 
happening in some government agencies with real creativity, but 
the performance here, as I am evaluating it as I go along, is 
quite mixed, and some agencies are really still way back in the 
20th century. That is how far back they are. They are not 
moving rapidly.
    So the notion here would be to put a bill in that would 
perhaps create some central initiating authority over E-
Government, somewhat like government security, and put pressure 
on agencies to update and to work on cross-government 
functions, in other words, to see if we could realize over the 
Net some of the things that we always talk about. For instance, 
when a business deals with government, isn't there a way to 
figure out how to go to one site and deal with a host of 
permits or regulations rather than having to shop all around? 
Obviously, E-Government allows for 24-hour government. My wife 
and daughter and even I occasionally are shopping late at 
night, long after the stores are closed. People could be 
relating to government long after--and to pick up a point the 
Chairman mentioned, we have the possibility here for a whole 
new generation to engage a much greater percentage of our 
citizenry in interacting with government, even interacting with 
more confidence and trust than has happened in the past. So I 
appreciate your comment, but I cut you off on something.
    Mr. Dodaro. Well, in terms of your question about what else 
we have in mind for this Committee, one involves the Government 
Performance and Results Act. In addition to requiring strategic 
and performance plans of each department and agency, there was 
a requirement for a government-wide performance plan to be 
submitted by OMB as part of the President's budget submission, 
which has been submitted, but there really was not any follow-
on mechanism that was put in place for congressional 
consultation and comment on that plan, as it was for the 
individual departments and agencies. That plan is organized now 
around major budget functions, which we thought was a 
reasonable start, but it needs to be put in a broader, cross-
cutting framework.
    One of the things that we had suggested was that this 
Committee consider taking aspects of that government-wide 
performance plan, with the support of GAO, and targeting and 
trying to set some performance targets for functions of 
government as well as individual programs. That would allow the 
opportunity to revisit the basic purpose of the programs, 
whether there was still a need for them; it would give this 
Committee the ability to bring people from different 
departments and agencies here to talk about the relationship 
between their various programs rather than just bringing up 
individual agencies one-by-one to justify their vested 
interests, as you point out.
    That will help create new incentives to substitute in part 
for the market test that you are talking about, because unless 
those new incentives are there, it is very difficult. And you 
put your finger on one of the most difficult problems that we 
continually face, and that is how to get substitute incentives 
for market discipline in government, and good oversight and 
broader oversight we think would be helpful in that regard.
    Senator Lieberman. Well-said.
    Let me ask one final general question. This really is an 
attempt to help us understand how to better utilize what you 
have suggested today. These graphs are very interesting and 
very helpful. This is one of the few documents I am actually 
going to take back with me and put on my desk, because it does 
point the way in a very concise form.
    But I am wondering--you have cited the six key themes with 
profound implications, and you have convinced me--but what do 
we do with them, then? In other words, take one of them and 
work it through. When you say these are the six key themes--
what, then? What should that lead us to do in relationship to 
our congressional, and particularly in this Committee our 
oversight responsibility for government operations and affairs? 
Could you run through it for me?
    Mr. Walker. We first have to ask ourselves what several of 
us must do. One of the things I would like to point out right 
now is that we issued just last week our first accountability 
report for the General Accounting Office. In the report, as you 
know, Senator Lieberman, we look at the whole government--
everything the government has done, is doing, or is thinking 
about doing anywhere in the world. This Committee has the 
ability to look at cross-governmental challenges as well. It is 
uniquely positioned to do so.
    We are reorganizing and realigning GAO, to try to recognize 
these themes, minimize the number of silos, minimize our layers 
of management and address a number of these challenges.
    OMB needs to do the same thing for the Executive Branch. 
They need to incorporate a number of themes, whether it be the 
six I identified or others that they think are appropriate for 
looking at these issues cross-government and developing 
performance standards that are focused on those themes.
    I suggest that this Committee needs to think about what it 
can do through oversight and other types of activities to 
encourage that and to make sure that agencies are taking those 
issues seriously. For example, I note that this Committee sent 
out letters to all the major departments and agencies 
commenting on their last performance plan and that it----
    Chairman Thompson. We are meeting with them agency-by-
agency now.
    Mr. Walker. Exactly. The letters were tailored, that is, 
customized for each agency. It was a bipartisan effort. The 
Committee is now bringing in agency officials to talk about the 
letters in a candid, constructive, and cooperative manner.
    All of us have things that we can and should do, in 
particular with regard to these cross-cutting challenges that 
face the government.
    Senator Lieberman. I know we could go on at length about 
this, and I want to yield to Senator Voinovich, but just 
looking at the first one--globalization. If you are telling 
us--and of course, I agree--that globalization is now a new 
reality, and you have some very powerful data in here--what 
should we do with that? What, then? If we acknowledge it is 
happening, and it is going to continue to happen and probably 
accelerate, what, then?
    Mr. Dodaro. There are certain targeted issues, for example, 
that we are beginning to look at. Take the issue of trade 
agreements. There are more than 300 trade agreements now that 
the United States is party to, and there are 17 different 
agencies that are responsible for monitoring compliance with 
those trade agreements, and that is expected to increase going 
forward.
    We are concerned about whether the government has the 
capacity to monitor collectively these trade agreements.
    Senator Lieberman. OK, so you think maybe there is too much 
overlap in those various agencies.
    Mr. Dodaro. There is overlap, but also looking at it from a 
government-wide perspective--is the Federal Government 
investing the proper resources; is it planning as an 
organizational entity? While each department is trying to plan 
for their role in monitoring these trade agreements, is the 
Federal Government collectively looking at the full set of 
requirements right now for monitoring the trade agreements 
going forward? That is one example.
    Another example could be some of the international 
organizations like the International Monetary Fund and the 
World Bank. Are we as a government comfortable with their 
position, their financial practices, and their roles looking at 
the full set of available tools?
    Mr. Walker. Senator Lieberman, you might want to take 
certain sub-issues under globalization and focus on what is 
being done to address them and make sure we do not have 
duplication, overlap, or gaps.
    Let me tell you one of the things that we have done in 
light of our strategic plan--and Chairman Thompson knows this 
because he participated in part of the session. I invited 12 of 
my colleagues, auditor generals from around the world, to GAO, 
and we used our strategic plan as a framework for discussion 
about mutual challenges that we face. In that room over 2\1/2\ 
days, we had 70 percent of global public expenditures 
represented--a very diverse group. We started identifying 
opportunities where we have shared challenges and where we can 
share successes. We also identified areas where we can share 
knowledge regarding data, experiences, practices, 
methodologies, and so forth.
    I suggest that one thing this Committee can do is to focus 
on the issues that are most important to you. You might get a 
start by focusing on a few issues and making progress on those 
few issues. By doing that, others may seek to emulate your 
efforts.
    Senator Lieberman. Thank you very much. You have both been 
very helpful.
    Chairman Thompson. Can I make just one small comment--and 
Senator Voinovich, I am sorry for taking so long to get to you. 
But let me make a suggestion with regard to your question, 
Senator Lieberman, with regard to what we do about these 
important issues.
    My suggestion would be that we spend more time on them. I 
was looking at the testimony of Virginia Thomas, Senior Fellow, 
Governmental Studies, at Heritage before the House Rules 
Subcommittee on Rules and Organization of the House just a few 
days ago. She had a footnote which referenced our Committee 
Report. I had not picked up on this particular aspect of it--
the Biennial Budgeting and Appropriations Act Report.
    She says here that, according to the report, ``At least 
half of all Senate roll call votes for each year since 1991 
relate to the annual budget. In 1996, 73 percent of all roll 
call votes were budget-related.''
    Senator Lieberman. And I might add, as we all know, that a 
lot of them--how can I put this gracefully--the budget votes 
often become an occasion for trotting out your favorite idea 
just to get a vote on it and a little exposure, or indulging in 
partisan combat, so they become vehicles. In other words, that 
is an extraordinary percentage, and a lot of that is just that 
they become an occasion for mischief--or advocacy--however you 
view it, and maybe often a little of both.
    Chairman Thompson. It consumes our every waking hour for 
big portions of the year, and plotting and scheming and 
reacting to--and not just the voting part of it.
    Senator Voinovich.
    Senator Voinovich. Thank you, Mr. Chairman.
    I would like to stay on the mountaintop with Senator 
Lieberman for a moment. First of all, as a relative newcomer to 
this group, I would like to ask for a GAO study on whether 
Congress is organized to deal with the challenges, 
opportunities, and problems of the 21st Century.
    Mr. Walker. We do not need a study, Senator.
    Senator Voinovich. If you look at the committees, we have 
as much overlap in our committees and everything else--in fact, 
it is worse than the Federal Government--starting with our own 
situation. And logic would dictate that at the beginning of the 
2-year session, the most wonderful thing would be to have the 
leaders spend time on a bipartisan basis identifying five or 
six things that they should tackle during the Congress that are 
the most important to the American people, so we do not get off 
on a lot of these ``flavor of the month'' or ``flavor of the 
day'' things that we spend so much time on and ignore all these 
other things that really need to be done. I am really sincere 
about that--are we organized properly to get the job done.
    Senator Thompson brought up the budget. Again, it seems to 
me that ought to be something we should do, and it should be a 
lay-up shot. God knows if we will ever get to it this year 
because of everything else that we are dealing with.
    That is one observation, and I am really sincere about 
that. It would be interesting, and maybe we can talk to the 
leadership about whether we are organized properly. We are 
starting a new century with a lot of different challenges than 
we had in the last century--can we handle them?
    The other thing, when you start talking about the big 
picture, is unmet needs. We are talking about reducing taxes 
and spending more money on new programs, and we really need to 
have someone sit down and talk about what are the unmet needs. 
You can start off with technology, and you can talk about the 
human capital crisis, you can talk about infrastructure needs. 
In another committee I am on, we have $37 billion worth of 
projects that have either design or money into them that are 
funded by the Energy and Water Appropriations Subcommittee, and 
we only spend about $1.4 billion a year to fund those. So there 
is all this stuff stacked up out there that we ignore.
    The other thing is what is the role of the Federal 
Government. People constantly come to me, and I am sure they 
come to you also, and they say we want an increase in this, or 
we want you to do that, and I stop them, and I say hold on a 
minute. We are having a tough time taking care of the things 
that we are supposed to be taking care of.
    The next thing they say--and I think this is something that 
needs to be unmasked--is you have this surplus.
    And then I say to them if you look at the numbers, in 10 
years, 70 to 73 percent of the money is going to be used for 
entitlements. That means that that is all that is left to deal 
with nondiscretionary, defense, and paying the interest--and 
that gets into another favorite subject of mine, and that is to 
take the money we have and get the interest cost down, because 
if we do not get the interest cost down, we are not going to 
have money for some of these other programs.
    And then I ask them what the Federal Government should be 
doing. In education, we are spending billions of dollars, which 
is an important issue here, at the top of the polls, but what 
role do we play in that issue?
    I am talking about these bigger things, and the public 
needs to be educated about them, and that should start to color 
the judgments that we make. If the public really understood the 
problems we face, I think it would be easier for us to deal 
with those problems.
    For example, on the surplus, I happen to believe that we 
have to reform Social Security. The thing that frustrates me is 
that when the Social Security surplus comes in, we either use 
it to reduce the debt or spend it. Most people think you can 
put it in a box and lock it up like they do with their 401(k)s. 
But the fact is that if we are going to deal with Social 
Security, in all probability we are going to have to allow 
people to keep a lot more of their money. In other words, they 
will put it in an account, but they will not give it to us; if 
they do not give it to us, we cannot use it to reduce the 
national debt or spend it.
    These are some of the fundamental things that I think need 
to be shared, the big picture things, because you are right, we 
deal with this and that, but so often we do not step back from 
where we are. I think this is a tremendous opportunity.
    It is the same way with this Committee, Mr. Chairman. We 
know there is a lot of stuff out there--my gosh, I hold 
hearings, you hold hearings--but it would be great to work with 
Mr. Walker and sit down and set some priorities and say these 
are the priorities that we are going to work on, and maybe 
there will only be three of them, but we are going to saw away 
at these things--and in addition to that, the people who are 
dealing with us know that we are going to saw away; it is not 
one of these deals where we come in and have a hearing and 
everybody says ``I understand,'' and they leave, and nothing 
happens.
    We could set the example. We have all these great reports. 
The question is where do we focus our attention. And I think 
that would be a challenge, and you are right that if we could 
do that in this Committee, maybe we could set an example for 
some other committees doing oversight and spend our time where 
we are going to get the biggest return on the expenditure of 
our effort.
    Mr. Walker. Senator, several comments. First, there are 
several reasons why we did our strategic plan. One is that--as 
you know, we are not covered by the Results Act--we voluntarily 
did it because we believe we should lead by example. We believe 
it makes business sense. We did it because the GAO needs to 
look at things differently, at how we can best serve our 
client, the Congress; best serve the country; and, recognize 
the reality that it is a whole new ball game and that, more and 
more, we have to look longer, more broadly, more integrated, 
cross-functionally in order to address challenges.
    Frankly, I am hoping that the Congress will see this as a 
tool for the Congress. In many ways, since we are a Legislative 
Branch agency, this is something that we have the ability to do 
that the Congress may not have the ability to do itself. It can 
not only help us but it might be able to help the Congress 
focus on more strategic issues. Since 90 percent-plus of the 
work that we do is based on either congressional mandate or 
congressional request, hopefully this document will help to 
reform some of those mandates and requests such that we are 
asked to do work in the areas where we can make the most 
difference.
    I think it is also important to look at how you organize. 
We are looking at how we are organized because we can control 
that. The Congress may need to ask itself, and probably should 
ask itself, if it is organized to effectively address these 
issues in the future. That discussion should be bipartisan and 
bicameral, before we would get involved.
    The Executive Branch needs to do the same thing. Is the 
Executive Branch organized in a manner that makes sense for the 
future? We talk about unmet wants. I think it is more important 
to focus on unmet needs. I also think it is important to focus 
on the baseline, because part of the problem is that you are 
presented constantly with: Well, we want to keep everything we 
have already got, but we have all these unmet needs. Therefore, 
we are just talking about adding. Although we have the surplus, 
it may or may not happen in the longer term, and it is going to 
go away eventually because of the demographic challenges. 
Therefore, we need to focus not just on the incremental needs. 
We have to focus on the baseline. In many cases, the baseline 
made a lot of sense at the time those decisions were made--20 
years, 40 years, 60 years ago. One of the greatest debates we 
need to engage in right now is not only on the role of 
government but the fundamental difference between wants, needs, 
and what we can afford.
    Let me give you two examples, one on the domestic side and 
one on the defense side. On the domestic side, we are spending 
a tremendous amount of money on health care. It is not just 
Medicare, not just Medicaid, and not just veterans health. It 
is also tax incentives which involves a tremendous amount of 
money. Also, there are regulatory burdens and costs associated 
with health care. Yet, health care costs are on an ever-
charging path upward.
    Chairman Thompson. And we are talking about adding new 
entitlements.
    Mr. Walker. And we are talking about possibly adding to it.
    We need to recognize that wants in health care are 
unlimited. Everybody wants as much as they can get, and they 
prefer to pay little or nothing for it.
    Needs are very different. People need to have access to 
health care at group rates, arguably. People arguably need to 
be protected against financial ruin due to an unexpected 
catastrophic illness. They may want more than that. They need 
inoculations for their children and so on. There are certain 
needs. So are we focusing on the needs? What about the wants, 
how much we can afford, and what should the relative priorities 
be?
    Another example is provided by weapons systems. What do we 
need versus what we want to assure our security? We have the 
technological ability, if given the money and the time, to do 
just about whatever we want; but, do we need all the different 
platforms that we are building? Also, whom are we going to use 
them against? What is the price from the standpoint of 
readiness, quality of life, and other considerations, greater 
needs versus wants?
    I think these are very serious debates. I would agree with 
you that this Committee could take a few issues and say we want 
to focus on--for example, E-Government or human capital. You 
could pick a handful of issues that cross boundaries that 
relate to this strategic plan to lead by example and make a 
difference. Somebody has got to start.
    Chairman Thompson. Tell me your thoughts about the Results 
Act and where we stand now--not our hopes and aspirations and 
possibilities, but realistically, where are we? Performance 
plans are coming out on March 31. The initial plans that came 
out were not overwhelming, to say the least. Many of the real 
problem areas, the high-risk areas, were not even addressed.
    Where do you think we are?
    Mr. Walker. First, we have had mixed reviews with regard to 
implementation of GPRA. On one hand, you have agencies like the 
Social Security Administration and the Department of 
Transportation that in our view are two of the better agencies 
with regard to taking GPRA seriously and focusing on these 
plans.
    On the other hand, there are others like HHS, State and DOD 
that apparently are not taking it as seriously. It is more of 
an annual paperwork exercise. It should be a foundation for how 
they do business and how they hold people accountable for 
results.
    I think we do have an opportunity. I mentioned our 
accountability report. Others will have to be issuing theirs 
this week. This provides us with a new data source, new 
information that could be a valuable tool in trying to help 
focus congressional oversight efforts and OMB activities, etc.
    I think that ultimately, in addition to trying to make sure 
the Results Act works the way it is intended, we are going to 
have to link it to institutional, team, and individual 
performance measures through the human capital area.
    People do what they are measured on and what they are 
evaluated on. Based on my experiences, we have major problems 
in the government as it relates to human capital, in particular 
with regard to performance management. If we have good plans 
focused on the right things, with meaningful measures, and can 
link that into how people are measured and rewarded to some 
degree, then you will really start getting results.
    Chairman Thompson. You talk about the people and the 
personnel problem, and those are obviously points well-taken, 
but at the heart of that, there is a management problem. When 
we looked at the computer situation which we just passed out of 
Committee, GAO has been telling us for years and years that at 
its heart, it is a management problem. It is not as if we did 
not have the technical capability or, presumably, the right 
people in place. But we have not had anybody cracking the whip, 
and that gets to another problem. OMB has done a terrible job, 
in my opinion, with regard to management issues. All the 
emphasis is on the budget now, and there is just no emphasis on 
the management part. We have people come up here who want to go 
over there, and instead of a realistic plan to address the 
problems, they do not even acknowledge there is one. Everything 
is public relations and touting so-called successes, and nobody 
is cracking the whip, and there is no accountability with 
regard to all this.
    So that sure, we have a people problem, but it is not just 
the technical aspect of it; it has to do with management and 
motivation--and I do not know what in the world you do about 
that. Hopefully, the next administration, whichever it is, will 
do a better job of addressing these management issues.
    Senator Voinovich. Mr. Chairman, just to build on what you 
are talking about, the issue is what is the structure within 
the government that is necessary for government to start paying 
attention to the human capital needs that are so important to 
our future--or, let us say, from a technological, management 
information, what vehicle is in place to deal with that. I 
grappled with that as Governor of Ohio, because the thing was 
all over the place. How do you organize your management 
information within the framework of government so that it 
becomes a priority that cuts across all the departments, and 
how do you get coordination among all of them?
    My observation, just building on what you have said, is 
that it does not appear that it is being done today, and the 
issue is how do you get it done. Is it OMB, is it personnel, or 
do you have some particular group that just works on this day 
in and day out?
    Mr. Walker. First, it starts at the top. In any 
organization, whether it is public sector, private sector or 
whatever, you have to have the commitment of the person at the 
top in order to get it done.
    Then, it is a matter of who ends up leading that effort. 
OMB is O, big B, little M, but it has been that way for a 
while. They do not have nearly as many resources focused on the 
``M'' as on the ``B.'' They need more attention, more focus, 
and more resources focused on the ``M.''.
    Chairman Thompson. Kind of like us, as I think about it.
    Mr. Walker. They also have some open slots that they need 
to fill. They need more focus, especially with regard to cross-
cutting issues. Now, they have done some things. They have the 
Presidential Management Objectives and the Priority Management 
Objectives. Some of those are cross-cutting, and many relate to 
our high-risk list. However, the issue of management needs to 
be much higher on the agenda. There needs to be much more 
concerted focus across government. Even in the area of human 
capital, while OPM can help, OMB has got to be involved. They 
have got to be involved in a major way because they tie 
directly to the President.
    Chairman Thompson. No question about it.
    One more thing specifically. I know we have had some 
discussions about this that have been ongoing, but I want you 
to work with us and majority/minority staff, and let us really 
give some attention--when these reports come out on March 31, 
let us give some attention to what we do now. This may be our 
last hope for a while, this Results Act. I have mixed feelings 
about it. We have been passing laws around here for a long 
time, and I guess some of them have done some good, and I am a 
little bit skeptical about it, but some people think that we 
really have an opportunity with the Results Act to make a 
difference. And it is a part of an almost global movement to 
become more results-oriented. Everybody is kind of wising up to 
the fact that you have got to look at performance. So we have 
to assume that there is a real possibility there.
    Now we need to figure out how do we bring these agencies 
that are coming in with these bogus documents and plans--what 
do we do about them; how do we get those plans up and running? 
They have the audacity to come in here, and they do not even 
address some of the high-risk list areas. What do we do about 
that?
    How do we integrate what we are getting with the 
appropriations process? How do we make sure that all this is--
and I know that in one way or another, it will be brought to 
the attention of the appropriators, but there needs to be some 
interaction, it seems to me, between this Committee and the 
appropriators. There needs to be a procedure and a mechanism, I 
think--an annual series of hearings where we choose certain 
agencies to highlight or put the spotlight on certainly would 
be a part of that. But how do we set up a procedure where we 
can take what we are getting, go backward and improve and 
encourage and cajole when necessary to get the input right, 
because if it is garbage in, it is going to be garbage out. 
These people are essentially, lest we forget, judging 
themselves, and we are going to have to ride herd on that, or 
else all the grades are going to be ``A''. And then, how do we 
go forward and make sure there is some accountability and make 
sure there are some results for bad performance--budgetary or 
otherwise--and on a systematic basis where we have an 
integrated approach to dealing with this.
    Mr. Walker. Mr. Chairman, we would be happy to work with 
this Committee on a bipartisan basis to try to do that. You 
have mentioned possibly holding hearings once a year on several 
issues or with regard to certain departments or agencies or 
programs, which is important. It would be important to make 
sure that those are balanced, including not just the 
departments and agencies that are not doing well, but also 
maybe some that are doing well, so that we can share some best 
practices.
    Chairman Thompson. And how much time should we 
realistically be devoting to that in terms of public hearings? 
Our staff is already meeting with these agencies one-on-one. 
What kind of things--just really getting down into the 
details--what kinds of things should we be looking for? What 
should we be doing from a staffing standpoint? What should we 
be issuing reports on versus what should we be holding hearings 
on? We cannot hold hearings all the time on just one issue.
    Mr. Walker. I understand. We would be happy to work with 
you to come up with a proposed approach that would make sense 
for this Committee as well as for us.
    Chairman Thompson. I would think that a good deal of our 
effort in the beginning stages of this is going to have to be 
going back to some of these agencies and pointing out to them 
where their plans are deficient and their methodology is 
deficient.
    Mr. Dodaro. In that regard, Mr. Chairman, the meetings 
which have been held so far on a bipartisan basis are really 
resonating with the agencies. Because they are in-depth, they 
are bringing all the major management challenges together, and 
there is follow-through, and as a result, agencies see that the 
Committee is serious about these issues. That is one of the 
incentives that substitutes for market tests in the government 
is really sustained follow-through. That is very important.
    Mr. Walker. What you may want to do as well, Mr. Chairman, 
piggybacking on that bipartisan initiative that seems to be 
working fairly well so far, is to pick some examples out of 
that effort. You may want to pick one or two good examples of 
departments or agencies that are doing a great job.
    Senator Lieberman. That is a great idea.
    Mr. Walker. And pick one or two examples where they are not 
taking it seriously. Call them up on a targeted basis. It is 
balanced then. You are talking about some that are doing a 
better job and how are they going about it and why are they 
doing a better job, and yet you are talking about some that are 
not.
    Senator Lieberman. Maybe we ought to ask you to award some 
gold stars as well as noting where the high-risk agencies are, 
to say who is performing well. I remember once when your 
predecessor was here, he gave us his testimony on the high-risk 
agencies, and I think that has been very helpful progress. And 
I agree with you--sometimes I get frustrated because I see the 
same agencies appearing--but on the other hand, as you said in 
your last high-risk report in January of last year, overall, 
agencies are taking the problem seriously and making progress 
to correct the problems.
    But I remember asking him was anybody really standing out, 
and at that time, Mr. Bowsher said the U.S. Army he thought had 
been superb. I guess the answer would be different today.
    Mr. Walker. Yes. Times change.
    Senator Lieberman. It is a little bit like the effect of 
the Baldridge Prize for private sector success in innovation. 
Maybe we ought to be giving out some blue ribbons as well.
    Mr. Walker. Senator, one of the things that we really try 
to do in going about doing our work is to follow our three core 
values of accountability, integrity and reliability. 
Accountability is what we do; integrity is how we do it; 
reliability is how we want it to be received. Moreover, how we 
do our work directly relates to what you are talking about. We 
want to be professional, objective, fact-based, nonpartisan, 
nonideological, fair, and balanced. If somebody is making 
progress, we want to acknowledge that. If somebody has created 
a best practice, we want to share that.
    I believe that that is important. In addition to maximizing 
the performance and assuring the accountability of government, 
we need to be concerned about public trust in government. If we 
do not provide a more balanced report card on what these 
agencies are doing and how they are doing, and if all we do is 
focus on the negative, it is no wonder that the public does not 
have much respect or confidence in their government.
    Senator Lieberman. That is a good point.
    Mr. Walker. So we need to achieve results, but we need to 
be constructive about how we go about it. We need to hold 
people accountable where they need to be held accountable.
    Senator Lieberman. You are right. A part of 
accountability--and I am dealing with this as I work with a 
bill on education--is to be prepared to sanction those who are 
performing below generally-embraced standards, but also to in 
some sense reward those who are performing not just at the 
standards but well above them, to set models for both.
    Mr. Walker. Let me give you one example of where there has 
been a fundamental breakdown in accountability, and that is in 
weapon systems development and acquisition. The Defense 
Department does not follow commercial best practices. We are 
doing some work to help them understand what they are so that 
hopefully they will. But the result of not following commercial 
best practices is wasted money, compromised performance 
standards, and questionable cost-benefit on a number of 
platforms.
    Yet, they assign people to these projects for 2 or 3 years, 
and by the time it blows up, you have diffuse accountability. 
In many cases, nobody is held accountable. In fact, people have 
punched tickets and have gotten promoted because they have 
punched tickets, because they have been through this particular 
developmental effort.
    That is one example. There are many others that exist. What 
we are trying to do there is help them understand what 
commercial best practices are. I suggest that the Congress is 
going to have to decide whether they ought to be required 
rather than encouraged to follow these practices, given the 
stakes and the amount of funds involved.
    Senator Lieberman. That is a very good example.
    Mr. Chairman, if I may, I was really struck by the chart 
here showing the distribution of Federal spending. I am on the 
Armed Services Committee, and this really does show how defense 
spending has declined dramatically as a percentage of overall 
outlays even while our responsibilities have grown. So there is 
a strong case to be made on this graphic for more defense 
spending--but that is not the end of it. Obviously, you have 
got to spend smart. I am a big supporter of the Pentagon, but 
that is the largest single organization in the world, a subpart 
of the U.S. Government, and there are lots of ways in which 
they could be spending more smartly. So your work there is 
very, very important and very helpful.
    Chairman Thompson. You need to keep telling us, too, what 
your own manpower needs are. I know that sometimes, there has 
been an issue raised as to whether or not you are being 
overtaxed by us, some of your folks, in terms of trying to get 
some of this information on a timely basis.
    The other thing I would suggest is that you have a fine 
line to walk, and I think you do it well, in being nonpartisan 
and being optimistic where things merit it. That is a problem 
that we have as Members and as a Committee. Always talking 
about the negative, you increase the cynicism. But you are not 
going to do anything about the cynicism until you solve the 
problem, and you are not going to solve the problem until you 
have some accountability for those who are not doing the job.
    I would encourage you--you are always very frank, but in 
some of the reports that I have seen, it is a little bit like, 
``on the one hand this, on the one hand that,'' and you have an 
egregious situation there that you know the writer of the 
report knows is an egregious situation but will not say it. 
Where the facts merit it, where we have a problem, bite the 
bullet--but where you do not have a problem, my goodness, if 
you can come up here and praise some people, we will bring them 
up here and shine a spotlight on them and use them to embarrass 
the others. We are not just trying to be negative. But where 
you have a real problem--just like you were talking about with 
the weapons acquisition thing--that just says it; that is just 
the way it is--where it is clear, encourage your people to call 
it like it is and be able to justify it when you come up here.
    It is a fine line that you have to walk, but we really have 
to do something to break through this massive resistance to 
change that we all know about.
    One final thing. You were talking about our people and our 
personnel problem and the downsizing that we have seen in terms 
of numbers. Of course, we also know that a part of that has to 
do with the military downsizing. We also know that the numbers 
are difficult to track because we have outsourced more and more 
stuff. We have a shadow government now of contractors who are 
doing work that Federal employees used to be doing.
    What is the significance of that? Are we hurting ourselves 
by doing that? Are we going in that direction so we can all 
point toward the fact that we are downsizing government, or is 
it based on a need that we have to move in that direction?
    What have been the consequences of these things?
    Mr. Walker. Clearly, there was some need, but the need 
should be based on a considered analysis, and that considered 
analysis should be done on an agency-by-agency basis. 
Otherwise, you end up having a circumstance where the people 
who do a good job get penalized, and the people who do not do a 
good job maybe get off lightly.
    As I mentioned before, government has been downsized 
significantly, but in some cases, it is a matter of who is 
doing the work. It is being done by the private sector through 
contracting rather than through full-time equivalents or 
employees of the Federal Government. I think one of the 
challenges that we have there is that even if you are going to 
outsource a function, you cannot forget about your 
responsibilities to the public. You have to have the skills 
internally that can manage cost and quality, and in some cases, 
the agencies have not retained the skills internally to manage 
the cost and quality of the contractors.
    In addition, we face a situation where a very significant 
percentage of the Federal work force is eligible to retire 
within the next 5 years. We have related succession planning 
challenges and challenges with regard to skills imbalances that 
exist in certain departments and agencies. I think we need to 
start addressing those.
    You know that we have asked for legislation in the case of 
GAO, to help us be able to more effectively meet Congress' 
needs and the needs of the American people within existing 
resource levels by giving us more flexibility, while protecting 
against abuse of individuals, which is incredibly important.
    Like any other agency that is a professional services firm, 
we have to be able to make more decisions based on skills, 
knowledge, and performance. That is the foundation for making 
sound decisions while providing protections against abuse as it 
relates to individuals.
    So this is a very important area, Mr. Chairman, not just 
for GAO, but for the government, and we are hoping that you all 
will help us to help you.
    Chairman Thompson. Thank you very much. This has been 
extremely helpful, and we look forward to working with you on 
these problems.
    The record will remain open for a week after the close of 
the hearing for any further submissions.
    Mr. Walker. Thank you, Mr. Chairman.
    Chairman Thompson. We are adjourned.
    [Whereupon, at 12:35 p.m., the Committee was adjourned.]
                            A P P E N D I X

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