[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                 TREASURY, POSTAL SERVICE, AND GENERAL

                     GOVERNMENT APPROPRIATIONS FOR

                            FISCAL YEAR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT 
                             APPROPRIATIONS
                ERNEST J. ISTOOK, Jr., Oklahoma, Chairman
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 ANNE M. NORTHUP, Kentucky           CARRIE P. MEEK, Florida
 JOHN E. SUNUNU, New Hampshire       DAVID E. PRICE, North Carolina
 JOHN E. PETERSON, Pennsylvania      STEVEN R. ROTHMAN, New Jersey
 TODD TIAHRT, Kansas                 PETER J. VISCLOSKY, Indiana   
 JOHN E. SWEENEY, New York
 DON SHERWOOD, Pennsylvania         
                          
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Michelle Mrdeza, Jeff Ashford, Kurt Dodd, Walter Hearne, and Tammy 
                                Hughes,
                            Staff Assistants
                                ________
                                 PART 4

                          INDEPENDENT AGENCIES
                                                                   Page
 Federal Election Commission......................................    1
 General Services Administration..................................  121
 National Archives and Records Administration.....................  503
 Office of Personnel Management...................................  669
 Committee for Purchase From People Who Are Blind or Severely 
Disabled..........................................................  941
 Federal Labor Relations Authority................................  965
 Merit Systems Protection Board................................... 1013
 Office of Government Ethics...................................... 1031
 Office of Inspector General, OPM................................. 1105
 Office of Special Counsel........................................ 1111
 United States Tax Court.......................................... 1129
                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 81-599                     WASHINGTON : 2002





                      COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New York
 ZACH WAMP, Tennessee                LUCILLE ROYBAL-ALLARD, California
 TOM LATHAM, Iowa                    SAM FARR, California
 ANNE M. NORTHUP, Kentucky           JESSE L. JACKSON, Jr., Illinois
 ROBERT B. ADERHOLT, Alabama         CAROLYN C. KILPATRICK, Michigan
 JO ANN EMERSON, Missouri            ALLEN BOYD, Florida
 JOHN E. SUNUNU, New Hampshire       CHAKA FATTAH, Pennsylvania
 KAY GRANGER, Texas                  STEVEN R. ROTHMAN, New Jersey    
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     
   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
TREASURY, POSTAL SERVICE AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2003

                              ----------                              

                                         Wednesday, March 13, 2002.

                    GENERAL SERVICES ADMINISTRATION

                               WITNESSES

STEPHEN A. PERRY, ADMINISTRATOR, GSA
JOSEPH MORAVEC, COMMISSIONER, PUBLIC BUILDINGS SERVICE, GSA
SANDRA N. BATES, COMMISSIONER, FEDERAL TECHNOLOGY SERVICE, GSA

                      Chairman's Opening Statement

    Mr. Istook [presiding]. The subcommittee will come to 
order.
    This morning we are happy to welcome Mr. Stephen Perry, the 
Administrator of the General Services Administration, for his 
first appearance before this Committee.
    We are happy you are here. I want to thank you again, 
especially, for attending the groundbreaking of the new federal 
campus in Oklahoma City recently. And everyone, and I 
especially, were happy to have you there.
    We look forward, of course, to your testimony today about 
the budget request for fiscal year 2003 on GSA. Obviously there 
is a great many directions that we can go because GSA has such 
a broad scope. The budget request consists of $276 million for 
the Federal Buildings Fund, $247 million for other accounts as 
direct appropriations. But for the Federal Buildings Fund, 
there is obligational authority exceeding $6.8 billion, and 
total obligation with revolving funds close to $19 billion. 
Obviously a major undertaking that you have with GSA.
    Another financial measure, of course, is the related 
financial transactions that are expected to reach almost $76 
billion this fiscal year. So GSA extends its reach into just 
about every aspect of the federal government, as well as 
touching on a great amount of the private sector.
    I know many of the issues are touched upon in your written 
testimony, including the Federal Buildings Fund, courthouse 
construction. Repairs and alterations are an immense issue, I 
am aware, keeping up with the quality of the federal office 
space.
    And I want to make a note that I am pleased that GSA has 
formed very strong working relations with building owners and 
the real estate industry. And I am personally pleased, and I 
believe the committee is also, with the cooperation between GSA 
and those groups to make sure that there is fair and reasonable 
telecommunications access for federal tenants. And I appreciate 
the position the GSA has taken on that.
    Your testimony also, I know, deals a lot with e-
government--major funding requests for increasing on the 
Electronic Government Fund. New citizen service initiatives; 
computer security as a main topic, with the concern regarding 
homeland security, as well as GSA's ability to adjust and to 
help people make the adjustments required because of the attack 
on the World Trade Center and the recovery and restoration of 
facilities after that.
    So computer security, security of people, security of 
property, are key components of homeland security. And we are 
glad that GSA is diligent in looking at its role in that.
    That is going to conclude my opening remarks.
    Mr. Perry, before your testimony, of course, we would like 
to recognize Mr. Hoyer, the ranking member.

                      Mr. Hoyer Opening Statement

    Mr. Hoyer. Thank you very much, Mr. Chairman.
    I want to join the chairman, Mr. Perry, in welcoming you to 
our committee. We had the opportunity to meet in my office; I 
appreciate your coming by.
    You have an opportunity and a challenge in front of you. I 
am going to talk a little bit about the challenge, which 
usually boils down to dollars in terms of what we can do.

                       RECOGNITION OF BILL EARLY

    Before I do that, I regret that Bill Early is not here. It 
is my understanding that he is coming back from Europe. Your 
chief financial officer and I have worked together for 20 years 
on the GSA budget and on investing in America's infrastructure. 
He will be retiring, as I understand it, next month.
    Bill has been your budget director since 1979 and chief 
financial officer since 1999. He has provided a tremendous 
service, in my opinion, to the federal government, the General 
Services Administration, and frankly to this committee as well. 
He has also been a great friend to me, and we relied on his 
advice and counsel on what needed to be done and how we could 
do it.
    I want to know--I want you to pass along to him, if you 
will, that he is going to be missed by all of us on both sides 
of the aisle. He was not a partisan official, as you know, but 
he was a very conscientious, honest person of great ability of 
which all his colleagues at GSA can be very proud.
    Mr. Perry, you are presenting a budget request that 
provides for, as the chairman pointed out, $18.884 billion in 
total obligations connected to its revolving fund. However, the 
budget request calls for $524 million in direct appropriations.

                        COURTHOUSE CONSTRUCTION

    $260 million is requested for site and design related to 
new courthouses. We continue to fall behind with this program, 
and it is costing American taxpayers a lot of money. It is, as 
well, costing us in terms of the handling of cases in a timely 
fashion. It is also, in this era of security, posing a very 
substantial security challenge to us.
    This request that you have presented covers the fiscal year 
2002 priorities not funded last year. And we were behind last 
year, as we were behind the year before that, as we were behind 
the year before that.
    Since fiscal year 1996, when the Judiciary started 
approving prioritized five-year courthouse project plans, it 
has received $1.974 billion in appropriations for courthouse 
construction. That is a lot of money. It is, however, $2.1 
billion--in other words, less than 50 percent than you 
requested. As a result, the cost of building these 
courthouses--and I do not have a figure off the top of my 
head--is going to be hundreds of millions of dollars more, 
period.
    No one doubts the need for these facilities. America wants 
justice; America wants courts accessible to resolve conflicts. 
That is how we do it in a democracy, as opposed to guns. And we 
are not providing the infrastructure to do it. Had funding been 
available sooner, more than 47 projects could have been funded 
by now.

                          CENSUS CONSTRUCTION

    Your budget also includes $177 million to construct the 
first of two new Census buildings. I want to applaud you for 
that. The current Census buildings that we have hundreds--I am 
not sure of the complement of employees in those two 
buildings--how many?--5,000 were built for World War II--
temporary facilities. Awful infrastructure and unhealthy 
environment and clearly not a facility in which you can expect 
people to perform at their best.
    It is always appropriate to do the right thing, and we are 
proceeding on that. Hopefully, not only will that funding 
survive, but we will make sure that we continue that project 
along as quickly as it can be accomplished within the framework 
of your responsibilities.

                            FDA CONSTRUCTION

    The funding level, however, for another important project 
in this region is not so good. I am concerned with the level 
requested for the Food and Drug Administration, consolidation 
at White Oak, Maryland. This is not in my district; it is 
adjacent to my district.
    We are woefully behind what the first Bush administration 
projected we should do, what the Clinton administration 
projected we should do, and, as far as I know--and you could 
comment on this at some point in time--what the GSA and FDA 
presently think need to be done.
    So I do not think this is a partisan issue. This is another 
question, are we going to construct infrastructure consistent 
with both sound fiscal policy, and employee and objective 
policy?
    The design for phase three of this project was funded at $9 
million. It appears that construction funding for phase three 
did not fit into OMB's overall budget number for GSA.
    Again, this sounds very good, but nobody in the 
administration, nobody in Congress doubts that we are going to 
do this project. Why? Because we will save, over 20 years, 
hundreds of millions of dollars again, because we are now in 
leased space all over the Washington region--a very ineffective 
way to operate the agency and also a more expensive way to 
operate the agency.
    So not only are we going to get better infrastructure, 
better working conditions, but we are going to save money. By 
delaying it, we undermine all three of those objectives.
    In addition, Mr. Chairman, I would like to include that 
Betsy Bretz, who is the chairman of Labquest, who has been a 
citizens' group--sometimes you have a citizens' group concerned 
about more traffic, more personnel, more this, that and the 
other, and so you have to overcome opposition. In this case, 
the citizens are very much in favor of it.
    Ms. Bretz, who is in the audience today, has done an 
extraordinary job on this.
    I would like to include at this point in time in the record 
not only a letter that she wrote to me on March 8, but also 
some pictures which show the current conditions of some of the 
lease space for FDA around the country, if there is no 
objection, Mr. Chairman.
    Unfortunately, delaying this project will only end up being 
more costly, as I have said. In addition, the horrible 
conditions of existing facilities are not getting better.

                        REPAIRS AND ALTERATIONS

    I am pleased, on the other hand, to see that $986 million 
is requested for the repairs and alterations program. Again, as 
this committee knows, GAO recently assessed the existing 
backlog of work at our federal facilities to be nearly $4 
billion. That is in maintenance work that is not being done. As 
facilities deteriorate, again, what does that mean? It means it 
is more expensive in the long run either to replace or to fix.
    Finally, I look forward to hearing more about your 
immediate needs for security at our federal facilities, Mr. 
Perry. Last year you requested $200 million to address security 
concerns, yet $126 million was provided. I do not know how you 
made up that gap or what security needs havegone unmet. I would 
like to hear. I would like to hear more about your plans to address the 
security issues and if the current level of funding is sufficient.
    Mr. Chairman, I know you have given me a longer time than I 
usually take, but this is, I think, a very critical 
responsibility of this committee to make sure that our 
colleagues and the citizens know that the cost of failing to 
invest both in courthouses and other infrastructure, whether it 
is at Census, FDA or others, what the costs of deferring means 
to the taxpayers of projects that in a bipartisan--many 
administrations have agreed need to be done.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you.
    Mr. Perry, it is a practice to administer the oath to 
witnesses.
    Do you solemnly swear the testimony you are about to give 
will be the truth, the whole truth and nothing but the truth, 
so help you God?
    Mr. Perry. I do.
    Mr. Istook. Thank you. We have the entirety, of course, of 
your written testimony, and I always encourage witnesses, if 
they will, to give us the executive summary version, or even 
speak extemporaneously, as they wish, in their oral remarks.

                         STATEMENT OF MR. PERRY

    Mr. Perry. I would be happy to do that. Chairman Istook, 
Congressman Hoyer, members of the Committee, thank you for this 
opportunity to meet with you and discuss the president's budget 
for GSA for fiscal year 2003.
    As I am sure you may know, I have been on the job now for 
nine months. I would like to tell you that I am truly honored 
to be in this position. I am delighted. This is a critically 
important agency, as you have pointed out, Congressman Hoyer, 
and it is also a great agency. Good people, and we are doing, I 
think, a good job. But you are right, we have lots of 
challenges ahead of us, and we need to address them 
forthrightly.
    I would like to introduce, if I may, just a few of the GSA 
people who have joined me here today. I can assure you, from 
working with them, that they are as proud and as excited as I 
am to be a part of this GSA team. Maybe they can just raise 
their hand as I call them.
    Joe Moravec is our Commissioner of the Public Buildings 
Service.
    Sandy Bates is our Commissioner of the Federal Technology 
Service.
    Donna Bennett, I believe, came in, and she is our 
Commissioner of the Federal Supply Service.
    Marty Wagner is our Associate Administrator for Government-
wide Policy, and it is the area that will be responsible for 
our work in the area of e-government initiatives.
    I believe Dan Levinson is here, is he? There he is, our GSA 
Inspector General.
    And Debi Schilling is here, our budget director, as is 
Shawn McBurney, our Director of Congressional and 
Intergovernmental Affairs.
    Now, there are some other GSA associates, and if they do 
not mind, I will not introduce them all. But that group that I 
mentioned is the group that is here primarily to participate 
with me in presenting this budget proposal to you, and some of 
them will participate in answering some of the questions that 
you all may have in their particular areas of responsibility.
    Mr. Chairman, with your permission, I would like to take 
just a moment to mention that fact, as Congressman Hoyer has 
mentioned, our chief financial officer Bill Early is not with 
us today. He particularly asked me to mention to you and to 
Congressman Hoyer that he regrets not being here. You know he 
takes this work very seriously and he would have been here.
    The reason he is not is that, as Congressman Hoyer has 
pointed out, Bill is planning to retire. He initially had 
planned to retire in January, and had planned a trip with his 
wife to France, which is where they are now. I asked him if he 
would stay on three more months to help us get through this 
budget process and to help us work through thetransition to a 
new CFO. He agreed to do that, but that is why, on such an important 
day, he happens to be out of town. [Laughter.]
    It is only because of those extraordinary circumstances. 
And he asked me that I be sure to express his regrets that he 
is unable to be at this hearing today.
    Mr. Hoyer. Mr. Chairman, Bill is in Paris, and he wants us 
to think that he would rather be here. [Laughter.]
    Mr. Istook. I was going to let that pass without comment, 
myself. [Laughter.]
    Mr. Perry. Mr. Chairman, as we return now to the 
president's budget request for GSA for fiscal year 2003, I 
would like to take just a moment to supplement the information 
I have provided in my written report to make a couple of brief 
comments regarding some of the major programmatic themes that 
are reflected in this year's budget.

                        REPAIRS AND ALTERATIONS

    One of those major programmatic themes in this budget 
request is our very strong resolve to begin to address the 
long-standing problem of the very large, approximately $5 
billion, according to our most recent estimate, backlog of 
building repairs and alterations work, which has accumulated as 
a result of being deferred for many years.
    Under the proposed budget for fiscal year 2003, the Federal 
Buildings Fund capital program spending would be about $1.5 
billion. Of that amount, $1.2 billion would come from revenues 
to be generated in the fund in fiscal year 2003. So this 
requires only the $276 million in direct appropriations that we 
have requested.
    That $1.5 billion capital program for 2003, when you look 
back, is essentially the same as the number in 2002. However, 
there is a shift in emphasis towards more to be allocated in 
the area of repairs and alterations. The 2003 budget includes 
$557 million for new construction, including our courthouse 
construction program, and $986 million for repairs and 
alterations.
    Now, just another comment with respect to the need to 
aggressively address the issue of reducing this large backlog 
of repairs and alterations work in federally owned buildings. I 
want to assure the Committee that we, in addition to spending, 
are doing some other things that will help to address that.
    Among them, we are committed to providing what we call 
better life-cycle management of federal property assets. Our 
portfolio management process is in need of some improvement and 
improved execution. And Joe Moravec and his team are really 
working aggressively to make that happen.

                       PROPERTY MANAGEMENT REFORM

    Additionally, our work in this area will be helped if we 
are able to get some enabling legislation that will bring about 
some property management reform and enable us to use commonly 
used practices of the commercial sector to be able to provide 
funding to assist the funding that the Congress can provide 
with respect to bringing these federally owned buildings up to 
the standard where they should be.
    We can comment on that as we get into it, but that will 
include the opportunity for public-private partnerships and for 
outleasing, in particular.

                     SECURITY IN FEDERAL BUILDINGS

    The second significant theme reflected in this year's 
budget that I wanted to mention--and you have already mentioned 
it, Congressman Istook, is the issue of security at federal 
buildings, security which will be effective in protecting the 
lives and safety of federal workers and members of the public 
who visit our public buildings, as well as the property assets 
themselves.
    After the attacks of September 11, and unfortunately with 
the prospect that the threat to government is still increased, 
we know that we must promptly increase our security measures to 
counter the increased level of threat that we face.
    We have requested $417 million for protection in this 
year's budget. That amount is roughly $57 million more than we 
expect to spend in fiscal year 2002, given the supplemental 
amount that we have received to date.

                         ELECTRONIC GOVERNMENT

    And then, finally, the third programmatic theme that I 
wanted to mention that runs through this year's budget is the 
issue of electronic government, which, as you know, is a major 
part of President Bush's management and performance agenda.
    E-government, we think, is key to this vision of having a 
more citizen-centered government which utilizes modern 
technology to improve government performance and to deliver 
good government service to the American people.
    Mr. Chairman and members of the Committee, that concludes 
my opening remarks, and I will be happy to respond to questions 
you may have regarding the budget.
    Mr. Istook. Thank you.
    Mr. Perry, since we have the convenience of just being 
underneath the House floor, probably the most efficient way for 
all of us to answer the vote that is under way is to recess for 
what should be no more than a minute and a half. Let us cast 
our votes. We will be right back to ask questions. It is very 
nice to be so close.
    We stand in recess.
    [Recess.]
    Mr. Istook. Thank you for being patient while we had to 
cast a quick vote.
    You mentioned, of course, focuses relating to federal 
buildings and their condition, the financing mechanisms for 
them. You mentioned security, you mentioned e-government. And 
GSA has such a broad mission, but I wanted to begin with asking 
something that relates to the federal buildings.
    And sometimes I wonder if it is like the old story of the 
blind men and the elephant. One feels the trunk; another the 
legs, the tail, the ears and so forth. And your perspective 
depends upon what part you are seeing.
    In federal buildings, GSA is--I guess it is actually the 
largest landlord in the country, and obviously the largest 
landlord of the federal government. We have some that are owned 
outright. You mentioned significant lease obligations. You have 
all sorts of different special arrangements; buildings that are 
constructed as part of a long-term lease contract--I forget the 
term that is normally applied for that.

                       FEDERAL BUILDING INVENTORY

    But my initial question has got to be, structurally, how 
much of the federal building situation are we looking at 
through GSA, and how much are we really not encountering 
because it is not handled through GSA?
    And what is the mix between that that is owned outright by 
the federal government or lease-purchase or flat lease or some 
other arrangement? Do you feel that you have the handle that 
you need on the big picture, not just some isolated elements?
    Mr. Perry. Let me give at least a partial answer to that. 
You are correct that, in addition to GSA as a land-holding 
agency, there are other agencies who are land-holding agencies, 
and they have buildings which are not GSA-managed. And 
obviously we focus on those buildings which are in the GSA 
inventory, some 8,300 buildings in total; 1,800 of them 
federally owned buildings; 6,500 that are private-sector-owned.
    One thing, though, that I think bears on your overall 
question, if the overall question is that we need to be 
concerned about the entire spectrum of federal government 
facilities----
    Mr. Istook. Correct.

                          PROPERTY REFORM ACT

    Mr. Perry [continuing]. In the property management reform 
legislation that we have proposed, one of the features that 
would be included is that GSA would have the lead 
responsibility in developing real property assets, life-cycle 
management principles. Those principles would be complied with 
not only by GSA but by all agencies.
    So even though GSA would not necessarily take on more 
direct responsibility for managing buildings that are not in 
the GSA inventory and that are in the inventory of Energy and 
Agriculture and other land-holding agencies, they would 
nevertheless be using good life-cycle planning, from the 
planning for acquisition of facilities that are appropriate for 
their missions; through maintenance, so that we hopefully do 
not have a reoccurrence of the maintenance situation that we 
are facing today; through ultimate use and subsequent disposal. 
That whole process would be outlined.
    We would have the responsibility for developing those 
principles and for working with other agencies to provide them 
with guidance and to assist them with compliance. I think that 
would go a long way toward this issue of making sure that all 
of the federal government's assets are managed in an 
appropriate way.
    Mr. Istook. Certainly. And I am concerned with this 
subcommittee having the general government jurisdiction that it 
does. I am concerned with, to what extent, through GSA and the 
other agencies for which we have responsibility, to what extent 
are we getting the big picture and to what extent are we only 
looking at partial ones.
    And I wanted to sound that as a theme, because I want you 
to understand that will be behind certain coordination requests 
that we want to be involved with you on.

                         LEASED SPACE INVENTORY

    I did notice, of course, in your prepared testimony you 
mentioned, for example, that the budget for rental space, as 
proposed under the Federal Buildings Fund, involves an 
additional 3.1 million square feet, a 2 percent increase in the 
size of the leased inventory.
    I know the leased inventory is not the full inventory, but 
we have heard a lot of discussion about reduction in the number 
of federal workers, about work being contracted out to various 
private-sector entities.
    But do we see that reflected in the space demands that it 
has made to the federal government here. When we look, of 
course, it is just the leased inventory----
    Mr. Perry. Right.
    Mr. Istook [continuing]. A 2 percent increase. Is there any 
change in the space demands of the federal government that is 
associated with efforts at downsizing the federal government or 
with contracting out any federal services? How is that 
affecting the space needs, both on a total basis and on a per-
worker basis?
    Mr. Perry. Two things. One, as you point out, we would have 
to look at the total to make sure that we are not seeing some 
movement from federally owned space into leased. And we do know 
that some of that is occurring, partly because of the 
deteriorated state of some of our federally owned buildings.
    But with respect to the larger issue--and I will ask my 
colleague, Joe Moravec, if he would supplement if he has 
information beyond this--we do attempt to find out specifically 
what agencies' longer-term needs are by meeting with them.
    One recent experience I am sure they would not mind my 
mentioning--I think it serves as an illustration of the point 
that you are making. We know that the IRS, for example, has a 
congressional mandate to increase the amount of electronic 
filings. And the expectation is that that could result, over 
time, in a reduction of their total workforce.
    When we met with them and had that very discussion as to 
what are your projections with respect to this, their space 
needs were not declining. They are being reconfigured. They 
will be doing different things within their 10 centers around 
the United States.
    But it was a little bit surprising to our folks that, at 
least in that example, sometimes you do something that may 
streamline your process but not necessarily, at least in their 
present projection, have the impact of reducing the work space 
that they need.
    So that is the way we try to do it, agency by agency, to 
work with them in terms of what are your long-term programmatic 
needs with respect to space utilization or space needs? We are 
very much involved with that right now with the Department of 
Education, a smaller agency with smaller facility needs. They 
are reconfiguring their use of space in the Washington, D.C., 
area. We are not seeing a reduction overall but a 
consolidation.
    So, Joe, I do not know whether you would like to comment.

                    SPACE NEEDS OF FEDERAL EMPLOYEES

    Mr. Moravec. I would just like to say that the Public 
Buildings Service's mission, to put it simply, is to provide a 
superior work place for the federal worker and also superior 
value for the American taxpayer. That is the goal we keep in 
mind whenever we are in a customer situation.
    Of course, we do not determine what a client's needs will 
be. We attempt to anticipate and fit a facility plan to the 
actual strategic needs of whatever agency is our client.
    Of course, with regard to the questions of outsourcing of 
some of the functions of government, not only federal employees 
are occupying the space that we provide for them. Very often, 
there are government contractors also occupying that space. So 
that may be part of the reason why an overall inventory of 
space that we provide for our client agencies has not been 
decreasing. It has been fairly constant.
    We have to remember--even though 3 million square feet is a 
lot of space, it is on a base of 335 million square feet. So it 
is a huge base and a fairly modest incremental change.
    And I should also point out that the rent that we are now 
paying, just looking at that portion of our inventory, is 
pretty much flat between 2002 and 2003. So the actual cost to 
the Federal Buildings Fund is going to remain pretty much 
constant between those two years.
    Mr. Istook. Sure. Well, that is something obviously I want 
us to pursue further, as to what is the effect of the 
outsourcing and the realignment?
    And as you mentioned, you have some federal agencies that--
you mentioned the Department of Education: decrease in the 
workforce, but the space requirements do not go down with it. 
That is a curious phenomenon. I do not know what is behind it. 
And that involves, also, the department itself. But those are 
the type of questions that we want to explore and go into 
further.

                              VACANT SPACE

    Mr. Moravec. Just to follow up on that, we are very focused 
on trying to reduce the amount of vacant space, both of the 
owned inventory and the leased inventory. About 9 percent of 
our total inventory of owned space, of about 185 million square 
feet, is off-line. It is either vacant or is in transition. 
About 2 percent of the space that we lease from the private 
sector is off-line.
    We are relentlessly focused on trying to reduce the amount 
of space that is off-line. But given the size of the numbers we 
are talking about, 1 percent of our inventory is, you know, 3 
million, 4 million square feet.
    Mr. Istook. And I understand. But frankly, I would 
appreciate a little bit more aggressive approach to 
understanding, if the need is going down, why isn't the space 
going down? That is something I think we want to explore and 
follow up. I know you are not prepared to answer that in more 
detail today.
    I want to give Mr. Hoyer an opportunity to pose questions. 
Mr. Hoyer.
    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Superior work space at superior value, I spoke of that in 
my comments.
    Let me ask you some questions, and if you do not have the 
answers, I would like to have them for the record as soon as 
possible, i.e. within the next 30 days.

                            NEW CONSTRUCTION

    First, I would like to know what GSA's request to OMB for 
new construction--in other words, what you perceive to be the 
need to accomplish superior work space and superior value. Do 
you have any----
    Mr. Moravec. It was a much larger number than actually came 
forward in the president's budget. The total is about $1.9 
billion, in terms of our request.
    Mr. Hoyer. And you got?
    Mr. Moravec. We got $557 million.
    Mr. Hoyer. A little over 30 percent.
    You may not have this. I would like to know what projects 
would have been done with the $1.8 billion, in other words, 
that you determined were priority projects that needed to be 
funded and we will not be able to fund as a result of the 
reduction. And you will probably leave that for the record.
    Mr. Moravec. We can provide that.
    Mr. Perry. We would probably need to submit that for the 
record.
    There were some very important priority projects that did 
come forward in the president's budget, most notably $177 
million for the new Census facility in Suitland $57 million for 
the U.S. Mission to the U.N., and $9 million to conclude the 
construction funding for the new NOAA facility, also in 
Suitland.
    Then five border stations which, given the present state of 
affairs and our war on terrorism, is getting a lot of attention 
these days in terms of funding priority.

                        CONSTRUCTION PRIORITIES

    Mr. Hoyer. Let me make it clear that I an absolutely 
convinced that projects that were included are, in fact, 
priority projects. So I do not have any argument with that. 
Obviously, we have $1.3 billion of projects that you suggested 
should to be done this year that are still on the table. I 
would like to know what they are so that we can consider those.
    I take it--if you know the answer to this question--that 
the money for these projects was not deleted for policy reasons 
but for fiscal reasons, is that correct?
    Mr. Perry. Yes.
    Mr. Hoyer. Would I be, then--when we get the request--in 
other words, projects that are not being done, are not being 
funded, we can conclude that none of those were deleted for 
reasons of policy, but simply because of lack of resources.
    Mr. Perry. That is our understanding, that these 
determinations were based upon fiscal restraints, because we 
had many more requests than the administration was able to 
accommodate.

                        SECURITY CONSIDERATIONS

    Mr. Hoyer. Thank you. How much money is GSA proposing to 
spend? You may have mentioned this figure in your statement, 
and if you did I apologize, for fiscal year 2003 security 
improvements around federal buildings in the nation's capital?
    Mr. Perry. The number--I did not mention it for around the 
nation's capital. I said that the budget included $417 million 
for security. I do not have a number for that region.
    Mr. Hoyer. You do not have a national capital region?
    Mr. Moravec. I do know that we have spent--this is 
retrospective, but we have spent about another $9 million since 
September 11 in the national capital region for security 
functions.
    Mr. Hoyer. Okay. For the record, if you would include which 
agencies in the national capital have their security 
requirements funded through GSA, as opposed to funding them 
within their own budgets.

                           FDA CONSOLIDATION

    Now let me go to the FDA consolidation. Mr. Perry, as I 
think I mentioned in the office, I have been working on this 
FDA consolidation for 10 years now, starting with the first 
Bush administration, in which, frankly, coming out of the last 
years of the Reagan administration, a determination was made 
that FDA needed to be consolidated.
    Dr. Kessler, then, who was Bush's, I guess, FDA 
administrator, put together a project as it came forward. The 
final decision was made to put it at White Oak, and we have 
started with that process.
    My question is, what is the total amount required for phase 
three construction for the FDA project, if you know?
    Mr. Perry. The total amount for construction only for phase 
three is about $207 million.
    Mr. Hoyer. $207 million.
    Mr. Moravec. That would include the centers for devices and 
radiological health, laboratory, office, animal holding areas, 
job care centers, construction parking. It is a pretty big 
program.
    Mr. Hoyer. What amount did GSA seek from OMB for FDA 
consolidation at White Oak?
    Mr. Moravec. Of course in the context of the discussion we 
are having, we have obviously tried to do the best we can with 
the available resources. And so we have tried to prioritize.
    Mr. Hoyer. I understand. This is not an implied criticism. 
I may disagree with the amount of resources applied, but I want 
to have the Committee knowledgeable as to what GSA thought was 
an appropriate expenditure.
    Mr. Moravec. We asked for $221 million for FDA design, 
management and inspection of construction for fiscal year 2003.
    Mr. Hoyer. You may not want to do this at this point in 
time, but for the record or at some point in time just in 
conversation, I would like to know that if the Congress, ifthis 
Committee would see fit to fund an additional increment, I would like 
to know what you believe would--the amount and the most important 
increment that we would take, above the $5.5 million or--I think that 
is what is included now in the budget.
    Mr. Moravec. I have a possible answer, but I would like to 
submit a more detailed answer for the record, if that is 
acceptable.
    Mr. Hoyer. That is fine. If you could do it within the next 
30 days, that would be my request.

                           COURTHOUSE PROGRAM

    Now, what was the total request for new courthouse 
construction?
    Mr. Perry. About a billion dollars.
    Mr. Hoyer. $1 billion. And new courthouse construction is, 
again, at----
    Mr. Perry. $260 million.
    Mr. Hoyer. $260 million. So that is about 25 percent.
    Now, Mr. Perry, I presume you reviewed those requests for 
your people?
    Mr. Perry. Yes, particularly with Joe and his team.
    Mr. Hoyer. You made a determination that the billion 
dollars necessary to proceed with at this point in time?
    Mr. Perry. We made a determination that, consistent with 
the Judiciary's request, we are doing everything we possibly 
can to be supportive of that need.
    We agree wholeheartedly with the points you made, that, as 
we are able to get these projects moving along, that it 
prevents higher expenses later. But again, it is up against the 
constraints that we run into, in terms of total availability.
    Mr. Hoyer. The last question I want to--I have a long 
question I want to submit for the record, but our timeframe, as 
you know, does not allow for extended questions.
    You, I note in your biography, spent time as vice president 
at Timken, as the human resources vice president, in charge of 
human resources.

                PUBLIC'S PERCEPTION OF FEDERAL EMPLOYEES

    Now, I want you to know, I have asked, literally, at this 
point in time maybe a hundred over the 20 years I have been in 
Congress. Federal employees get a lot of flack. There are a lot 
of citizens who have a misperception of the talent, the level 
of commitment, the hard work that is performed by federal 
employees, largely, in my opinion, because the majority of our 
citizens are exposed to federal employees at relatively low 
level--telephone, clerks at a desk or something--that may be 
hassled and they do not really see the inside, unfortunately, 
on a day-to-day basis.
    I want you, if you will, to compare the level of talent, 
the level of work, and the quality of work that you see at GSA 
as compared with Timken Company.
    Mr. Perry. Well, may I begin with a little bit of a longer 
answer to your question, because I will admit to you that, at 
one point, I was one of those private-sector people who 
believed that people who were working in the federal government 
might not measure up.
    My first dispelling of that myth was when I worked for 
then-Governor Voinovich in the state of Ohio for two years. And 
what I realized was, people who are in the public sector are 
every bit as capable, maybe more conscientious in many cases, 
than their counterparts. Clearly, at some higher levels, the 
scope of their responsibilities rival and exceed their 
counterparts in the private sector. And clearly that is true in 
the federal government.

                  COMPARISON OF GSA TO PRIVATE SECTOR

    So I did not have that misconception when I came to the 
federal government. Still, what I found at GSA, in terms of the 
capability, competency, dedication, is startling to me, I guess 
that is the word I would use.
    Now, are there people in my former company, the Timken 
Company, who are conscientious, capable, well-trained and very 
good at what they do? Absolutely, yes. But I would have nothing 
negative to say with respect to the people who work for the 
government.
    In our particular agency, the issue that we have, with 
respect to taking this great group of individuals and asking 
ourselves the question, as we have, is our performance level 
what it should be, and we came back with the answer, no, it is 
not. Not necessarily because we do not have the skills, that is 
not the issue. It is more a case of focus: What are the 
critical few things that we are going to do, and do really 
well? And what may be some things are on the periphery, that 
will take less?
    But my answer to your question is that people within the 
federal government are perhaps not given their due in terms of 
how some suppose their skills and abilities match up with 
people in the private sector.
    Mr. Hoyer. Thank you very much for that answer. I will tell 
you, and Mr. Chairman too and members of this committee, I have 
asked that question, as I said, at least 100 times in 
subcommittees on which I serve and the appropriations 
committee.
    All of the individuals who have had very substantial 
experience and responsibility in the private sector, not to in 
any way diminish private-sector personnel who are obviously 
very able and successful, but to try to educate members who may 
not have as much involvement, as you say, with Mr. Senator 
Voinovich and your experience in Ohio in a similar role as you 
are playing now, to dispel the incorrect notion that somehow 
federal employees, state employees, public-sector employees are 
not as highly motivated or as able as their counterparts. The 
biggest distinction I findis that they are respected less and 
paid less than their private-sector counterparts.
    I certainly appreciate your answer, which is consistent 
with other answers I have received.
    Mr. Chairman, I am going to have to leave in five minutes, 
and I apologize for that.
    As you know, we are having an NIH--unfortunately, the 
chairman is riveted to his seat, but he and I both serve on the 
Labor and Health Committee, and we are starting the overview of 
the NIH. So I do not want my leaving to be interpreted as 
disinterest. I look forward to working closely with you.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Hoyer.
    Mr. Sherwood.

                      SECURITY IN LEASED BUILDINGS

    Mr. Sherwood. It is a very daunting job to manage all these 
buildings, and we have touched on a great deal.
    What I would like to ask you about is, in your leased 
buildings, what concerns do you have about security? Are you as 
well able in leased buildings to provide security as you are in 
the federally owned buildings?
    And do--it seems to me that we are asking you to do 
something that is very difficult. We are asking real estate 
people to provide high-level security. And that is--that might 
not--I think that is a daunting challenge. And would you like 
to comment on that?
    Mr. Perry. Yes, I will. Let me take the last part of your 
question first, if I may, the issue of real estate people 
providing security.
    It is correct that the top manager of our Public Buildings 
Service, Joe Moravec, is a real estate professional. But the 
people who directly run our security are security 
professionals. As a matter of fact, Wendell Shingler is here, 
who is our recently added director of the Federal Protective 
Service. And Wendell has 20-plus years of experience in law 
enforcement and security; was formerly the head of the U.S. 
Marshals Service.
    And then if you go down the ranks of our security 
professionals, they are, in fact, law enforcement and security 
professionals, not lease or real estate people. There are some 
mixture of some people that have real estate experience, but 
for purposes of providing protection, we do use police and 
police-experienced or law-enforcement-experienced people and 
security people.
    In fact, one of the recent initiatives was to establish a 
program by which we would take people who had law enforcement 
experience and couple that with some of the features that you 
need to be able to interact with tenants and to have the 
property management aspect combined. And we call that position 
a law enforcement security officer position, LESOP.
    Then to go to the first part of your question, the issue of 
whether there is a differential between our objectives and 
providing security in a federally owned building versus a 
leased building, and of course there is none. We have the same 
high standard. Whether a federal worker is stationed in a 
building that we own or a building that we do not own, our 
efforts to prevent any kind of mishap are the same.

                        THREAT REDUCTION PROGRAM

    And the way we approach that is through what our security 
people refer to as a threat-reduction program. In recent years, 
we have had greater fortune in being at the table, if you 
will--our security professionals being at the table with the 
other law enforcement agencies--the FBI and other people that 
are in criminal intelligence information gathering.
    We have used that information to develop a security threat 
assessment tool. And we apply that tool on a national basis. We 
apply it, more importantly, on a regional basis, a geographic 
city basis--we can get down to building by building--to try to 
understand the threat that may apply to a particular region of 
the country. And then take that threat assessment index and use 
that to develop countermeasures and install those 
countermeasures in an effort to bring the threat level down.
    So it is sort of like in many law enforcement 
organizations, there may be some civilians who have some 
positions in general management responsibility, but the 
civilians do not, in any shape, way or form, attempt to 
override the professional judgment of the law enforcement 
people who are on the scene and have the primary responsibility 
for delivering security.
    Mr. Moravec. If I could just amplify on that answer, we 
believe that law enforcement and security are integral and 
indivisible from the other services that we provide to our 
customers in GSA-managed buildings.
    We think that it makes a lot of sense to avoid a 
duplicative bureaucracy that is not responsive to our clients' 
needs. In terms of the efficiency and cost-effectiveness, as 
well as the customer convenience that we strive for at GSA, it 
makes sense to us to have these security services folded into a 
total package of services that we offer to our customers.

                SECURITY IN BUILDINGS WITH MIXED TENANTS

    Mr. Sherwood. The one thing we have learned--or one of the 
many things we have learned on security is separation. And we 
see it all around the capital. We are getting the Capitol 
Building separated from the traffic flow. Maybe even got the 
judge in the local courthouse at home, federal courthouse, 
worrying to me about a parking lot that is next to the building 
that you can get a car too close, and I think rightfully 
worried. And it bit us at the Cole. We did notkeep separation.
    How do you keep separation when you lease a floor in a 
public building, or lease offices in a commercial building? 
Now, in all the new courthouses that you are building, you are 
making very sure that you have plenty of separation.
    Mr. Perry. Yes.
    Mr. Sherwood. But how do you do that in these leased 
facilities?
    Mr. Perry. It varies from place to place. We were recently 
in one of our buildings in Philadelphia, and in that case the 
perimeter around the area where the agency is located is, by 
keycard, locked off from the rest of the building. It is 
correct that the public has access to the rest of the building.

                   SECURITY AT RONALD REAGAN BUILDING

    And we have buildings, even federally owned buildings--the 
Ronald Reagan building being an example of that--where there 
are federal agencies in there but, at the same time, it is open 
and the public is encouraged to go there. And in that building, 
to get into for example, the EPA offices, which are in there, 
you have got to go through at least two levels of security to 
get to the federal agency. But the public will have general 
access to the building and to some sections of the parking lot.
    So there are cases, in certain circumstances, where those 
two things can live together and be compatible. Certainly, 
there would be some instances, the courts being a good example 
perhaps, where it would not be compatible and you would not put 
any public access with certain agencies or with certain ports. 
But we do have cases, in both federal buildings and in leased 
buildings, where the public and the agencies habitate together.

                           COURTHOUSE PROGRAM

    Mr. Sherwood. In the courthouse expansion program--in the 
courthouse replacement program, I guess I should say, do you 
think that you have the right kind of rapport with the 
Judiciary? It has been my personal experience that some of 
these courthouses are monuments and built beyond expectation, 
no sharing of--judges do not share courtrooms, et cetera, et 
cetera.
    And in this time of fiscal restraint with lots of competing 
priorities for the money that we have in the federal 
government, do you think that our new courthouses are being 
built to realistic standards, or are we building palaces?

                         COURTS LONG-TERM PLAN

    Mr. Perry. Well, in answer to that question, I will put in 
two categories.
    The first category of my comment, Congressman, concerns the 
process that has been used by the courts to determine their 
long-term needs, their five-year plan--and then they will try 
to address 10 year space needs, in terms of what numbers of 
judges they will have to house. I give lots of kudos to them 
for doing really an outstanding job in terms of thinking longer 
term.
    Many of our other federal agencies could benefit by having 
a property management approach that makes the best effort to 
look at what is happening long term, and to develop a plan 
along those lines, set priorities and so forth.
    Now, within that, of course, reasonable people could 
disagree about some of the criteria that they have arrived at--
provision of courtrooms for senior judges, as an example. But I 
am sure that both of us know some senior judges who are as 
active as their non-retired judge counterparts.
    So I think they have a good process for doing that.

                        FEDERAL COURTHOUSE COSTS

    The second item, with respect to whether the courthouses 
are palatial, I have seen great examples of efficient use of 
courthouse space and courthouse design.
    In fact, Joe has just concluded, or is concluding, a study. 
One of the assumptions made was that the cost of building a 
federal courthouse is substantially higher than the cost of 
building state courthouses, generally speaking.
    What we found was that cost differential was in the 10 to 
12 percent arena, and some of that differential comes from more 
durable materials, which, when you look at it on a return-on-
investment basis, could be justified.
    And then, some of that results from the statutory--I do not 
know if they are statutory, but regulatory requirements as to 
what federal courthouses have to have in them, and perhaps some 
of that comes out of the standards.
    I know that is a bit of a long-winded answer, but I guess 
my bottom line is, in my judgment--and Joe would be more of a 
professional on this--we and the courts are not on a track to 
try to build palatial courthouses. We are trying to build 
stately buildings, buildings that will reflect the stature of 
the Judiciary and our system of government, but by the same 
token, using materials that--I believe it was the courthouse in 
Boston where they used what, when you walk in, appears to be 
wood paneling on the courtroom walls, but it is veneer. And 
cases where, when you look above, what appears to be carved 
marble, is material, poured in place and put up there.
    So I think there are a lot of efforts to make sure that the 
court construction cost is efficient. And again, the best 
example of that we have recently, is this comparison of cost 
per square foot of constructing state courthouses. And in many 
of those state courthouses, a lot of the floors are more 
office-space-type space as opposed to courtroom-type space. So 
when we take that into account, what we are finding is that we 
are not way out of line, in my opinion.

                       UTILIZATION OF COURT SPACE

    Mr. Sherwood. Do you have any studies that show us 
theutilization of the new courtrooms that we have been building? Like, 
on the average, are they utilized 40 days a year or 60 days a year or--
--
    Mr. Perry. No, I personally do not have that.
    Joe, do you have that?
    Mr. Moravec. I am not aware of any such information GSA is 
committed to the design guide which stipulates that there will 
be one courtroom for every active judge and one courtroom for 
every senior judge for 10 years after he goes senior, and then 
chambers thereafter. There are cases where we depart from that 
standard, it is when the Judiciary brings our attention to 
special situations--a particularly heavy caseload, for 
example--at a particular courthouse. That has been our focus.
    Mr. Sherwood. How was that standard devised?
    Mr. Moravec. It was devised in collaboration with the 
Judicial Conference over the last 10 years, and it is 
constantly looked at and reassessed. Within GSA, we have a 
courthouse management group, an actual group of specialists who 
are focused specifically on the Judiciary's special needs.
    Mr. Sherwood. Mr. Chairman, would you think it would be 
appropriate to get some utilization information?
    Mr. Istook. Oh, I think certainly that is accessible both 
through GSA and the Administrative Office of the Courts. I am 
sure we can get that through questions for the record.
    Mr. Sherwood. I would be interested in seeing that.
    Mr. Istook. Certainly. And the challenge is also--it is not 
only the question of utilization, it is the question of surge 
capability too. I mean, it is a challenge. It is a major 
scheduling challenge, as we all witness here in the Capitol 
complex. You know, how many meeting rooms do we need for the 
Congress of the United States? Some days it is hard to find a 
room that is free; other days you will find many that are free. 
That is a significant challenge that we have to deal with on 
this.
    Thank you, Mr. Sherwood.
    I could not help but think, Mr. Perry, when you mentioned, 
you know, the faux carving, having the appearance of carved 
marble, because in this particular room, I have a great example 
of artistry on the ceiling, gives the impression that something 
has been carved or shaped in three dimensions even though it is 
actually only two. Maybe one of the prime examples I have ever 
seen. The artist did a terrific job here, although with today's 
artisans I do not know if it is more or less expensive to have 
the sculpting or the painting. [Laughter.]

                       FEDERAL TECHNOLOGY SERVICE

    Most of the things I think we need to inquire about, we 
will cover with questions submitted for the record. But I 
wanted to ask you--and I am pleased you have Ms. Bates here 
with the Federal Technology Service.

                     DUPLICATION OF CYBER SECURITY

    Within GSA, we have the Federal Technology Service. We have 
the information assurance and critical infrastructure program. 
We have the federal computer incident and response compliance. 
The FBI has the national infrastructure protection center. GSA, 
I believe, has the national security incident response center. 
Cyber warning information network; you have gov.net; you have 
FirstGov as a portal. You have all of these distinct offices.
    And my question is, how much duplication is there, having 
distinct offices as opposed to having distinctive services, 
meaning supply by a common grouping of the expertise and the 
systems that are needed?
    Mr. Perry. Across the government?
    Mr. Istook. Yes. Well, within GSA and across the 
government.
    My concern is that, in our desire to have the level of 
cyber security that we know is very important, are we 
stovepiping it? Are we creating so many distinct offices for 
distinct purposes rather than having those functions centrally 
administered and handled? And perhaps streamline the process by 
expecting some of the same people and resources to have 
multiple capabilities.
    Mr. Perry. Well, Congressman, you raise, obviously, a very 
interesting question. I will tell you that I do not pretend to 
have the complete answer to that.
    I do know as a matter of the way we are attempting to 
organize ourselves within GSA, it is to eliminate stovepiping, 
it is to eliminate duplication. It is to take like kinds of 
activities and have them work together, where that makes sense. 
Now, there are rare occasions when some amount of duplication 
is a useful thing. But typically, it is not useful enough, and 
wasteful.
    So I will ask Sandy if she has some comments about that. I 
have not seen in that particular instance that we have 
stovepipes----
    Mr. Istook. With regard to the offices I mentioned--and I 
know I have not mentioned everything that exists throughout the 
government, but most of these are GSA--have you expressly 
addressed that issue with these offices in GSA?
    Mr. Perry. I will admit to you again, in a general sense, 
not specifically as it relates to that, but an example would be 
our CIO's office, which also gets involved in some cyber 
security issues.
    As you know, we have 11 regional offices, or regions around 
the nation, each of whom has their own CIO people, and they 
were operating fairly autonomously. We made an effort to make 
sure that, with respect to items of computer information that 
need to beadministered across the enterprise, that the CIO is 
responsible and makes sure that is happening, and we eliminate the 11 
or 12 duplications that occur.
    On a smaller scale, we have----
    Mr. Istook. Have those positions been eliminated, are you 
saying?
    Mr. Perry. In this instance, it is a matter of coordinating 
their effort. It is not a matter of saying that, in this case--
well, we have eliminated some functions. We have not eliminated 
people, as yet.
    We had a proliferation, for example, of website 
development. That is gone. They are bringing that together as 
one website within our organization.
    Mr. Istook. One grouping of people with that expertise.
    Mr. Perry. Yes. Now, they will still be physically located 
in the regions, but the reporting structure and the way in 
which their work is organized will be as though they were one 
group sitting side by side.
    Mr. Istook. Having someone on the West working on the 
website with someone on the East, for example.
    Mr. Perry. Exactly.
    Now, you mentioned gov.net, and that is not something that 
is up and running. That is, at this point, an idea. So that one 
would not fit in that category.
    Sandy, do you have a comment to make?
    Ms. Bates. No. Just kind of along, though, what you said, 
Steve, many of the acronyms that you used are certainly ones 
that are familiar in the cyber security community.
    We at FTS are responsible for FedCIRC, which is the Federal 
Computer Incident Response Center. The NIPC is at the FBI.
    Mr. Istook. Yes.
    Ms. Bates. And many of the others, those that are of 
national security, I believe are complementary and 
collaborative efforts focused on specific pieces of the 
community and then come together through collaboration and 
cooperation to avoid duplication.
    With regard to gov.net, as Mr. Perry just referenced, that 
is basically still in the study stages. We were asked by Mr. 
Richard Clarke, the President's cyberspace security advisor, to 
look at the possibility or the feasibility of such a capability 
for specific government applications, which would basically be 
a stand-alone network.
    We issued a request for information to the industry and 
received 170 responses. We are in the process of evaluating 
those, not in terms of the acquisition, but letting the 
industry give us their best thinking on this type of capability 
as a way to provide information to make further decisions.
    Mr. Istook. I suppose part of the question is, who, if 
anyone, has the charge--and not exclusively within GSA, 
obviously; within GSA, Mr. Perry, you have the overall charge--
but within government as a whole? Who has the charge of looking 
at the cyber security offices that have been created, whether 
in GSA or elsewhere, and trying to find the ways to streamline 
it, which I would hope would enhance the operations of those 
and to weed out the redundancy and duplication? Does anyone 
have that responsibility?
    Mr. Perry. I do not know that--and maybe Sandy would know. 
I do not know that there is one person. They do come together 
as an interagency group and try to deal with issues across 
agencies in that way. But I am not sure that there is any one 
individual or one group that is designated to have overarching 
responsibility for making that happen.
    Am I correct?
    Ms. Bates. I believe today it is residing with Mr. Clarke.
    Mr. Istook. Which Mr. Clarke are you talking about?
    Ms. Bates. Richard Clarke, who is the cyberspace security 
advisor appointed by the President, and he is doing that 
between the Office of the President and the Office of Homeland 
Security.
    Mr. Istook. Yes, but you see, you are talking about a 
presidential advisor as opposed to someone who has a 
directionally accountable charge. And I am worried that perhaps 
there is no one at this point.
    Mr. Perry. I think it is sort of symptomatic of what 
happens in other disciplines as well. If you were to say how do 
we look across our CFO activities, or our CIO activities, or 
our human resources activities, or our e-government activities, 
your point is correct that each agency sort of does its own.
    And my understanding is that the way in which you bring it 
together to date is through these interagency councils who do 
meet and share information and hopefully try to establish 
common ground and common principles, but without someone who 
says, you know, ``In the final analysis we are going to do it 
like this.''
    And right now, as a matter of fact, in the e-government 
arena, we are struggling with that very thing, as you know. To 
be able to say that, as we move into something that is entirely 
different for us, let's not do it agency by agency; let's do it 
collaboratively. Now, that makes incredibly good sense. So 
every agency head says, ``Okay, let's do it collaboratively.''
    But then, as you get into that collaborative work, you 
reach points in time where you have to make a decision. Agency 
A wants to go this way; Agency B wants to go this way. And we 
do think that there needs to be the kind of central authority 
that you refer to, that is consultative but then,in the final 
analysis, can be directive and say, ``This is what makes the best sense 
for the government as a whole,'' and move in a direction.
    Mr. Istook. And I would certainly concur that if you have 
collaboration but you do not have someone with authority, you 
do not have accountability. You have to have authority so that 
you can hold them responsible for that. That is my concern.
    As I mentioned, we had a great many questions for the 
record, and I think that will be the most effective way, rather 
than trying to do one-on-one interchanges.
    But this is a significant area of concern, just as the 
other issue I mentioned earlier was, that I want to see what we 
can do and help--and it is not just entirely GSA, I understand 
that thoroughly. But GSA is a central authority, as you 
recognize, with the e-government initiatives that do involve 
the GSA. And it is a logical place for a lot of the 
accountability to reside.
    So we will be pursuing that and some other matters with 
questions for the record.
    Thank you for taking the time. I know other members, they 
might come in later if we were continuing, because we have got 
so many subcommittees meeting today. But we will submit those 
for the record.
    Mr. Perry, again, I appreciate you and everyone else taking 
time today.
    Mr. Perry. Thank you very much, Congressman.
    Mr. Istook. And we will stand adjourned.

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                                            Tuesday, June 18, 2002.

                     OFFICE OF PERSONNEL MANAGEMENT

                               WITNESSES

DAN BLAIR, DEPUTY DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT, ACCOMPANIED 
    BY
WILLIAM E. FLYNN III, SENIOR POLICY ADVISER;
KATHLEEN McGETTIGAN, CHIEF FINANCIAL OFFICER; AND
PATRICK McFARLAND, INSPECTOR GENERAL
    Mr. Istook. Call the subcommittee to order. Good morning. I 
am pleased to welcome this morning Dan Blair, the deputy 
director of the Office of Personnel Management to be testifying 
on the President's 2003 budget. Director Kay Cole James was 
originally scheduled to be here, but because of urgent matters 
that came up, she is not able to do so, and because of our 
limited time frame we were not able to change the hearing time 
to enable her testimony directly before us.
    OPM, of course, is the Government's chief personnel office. 
It has responsibility for managing the merit systems, the trust 
funds that provide for retirement and health plans of Federal 
employees and annuitants, and to give advisory assistance to 
Federal agencies on personnel matters. With the Federal 
workforce being over 1.8 million, the role of OPM is more 
important than ever on recruitment, management and development 
of Federal worker issues. And we know that in the last decade, 
there has been significant restructuring and outsourcing, 
cutting OPM staff over the last 10 years by some 50 percent. 
And as I mentioned to my counterpart and ranking member, Mr. 
Hoyer, I really believe this morning we will really just 
scratch the surface of a number of things.
    This subcommittee, because of the necessary focus on border 
security and homeland security issues, with Customs and the 
Office of Homeland Security, hasn't given the attention that I 
think is deserved by the Office of Personnel Management, 
something I hope we can correct and work more closely with you 
in the future.
    In theory, of course, the director of OPM is the 
President's chief human resource adviser. However, with 
decentralization, it is clear that many agencies have developed 
their own approaches. OMB has a dominant role on compensation 
policy and anything else that involves funding and legislation. 
We are in a time of great change and expansion since September 
11, in particular. Rapid growth of certain agencies, 
recruitment, including recruitment between Federal agencies in 
a very significant and major way, massive training needs, 
placement of thousands of new government workers, are all 
current issues. At the same time, that inevitably poses issues 
involving classification of positions, compensation policy, 
avoiding unintended competition between agencies.
    Your latest white paper has been issued on modernizing 
compensation policy. That is already generating a lot of 
discussion in and outside of the government about potential 
alternatives to existing structures and incentives and 
especially how to integrate performance measures and management 
into the human resource systems. As part of the trust fund 
responsibility for health and retirement benefits, you have a 
major challenge in keeping foremost the best interest of the 
Federal workforce and the retired members of the Federal 
workforce.
    In particular, one thing we want to look at today is your 
stewardship of the Federal employee health benefits program, 
modernization of retirement systems and introduction of long-
term care retirement programs. I, as many others, am very 
concerned with the recent experience of FEHBP with premiums 
rapidly rising, which is not unique among health insurance 
plans across the country. But that seems to be accompanied by a 
high rate of departure of health carriers. That can affect the 
quality and availability of care for the Federal workforce.
    First among the OPM appropriations is funding for the 
Office of Inspector General, which has been taking additional 
measures to counter the criminal diversion of retirement and 
health payments. It has the lead of investigating instances of 
FEHBP-related fraud and mismanagement. It has a significant new 
work load in relation to that.
    In addition, we are concerned that there may be an 
additional criminal investigative work load that could be 
associated with some aspects of homeland security that cuts 
across, I think, all the different IG offices. So there is much 
to dig into and, unfortunately, we will probably just scratch 
the surface of many issues, but I think it is very important 
that we get that under way.
    Before receiving your testimony, of course, I want to 
recognize our distinguished ranking member, Mr. Hoyer, for his 
remarks.
    Mr. Hoyer. Thank you very much, Mr. Chairman. I want to 
welcome Mr. Blair here, the deputy director. The deputy 
director, as all of us know, has long-time experience both on 
the House and the Senate side in dealing with issues that 
affect Federal employees and the civil service generally in 
management issues. I do, however, regret that Director James 
could not be here. I would hope at some point in time we do 
have an opportunity to hear from Director James. I expect to be 
talking to her soon, but the issues we are dealing with are 
critically important. There are challenges that are of great 
magnitude confronting the Federal civil service and I am 
hopeful that Director James will be able to discuss these and 
to question her at some time in the future.
    I happen to represent, as all of you know, many Federal 
employees who would work under the Department of Homeland 
Security if it were created, and I have a number of concerns 
about that, in particular what authority this new department 
will have in hiring, what authority the department will have to 
pay its employees, what rights will these employees have, and 
what authority will be available for workplace decisions and 
will it be different than the current civil service system that 
most Federal employees work under.
    We also this morning have an opportunity to discuss what 
efforts are being considered to address the human capital 
crises that I think confront our government. I think Senator 
Voinovich and I agree on that issue. Anybody who looks at the 
statistics agrees as well. In 2001, the General Accounting 
Office added human capital management within the Federal 
Government to its high risk list, as you know. By 2006, the 
Office of Personnel Management estimates that 46-and-a-half 
percent of Federal employees will retire. Within the managerial 
ranks, OPM estimates that 49 percent of the Federal workforce 
will retire. This creates a gigantic challenge, it seems to me, 
on the Federal service as we face new challenges that we are at 
risk of losing some of our most experienced talent. We need to 
start thinking about the future, and who will be filling these 
positions, and I know that you're doing that.
    This is an historic opportunity to sell wonderful 
opportunities of the Federal Government to our young people, 
but at the same time we need to retain our best and brightest 
employees by focusing on the things that matter to them, such 
as affordable health plans, and the chairman has mentioned the 
FEHBP, which is itself in crisis.
    Frankly, had we passed legislation in 1995 to cap the 
contribution of the Federal Government to FEHBP, Federal 
employees would have had a net loss in purchasing power as a 
result of increased premiums over that same period of time, 
which, of course, substantially outstripped the 13 percent 
increase in pay. We unfortunately have not kept pace with the 
comparable pay in the private sector, either. Federal Employees 
Pay Comparability Act, which President Bush signed into law in 
1990, and which passed as a part of the Treasury postal bill in 
fiscal year 1991 was intended, of course, to reduce the pay gap 
between the private sector and Federal pay. This administration 
and previous administrations--bipartisan fashion--have not 
followed this requirement while the pay disparity with the 
private sector continues to grow. According to the Bureau of 
Labor Statistics, a 34 percent pay gap exists between the 
Federal employees and their private sector counterparts. 
Whatever else you do with employees, you cannot compete to 
recruit or retain Federal employees with that kind of 
performance.
    Let me say at this point in time as well, and I am going to 
ask questions about, we have a crisis in our Federal law 
enforcement. Federal law enforcement is competing with itself 
very, very keenly. The Transportation Security Agency--I talked 
to a young 24-year-old ex-Capitol police officer. She is now an 
air marshal. She's making $20,000 more as an air marshal than 
she was making as a Capitol police officer; $20,000. And I 
presume, Mr. Blair, you are going to tell me that the 34 
percent disparity really doesn't exist. Either it exists and we 
are not able to pay $10,000 more and recruit from the private 
sector, or we have to steal from our own people and pay them 
$20,000 more to fill up the Transportation Security Agency's 
requirements in a short period of time. We have a real problem 
and we need to deal with it. This year, the administration 
requested that the 2003 pay adjustment for military personnel 
be adjusted upwards by 4.1 percent, but only 2.6 percent for 
civilian employees. On February 2 an administration official 
was quoted--high official was quoted in The Washington Post as 
saying, and I quote, the military pay policy is responsible and 
sensible because they are protecting our citizens and the 
homeland against foreign enemies which is one of the foremost 
priorities of the United States Government. I am not sure what 
the FBI are doing or the CIA are doing, or the thousands of 
people who are in civilian garb and in the civilian sector at 
the Department of Defense or at NSA or DEA or Customs or at ATF 
or at Secret Service or all the other civilians who are 
protecting our homeland, but send them the message we cannot 
have a disparity of one-and-a-half points because our men and 
women in uniform, whether they're here in the United States or 
overseas--I am not talking about hazardous duty pay or wartime 
pay, we're talking about across-the-board deployed or 
undeployed. We have a crisis in the Federal service and this is 
not helping. And I am going to try to change that. And when we 
have a 34 percent disparity, which every administration, 
irrespective of party says, oh, it really doesn't exist. And 
since 1990, do you know how many substantive plans we have had 
to replace FEPCA? Zero. Not one.
    I have told every OMB director, every OPM director, fine, 
put it on the table. If you don't believe this works, put it on 
the table. Put up or shut up, in effect. And again, I want to 
emphasize this is not a partisan issue. Every administration 
takes this position, Democrat or Republican, that, oh, this 
isn't really correct and therefore we don't follow it. You are 
not following the law. The Federal Government is breaking the 
law if we don't give the 34 percent catch-up. Now we are not 
going to do that because we couldn't afford to do that, but we 
are breaking the law. The President has stated many times that 
these employees on the front line--I am going back to my 
comment about the uniformed personnel--don't tell a Customs 
agent that is interdicting these people--or Transportation 
Security Agency now we have to be paying them a lot more. Why? 
Because when the rubber hits the road in reality and we had to 
hire people, we found out this pay disparity existed.
    So what do we do? We simply put it inside the Federal 
Government pay disparity. 24-year-old young woman, good Capitol 
policeman, now making $20,000 more because she's now working as 
an air marshal. I would hope that we would overcome that.
    I look forward to discussing these and many other issues 
with you today, including the budget request for $262 million 
in discretionary funding.
    Mr. Chairman, I thank you for giving me the time to raise 
some of these issues. As you know, I thought this was an 
important hearing. I still think it is an important hearing, 
but I certainly agree with you that we are just going to touch 
the surface. Thank you, sir.
    Mr. Istook. Thank you, Mr. Hoyer.
    Mr. Blair, it is certainly our practice to receive 
testimony under oath. So if I could have the witnesses stand.
    [Witnesses sworn.]
    Mr. Istook. Mr. Blair, of course, we have your written 
statement, which will be placed in the record in its entirety. 
I always encourage witnesses to feel free to depart from it, to 
shorten it, to deviate, however may be best, because we have 
the written information and we are interested in seeing how we 
can expand upon the knowledge that it imparts to us. So we 
would be pleased at this time to hear your testimony.

                           Summary Statement

    Mr. Blair. I do have a longer written statement that I ask 
be included for the record. Thank you, Mr. Chairman and members 
of the subcommittee.
    Director James sends her regrets that she is unable to 
testify before the distinguished subcommittee herself this 
morning. As the members know, the director is intricately 
involved with the formation of the new Department of Homeland 
Security. She is working in close consultation with the 
President's team, and this morning she had a commitment which 
unfortunately precludes her from being here.
    I am pleased to have this opportunity to discuss the 
appropriations request for the Office of Personnel Management 
for fiscal year 2003 on behalf of Director James.
    I am joined today by two of our top executives, Ed Flynn, 
senior policy adviser to Director James and former Associate 
Director of OPM for retirement and insurance, and Kathleen 
McGettigan, our very capable Chief Financial Officer. Also at 
the table is our Inspector General, Pat McFarland.
    The President has requested a total of $40.7 billion for 
OPM, an increase of $11.8 billion for fiscal year 2002. The 
principal reason for the overall increase is inclusion of 
amounts necessary to fully fund future retirement and health 
benefit costs as proposed by the administration's Managerial 
Flexibility Act. That proposal was transmitted to Congress by 
the President on October 15, 2001, and currently is pending as 
S. 1612.
    OPM's requested appropriations are 1 percent discretionary 
and 99 percent mandatory. Of the $273.9 million in 
discretionary funds, $60 million of that will be directed to 
building capacity and systems relating to information 
technology projects, including the five e-government 
initiatives that OPM has been asked to manage.
    Those five initiatives form an interlocking system that 
will play an integral role in streamlining and improving 
procedures for moving Federal employees through the employment 
cycle beginning with recruitment, continuing through all 
aspects of employment and training, and culminating with 
retirement.
    Mr. Hoyer. Mr. Chairman, excuse me. Do we have--this does 
not track, as I can tell, Ms. James' statement. Do we have a 
copy of that statement?
    Mr. Blair. It is a shorter version.
    Mr. Istook. I don't know if we have a written copy of the 
shorter version.
    Mr. Blair. I don't believe you do. I could provide one for 
the record, if that would help.
    Mr. Istook. That would be appreciated.
    [The information follows:]

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    Mr. Blair. As I was saying, the five e-government 
initiatives use technology to remove redundancies, reduce 
response times, eliminate paperwork and improve coordination 
among Federal agencies.
    OPM's administrative accounts will support 2,945 full-time 
equivalent employees in fiscal year 2003, 39 fewer positions 
than in FY 2002. Director James' written statement discusses 
OPM's funding request in greater detail. What I would like to 
do in the remainder of my time is describe for you the new 
direction and initiatives we are pursuing.
    These initiatives will have a direct and tangible impact on 
the executive branch's overall success in hiring and managing 
people efficiently to serve the American public.
    Internally our goal is to create a nimble organization with 
a structure that will enable us to provide better, quicker, 
more responsive policy leadership and support to Federal 
agencies.
    We are using zero-based budgeting, which has helped us 
identify and redirect resources to priorities. Every dollar has 
to be justified in terms of how it relates to the President's 
agenda and contributes measurably to performing our mission at 
OPM.
    We are fostering a results-oriented environment within OPM 
that cultivates and rewards excellence. As an accountability 
measure, we have initiated a 360-degree review of service 
delivery and customer satisfaction and we look forward to the 
results later this summer.
    To hold OPM senior executives accountable for results, our 
new SES Performance Standard for Executive Excellence provides 
direct linkages between what we expect of our executives, how 
we evaluate and rate their performance against these 
expectations and the actions we take as a result of those 
assessments. This standard explicitly requires that our 
executives achieve results against the President's five 
management agenda initiatives.
    OPM plays a key role in supporting the President's human 
capital initiative Governmentwide as well. We truly intend to 
be a model of human capital management and, indeed, overall 
management for the Federal Government.
    We are proud that OPM has received some of the best scores 
in Government on the executive branch management score card. At 
the end of fiscal year 2001, we rated yellow on two of the five 
initiatives, human capital and electronic government. As you 
know, few Federal agencies attained this level. In fact, only 
six agencies received two or more yellows. Since that time, OPM 
is making strong progress implementing our plans to achieve 
additional measurable results.
    As the leader or managing partner of the Human Capital 
initiative, OPM works hand in hand with our OMB colleagues to 
go over each department's proposed human capital action plans, 
reinforcing excellent practices and strategies, assessing them 
for weaknesses, and suggesting new strategies to make them 
successful.
    We also offer direct assistance to departments and agencies 
by sending a strike force composed of top OPM executives to 
solve immediate problems. We have been tested and tempered by 
the events of September 11. OPM teams have been a key technical 
resource for helping establish the Office of Homeland Security 
and for creating the HR systems and performing the security 
investigations associated with staffing the new Transportation 
Security Administration. We anticipate this work will 
accelerate as we help create the new Cabinet-level Department 
of Homeland Security.
    Indeed, we see our job as making sure that all Federal 
agencies and departments have the tools they need to recruit, 
hire, retain, train and manage performance.
    We are undertaking fresh approaches for Federal hiring that 
reflect the best practices in the private sector, while 
respecting the core values of public service, including the 
Merit System and veterans' preference. We are also re-examining 
the Federal Government's compensation systems to see how we 
might improve the linkage with both recruitment and performance 
recognition.
    Benefits are an important part of the overall compensation 
package. I want to emphasize the significant efforts we are 
making to address health insurance premium increases. Director 
James put Federal Employee Health Benefits Program providers on 
notice to expect very, very tough negotiations this year. And 
she challenged carriers to contain costs, maintain quality and 
keep the Government's program a model of consumer choice and on 
the cutting edge of employer-provided health benefits. This 
past Friday, Director James sat down with her OPM negotiating 
team and gave them clear direction: negotiate fiercely on price 
and quality. They have her personal pledge to back them up and 
provide any assistance they need to keep prices affordable for 
our employees.
    I thank you for the opportunity to discuss our budget 
request with you this morning and provide some insights into 
our activities. I am very proud of the significant steps we 
have taken to implement the President's management agenda with 
OPM and our government-wide leadership in the areas of 
strategic human capital management and electronic government. I 
would be pleased to respond to any questions the subcommittee 
may have.
    [The information follows:]

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                            HEALTH CARE COST

    Mr. Istook. Thank you, Mr. Blair. Let me begin with the 
topic you were addressing at the end, the FEHBP. I believe, and 
I will use approximate figures, in recent years, the annual 
increases in premiums have been in the neighborhood of 10 
percent, I think just under. It is projected 12.2 percent 
increases for the current fiscal year. You mentioned strenuous 
negotiations and efforts to accomplish all you can in that. And 
we understand that you both have to have providers that will 
offer the health insurance at affordable rates and providers 
that will remain in business, that will be able to continue to 
provide those policies in the future because, you know, if you 
negotiate in a way that you somehow managed to persuade people 
to take a loss, they wouldn't be around next year in that.
    With that in mind and knowing that negotiation itself isn't 
going to cure some of the underlying factors, I would be 
interested in OPM's assessment of what factors are driving the 
escalation in health care costs and therefore in health care 
premiums, and then especially to address with you the factors 
over which OPM does have some elements of control, for example, 
some of the mandated coverage options for HMOs where you have 
State mandates that are incorporated into the Federal coverage 
because OPM has not chosen to exercise its authority to not 
have providers be bound by those State HMO requirements.
    Also, if you might address the issue of the planned 
variety, whether OPM, by putting different strictures on what a 
plan must be, takes away some of the options they might seek to 
adopt involving higher levels of copayment or coinsurance, 
whatever it might be.
    So that is a very broad question, but if you would address, 
please, what OPM believes is driving the cost and where OPM has 
some control points on some of those elements.
    Mr. Blair. Thank you, Mr. Chairman. I will touch on that 
briefly. These negotiations don't take place in a vacuum. As we 
have seen, health care costs skyrocketing throughout the 
country. And, sadly, these increases that we have seen over the 
years reflect that. We have heard this year CALPERS, the 
California retirement system, will be implementing cost 
increases of around 25 percent. And we have seen reports that 
health care costs generally will increase anywhere from 10 to 
25 percent.
    Given that situation, Director James met with her 
negotiators. I believe that was the first time an OPM director 
has ever met with negotiators to give them clear, explicit 
advice to hang tough and negotiate well.
    Considering that, let us look at the factors leading to the 
cost increases. It's medical inflation, increased utilization, 
an aging workforce, an aging population, and these are all 
things we've seen outside the Federal sector as well. Increased 
use of prescription drugs is another factor that is doing that. 
And so those are things that are driving the cost increases 
that we're going to have to address.
    Secondly, you asked what do we have control over. Some of 
the things that we have urged in the past are to avoid the 
issue of mandates in the Program because we've always felt that 
the strength of the Program lies in competition. And one of the 
issues that you've raised with us is what are State mandates 
doing to the premiums for HMOs. Initially we looked at that and 
we thought it was incremental and not a significant source of 
cost increases. But, that said, we're looking at studying that 
issue further and working with the contractor to see if we can 
just get a better handle on what those costs are. So we hope to 
have that later in the fall.

                  EFFECT OF HEALTH CARE COST INCREASE

    Mr. Istook. Let me look at a couple of things you 
mentioned. First, when we talk about 12 percent or whatever it 
may be, of inflation, since you have the 75 percent cap on the 
Federal payment toward the health insurance, the factors, when 
you add in the deductibles and the cap, the 12 percent doesn't 
necessarily fall equally on the employer and the employee. Do 
you have any breakout of how you expect that to be attributed? 
It's certainly possible, considering those variables that, you 
know, potentially maybe the employee is bearing 10 percent 
extra costs and the employer 15 percent, or you might swap 
those figures. What is that mix as you project it on who will 
bear what proportion of increase?
    Mr. Blair. Well, since it is a 75 percent cap, it does fall 
unevenly, depending on what plan you enroll in. For instance, 
HMOs are community-rated so their prices are going to be 
different depending on which HMO you are participating in, in 
which part of the country. Our fee-for-service plans offer a 
flat rate across the country. And so we have to provide you for 
the record how that more significantly, or in a more detailed 
form how that affects the program, and we'd be happy to do 
that.
    [The information follows:]

    In 2002 the average increase in premiums was 13.3 percent and the 
Government and enrollee shares of this increase were identical, both 
increased by 13.3 percent. In 2001, the average increase in overall 
premiums was 10.5 percent--the enrollee share increased by 11.5 percent 
while the Government share increased by 10.0 percent.

                COSTS AND BENEFITS OF PRESCRIPTION DRUGS

    Mr. Istook. I think that would be helpful because just 
talking about 12 percent in a vacuum doesn't really tell us the 
respective burdens that we might expect to be borne by the 
Government and the enrollees.
    You mentioned among the factors of inflation, utilization 
rate, aging workforce and increased use of prescription drugs. 
Many people present the belief that that use of prescription 
drugs decreases the cost of medical care because it 
substitutes, for example, for surgery or for some other forms 
of invasive treatment. Is it the experience of FEHBP that the 
increased use of prescription drugs is not providing offsetting 
benefits relating to costs--it may provide benefits relating to 
the level of health, but it is not producing cost savings?
    Mr. Blair. I don't know if we have those figures or not. As 
you know, the increasing costs of pharmaceuticals include the 
research and development of those new drugs coming into the 
market, the lack of availability of the generics for the top-
rated drugs, but I don't know if we have that information, and 
I want to ask Mr. Flynn.
    Mr. Flynn. I might just add to that, Mr. Chairman, we don't 
have any information relating to that at OPM. I would say, 
however, that I think that the evidence in sort of society 
generally and in the Federal employee health benefit population 
suggests that we actually do have greater longevity. Long-term 
studies of how long people live and how long they live healthy 
lives is a function of their health care, and prescription 
drugs are more and more a major component of that. But we 
certainly do not see any diminishment of other costs in the 
program as a result of the higher costs or utilization of 
prescription drugs. But there are many, many factors that 
affect that overall equation and I don't know that you would 
see it, in any event.
    More likely it's the case that you're seeing perhaps some 
slight decrease in the rate at which costs would otherwise 
increase as opposed to a true cost savings itself.
    Mr. Istook. Is that something--is that basically a 
speculation that might be the case, or is there any evidence to 
show that it slows the rate of increase?
    Mr. Flynn. It is more speculative on my part, Mr. Chairman, 
but I think there's some evidence to suggest that may be the 
case.
    Mr. Istook. Very good. And this is a topic I think we want 
to explore further and certainly with some questions for the 
record as well, but I need to yield time now to Mr. Hoyer.

                 COMPLIANCES WITH PAY COMPARABILITY ACT

    Mr. Hoyer. Thank you very much, Mr. Chairman. Mr. Blair, 
have you asked for an opinion from counsel as to whether or not 
the administration is in compliance with FEPCA in recommending 
2.6 percent for Federal employees?
    Mr. Blair. No, sir.
    Mr. Hoyer. And I'll ask you a question for the record, if 
you would submit for the record the opinion of OPM as to 
whether or not the administration is in compliance with FEPCA 
in asking for a 2.6 percent raise and, if not, what raise would 
be in compliance with the statute. And we are going to mark up 
pretty soon so if you could give us that pretty soon, I'd 
appreciate it.
    [The information follows:]

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                        FEDERAL LAW ENFORCEMENT

    Mr. Hoyer. You heard me talk about the Capitol Police and 
the TSA. I have indicated in committee, I believe that there's 
a crisis currently in Federal law enforcement. The uniformed 
Secret Service division has lost about 12 percent of its 
personnel in protecting the White House, most of whom who have 
gone to TSA. Are you looking at this? Is there a study as to 
what pay and benefits ought to be in terms of Federal law 
enforcement categories? I presume those categories could be 
broken down to some degree as far as experience necessary and 
risks involved and training required?
    Mr. Blair. Let me address it from two different angles. We 
are looking internally at the cannibalization that is taking 
place among different agencies. Most of this is attributable to 
new agencies like the TSA which are given authorities that are 
normally outside the scope of title 5 and outside the realm of 
OPM's ability to oversee it. And what we have created over the 
past few years is really a patchwork quilt of have and have-not 
agencies who have different authorities, different abilities to 
recruit, retain--the IRS--we can go through the whole history 
of different agencies getting different authorities. So one of 
the things the director wanted to look at is why are agencies 
seeking these authorities. What's wrong with our current title 
5 laws that prohibit the flexibility that agencies feel that 
they need in order to recruit and retain these employees.
    One of the first steps the Director has done, and I know 
you are familiar with it yourself, is her white paper on 
compensation reform. That is a thorough study and a very well 
written analysis of the problems confronting the Federal 
compensation system. The compensation system that we have today 
was drafted and implemented for a workforce in the 1940s, and 
we are in 2002 and we need to update and contemporize the ways 
that we establish compensation systems for our agencies. We 
don't have the flexibilities that are out there. If one agency 
gets a flexibility, either by virtue of other authorizers or in 
an appropriations bill, other agencies would like to see that 
flexibility, too, and they can't do it.

               COMPETITION FOR LAW ENFORCEMENT EMPLOYEES

    Mr. Hoyer. I think you're right on that, but unfortunately 
our time is limited. Let's focus on what you are proposing be 
done with respect to the crisis that is now occurring with 
respect to Federal law enforcement agencies competing with one 
another and the vacancies that are occurring and the risks that 
those create to the White House, to the Capitol, and to others 
in terms of being able to retain and recruit people to those 
agencies?
    Mr. Blair. Well, we have limited authority as an agency to 
prevent TSA from going to another agency. That said, some of 
the things we'd like to see done are contained in the 
Managerial Flexibility Act that would allow for increased 
demonstration projects, and streamlined demonstration projects, 
authority, permit alternative personnel systems be adopted, and 
allow agencies authority to access the flexibilities that have 
already been given to other agencies. That would make 
significant steps toward addressing the problems that you are 
mentioning right there.
    I think the overall problem is a compensation system that 
is not flexible enough to adapt to the changing roles.

                           COMPENSATION STUDY

    Mr. Hoyer. When does OPM expect to submit a plan on 
appropriate compensation?
    Mr. Blair. We are studying and I would expect something in 
the next year. As you know, we've just unveiled that paper. And 
what we are involved in right now is an education process for 
the Federal community of identifying what the overall problems 
are. I know the director is very anxious to move forward on 
something like this.

                     PAY AND BENEFITS COMPARABILITY

    Mr. Hoyer. In the interim, in light of the fact within the 
next five years you heard the figures 46, 47 percent 
managerial, do you believe that we are staying current or 
falling behind private sector analogs in terms of pay and 
benefits?
    Mr. Blair. It's hard to say overall.
    Mr. Hoyer. Do you reject the BLS----

                                PAY GAPS

    Mr. Blair. No, I'm not rejecting it. When we talk about one 
pay gap, it's really multiple pay gaps. Because of our locality 
pay system, in some areas we are actually at market in certain 
occupations and in certain grades. But overall----
    Mr. Hoyer. Can you give me an example?
    Mr. Blair. I would have to provide that for the record.
    Mr. Hoyer. Would you do that, please.
    [The information follows:]

          Pay Gaps Example of Occupation Paid at Market Rates

    After locality payments are taken into account, Federal rates of 
pay for clerical positions in the Huntsville and Orlando locality pay 
areas now exceed the levels that are paid for non-Federal clerical 
positions. We have attached material that provides a fuller picture of 
this situation.
    [Separate file submitted.]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Mr. Blair. There are multiple pay gaps out there. Some are 
smaller, some are larger than others. That 34 percent number is 
an average.

                   SELF-INSURANCE FOR HEALTH BENEFITS

    Mr. Hoyer. I agree with that, and I understand that 
entirely.
    With respect to the Federal employees health benefit, is 
OPM looking at an alternative of self insurance?
    Mr. Blair. Not to my knowledge, at this time.
    Mr. Hoyer. Would it be wise, do you think, for OPM to look 
at an alternative for self insurance as it relates to the cost 
to the Federal Government? And let me tell you my premise. My 
premise is that people stay in this system, i.e. The various 
alternative insurers, because they're making a profit. When 
they think they can't make a profit, they're going to drop out 
of this business. That's the way it ought to work. Now if they 
are making a profit, then as long as they don't have any 
competition from us saying we are going to be self insurers, or 
you can do it, I think we are going to have trouble containing 
costs. And I agree with all the reasons that you raised, but it 
seems to me you ought to add to your quiver an arrow of the 
possibility of self insurance in terms of costs to the Federal 
Government and, therefore, the Federal taxpayer.
    Mr. Blair. That's certainly something to consider. I know 
the issue of self insurance has been around for quitesome time. 
Back in the 1980s when we looked at reforming the Federal employee 
health benefit system, that was one of the options that was being 
considered at the time.

                 UNION MEMBERSHIP AND NATIONAL SECURITY

    Mr. Hoyer. I'm not necessarily for that, but the last 
question I want to ask you on this first round is on January 7, 
the President issued an executive order that excludes several 
hundred employees at the Department of Justice from the Federal 
labor management relations program. Justification was that 
union membership or potential union membership in the case of 
the U.S. Attorneys was a threat to national security. Some of 
these employees had been union members, of course, for 20 
years. To my knowledge, up until now, there has never been a 
suggestion that their union membership imperiled national 
security.
    Mr. Blair, I would ask you, you are not going to be able to 
do it now, but I would ask you within the next 10 days to give 
me, one, two, three, four examples where union membership posed 
a threat to the security of the United States in any agency in 
the Federal Government, period. I want that as soon as you can 
provide it for me.
     The Homeland Security Department, which is going to have 
160,000 or more employees, I am fearful that OPM, the 
administration are going to use the rationale that they have 
applied to the Justice Department and applying to TSA 
components to this entire department for the purposes of 
accomplishing an objective. They don't believe in the 
unionization of Federal employees. I understand that's a 
substantive disagreement. I believe in collective bargaining. I 
believe in the trade union movement. I think employees have 
been advantaged by it and need to be advantaged by it. But I 
want to have some specific examples within the next 10 days, 
because this issue is moving very quickly of where OPM believes 
there has been a security threat to the United States or to the 
particular agency as a result of union membership.
    Mr. Blair. We will be happy to provide you the responses 
for the record.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Mr. Hoyer. Thank you very much, sir.
    Mr. Istook. Thank you, Mr. Hoyer. Let me tell the members 
the order in which I intend to call on them under the five-
minute rule, although we may be a little bit slightly lax on 
it, but not very. Mr. Sherwood would be next. He has left the 
room momentarily. So as soon as he returns, I'll put him back 
in the cue of whatever position that may be. We have Mr. Price, 
Mr. Tiahrt, Mrs. Meek, Mr. Visclosky and Mr. Peterson. So I 
will recognize Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.

                     LOSS OF HEALTH BENEFITS PLANS

    Deputy Director Blair, let me add my welcome to you and 
your colleagues here today. I would like to raise a question 
first about the Federal employees health benefit program. As 
you know, there has been some unwelcomed changes in the options 
available to employees and the cost of their premiums, and I 
have been hearing about this, as have many members, from 
Federal employees in our districts, and particularly in my case 
from Federal employees at the Research Triangle Park. They 
raised questions about the changes in the plan. And let me 
focus here on the range of options available among the various 
problems that we might address.
    It is my understanding that 49 plans have pulled out of the 
FEHBP, 50 if the Blue Cross Blue Shield high option plan is 
counted, and that's something like 27 percent of the FEHBP 
plans. In North Carolina there's only one HMO option remaining 
where there were five only last year, and North Carolina is not 
alone. Apparently West Virginia, Rhode Island and South 
Carolina have one HMO option apiece, and Delaware has none.
    What is OPM actively doing to make certain that Federal 
employees in North Carolina and other states have adequate 
health care plans from which they can choose for the coming 
year? What can we do about this and what are you doing about 
this?
    Mr. Blair. Mr. Price, the hallmark of our plan has always 
been choice and we are committed to providing a full range of 
choices for our plan enrollees. That said, you are correct that 
a number of plans have dropped out over the past few years. Of 
the 50 you cited, I would speculate that the 49 are HMOs and 
they dropped out for a variety of business reasons, that their 
rates weren't competitive, that there was consolidation in the 
industry, or a host of other reasons.
    That said, we are working with the States. We are actively 
advertising in Commerce Business Daily. We are working with 
local HMOs. We are urging them to participate in the program, 
and we are doing everything we can to identify HMOs in these 
areas to participate in the program, but it is a tough job 
because a number of times, depending on what the health care 
costs are in that area, maybe the HMO premiumsare not 
competitive with our fee-for-service plans.
    And you also mentioned about the Blue Cross Blue Shield 
high option plan dropping out. Well, my personal view on that, 
is that maybe that was a good thing because I think people were 
buying a Cadillac but instead they were receiving a Chevette 
because it was not the best of plans. It was an expensive plan. 
And I think the actuarial value of the plan was essentially the 
same as that of the standard option. So what we've been trying 
to do is make sure our options are affordable and with the 
dropping out of the high option we now have the basic option 
plan which would be more affordable for those employees who are 
trying to cut costs but still receive comprehensive health care 
coverage through the Federal employee benefit program.

                         BLUE CROSS/BLUE SHIELD

    Mr. Price. The basic option is an HMO plan, the basic Blue 
Cross, Blue Shield----
    Mr. Blair. It's not an HMO plan. It's a PPO plan. You can 
go outside, but I think the reimbursement rates for that are 
substantially less than if you stay within the system.

                            COVERAGE CHANGE

    Mr. Price. Standard Blue Cross Blue Shield plan is still 
available. That's the fee-for-service plan but with somewhat 
less comprehensive coverage, now. Is that true?
    Mr. Blair. I think it has the same comprehensive coverage 
it always has had.
    Mr. Price. Annual physicals provided for in that plan?
    Mr. Blair. I have to get back to you on that.
    [The information follows:]

    Yes, the Standard Option of Blue Cross/Blue Shield Plan covers 
annual physical examinations for enrollees aged 65 and over, for those 
under 65, examinations are covered every three years.

    Mr. Price. I'd appreciate you doing that. That is one point 
of issue here, it's whether not only have plans been dropped 
but has the coverage available under the plans that have been 
retained, has that been altered in ways.
    Mr. Blair. If you don't mind, I would turn to Mr. Flynn, 
who might be a little bit more familiar with the day-to-day 
operation of this.
    Mr. Flynn. Mr. Price, the only thing I would say about the 
benefits themselves is, generally speaking, you don't see an 
elimination of a benefit. You may see an increase in copayments 
or deductibles. So I think Deputy Director Blair is correct.
    When it comes to annual physicals in the standard Blue 
Cross, we'd have to check on that for the record. But my guess 
would be, sir, that it is an increase in copayments and 
deductibles and not the elimination or changing of a benefit.

                     INABILITY OF HMO'S TO COMPLETE

    Mr. Price. I would appreciate you getting back on that. But 
back to what you said, Mr. Blair, about the basic reason for 
this, which, of course, is what we really need to get at. You 
referred to the--these HMO plans simply not being able to 
compete. What's the--what's your diagnosis of that? With the 
authority and resources you're going to have, is there any way 
to fix it?
    Mr. Blair. Well, I think it's a problem--HMOs gained in 
popularity in the 1980s and 1990s. And when there's more 
competition, there's a shake-out in the industry. What we need 
to do is, as a program manager, is make sure that we are 
talking to HMOs in the area that may be medically underserved 
by HMOs or may not have plans participating in the program. We 
are talking to State health care associations, HMO 
associations, trade associations, contacting HMOs locally that 
we know exist in areas that may not be served by those 
participating in the plan. So we are very proactive on that.
    With that said, the industry as a whole has undergone 
consolidations, some plans have gone out of business, and there 
is just a reduction in the number of HMOs being offered. Today, 
I believe we have 180 plans participating nationwide in the 
FEHBP. So we still offer a number of competitive plans with the 
wide range of choices. It's interesting, we are talking about 
the number of plans today because a few years ago, we were 
talking about are there too many plans within the FEHBP. I 
think at one time we had over 300. So it's a question of 
striking an appropriate and proper balance, and we want to make 
sure that customers have choices in all States. Like you 
mentioned Delaware, where they might not have an HMO plan, we 
need to double our efforts to make sure that we can attract 
someone to participate in the program.
    Mr. Price. Yes. And obviously the spotty character of this 
availability is a major concern, the relevant figures.The 
relevant figure is not the number of plans nationwide but State by 
State what employees can actually have access to.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Price. We will go next by Mr. 
Sherwood and he'll be followed by Mr. Tiahrt.

                           SIZE OF WORKFORCE

    Mr. Sherwood. Thank you, Mr. Chairman. A lot of the 
discussion today has been on pay and benefits and we know that 
we're going to have to continue that discussion. But my 
business experience leads me to observe that the Federal 
Government and government in general usually uses more people 
than private industry to do the same amount of jobs. And I'm 
wondering if you and the Office of Personnel Management have a 
responsibility for advising the offices that you serve on 
efficient use of people and so that we can get our rosters 
down. I noticed you said there's 39 fewer people than in the 
last budget. But 39 up or down with the size of this is a 
pretty small number. And I'd like you to comment on that.
    Mr. Blair. Well, I think the 39 is a reduction in full-time 
equivalents. And I think if you look at our agency, and a 
number of your members have a long history with this agency, we 
were at approximately 6500 in the early '90s and we are down to 
around 2945 full-time equivalents. So at OPM, any way, we have 
really tightened our belts and seen a significant downsizing 
and restructuring over the years. But one of the new roles that 
OPM is playing within this administration is looking at the 
ownership and management of the human capital initiative which 
is one of the five cross-cutting Governmentwide agenda items on 
the President's management agenda. We are going to be looking 
at holding managers accountable and how agencies are managing 
themselves in terms of their human resources. So I think that 
gets at your questions of are we looking at the jobs and are we 
looking at the agencies and are they doing the appropriate work 
with the right amount of people. In some cases they may need 
some more and some cases they may need less. I don't think 
there is a blanket statement I can say on something like that.

                STRATEGIC MANAGEMENT OF HUMAN RESOURCES

    Mr. Sherwood. People will normally perform up to their 
expectation. And if the systems are designed efficiently, 
usually you can get the result that you want. It's not that--
but it takes modernization all the time to redesign the 
systems. And if you have cut your workforce in your agency by 
over 50 percent and if you could pass just a little of that 
expertise along to the Federal Government--to the rest of the 
Federal Government, that would be huge, and I wondered if--
you've obviously had to develop some new systems and develop 
some expertise to be able to cut your staff from 6500 down to 
3,000. How is that expertise passed and is it part of your 
mission to pass that expertise on to the rest of the 
government.
    Mr. Blair. I think an integral part of OPM's mission is to 
make sure that agencies have the appropriate human resources 
available to them. And so it is an agency-by-agency, office-by-
office basis. We want to make sure if there are going to be 
efforts at looking at the numbers that it's done strategically. 
And I think that has been part of the problem in the past 10 
years when the Government went through the downsizing is that 
it wasn't done strategically. It was a budget-driven, numbers-
driven exercise. And as GAO has reported, and as both the House 
and Senate committees have looked at, oftentimes the program 
failures that are associated with the Federal Government can be 
directly linked to their people. And so what we want to do in 
this administration and at OPM is make sure the agencies are 
staffed appropriately and have the necessary human resources, 
and not be so much numbers-driven, but looking at it overall 
and saying do you have the resources necessary to carry out 
your mission.

                           WORKFORCE ANALYSIS

    Mr. Sherwood. I understand that, but I was taking it a step 
farther than that. Do you provide counseling on what resources 
are necessary to achieve certain workloads and get certain 
outputs?
    Mr. Blair. I don't say we provide counseling. We look at 
the agencies. But agencies are the best ones to determine what 
their own missions are and what their own needs are. And so we 
counsel in that context of saying agencies know best how to get 
their work done. And once we know what work they need to get 
done, then we will give them the appropriate counseling and 
guidance on their workforce.
    Mr. Sherwood. Of course, I agree 100 percent, it would be 
up to the agency--you are not to set the mission, but I thought 
you were to be the expert of how you achieve that through 
personnel.
    Mr. Blair. We have asked agencies to conduct workforce 
analyses and we have done that for them, and we are advising 
them on that. I just didn't want to lend the impression that we 
were doing more than--that we were doing more in terms of 
establishing the mission. We want to help the agencies perform 
their missions appropriately, and that would include looking at 
their workforce and performing workforce analyses.

                       REDUCTION OF OPM WORKFORCE

    Mr. Sherwood. Would you care to comment on how yours was 
able to come down from 6500 to 2945?
    Mr. Blair. I think it was a deliberative--it was a 
difficult process. I was not part of the agency at that time. I 
was actually watching it from a distance as it happened. It was 
a very difficult process. Some would say it was not done 
strategically. With that said, we are working hard to make sure 
that OPM performs its role well and the director is re-
energizing the agency and has devoted theresources we have to 
what we feel to be the most important missions of our agency. So there 
were lessons learned, both positive and negative, and I think there are 
things that we can take forward in this administration and apply them.
    Mr. Istook. Thank you, Mr. Sherwood. Call on Mr. Tiahrt, 
and he will be followed by Mrs. Meek.
    Mr. Tiahrt. Thank you, Mr. Chairman.

                                 HIRING

    Mr. Blair, is it correct to say that you hire people for 
government agencies; that you provide the talent for the 
government agencies; is that correct?
    Mr. Blair. We have delegated authority to hire, but we are 
involved in the recruitment and retention.
    Mr. Tiahrt. And you provide all government personnel except 
for the military personnel; is that correct?
    Mr. Blair. We do. But most oftentimes we have delegated our 
hiring authority to the agencies.
    Mr. Tiahrt. But you do have even a civilian in the DOD.
    Mr. Blair. Yes, sir.
    Mr. Tiahrt. Is the INS part of the agencies that you 
provide personnel to?
    Mr. Blair. Yes, sir.
    Mr. Tiahrt. Is there anybody in your agency that fires 
anybody or is that done----
    Mr. Blair. That would be through the agency itself.
    Mr. Tiahrt. You just hire, you don't fire.
    Mr. Blair. Right. And I want to make it clear. We don't do 
the actual hiring. It's up to the agency to hire the person. We 
would be the ones who would be making sure they are adhering to 
the principles in hiring and making sure they are following the 
proper processes. But we don't do the actual hiring.
    Mr. Tiahrt. So you have oversight of hiring?
    Mr. Blair. Correct.
    Mr. Tiahrt. But you don't hire anybody.

                                 FIRING

    Mr. Tiahrt. And we don't have anybody that fires anybody?
    Mr. Blair. That would be up to the individual agency.
    Mr. Tiahrt. Well, I'm a little puzzled because the INS, six 
months after terrorists flew airplanes into our structures, two 
of them received an extension for visas, and as far as I know, 
nobody was fired for that gross incompetency. How do people get 
fired? Is there some procedures for someone being fired in the 
government? Has anyone been fired lately? Who is the last 
person that was fired?
    Mr. Blair. I couldn't tell you that, sir, but I think that 
one of the frequent criticisms from people at the Federal 
Government, is that it is too tough to fire people.
    Mr. Tiahrt. So we can hire them and you can have oversight 
over hiring people, but it's very difficult to get fired.
    I don't know--I think I've heard of one guy at the 
Department of Education that was stealing computers that may 
have gotten fired, but I think that was because he committed a 
felony. I don't know if you can get fired for being 
incompetent. Can you be fired for being incompetent in the 
government, or is that just--we just take people on like we 
take on relatives and----
    Mr. Blair. We can fire them for incompetency, for failure 
to perform their work, and I'm told that last year was about 
9,000 people were actually terminated from Federal service.
    Mr. Tiahrt. Nine thousand out of how many?
    Mr. Blair. Out of 1.8 million, but you need to take that in 
context that by the time that you get to actually firing 
people, most people have resigned by that time, because if 
you----
    Mr. Tiahrt. How long of a process is it to--is there a 
series, first a verbal reprimand and then a written reprimand? 
Is that how it goes?
    Mr. Blair. It can be verbal, then written, a series of 
escalating procedures.

                            APPEALS PROCESS

    Mr. Tiahrt. Does anybody have oversight over that? Is there 
a grievance procedure, or is that all handled through the 
unions?
    Mr. Blair. There are grievance procedures and then if 
there's an adverse action to fire or demote, that goes through 
the Merit Systems Protection Board. An employee can appeal 
those actions against him or her.
    Mr. Tiahrt. Do you have oversight over those procedures? Is 
that at the agency level or is that at OPM?
    Mr. Blair. That is done through the independent Merit 
Systems Protection Board which is a quasi-judicial body that 
hears these employee appeals.
    Mr. Tiahrt. And that is not under your jurisdiction?
    Mr. Blair. No, sir.
    Mr. Tiahrt. Whose jurisdiction is that under?
    Mr. Blair. It's an independent agency.
    Mr. Tiahrt. Is that part of ``O'' on TPO? Okay. I'll get to 
them later.
    Your procedures have been--is that something that has been 
established a long time? Who reviews the procedures? Are they 
part of a collective bargaining agreement, or are they part of 
standard operating procedures? When you operate by those 
procedures, how do they evolve?
    Mr. Blair. They evolved over time, and I believe they are 
set in law by statute, primarily through the Civil Service 
Reform Act of 1978, which established an independent MSPB, 
Merit Systems Protection Board.
    Mr. Tiahrt. Interesting. I didn't realize that. I thought 
that we had something that was an accumulation of a collective 
bargaining agreement and just procedure--civil service 
procedures that we've had in the past.
    Mr. Blair. Not to my knowledge. Most of these are grounded 
in statute.

                         COLLECTIVE BARGAINING

    Mr. Tiahrt. Do all union collective bargaining agreements 
that exist comply with civil service acts? Is that how they----
    Mr. Blair. They should.
    Mr. Tiahrt. Okay. So there are some structures that in a 
collective bargaining are not open for change--subject to 
change, then? Part of the negotiation process?
    Mr. Blair. I believe so.
    Mr. Tiahrt. What is confined in a collective bargaining 
agreement now? Is it just wages and health care benefits or----
    Mr. Blair. Wages and health care benefits can't be touched 
by a collective bargaining agreement. I think the term of art 
is conditions of employment, excepting wages and benefits. So 
it would be office-place rules and procedures, but as far as 
adverse actions--and adverse actions are the term of art that 
you use when you're talking about firing an employee or 
disciplining them--then those are statutorily governed.
    Mr. Tiahrt. I'm not sure I understand why we have 
government unions then. It seems like there's not much to 
negotiate, not much for--not much leverage that the collective 
group has. I would----
    Mr. Blair. I'm not sure how you want me to comment on that, 
sir. I think the unions play a vital role in our labor 
management negotiations, labor management procedures, and I 
think I would leave it at that. Very important----
    Mr. Tiahrt. Mr. Chairman, in conclusion, since Mr. Blair 
read his brief statement into the record, I don't think there's 
any reason for him to submit it into the record, and being as 
efficient as he is, I wouldn't want him to conduct a redundant 
procedure.
    Mr. Istook. Well, I understand that, but we have assured 
the members we would have the entirety put in the record, 
nevertheless. But I appreciate the gentleman's concern.
    Mrs. Meek, who will be followed by Mr. Visclosky. Mrs. 
Meek.
    Mrs. Meek. Thank you, Mr. Chairman, and welcome.
    Mr. Blair. Thank you.

                          IMPACT OF RETIREMENT

    Mrs. Meek. I've been reading the report from the deputy 
director. It's quite a--not complex, but very, I would say, 
generic in the application to what is going on in your agency. 
I'm also seeing that you've got a big job of integration, to 
try to integrate all of these departments and agencies 
together. In Monday's Washington Post it was noted that five 
major Federal agencies that are proposed for inclusion in the 
Department of Homeland Security could lose almost a third of 
their staffs in the next five years to retirements. Some 
workers don't fit well with unfamiliar things when they're 
going into a new agency. Therefore, you'll probably have quite 
a few retirements. And they noted the number--the percentage of 
workers that would probably be eligible for retirement in the 
next five years. Have you done any kind of assessment or 
surveys in your job as director there as to the potential 
impact on the Department of Homeland Security on these 
retirements?
    Mr. Blair. I don't think we've done anything specific 
regarding these departments other than the information that's 
already out there, and that the current departments mainly 
mirror what we see across Government, that there will be a 
retirement wave over the course of the next five years, up to 
50 percent eligible, if you include regular retirement and 
early-out. The situation would be worse for senior executives, 
but I think this mirrors Government as a whole. Whether or not 
everyone eligible will go out is another question, but I think 
that we need to make sure that we have systems in place to 
ensure continuity and smooth operations of Government.

                COSTS OF HOMELAND SECURITY CONSOLIDATION

    Mrs. Meek. Do you foresee any additional costs to this big 
consolidation that you intend to take?

                             VOTING RIGHTS

    Mr. Blair. I wouldn't begin to speculate on that.
    Mrs. Meek. My next question has to do with elections. The 
Department of Justice has a strong function it plays in the 
election or election reform and, of course, your agency is the 
one that handles the OPM for this particular part of 
government. And I have not--I've watched--I saw in yourbudget 
plan that you only are authorizing--you're authorized to provide 
examiners and observers for elections, and as--these are to be 
determined by the AG's office.
    Now, I'm from Florida, so therefore I'm very, very 
concerned about what is going to happen in elections and any 
kind of reformation on the election system. The Voter Act gives 
the Attorney General the power to enforce the rights that are 
guaranteed under that, and I know that your budget requests for 
voting rights examiners and observers is flat, and that you're 
requesting five FTEs for that program and that you note that 
you expect that this will be sufficient to meet all of the 
requests from the Department of Justice.
    Now, given all of the massive voting problems that you had 
the last time and in the 2000 presidential election, do you 
expect an increase in the demand for voting rights examiners 
and observers? If not, why not? And I'm sure your answer is 
going to be if they don't request them, you won't get them, but 
if so, how will you handle this increased demand? All over this 
country minorities are asking for not so much more voters, but 
counting of the ones we have. That's all I hear when I move 
from one jurisdiction to the other. Be sure to get an accurate 
vote count. They're not that nearly concerned about how many 
new voters, but whether they will be counted. So my question I 
have, have you thought about that, and if not, will you please 
begin to do so?
    Mr. Blair. Thank you, Mrs. Meek. I appreciate that. It's my 
understanding that our request is for management employees to 
oversee these observers and that it's not for the actual 
maintenance or pay for the observers themselves. And so that is 
why you didn't see an increase in our appropriation for the 
managers who oversee these folks, because they're not OPM. The 
observers are not OPM employees.
    Mrs. Meek. But that would come from the Department of 
Justice, wouldn't it? What kind of coordination do you have 
with them in terms of initiating their requests for the 
managers to oversee this?
    Mr. Blair. I'm----
    Mrs. Meek. Your job is consolidation, as I perceive it. So 
I'm asking, since the Department of Justice is the one that 
will probably be requesting these managers and observers from 
you, what kind of consolidation or coordination will you have 
with the Department of Justice in that regard?
    Mr. Blair. We would meet what they would ask of us to do.
    Mrs. Meek. Okay. You have the listing of Federal registered 
voters maintained as the court provided on this telephone 
preservice. Are you familiar with that?
    Mr. Blair. No, ma'am, but I could be----
    Mrs. Meek. Well, as you begin to get more information on 
this, will you please give this committee some----
    Mr. Blair. Certainly.
    Mrs. Meek [continuing]. Input as to how this will work? 
It's a very important subject. Your agency is extremely 
important, and to have the jobs you have here in consolidating 
and integrating, it's going to really take a phenomenal kind of 
management that your agency itself is going to have.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T1599A.707
    
    Mrs. Meek.  I have another question. Do I have time in this 
round, Mr. Chairman?
    Mr. Istook. Oh, you've got about 30 seconds left in this 
round.
    Mrs. Meek. Mr. Chairman, I'll wait then. And thank you very 
much, Mr. Blair.
    Mr. Istook. Thank you, Mrs. Meek. Mr. Visclosky.
    Mr. Visclosky. Mr. Blair, you have stated that----
    Mr. Istook. And you'll be followed by Mr. Peterson.

                              OUTSOURCING

    Mr. Visclosky [continuing]. Reductions in workforce should 
be strategically driven and not number-driven. Should that 
approach also be the same for outsourcing?
    Mr. Blair. I would say that they serve concurrent and 
complementary purposes, but that the President's initiative 
called for meeting 50 percent of the Fair Act inventories, and 
so that is something that we fully support at OPM.
    Mr. Visclosky. Do you know what the strategy behind that 
number is?
    Mr. Blair. No, sir, I don't. I do know that it is half of 
what the Fair Act inventory, I believe, identifies as those 
jobs that are of a commercial nature and that the call for 
outsourcing has--or the administration's call for outsourcing 
has just identified that we go forward with half of those, 
rather than all of those. But I'm not aware of what the 
strategy was on that.
    Mr. Visclosky. Thank you, Mr. Chairman.
    Mr. Istook. Are you done, Mr. Visclosky?
    Mr. Visclosky. Yes, sir, I am.
    Mr. Istook. All right. Very good. Mr. Peterson.
    Mr. Peterson. Thank you, and welcome, Mr. Blair.

                 INCREASES IN HEALTH BENEFITS PREMIUMS

    Back to the health care issue, I think you gave the 
figures, but what are the annual increases, percentage 
increases for health care for Federal employees?
    Mr. Blair. Last year it was 13.3 percent, I believe.
    Mr. Peterson. The year before that?
    Mr. Blair. I'd have to provide that for the record. I know 
that it was--it's been double digits the last few years.
    [The information follows:]

    The average premium increase in 2001 was 10.5 percent.

    Mr. Peterson. Okay. Do you have any tracking of--does that 
vary by different parts of the country, where systems are more 
or less available to you?
    Mr. Blair. Well, we have the fee-for-service plans which 
have a constant and steady rate across the country, like your 
Blue Cross and Blue Shield standard option. If you're in New 
York, Miami, Washington or other areas, you pay the same fee 
that every--same premium that everyone else pays. HMOs are 
community rates, and so HMOs are going to differ depending on 
the area that they serve.
    Mr. Peterson. But are HMOs or fee-for-service increasing 
the fastest?
    Mr. Blair. That I don't know. We'd have to provide that for 
the record.
    [The information follows:]

    In 2002 the average increase in HMO premiums was 14.0 percent 
compared to 12.9 percent for fee-for-service plans. In 2001 the rate of 
the respective increases was reversed, 10.9 percent for fee-for-service 
versus 8.5 percent for HMOs.

    Mr. Peterson. But do you track, like, in, say, Monopoly 
States where there's not much competition, are rates higher? 
Does it cost you more to provide Federal employees health care 
there?
    Mr. Blair. Well, that I'm not sure, and we can provide that 
for the record, but I would say that in States that are not as 
well served by HMOs, you still have the benefit of the fee-for-
service plans and all the fee-for-service plans apply equally 
across the board to every State.
    [The information follows:]

    Our community rated HMO premiums are based on the rates each plan 
charges to local purchasers that are closest to use in size. So we 
benefit from whatever competition exists in an area, even if the 
competing plans don't contract with us. We are not aware of any data 
that indicates that the number of competing HMO plans has an effect on 
premiums.

    Mr. Peterson. So it's a national----

                     TYPE OF HEALTH BENEFITS PLANS

    Mr. Blair. Yes. The fee-for-service plans are national in 
scope.
    Mr. Peterson. And that is basically the Blues?
    Mr. Blair. Blues. And I believe there are 12 other plans as 
well. They are employee organization plans.
    Mr. Peterson. Of course, I come from a State where my part 
of the State is 75 to 80 percent Blue. So it's Blue--some color 
of Blue.
    Mr. Blair. Well, they are the largest of the plans.

                     PRESCRIPTION DRUG UTILIZATION

    Mr. Peterson. Okay. You were talking about the--everybody 
is talking about the greatest increase in cost is pharmacy, and 
we--and I agree that we're--drugs do save lives. You know, 
people that have strokes today can have a pretty normal life 
because of drugs. There's just a lot of successes, but I've not 
talked to a health care executive or a health care--or doctor 
that isn't concerned about the overutilization of drugs today. 
I mean, you know, we're a drug-addicted society, legal and 
illegal, that everybody wants a drug. Instead of changing 
health care, you know, and instead of changing your diet, they 
want a cholesterol drug. Instead of taking off weight, they 
want a blood pressure drug. I mean, everybody is taking the 
easy way out, and I guess the--but the cost figures are that 
the negative reaction to drugs equal the cost of drugs. I think 
a lot of you may not be aware of that. That's a national 
statistic. So if we spend $4 billion on drugs, we're going to 
have $4 billion worth of health care costs from negative 
reaction to drugs. These powerful drugs do a lot of things to 
us, and when you have people taking multiple drugs, those 
problems arise.
    Is there any effort to study that issue of the 
overutilization of drugs? Because I think that is the direction 
we're headed in this country. We're going to be--we're already 
overutilizing drugs already. We're going to continue to 
overutilize. And I'm not opposed to the new life-saving drugs 
that are coming, but the overuse of drugs, in my view, is going 
to sink our system, and it's not in the long term going to give 
us better health.
    Mr. Blair. Well, we do emphasize and aggressively pursue 
plan management, health care plan management, and looking at 
things like utilization of drugs. We also urge that the plans 
look at using generics and also we have a new three-tier option 
for the prescription plans. So part of that component is 
looking at the utilization of the drugs. I'm not sure it goes 
as far as what you are suggesting.
    Mr. Peterson. I would urge you to look into that, because I 
know Pennsylvania has a prescription plan for seniors, and 
they've had it for years. They've had huge successes at 
monitoring what people are taking and the multiplicity of drugs 
they are taking and the negative reactions. I mean, you'll get 
a letter or a call from them saying, hey, you're on these five 
drugs. These two are going to cause problems.
    Mr. Blair. And I think those are common within the FEHBP, 
that for example for the Blue Cross Blue Shield plan, if you 
utilized their prescription drug plan, you'll receive notices 
much like what you said.
    Mr. Peterson. Okay. I would urge you to pursue that. I 
think there's a savings there.
    You've cut your workforce in half, less than a decade--in a 
decade. Is that technology?
    Mr. Blair. No. I think it was----
    Mr. Peterson. Fact and waste?

                       REDUCTION IN OPM WORKFORCE

    Mr. Blair. It's hard to comment, because I was not there 
during the time of the downsizing, although I was watching it 
from a different perspective, and most of the downsizing took 
place in our investigation service, that was spun off as a for-
profit, and they perform some of the investigation functions 
now.
    Mr. Peterson. Oh. So it wasn't a true 50 percent cut in 
employment.
    Mr. Blair. From the Government it was, but the functions 
are still being carried out through a private sector company.
    Mr. Peterson. All right. Well, that's--because that is a 
huge number. I--okay.

                              E-GOVERNMENT

    What--as technology--how do you rate agencies--the use of 
technology for efficient management, where are we at, and do 
you play any role there?
    Mr. Blair. Well, we do play a very important role. We are 
the managers of five of the 24 Governmentwide electronic 
government initiatives, and those include the human resource 
data network or what has been morphed into the enterprise HR 
integration system, recruitment one-stop, e-clearance, e-
training and e-payroll. And so we are heavily pushing 
technology in our management of our human resources.
    Mr. Peterson. Do you buy it or lease it?
    Mr. Blair. We're going to, I believe, buy although, we're 
in the early planning stage at this point. For example, 
recruitment one-stop, is a portal which you can access, and 
you'll be able to track where your applications are going and 
where you stand in the application process, do resume building, 
and things like that. We put an RFI out recently looking at how 
we want to form this, and so we're going to be working with 
contractors on there.
    Mr. Peterson. But will you be owning the equipment or 
renting it or leasing it?
    Mr. Blair. I think it will depend on the project.
    Mr. Peterson. But I guess from my state background, and I 
think it's the same here, through the complex General Services 
purchasing processes, it's my conclusion that government cannot 
ever stay anywhere near the edge of technology, because that 
process won't let you. I mean, it just doesn't let you bid 
competitively. It doesn't let you get the right systems that--
and so you have this hodgepodge out there of systems that don't 
talk to each other, and we hear about that every day. So in my 
view, the only way government can use technology is to lease 
it, and then not own it. I mean, when you own it, then it's 
your system and you have to--but if you can lease it and then 
you can keep it updated and have systems that are compatible 
and talk to each other, I mean, I think that's the only way you 
can actually get there. That would be my view as a former 
business person, too, is that I--I just don't think the 
government purchasing systems will allow you to--do you have--
--
    Mr. Istook. Mr. Peterson, your time has expired.
    Mr. Peterson. Boy, am I quick.

                      INVESTIGATION PRIVATIZATION

    Mr. Istook. Thank you. Mr. Blair, let me follow up on 
something that Mr. Peterson did touch on. The outsourcing of 
the investigation service has been, I suspect, the most 
significant factor in the downsizing of OPM, and your budget 
submissions in the investigation service has investigations 
conducted for other Federal agencies through a contract with a 
corporation. We're talking about fiscal year 2003 using 
revolving funds, that is, funds that come in from other Federal 
agencies flow through OPM for the purpose of conducting these 
investigations.
    Fiscal year 2003, we're talking about $234 million on this 
particular fund. Your revolving funds are more substantial than 
your appropriated funds. So you have 53 people employed within 
OPM, and I'm not quite sure how many through the corporation, 
but the budget submission says that contract is with a 
corporation. I mean, it's all contracted with a single 
corporation?
    Mr. Blair. Yes.
    Mr. Istook. And who is that?
    Mr. Blair. It's the US Investigations Services.
    Mr. Istook. All right. And that is a private corporation?
    Mr. Blair. It's my understanding.
    Mr. Hoyer. Mr. Chairman, if you'll yield, at the time they 
did this, what they did was--and I forget the phrase that was 
used now. In fact, it's an employee corporation, and--so that 
we could say we had less Federal employees, we simply turned 
them into private sector employees, and we turned them into 
private sector employees by creating--I forget--somebody can 
probably--the phrase, what is the phrase?
    Mr. Blair. An ESOP.
    Mr. Hoyer. We turned it into an ESOP.
    Mr. Istook. Employees Stock Ownership Plan.
    Mr. Hoyer. Right. Frankly, I think it was pretty successful 
and the employees were pretty pleased about it because they 
were going to lose jobs in the downsizing, but whether or not 
we saved money I think is the issue, and Mr. Sherwood was 
looking at that.
    Mr. Istook. Well, actually, I was trying to take it into a 
little bit different direction----
    Mr. Hoyer. Okay.
    Mr. Istook [continuing]. Than necessarily the financial 
savings. And that is this. You're providing in some cases for 
DOD, in other cases for other Federal agencies involving 
security clearances. So, I mean, the threshold question is to 
who and how is this contractor being held responsible with 
which we're expending over $200 million a year to provide 
Federal investigative services, including security clearances, 
at a time of great concern regarding homeland security?
    Mr. Blair. We're doing everything we can to ensure 
accountability there. I'd have to get back with you as to the 
specifics on that.
    [The information follows:]

    OPM's Investigations Service (IS) has in place extensive oversight 
controls of the US Investigations Services (USIS). We monitor the 
quality, guantity, and timeliness of USIS cases. In addition, we have 
an integrity program to assure that USIS is doing the job they say they 
are doing in the way that the contract with them requires. IS maintains 
a staff (Contract Management Services) of Federal employees whose sole 
function is to monitor the performance of USIS on this contract. Also, 
the contract with USIS requires them to provide their own quality and 
integrity controls and supply management reports to IS on a periodic 
basis. These, in combination with IS generated management reports, help 
IS keep constant oversight of USIS's performance.
    The completed investigations supplied to IS from USIS are then 
transmitted to the requesting Federal agency for its use. Some are used 
for security clearance determinations by these other agencies but, 
under the contract with OPM, USIS has no involvement in the 
adjudications/granting of those clearances.

    Mr. Blair. I do know that we--this is part of a revolving 
fund account, which you said, and so the agencies are the ones 
who are utilizing our services on that, and to that extent, I 
think there has been a degree of satisfaction with the level of 
service rendered. But I want to get back with you on more 
specifics, especially how we're holding them accountable.
    Mr. Istook. Certainly, because, I mean, we've had concerns, 
for example, we've had discussions here about TSA, and we've 
talked about whether the people that are conducting passenger 
screening, baggage screening and so forth are American 
citizens. I don't know if the people that are conducting these 
security background checks are themselves required to meet the 
same standards that we require of them to screen passengers or 
to screen baggage. I'm concerned with potential homeland 
security issues that come up through having created a private 
corporation that now is charged with this. Has OPM done--made a 
particular effort to inquire into how the manner which these 
investigations are being done by the private corporation 
impacts and interfaces with homeland security?
    Mr. Blair. I am told that those individuals all have had 
background checks who are in turn doing checks on others.
    Mr. Istook. But are they all American citizens, for 
example?
    Mr. Blair. That I could not comment on. I'd have to get 
back with you on that.
    [The information follows:]

    All USIS Investigators are U.S. citizens. It is stipulated 
in their contract with OPM and, since background investigations 
are conducted on each USIS Investigator, we are able to verify 
this fact. Consequently, USIS Investigators are eligible for a 
``Top Secret'' clearance, but clearances are granted only to 
those Investigators who have a definite need for a clearance to 
perform their work.

    Mr. Istook. Okay. I think that's an area that we certainly 
want to----
    Mr. Blair. Yes. I do want to----
    Mr. Istook [continuing]. Get a lot more information than 
perhaps you have today, but I think it's something very valid 
to looking----
    Mr. Blair. Mr. Chairman, I would assume they are, but 
before I give you a definitive answer, I'd rather feel like I'm 
on firm ground.
    Mr. Istook. Understood. And I think with the type of work 
that has been contracted with them and the serious concerns 
with this, there's probably a number of questions that we need 
to have answered in connection with that, because, I mean, 
we're talking about national security clearances. I do not know 
what portion of Federal security clearances are being 
investigated by this agency as opposed to--through Defense's 
own investigative people or through FBI background checks, and 
I think we want to understand that mix and what that 
relationship is. So that's something that I would certainly 
appreciate your----
    Mr. Blair. Certainly.

                 TRANSPORTATION SECURITY ADMINISTRATION

    Mr. Istook [continuing]. Great amount of attention to that.
    With that--and let me segue from that back into some of the 
issues on TSA and OPM's role. Is it correct that the manner 
which TSA was established does not give OPM any ability to try 
to match what they are paying and what the requirements are for 
those personnel with what we're doing elsewhere in Federal law 
enforcement?
    Mr. Blair. Well, I think we can----
    Mr. Istook. Or do you have a role in that?
    Mr. Blair. We don't really have a role in what TSA offers.
    Mr. Istook. Okay. So there's--what role does OPM have with 
TSA, Transportation Security Agency?
    Mr. Blair. Merely an oversight role, and when you say 
oversight, that conveys a bunch of different ideas as to what 
oversight may include. When Congress enacted the legislation 
authorizing the Transportation Security Agency, it was outside 
the purview of title 5, and we could not establish what their 
pay rates were going to be, and so that was one of the 
challenges that I think we're facing internally within the 
administration of how to deal with this cannibalization that is 
going on.
    Mr. Istook. Does the fact that they were removed from the 
jurisdiction of OPM's normal interaction also have a bearing on 
the number of people that are being talked about at TSA? I 
mean, first we heard figures of 38,000 people. Then we heard 
figures of 45,000 people. Then of 60,000 people and 70,000 
people. Is the fact that OPM does not have its normal relation 
with TSA as it would with other Federalagencies, to your 
knowledge, is that related in--related to the great growth in the plans 
for how many people they will have?
    Mr. Blair. I could not----
    Mr. Istook. That would be something under normal 
circumstances they would have to work with you to establish.
    Mr. Blair. It's hard to say that they've been a normal, 
quote, unquote, title 5 agency. If we would see the same 
estimations with regard to staffing as they would now--I'm not 
privy to why the numbers have gone up or why they're going up 
more, and had we had the authority, I don't know if we'd be at 
the same point that they are now. It's just really hard for me 
to say. I just know that there's a level of frustration 
internally within the administration, and certainly it's 
evidenced by the subcommittee today that there are agencies 
that have authorities and other agencies that don't have 
authorities and that there is a serious case of cherry-picking 
going on.
    Mr. Istook. And does this--if they were under title 5, the 
normal structure, would the size of their payroll, of the 
number of people, be something that they would have to work 
with you to establish?
    Mr. Blair. I'm not sure I understand the question. I 
apologize.
    Mr. Istook. Okay. If they had not been removed from title 5 
jurisdiction, would they have to work with OPM to justify and 
get clearance for the number of people they would be hiring?
    Mr. Blair. I think it would be more OMB than OPM as far as 
their number of employees.
    Mr. Istook. Okay. And has there been by OPM, and would you 
be the proper ones to look at it, an assessment of the extent 
of this cannibalization, of people being hired by TSA from 
other Federal agencies? Mr. Hoyer mentioned 12 percent of the 
uniformed Secret Service people, sometimes in differentials of 
$20,000 per year, for example. Has OPM made any assessment, or 
is one in progress, of trying to measure this cannibalization, 
the displacement, the number of people that are being displaced 
and the cost to the taxpayers, how it influences both the pay 
structure in the receiving agency and in the agency from which 
somebody leaves, what they have to do to retrain and replace 
people?
    Mr. Blair. We do have the data as far as the transfer from 
one agency to another, and we'd be happy to provide for the 
record as to what the--if there are any costs associated with 
that.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    
    Mr. Istook. I appreciate that, because I know that's 
something that we've been very interested in trying to get a 
handle on.

                    DEPARTMENT OF HOMELAND SECURITY

    And finally, Mrs. Meek was asking you about the impact, 
potentially, of establishing the new Department of Homeland 
Security. We're talking about 160,000 Federal workers out of a 
Federal workforce of about 1.8. So almost 10 percent of the 
Federal workforce. Knowing when there have been people that 
have changed between agencies before there's been a 
consolidation, doesn't that normally involve OPM in trying to 
process the job descriptions, the necessary payroll and 
employment transactions and transfers? I'm trying to anticipate 
what might be the workload that could be placed upon OPM as 
part of moving 160,000 Federal workers into a new department.
    Mr. Blair. At this point we don't anticipate any additional 
resources being required.
    Mr. Istook. Would you have to process 160,000 people in 
some way through OPM?
    Mr. Blair. We'll be providing consultative services, to my 
knowledge, but I don't anticipate at this point--or it hasn't 
been brought to our attention at this point whether we would be 
requiring additional resources.

                            REORGANIZATIONS

    Mr. Istook. Would you normally--if somebody switches from 
one Federal agency to another, does OPM become involved in at 
least making some adjustment in their record for retirement 
purposes, if nothing else?
    Mr. Blair. We keep the record, and that's all.
    Mr. Istook. So if someone changes from one agency to 
another, you have to make an adjustment in that record?
    Mr. Blair. There would be a record of that--of that--I 
don't want to use the word transaction, but you know, for lack 
of a choice of a better word, there is evidence of that 
transaction, and we would retain that.
    Mr. Istook. Now, I think it would be good to know 
historically when there have been mergers or other reworkings 
of Federal departments, to what extent OPM has historically 
been involved in being called upon to provide services in 
reworking job descriptions or whatever that might be.
    Mr. Blair. We would probably have a limited history, 
because this is an historic reorganization itself, and from 
what I've read in the papers, we haven't seen anything quite 
like it since 1947, and I'm not sure if that's the accurate 
date or not. And our agency was formed in 1978.

                     TRANSPORTATION SECURITY AGENCY

    That said, I do want to provide you with an idea that--for 
instance, with the Transportation Security Agency, while we had 
little control over how their staffing needs, we did respond in 
a consultative manner by sending what we call some of our 
strike forces over there to help them with staffing, especially 
with their executive staffing. So we are playing a consultative 
role, but we don't have a legislative authority over their 
hiring and personnel procedures.
    Mr. Istook. Any sort of processing that goes through OPM 
because of the people being hired by the new Federal agency, 
the TSA?
    Mr. Blair. I'd have to get back with you. I'm not sure what 
role. I don't think so. I think we were mainly at the executive 
levels, but--and I don't--I'm not sure if we're involved in the 
day-to-day processing of the screeners.
    Mr. Istook. But with the new hires. Very good. Thank you. I 
think that information will be very useful to us, and something 
that could have significant impact, I know, on OPM's funding 
needs.
    Mr. Hoyer.

                                OPM ROLE

    Mr. Hoyer. Mr. Chairman, your questions and Mr. Tiahrt's 
questions, I think--there seems to be--there's a little bit of 
confusion. OPM is not a management agency. The Office of 
Personnel Management is in effect a service agency, and the 
service it provides, it tries to provide to the Federal 
Government a uniformity of policies as it relates to the 
dealing with personnel and to facilitate the management of the 
human resources within the Federal service. But the Office of 
Management and Budget is--Mr. Tiahrt is not here,but in terms 
of level of employees, obviously the OMB does have the authority and 
can impose FTE ceilings on agencies on behalf of the President. The 
Congress obviously can overthrow those, but what the OPM tries to do is 
try to advise the executive agencies, and they are advisers to the 
executive agencies. The executive agencies hire, fire and process their 
own employees. The OPM doesn't process employees in a classic sense of 
being--for instance, Don, in your automobile agency, a central agency 
that processes your employees, they don't do that. The divisions that 
we have in our corporation, i.e., the defense division, processes its 
own employees as if it were a separate corporation for that purpose.
    The importance of the OPM, though, is that it does in fact 
handle obviously a lot of the--certainly in terms of retirees, 
where you do centralize, then it goes from the division. Then 
it goes to a central handling. This is, by the way, why I was 
opposed to the President trying to discretely deal with those 
figures as opposed to unifying them. I hope we're going to 
unify them back or leave them unified, but OPM does deal at the 
retiree level both in terms of FEHBP retirement benefits or 
survivors' benefits. It does deal in a unified fashion at that 
level. I just think it's important for the committee to 
understand what OPM does. Now----
    Mr. Istook. And, Mr. Hoyer, that's exactly what I was 
talking about, if you have to do processing on the 160,000 
employees and their records outside of what would be your 
normal processing numbers.

                           PAY COMPARABILITY

    Mr. Hoyer. And, of course, they don't do that, so that 
won't impact on them in particular. However, let me make an 
observation, Mr. Blair, and you know where I'm coming from, and 
you've known me for a long period of time, and my advocacy. I 
hear about all of this flexibility. You know why most agencies 
want flexibility? Because they don't think we're paying enough. 
They don't think our benefit is good enough, and they can't 
recruit and retain the kind of people they want.
    Now, that directly relates to FEPCA where we're falling 
further and further behind, and you can sit there and everybody 
can sit there and deny it's 34 percent or you have to do 29 
percent or 27 percent adjustments to catch up to your 5 percent 
behind--we're way behind on FEPCA, as you know. And you can do 
it till the cows come home, but the proof is in the eating of 
the pudding, and the eating of the pudding is we didn't cover 
them under title 5. We gave them flexibility. Why? Because we 
felt we needed to do the job and get the job done right and we 
thought we needed the kind of quality people. So what happened? 
They're paying $20,000 more than the Capital Police are paying 
for similar services, law enforcement services. That's a 
frustration you hear in my voice, not an anger, a frustration 
that, come on, fellows, let's deal with it. Not ideologically. 
Let's deal with it on the ground in terms of competition, and I 
would hope that you, OMB and the President, if you think an 
alternative pay process is advisable, come up with it. Put it 
on the table. Let's debate it. Let's discuss it. I'm so tired 
of hearing every administration--I don't care whether it's the 
Clinton administration or the Bush administration, not so much 
the first Bush administration which, of course, signed the 
FEPCA and followed it, the only administration that followed 
it. And they followed it for one year and weren't here.
    But the fact is that we don't deal with this issue 
honestly. We shuck and jive about this issue, and it's not fair 
to the Federal employees. It's not fair to legislators. It's 
not fair to the executive department. We ought to deal with it 
honestly and come up with figures. We passed that 12 years ago. 
No administration has come up with an alternative, but every 
administration talks about--frankly, with all due respect to 
the statement that was submitted, it's very good rhetoric and 
very little substance. It's great governmental rhetoric about 
how we're--and zero-based budgeting. We've all talked about 
zero-based budgeting. Jimmy talked about zero-based budgeting 
and how he was going to bring that new dramatic system. I 
haven't seen it, and there's no substitute for saying--and I 
agree with Mr. Tiahrt--we need to do X job. What does it take 
us to do?
    And we pretend, by the way, that we're reducing--the 
Clinton administration reduced personnel in OPM. Sure. They had 
an ESOP. Hello. The Defense Department claims it's losing a lot 
of people. Baloney. They're just going to the private sector, 
and we're paying a premium for those employees. We're paying 
10, 15, 25 percent for those employees to contract them out. 
That's my premise. I'm willing to have anybody come in and say, 
oh, no, Mr. Hoyer, you're dead wrong. Here are the facts. It 
all sounds good. We need to get government smaller.
    And by the way, the only administration in the last 25 
years that got government smaller was the Clinton 
administration. Reduced over 370,000 Federal employees, in part 
by contracting them out and pretending we were saving 
something. At NIH we had caps on doctors, so they contracted 
that to GW. It cost 30,000 more to have the researchers at 
George Washington University than it did at NIH.
    We're not playing real. A lot of rhetoric. A lot of 
strategic downsizing. I don't want to get into a confrontation 
with you here to explain to me how you would have strategically 
downsized OPM as opposed to doing it in the budget-driven. With 
all due respect, from a Democrat standpoint, we sure don't do 
tax cuts strategically. Nobody gets up on the floor of the 
House of Representatives and says we need X dollars to run this 
government. We need X dollars to fight this war on terrorism. 
We need X dollars to run NIH, and therefore we need a tax level 
of X or Y. What we do is we're going to have a tax level of A, 
and you fit everything that we're doing into it.
    Let me ask one specific question. You've heard my speech. 
Nothing new you heard, but I do get frustrated and, frankly, in 
the recesses of your office, you must get frustrated with this 
rhetoric as well, because you know the facts. You've been here. 
You've been on committees. You know all of this rhetoric and 
all of this stuff sounds good and little hip here and a little 
hip there, and the bottom line is if you want to get something 
done, you've got to pay people to do it. If you don't want to 
do it--and you have never heard me do a deep never once in 21 
years serving in this Congress, about reduction in numbers of 
Federal employees. I don't care if we have 10 Federal 
employees. If we have 10, I'm going to fight that they get paid 
well and they get the kind of benefits that are comparable to 
the private sector, but I don't care whether they have 10, 20, 
30, 40 or 50. Level of employees is irrelevant to me.
    Don, you're absolutely right. The only number we need is 
the number we need to do the job that we want done, and no 
more, not one more. I want every one of them treated fairly.I 
want every one of them paid well, but I don't care what the level is. 
You didn't hear me peep at all when we reduced 370,000 Federal 
employees under the Clinton administration, because I don't think that 
is a relevant number. What is relevant is what we need to get the job 
done.

                    DEPARTMENT OF HOMELAND SECURITY

    Now, with respect to--and this is a question I want to ask 
you. On this creation of the Department of Homeland Security, 
title 5, chapter 23, merit system principles; chapter 43, 
performance standards; Chapter 53, pay, clearly FEPCA; chapter 
63, leave; chapter 71, labor management relations, including 
the right to belong to a union; chapter 72, antidiscrimination, 
including whistle-blower protection, which I think is 
critically--along with Mr. Grassley, this is not a partisan 
issue. Feels it's critically important. Chapter 72, conduct, 
standards; chapter 83, CSRS retirement; and chapter 84, 
retirement FEHBP.
    Which of those titles do you not think ought to be 
incorporated and included as fully operative with respect to 
every employee in the Department of Homeland Security, if any?
    Mr. Blair. I really can't comment on that. I'm told today 
the President will be unveiling his Department of Homeland 
Security proposal, and I would not want to pre-empt the 
President on the presentation of his proposal. I think that you 
bring up some very valid and very important points. They're 
going to be discussed and debated in this body and in the other 
body across the street, and we look forward to those debates, 
but at this point I cannot pre-empt the President in unveiling 
the proposal for the new Department of Homeland Security.
    Mr. Hoyer. Mr. Chairman, I know I've taken more than my 
time.
    Mr. Istook. Thank you, Mr. Hoyer. Mr. Price--I'm sorry. No. 
Mr. Sherwood is--should have been before you. Mr. Sherwood. 
Then we'll come back to Mr. Price.
    Mr. Sherwood. Thank you, Mr. Chairman. And----
    Mr. Hoyer. Don, I apologize. Can I make one observation? 
Then I have to leave, because Mr. Gephardt has a meeting.
    Mr. Sherwood. Certainly.
    Mr. Hoyer. Mr. Blair, I realize you can't preempt the 
President. I don't want you to do that, but I did want to bring 
up a--that I would ask you and particularly Kay Coles James. 
The President was speaking--and this was speaking of global 
warming, but on three different occasions and it was reported 
in New York Times and The Washington Post, et cetera. Too often 
in Washington, particularly, political rhetoric is the use of 
bureaucracy as an epithet, the use of bureaucracy to demean 
those whom we ask to do our jobs for us. That is to say, we set 
policy and we ask somebody to do it.
    I would hope that Ms. James and others would urge the 
President and everybody in the executive department not to 
simply slough off things because they're reports from the 
bureaucracy, not that because that may not be appropriate. I 
don't ask you to respond to this, but in terms of dealing with 
our personnel, if they think the employer doesn't think much of 
them, you can bet your sweet life their morale is not going to 
be very high.
    I thank you for yielding, Don.
    Mr. Istook. Okay. Mr. Sherwood reclaims his time.

                          COMPENSATION REFORM

    Mr. Sherwood. And Mr. Hoyer and I have talked this point a 
little bit before, and we agree in lots of areas. And my point 
is that you also do not need one more--we don't want one more 
person necessary, than it is necessary to do the job, but in an 
area of scarce resources, it's often instructive to critically 
look at our work plans and our work structures to determine 
staffing, and in that regard, I'd be a little interested to 
know if OPM is exploring any ways to make Federal pay more 
performance-oriented or merit-based, and I'm also a little 
concerned that we are probably operating with work level 
descriptions which were derived about 50 years ago and may not 
be too relevant in today's technology-driven organizations.
    In fact, I understand that 75 percent of our employees in 
the 1950s filled clerical positions of GS-7 and below, and 
today only 30 percent of our people have those clerical-type 
employees. And yet we have roughly the same sized organization.
    Now, I realize it's not always the same size, but I'd like 
to know what is being done to help agencies tailor their pay 
programs and their work rules to fulfill the missions that we 
have today.
    Mr. Blair. Well, I think you hit the nail on the head when 
you said our systems were tailored for those of the 1950s, and 
that's something that the director has pointed out in her white 
paper on compensation reform. She undertook a studied review of 
the Federal personnel and compensation systems, and what we 
have portrayed and what many in the field know and what we're 
educating others in the Federal community about is that our pay 
systems don't reflect the realities of today, that a one-size-
fits-all system doesn't work. We've seen that it doesn't work. 
We've seen a number of agencies getting outside of the larger 
system, and that we need to do something that better rewards 
outstanding performance. Our systems today do very little to 
reward performance and incentivize good performance. It does 
very little to reward excellence, and if we are going to have 
scarce dollars devoted to this, we need to make sure that 
they're devoted in such a way that they will be put to the best 
use of encouraging outstanding performance, and we don't have 
that today in our systems.
    Mr. Sherwood. I agree that we don't have it, and the thrust 
of my question is what are we doing about it?
    Mr. Blair. Well, what we're doing about it is looking at a 
way of developing some new proposals, and that's where the 
conversation began with the white paper. It outlined the 
problems, but it didn't outline the solutions, because what we 
wanted to do was educate the Federal community first before we 
engage in the debate about the solutions. So you can expect 
Director James to come forward over the course of the next 
year. I think that the Department of Homeland Security and 
OPM's efforts in that regard may put us back on our track. It 
may set us back a little bit on our timetable in proposing 
compensation reform.
    With that said, the director is committed to coming up with 
proposals to address these problems that we've talked today.
    Mr. Sherwood. Mr. Chairman, could we ask that when those 
proposals are formulated, we would get a chance to see them?
    Mr. Istook. I think that certainly would be the type of 
follow-on that we'd like to have as part of questions for the 
record.
    Mr. Blair. We'll make sure you get them, sir. I think this 
is something that we want to circulate widely.
    [The information follows:]

    We have no pay reform proposals available at this time.

    Mr. Sherwood. Thank you.
    Mr. Istook. Thank you, Mr. Sherwood.
    Mr. Price.

                              LOCALITY PAY

    Mr. Price. Thank you. Mr. Blair, let me ask you about two 
pending matters here, and then I may have some additional 
questions for the record. But first I would like to have a 
status report on the national compensation survey. The Federal 
Salary Council has indicated that it hopes the revised national 
compensation survey will be available for implementation next 
year. I wonder what further you can tell me in this regard. As 
you probably know, the President's pay agent rejected the 
Federal Salary Council's recommendation that Louisville, 
Nashville and Raleigh be made separate locality pay areas on 
the basis of shorter survey versions of the NCS. I don't think 
today we need to go into all of the twists and turns of the 
revision of the NCS, but I do wonder what the status of that 
revision is and also what OPM is going to do for areas like the 
ones I named once the NCS changes are in place.
    Mr. Blair. I can provide you specific information for the 
record regarding those areas.
    [The information follows:]

   LOCALITY PAY STATUS REPORT ON AUSTIN [NASHVILLE], LOUISVILLE, AND 
                                RALEIGH
    [The three areas mentioned by Representative Price should be 
Austin, Louisville, and Raleigh. The Bureau of Labor Statistics does 
not conduct a National Compensation Survey in Nashville.]
    Public Law 105-554 required that the Pay Agent use data collected 
by the Bureau of Labor Statistics (BLS) or data compiled by private 
sector firms to review five additional Metropolitan Statistical Areas 
(MSAs) for locality pay in 2002. The MSAs were those with at least 
2,500 General Schedule employees and large numbers of non-Federal 
workers which had not already been reviewed for locality pay. Las 
Vegas, Nashville, Raleigh, Austin, and Louisville qualified for review.
    Both the Federal Salary Council and the Pay Agent concluded that 
data compiled by private sector firms were not suitable for setting 
Federal pay. The Federal Salary Council recommended that the Pay Agent 
establish Austin, Louisville, and Raleigh as separate locality pay 
areas using small surveys BLS conducts in those locations as part of 
its data collection for the Rest of U.S. locality pay area. BLS does 
not conduct surveys in Las Vegas or Nashville. The Pay Agent did not 
accept the Council's recommendation because we are still working on 
improvements in BLS surveys first recommended by the Council and 
because the surveys conducted in these three MSAs are small sample 
surveys that produce unstable results.
    Three of the five improvements in BLS surveys will be included in 
data submitted this year. The fourth is still being tested and the 
fifth will take five years to fully incorporate. At present, the sample 
size in surveys conducted by BLS in Austin, Louisville, and Raleigh has 
not been expanded and the Pay Agent has not made decisions about when 
to review additional cities as potential locality pay areas.

    Mr. Blair. I do know that we're waiting for revisions in 
the non-Federal sector surveys, and so we're working on that. 
As far as the Louisville area, we can provide you specific 
information for the record.
    [The information follows:]

     LOCALITY PAY STATUS REPORT ON THE NATIONAL COMPENSATION SURVEY
    Three of the five improvements in the National Compensation Survey 
Program will be included in survey results delivered to the Pay Agent 
in Augsut 2002. These are:
           Excluding salary data from non-Federal jobs that 
        would be classified above GS-15 in the Government;
           Use of a model to estimate salaries for jobs not 
        selected by probability sampling but important in the 
        Government's workforce;
           Use of Federal employment weighting based on the 
        Standard Occupational Classification System.
    We have also developed and tested a simplified method of 
determining the grade level of non-Federal work selected by random 
sampling. This approach is based on the Federal Classification System 
but with the nine factors from the Factor Evaluation System reduced to 
four. We also provide grade leveling guides for 20 job families that 
cover the breadth of the Federal General Schedule workforce. The Bureau 
of Labor Statistics (BLS) plans to begin using the new guides late next 
year. However, it will take five years to complete the phase-in because 
BLS only conducts detailed interview surveys the first year a firm 
appears in its sample. Subsequent surveys collect salary update 
information for the remaining four years a firm is in the sample.
    We are still testing procedures to grade supervisory jobs selected 
by probability sampling but hope to incorporate this improvement in 
surveys conducted late next year. AT present, the sample size in 
surveys conducted by BLS in Austin, Louisville, and Raleigh has not 
been expanded and the Pay Agent has not made decisions about when to 
review additional cities as potential locality pay areas.

    Mr. Price. Well, Louisville, Nashville and Raleigh were the 
areas that were pending, so to speak, and that we hoped would 
be addressed when these revisions were available. As far as you 
know, the timetable for next year's implementation is still on 
track?
    Mr. Blair. To the best of my knowledge, and I do know that, 
for areas like Louisville and Nashville, we look at the total 
number of Federal employees in that area, and if they don't 
rise to a certain level, then they fall into the rest of the 
U.S. category.
    Mr. Price. Well, but there were five areas, and it's still 
down to three, that were clearly next in line, and the snag has 
come by this--through this determination by the President's pay 
agent that the NCS data was inadequate. So that's what we're 
waiting on.
    Mr. Blair. Okay. Well, we'll provide you an update, sir.
    [The information follows:]

LOCALITY PAY LOCATIONS IN LINE TO BE REVIEWED AS SEPARATE LOCALITY PAY 
                                 AREAS
    Public Law 106-554 required that the Pay Agent rank order 
Metropolitan Statistical Areas (MSAs) with 2,500 or more General 
Schedule employees by non-farm workers and skip any MSA that had 
already been reviewed for locality pay but were found to have pay 
levels below the Rest of U.S. locality pay area. While the Federal 
Employees Pay Comparability Act does not require such rankings, the 
Federal Salary Council has recommended and the Pay Agent approved using 
such rankings to queue MSAs in the past. At present, we are working on 
implementing the improvements in the National Compensation Survey 
Program so that the data may be used to set locality pay. Decisions 
about what areas should be added and what additional resources would be 
required to do so, and consideration of the effect this would have on 
data available for the Rest of U.S. locality pay area, have not been 
made. The Federal Salary Council has suggested that 2003 might be the 
year to review major aspects of the locality pay program including how 
many locality pay areas are feasible, what constitutes a meaningful 
difference in locality rates, the relative precision of pay gaps, and 
how to treat areas that cannot be surveyed separately.

                            PREVAILING RATES

    Mr. Price. All right. Okay. Second item, the compensation 
of wage-grade employees, and here, too, I'm dealing with a 
specific North Carolina problem, but one that is of long 
standing. This has to do with the central district of North 
Carolina. In March of this year, employees of the Butner Low-
Security Correctional Institute in Butner made a presentation 
to the Federal Prevailing Rate Advisory Committee and requested 
that the facility be considered part of the Richmond, 
Petersburg, Virginia wage area for wage-grade purposes.
    So I have two questions regarding that. First, what is the 
status of the FPRAC review of Butner's request to be part of 
the Richmond, Petersburg wage area following on that March 
presentation? And secondly, more broadly, what does OPM 
recommend as a means of dealing with a wage-grade pay system 
that provides no annual pay rate adjustment? In other words, 
does it really make sense for us to treat general schedule and 
wage-grade employees entirely differently in this regard?
    Mr. Blair. Well, as to your first question, I know that the 
chairman of the Federal Prevailing Rate Advisory Committee has 
personally visited North Carolina to review the situation and 
take it under her advisement. The committee has not made any 
recommendations to OPM at this point and so once they make the 
recommendations, then we'll act upon their recommendations. But 
FPRAC has not made any formal recommendations to OPM as of this 
point regarding that specific situation.
    Mr. Price. Any time frame----
    Mr. Blair. I would imagine----
    Mr. Price [continuing]. It will be completed?
    Mr. Blair. I'd have to get back with you on that.
    [The information follows:]

         TIME FRAME FOR FPRAC REVIEW OF BUTNER, NORTH CAROLINA
    The Federal Prevailing Rate Advisory Committee (FPRAC) reviewed the 
geographic wage area definition of the Central North Carolina Federal 
Wage System wage area in 1997 and recommended by consensus that OPM 
make no changes in the wage area. Because of continued interest 
expressed by management and labor officials from the Federal Correction 
Institution Butner; North Carolina, FPRAC agreed in March to reopen 
discussion of the Central North Carolina wage area. At this time, the 
management members of the Committee are completing a study of the wage 
area definition. Upon completion of their review, they will place the 
issue on FPRAC's agenda for deliberation. Once an item is on FPRAC's 
agenda, it normally takes the management and labor members of FPRAC at 
least two to three months before they can present OPM with a 
recommendation on a wage area. OPM will not know what the Committee's 
recommendation is until the members have completed their deliberations.

    Mr. Blair. I know that she did go down there and visit the 
sites personally, though, and that she's taking this very 
seriously. And as far as your second question goes, the Federal 
wage system really is a true locality system. We have about 132 
different wage areas that we survey, as opposed to 32 that we 
do for the General Schedule system.
    In addition, the Federal wage system has arguably acted 
better than the general schedule system, because if you're 
looking at pay differentials or pay gaps, the pay gap for the 
Federal wage system is--from what I'm told, is at 3 percent, 
and that is measured against step 2 in a five-step system. And 
so we have met comparability to a large degree in the Federal 
wage system.
    Now, the question about whether in some areas you want to 
give increases to match those that are being given in other 
wage areas in the private sector, but if the system is working 
and it's paying comparability wages, there may not be a need 
for any annual adjustment in order to recruit and retain new 
employees.
    To the best of my knowledge, we haven't had a recruitment 
and retention problem in most of those wage areas surveyed, and 
so it's a system that while maybe somewhat flawed, may be 
working as best intended, and so we have focused our attention 
on the General Schedule system.
    Mr. Price. But your view is that the wage-grade employees 
are getting comparable or better treatment in terms of annual 
adjustments?
    Mr. Blair. I'm saying they're getting comparable or better 
treatment than the better scheduled GS employees in terms of 
overall comparability, not in terms of annual adjustments. 
Because what we're paying is basically comparability for these 
wage-grade employees vis-a-vis the private sector.
    Mr. Price. And the annual adjustment, just to refer to your 
testimony, the annual adjustment anticipated in this budget 
does include the blue collar employees, and it--your language 
is--or Ms. James' language is will enable them to remain 
parallel to their white collar colleagues in terms of the pay 
adjustments they receive.
    Mr. Blair. Well, historically there's been a cap to prevent 
wage-grade employees from receiving more than the General 
Schedule, but I think it depends on the specific wage location 
whether or not the wage will be increased at all.
    Mr. Istook. Mr. Price----
    Mr. Price. That is, your language is that they remain 
parallel and you're saying that that will not in every case 
require an increase?
    Mr. Blair. I'm not sure--what are you----
    Mr. Price. I'm reading from your own statement, page 18.
    Mr. Blair. Okay. What I would say is that the wages would 
be capped at the same as the General Schedule. The increases 
would be capped as that of the General Schedule, but not in all 
cases where the wage-grade employees receive locality 
adjustments.
    Mr. Price. Thank you, Mr. Chairman. I would appreciate--if 
that requires further elaboration for the record, I'd 
appreciate your furnishing it.
    [The information follows:]

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    Mr. Istook. We can do that and follow up on the record.
    Mr. Peterson.

                               E-TRAINING

    Mr. Peterson. Thank you. If I could, Mr. Blair, could we go 
back to technology for a moment? We're still in a technology 
explosion in the world, in the country. And you're everywhere, 
and not all parts of America are as much a part of technology 
as other parts, and that is the parts that are declining. But 
do you find or do you have any feedback that some parts of the 
country you struggle to train your people in technology?
    Mr. Blair. I think we've had a problem in recruitment and 
retention of IT workers, and training has been a problem across 
Government in terms of agencies finding the sufficient 
resources to train their folks, and so the answer to your 
question is yes. And what we're doing about it is through one 
of our e-government initiatives, we'll provide what we call e-
training, which will provide for virtual training using up-to-
the-minute and best practices for employees Governmentwide. It 
will save on time, save on expenses and hopefully improve our 
training atmosphere within the Federal Government.

                         EMPLOYMENT INFORMATION

    Mr. Peterson. Okay. Rural areas, you talked about one-stop 
for Federal employment, one-stop shopping, you know. What do I 
tell rural folks who are interested in working for the Federal 
Government? Where do they plug in?
    Mr. Blair. USAjobs.gov.
    Mr. Peterson. If they're not computer literate, they're 
out?
    Mr. Blair. If they're not computer literate, we can provide 
alternative means of taking their applications, but at this 
point, the best place is through the net--Internet and----
    Mr. Peterson. USAjobs----
    Mr. Blair. USAjobs.gov.
    Mr. Peterson. Okay. We'll publish it.
    Mr. Blair. And you can get the same thing, I'm told, from 
toll-free telephone numbers as well.
    Mr. Peterson. Toll-free telephone numbers.

               INSPECTOR GENERAL OVERSIGHT OF TRUST FUNDS

    Mr. McFarland, I just want to read two quick statements of 
yours. The Federal employees health benefits program and the 
civil service retirement, Federal employees retirement 
programs, with current resource levels, we can only provide a 
limited presence in oversight of the trust fund programs. To be 
truly effective guardians of these trust funds, we must expand 
our ability to expose wage, fraud and abuse in these programs.
    You go on in the next paragraph and say, in addition to our 
increased presence, will strengthen the sentinel effect within 
the programs. We must also remember that health care fraud may 
put at risk the health and safety of current Federal employees, 
annuitants and their survivors and eligible family members.
    Would you like to expand on that? That is a pretty strong 
statement.
    Mr. McFarland. Yes, sir, it is, and it's I think right on 
target. A good example, I think, that might help bring this 
home is a case that--in recent months that I've talked about, 
and that was an FEHBP person went to the doctor, and after she 
left the doctor, a few weeks later a bill came in. And the bill 
included that they were treating her for lumps in her breasts. 
As a result of this, an investigation was instigated by our 
office. There are more factors to it, but I'm just trying to 
cut to the chase.
    During the interview of this lady, it was explained to her 
what was on the bill; and at the time of explanation, her 
husband was with her. When she heard about the lumps in her 
breast, she stood up and, in effect, started to take her blouse 
off because she was so distraught. Sixteen years earlier she 
had had a double mastectomy, and this doctor was charging her 
for lumps in her breast.
    Mr. Peterson. Charging you?
    Mr. McFarland. Charging FEHBP ultimately. But this is the 
kind of situation that--as much as we hold, and I am sure most 
of us do, our doctors in awe, these are the kinds of things 
that are happening all the time; and we are seeing it big time, 
of course, in the Federal Employees Health Benefits program. 
Many, many instances of ugly situations.
    So, yes, we are--in my particular office, we are way behind 
what we could be doing, and I say that not as a plea for more 
resources, because I am very pleased that we'll be getting an 
additional five people, but 2 years ago we had something like 
275 cases unassigned. Recently we have, I think, 75 cases 
unassigned.
    Mr. Peterson. Cases where you suspect fraud?
    Mr. McFarland. They are not assigned because we haven't 
been able to give them to a criminal investigator. They are 
simply unassigned. I mean, that is the best categorization of 
this at this point. But the major point I want to make is that 
in OPM, the Office of the Inspector General, we have 10 
criminal investigators. Now, just to draw a quick comparison 
because I think it is very important, the environment we work 
in with the amount of moneys expended and the number of 
subscribers equals that of the Criminal Defense Investigative 
Agency, under the Department of Defense IG, where they have 100 
criminal investigators doing the same work that we are doing 
with 10.
    Now, I only say that to make a comparison because I think 
it is important to know that I am obviously very proud of our 
operation. We do an awful lot with not too many people. So 
anything we can get, we are very appreciative of. But the thing 
is, our people carry 25 health care cases in their portfolio, 
15 retirement cases in their portfolio. HHS is an example, and 
DOD, their agents carry three to five cases. Now the difference 
is, three to five cases is manageable and they have got a lot 
of people to do that.
    I wish we were in a position to do that, but we are not. 
And what we do is exemplary work, and I am pleased to be able 
to say that.
    Mr. Peterson. How many dollars in health care benefits do 
you have to invest? How many dollars of health care costs are 
you dealing with?
    Mr. McFarland. I am not sure, Mr. Peterson, how to answer 
that because if we look at the--and I am just taking a side 
issue for a moment, but just the moneys involved in the assets 
of the--of OPM's administration of benefits program, we are 
looking at over $550 billion; and so much of that, of course, 
is the retirement and so much of that is the health care.
    We have--as an example, last year, our office, our 10 
criminal investigators and all of our auditors total brought 
back to the Government $242 million. Now that was different 
last year. It was one of those years that--we are not going to 
have necessarily the same, recurring things next year. And you 
noted in our paperwork, we have identified probably $100,000 
and then the following year--excuse me, $100 million, $102 
million the following year getting back on track because that 
was an exceptional year. But the point is, it is enormous 
amounts of money.
    Mr. Peterson. And you just don't have the people to 
investigate them?
    Mr. McFarland. No. Not by any stretch of the imagination.
    Mr. Istook. Thank you, Mr. Peterson.
    Mr. Blair, I appreciate the time with you and your staff. I 
hope you will give my best to Director James, and we will 
certainly submit the follow-up questions for the record, and 
0we shall appreciate your getting that information to us as 
promptly as you can, since we are very near needing to mark up 
our bill.
    We are adjourned.

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TREASURY, POSTAL SERVICE AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2003

                              ----------                              

                                         Wednesday, March 13, 2002.

                    GENERAL SERVICES ADMINISTRATION

                               WITNESSES

STEPHEN A. PERRY, ADMINISTRATOR, GSA
JOSEPH MORAVEC, COMMISSIONER, PUBLIC BUILDINGS SERVICE, GSA
SANDRA N. BATES, COMMISSIONER, FEDERAL TECHNOLOGY SERVICE, GSA

                      Chairman's Opening Statement

    Mr. Istook [presiding]. The subcommittee will come to 
order.
    This morning we are happy to welcome Mr. Stephen Perry, the 
Administrator of the General Services Administration, for his 
first appearance before this Committee.
    We are happy you are here. I want to thank you again, 
especially, for attending the groundbreaking of the new federal 
campus in Oklahoma City recently. And everyone, and I 
especially, were happy to have you there.
    We look forward, of course, to your testimony today about 
the budget request for fiscal year 2003 on GSA. Obviously there 
is a great many directions that we can go because GSA has such 
a broad scope. The budget request consists of $276 million for 
the Federal Buildings Fund, $247 million for other accounts as 
direct appropriations. But for the Federal Buildings Fund, 
there is obligational authority exceeding $6.8 billion, and 
total obligation with revolving funds close to $19 billion. 
Obviously a major undertaking that you have with GSA.
    Another financial measure, of course, is the related 
financial transactions that are expected to reach almost $76 
billion this fiscal year. So GSA extends its reach into just 
about every aspect of the federal government, as well as 
touching on a great amount of the private sector.
    I know many of the issues are touched upon in your written 
testimony, including the Federal Buildings Fund, courthouse 
construction. Repairs and alterations are an immense issue, I 
am aware, keeping up with the quality of the federal office 
space.
    And I want to make a note that I am pleased that GSA has 
formed very strong working relations with building owners and 
the real estate industry. And I am personally pleased, and I 
believe the committee is also, with the cooperation between GSA 
and those groups to make sure that there is fair and reasonable 
telecommunications access for federal tenants. And I appreciate 
the position the GSA has taken on that.
    Your testimony also, I know, deals a lot with e-
government--major funding requests for increasing on the 
Electronic Government Fund. New citizen service initiatives; 
computer security as a main topic, with the concern regarding 
homeland security, as well as GSA's ability to adjust and to 
help people make the adjustments required because of the attack 
on the World Trade Center and the recovery and restoration of 
facilities after that.
    So computer security, security of people, security of 
property, are key components of homeland security. And we are 
glad that GSA is diligent in looking at its role in that.
    That is going to conclude my opening remarks.
    Mr. Perry, before your testimony, of course, we would like 
to recognize Mr. Hoyer, the ranking member.

                      Mr. Hoyer Opening Statement

    Mr. Hoyer. Thank you very much, Mr. Chairman.
    I want to join the chairman, Mr. Perry, in welcoming you to 
our committee. We had the opportunity to meet in my office; I 
appreciate your coming by.
    You have an opportunity and a challenge in front of you. I 
am going to talk a little bit about the challenge, which 
usually boils down to dollars in terms of what we can do.

                       RECOGNITION OF BILL EARLY

    Before I do that, I regret that Bill Early is not here. It 
is my understanding that he is coming back from Europe. Your 
chief financial officer and I have worked together for 20 years 
on the GSA budget and on investing in America's infrastructure. 
He will be retiring, as I understand it, next month.
    Bill has been your budget director since 1979 and chief 
financial officer since 1999. He has provided a tremendous 
service, in my opinion, to the federal government, the General 
Services Administration, and frankly to this committee as well. 
He has also been a great friend to me, and we relied on his 
advice and counsel on what needed to be done and how we could 
do it.
    I want to know--I want you to pass along to him, if you 
will, that he is going to be missed by all of us on both sides 
of the aisle. He was not a partisan official, as you know, but 
he was a very conscientious, honest person of great ability of 
which all his colleagues at GSA can be very proud.
    Mr. Perry, you are presenting a budget request that 
provides for, as the chairman pointed out, $18.884 billion in 
total obligations connected to its revolving fund. However, the 
budget request calls for $524 million in direct appropriations.

                        COURTHOUSE CONSTRUCTION

    $260 million is requested for site and design related to 
new courthouses. We continue to fall behind with this program, 
and it is costing American taxpayers a lot of money. It is, as 
well, costing us in terms of the handling of cases in a timely 
fashion. It is also, in this era of security, posing a very 
substantial security challenge to us.
    This request that you have presented covers the fiscal year 
2002 priorities not funded last year. And we were behind last 
year, as we were behind the year before that, as we were behind 
the year before that.
    Since fiscal year 1996, when the Judiciary started 
approving prioritized five-year courthouse project plans, it 
has received $1.974 billion in appropriations for courthouse 
construction. That is a lot of money. It is, however, $2.1 
billion--in other words, less than 50 percent than you 
requested. As a result, the cost of building these 
courthouses--and I do not have a figure off the top of my 
head--is going to be hundreds of millions of dollars more, 
period.
    No one doubts the need for these facilities. America wants 
justice; America wants courts accessible to resolve conflicts. 
That is how we do it in a democracy, as opposed to guns. And we 
are not providing the infrastructure to do it. Had funding been 
available sooner, more than 47 projects could have been funded 
by now.

                          CENSUS CONSTRUCTION

    Your budget also includes $177 million to construct the 
first of two new Census buildings. I want to applaud you for 
that. The current Census buildings that we have hundreds--I am 
not sure of the complement of employees in those two 
buildings--how many?--5,000 were built for World War II--
temporary facilities. Awful infrastructure and unhealthy 
environment and clearly not a facility in which you can expect 
people to perform at their best.
    It is always appropriate to do the right thing, and we are 
proceeding on that. Hopefully, not only will that funding 
survive, but we will make sure that we continue that project 
along as quickly as it can be accomplished within the framework 
of your responsibilities.

                            FDA CONSTRUCTION

    The funding level, however, for another important project 
in this region is not so good. I am concerned with the level 
requested for the Food and Drug Administration, consolidation 
at White Oak, Maryland. This is not in my district; it is 
adjacent to my district.
    We are woefully behind what the first Bush administration 
projected we should do, what the Clinton administration 
projected we should do, and, as far as I know--and you could 
comment on this at some point in time--what the GSA and FDA 
presently think need to be done.
    So I do not think this is a partisan issue. This is another 
question, are we going to construct infrastructure consistent 
with both sound fiscal policy, and employee and objective 
policy?
    The design for phase three of this project was funded at $9 
million. It appears that construction funding for phase three 
did not fit into OMB's overall budget number for GSA.
    Again, this sounds very good, but nobody in the 
administration, nobody in Congress doubts that we are going to 
do this project. Why? Because we will save, over 20 years, 
hundreds of millions of dollars again, because we are now in 
leased space all over the Washington region--a very ineffective 
way to operate the agency and also a more expensive way to 
operate the agency.
    So not only are we going to get better infrastructure, 
better working conditions, but we are going to save money. By 
delaying it, we undermine all three of those objectives.
    In addition, Mr. Chairman, I would like to include that 
Betsy Bretz, who is the chairman of Labquest, who has been a 
citizens' group--sometimes you have a citizens' group concerned 
about more traffic, more personnel, more this, that and the 
other, and so you have to overcome opposition. In this case, 
the citizens are very much in favor of it.
    Ms. Bretz, who is in the audience today, has done an 
extraordinary job on this.
    I would like to include at this point in time in the record 
not only a letter that she wrote to me on March 8, but also 
some pictures which show the current conditions of some of the 
lease space for FDA around the country, if there is no 
objection, Mr. Chairman.
    Unfortunately, delaying this project will only end up being 
more costly, as I have said. In addition, the horrible 
conditions of existing facilities are not getting better.

                        REPAIRS AND ALTERATIONS

    I am pleased, on the other hand, to see that $986 million 
is requested for the repairs and alterations program. Again, as 
this committee knows, GAO recently assessed the existing 
backlog of work at our federal facilities to be nearly $4 
billion. That is in maintenance work that is not being done. As 
facilities deteriorate, again, what does that mean? It means it 
is more expensive in the long run either to replace or to fix.
    Finally, I look forward to hearing more about your 
immediate needs for security at our federal facilities, Mr. 
Perry. Last year you requested $200 million to address security 
concerns, yet $126 million was provided. I do not know how you 
made up that gap or what security needs havegone unmet. I would 
like to hear. I would like to hear more about your plans to address the 
security issues and if the current level of funding is sufficient.
    Mr. Chairman, I know you have given me a longer time than I 
usually take, but this is, I think, a very critical 
responsibility of this committee to make sure that our 
colleagues and the citizens know that the cost of failing to 
invest both in courthouses and other infrastructure, whether it 
is at Census, FDA or others, what the costs of deferring means 
to the taxpayers of projects that in a bipartisan--many 
administrations have agreed need to be done.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you.
    Mr. Perry, it is a practice to administer the oath to 
witnesses.
    Do you solemnly swear the testimony you are about to give 
will be the truth, the whole truth and nothing but the truth, 
so help you God?
    Mr. Perry. I do.
    Mr. Istook. Thank you. We have the entirety, of course, of 
your written testimony, and I always encourage witnesses, if 
they will, to give us the executive summary version, or even 
speak extemporaneously, as they wish, in their oral remarks.

                         STATEMENT OF MR. PERRY

    Mr. Perry. I would be happy to do that. Chairman Istook, 
Congressman Hoyer, members of the Committee, thank you for this 
opportunity to meet with you and discuss the president's budget 
for GSA for fiscal year 2003.
    As I am sure you may know, I have been on the job now for 
nine months. I would like to tell you that I am truly honored 
to be in this position. I am delighted. This is a critically 
important agency, as you have pointed out, Congressman Hoyer, 
and it is also a great agency. Good people, and we are doing, I 
think, a good job. But you are right, we have lots of 
challenges ahead of us, and we need to address them 
forthrightly.
    I would like to introduce, if I may, just a few of the GSA 
people who have joined me here today. I can assure you, from 
working with them, that they are as proud and as excited as I 
am to be a part of this GSA team. Maybe they can just raise 
their hand as I call them.
    Joe Moravec is our Commissioner of the Public Buildings 
Service.
    Sandy Bates is our Commissioner of the Federal Technology 
Service.
    Donna Bennett, I believe, came in, and she is our 
Commissioner of the Federal Supply Service.
    Marty Wagner is our Associate Administrator for Government-
wide Policy, and it is the area that will be responsible for 
our work in the area of e-government initiatives.
    I believe Dan Levinson is here, is he? There he is, our GSA 
Inspector General.
    And Debi Schilling is here, our budget director, as is 
Shawn McBurney, our Director of Congressional and 
Intergovernmental Affairs.
    Now, there are some other GSA associates, and if they do 
not mind, I will not introduce them all. But that group that I 
mentioned is the group that is here primarily to participate 
with me in presenting this budget proposal to you, and some of 
them will participate in answering some of the questions that 
you all may have in their particular areas of responsibility.
    Mr. Chairman, with your permission, I would like to take 
just a moment to mention that fact, as Congressman Hoyer has 
mentioned, our chief financial officer Bill Early is not with 
us today. He particularly asked me to mention to you and to 
Congressman Hoyer that he regrets not being here. You know he 
takes this work very seriously and he would have been here.
    The reason he is not is that, as Congressman Hoyer has 
pointed out, Bill is planning to retire. He initially had 
planned to retire in January, and had planned a trip with his 
wife to France, which is where they are now. I asked him if he 
would stay on three more months to help us get through this 
budget process and to help us work through thetransition to a 
new CFO. He agreed to do that, but that is why, on such an important 
day, he happens to be out of town. [Laughter.]
    It is only because of those extraordinary circumstances. 
And he asked me that I be sure to express his regrets that he 
is unable to be at this hearing today.
    Mr. Hoyer. Mr. Chairman, Bill is in Paris, and he wants us 
to think that he would rather be here. [Laughter.]
    Mr. Istook. I was going to let that pass without comment, 
myself. [Laughter.]
    Mr. Perry. Mr. Chairman, as we return now to the 
president's budget request for GSA for fiscal year 2003, I 
would like to take just a moment to supplement the information 
I have provided in my written report to make a couple of brief 
comments regarding some of the major programmatic themes that 
are reflected in this year's budget.

                        REPAIRS AND ALTERATIONS

    One of those major programmatic themes in this budget 
request is our very strong resolve to begin to address the 
long-standing problem of the very large, approximately $5 
billion, according to our most recent estimate, backlog of 
building repairs and alterations work, which has accumulated as 
a result of being deferred for many years.
    Under the proposed budget for fiscal year 2003, the Federal 
Buildings Fund capital program spending would be about $1.5 
billion. Of that amount, $1.2 billion would come from revenues 
to be generated in the fund in fiscal year 2003. So this 
requires only the $276 million in direct appropriations that we 
have requested.
    That $1.5 billion capital program for 2003, when you look 
back, is essentially the same as the number in 2002. However, 
there is a shift in emphasis towards more to be allocated in 
the area of repairs and alterations. The 2003 budget includes 
$557 million for new construction, including our courthouse 
construction program, and $986 million for repairs and 
alterations.
    Now, just another comment with respect to the need to 
aggressively address the issue of reducing this large backlog 
of repairs and alterations work in federally owned buildings. I 
want to assure the Committee that we, in addition to spending, 
are doing some other things that will help to address that.
    Among them, we are committed to providing what we call 
better life-cycle management of federal property assets. Our 
portfolio management process is in need of some improvement and 
improved execution. And Joe Moravec and his team are really 
working aggressively to make that happen.

                       PROPERTY MANAGEMENT REFORM

    Additionally, our work in this area will be helped if we 
are able to get some enabling legislation that will bring about 
some property management reform and enable us to use commonly 
used practices of the commercial sector to be able to provide 
funding to assist the funding that the Congress can provide 
with respect to bringing these federally owned buildings up to 
the standard where they should be.
    We can comment on that as we get into it, but that will 
include the opportunity for public-private partnerships and for 
outleasing, in particular.

                     SECURITY IN FEDERAL BUILDINGS

    The second significant theme reflected in this year's 
budget that I wanted to mention--and you have already mentioned 
it, Congressman Istook, is the issue of security at federal 
buildings, security which will be effective in protecting the 
lives and safety of federal workers and members of the public 
who visit our public buildings, as well as the property assets 
themselves.
    After the attacks of September 11, and unfortunately with 
the prospect that the threat to government is still increased, 
we know that we must promptly increase our security measures to 
counter the increased level of threat that we face.
    We have requested $417 million for protection in this 
year's budget. That amount is roughly $57 million more than we 
expect to spend in fiscal year 2002, given the supplemental 
amount that we have received to date.

                         ELECTRONIC GOVERNMENT

    And then, finally, the third programmatic theme that I 
wanted to mention that runs through this year's budget is the 
issue of electronic government, which, as you know, is a major 
part of President Bush's management and performance agenda.
    E-government, we think, is key to this vision of having a 
more citizen-centered government which utilizes modern 
technology to improve government performance and to deliver 
good government service to the American people.
    Mr. Chairman and members of the Committee, that concludes 
my opening remarks, and I will be happy to respond to questions 
you may have regarding the budget.
    Mr. Istook. Thank you.
    Mr. Perry, since we have the convenience of just being 
underneath the House floor, probably the most efficient way for 
all of us to answer the vote that is under way is to recess for 
what should be no more than a minute and a half. Let us cast 
our votes. We will be right back to ask questions. It is very 
nice to be so close.
    We stand in recess.
    [Recess.]
    Mr. Istook. Thank you for being patient while we had to 
cast a quick vote.
    You mentioned, of course, focuses relating to federal 
buildings and their condition, the financing mechanisms for 
them. You mentioned security, you mentioned e-government. And 
GSA has such a broad mission, but I wanted to begin with asking 
something that relates to the federal buildings.
    And sometimes I wonder if it is like the old story of the 
blind men and the elephant. One feels the trunk; another the 
legs, the tail, the ears and so forth. And your perspective 
depends upon what part you are seeing.
    In federal buildings, GSA is--I guess it is actually the 
largest landlord in the country, and obviously the largest 
landlord of the federal government. We have some that are owned 
outright. You mentioned significant lease obligations. You have 
all sorts of different special arrangements; buildings that are 
constructed as part of a long-term lease contract--I forget the 
term that is normally applied for that.

                       FEDERAL BUILDING INVENTORY

    But my initial question has got to be, structurally, how 
much of the federal building situation are we looking at 
through GSA, and how much are we really not encountering 
because it is not handled through GSA?
    And what is the mix between that that is owned outright by 
the federal government or lease-purchase or flat lease or some 
other arrangement? Do you feel that you have the handle that 
you need on the big picture, not just some isolated elements?
    Mr. Perry. Let me give at least a partial answer to that. 
You are correct that, in addition to GSA as a land-holding 
agency, there are other agencies who are land-holding agencies, 
and they have buildings which are not GSA-managed. And 
obviously we focus on those buildings which are in the GSA 
inventory, some 8,300 buildings in total; 1,800 of them 
federally owned buildings; 6,500 that are private-sector-owned.
    One thing, though, that I think bears on your overall 
question, if the overall question is that we need to be 
concerned about the entire spectrum of federal government 
facilities----
    Mr. Istook. Correct.

                          PROPERTY REFORM ACT

    Mr. Perry [continuing]. In the property management reform 
legislation that we have proposed, one of the features that 
would be included is that GSA would have the lead 
responsibility in developing real property assets, life-cycle 
management principles. Those principles would be complied with 
not only by GSA but by all agencies.
    So even though GSA would not necessarily take on more 
direct responsibility for managing buildings that are not in 
the GSA inventory and that are in the inventory of Energy and 
Agriculture and other land-holding agencies, they would 
nevertheless be using good life-cycle planning, from the 
planning for acquisition of facilities that are appropriate for 
their missions; through maintenance, so that we hopefully do 
not have a reoccurrence of the maintenance situation that we 
are facing today; through ultimate use and subsequent disposal. 
That whole process would be outlined.
    We would have the responsibility for developing those 
principles and for working with other agencies to provide them 
with guidance and to assist them with compliance. I think that 
would go a long way toward this issue of making sure that all 
of the federal government's assets are managed in an 
appropriate way.
    Mr. Istook. Certainly. And I am concerned with this 
subcommittee having the general government jurisdiction that it 
does. I am concerned with, to what extent, through GSA and the 
other agencies for which we have responsibility, to what extent 
are we getting the big picture and to what extent are we only 
looking at partial ones.
    And I wanted to sound that as a theme, because I want you 
to understand that will be behind certain coordination requests 
that we want to be involved with you on.

                         LEASED SPACE INVENTORY

    I did notice, of course, in your prepared testimony you 
mentioned, for example, that the budget for rental space, as 
proposed under the Federal Buildings Fund, involves an 
additional 3.1 million square feet, a 2 percent increase in the 
size of the leased inventory.
    I know the leased inventory is not the full inventory, but 
we have heard a lot of discussion about reduction in the number 
of federal workers, about work being contracted out to various 
private-sector entities.
    But do we see that reflected in the space demands that it 
has made to the federal government here. When we look, of 
course, it is just the leased inventory----
    Mr. Perry. Right.
    Mr. Istook [continuing]. A 2 percent increase. Is there any 
change in the space demands of the federal government that is 
associated with efforts at downsizing the federal government or 
with contracting out any federal services? How is that 
affecting the space needs, both on a total basis and on a per-
worker basis?
    Mr. Perry. Two things. One, as you point out, we would have 
to look at the total to make sure that we are not seeing some 
movement from federally owned space into leased. And we do know 
that some of that is occurring, partly because of the 
deteriorated state of some of our federally owned buildings.
    But with respect to the larger issue--and I will ask my 
colleague, Joe Moravec, if he would supplement if he has 
information beyond this--we do attempt to find out specifically 
what agencies' longer-term needs are by meeting with them.
    One recent experience I am sure they would not mind my 
mentioning--I think it serves as an illustration of the point 
that you are making. We know that the IRS, for example, has a 
congressional mandate to increase the amount of electronic 
filings. And the expectation is that that could result, over 
time, in a reduction of their total workforce.
    When we met with them and had that very discussion as to 
what are your projections with respect to this, their space 
needs were not declining. They are being reconfigured. They 
will be doing different things within their 10 centers around 
the United States.
    But it was a little bit surprising to our folks that, at 
least in that example, sometimes you do something that may 
streamline your process but not necessarily, at least in their 
present projection, have the impact of reducing the work space 
that they need.
    So that is the way we try to do it, agency by agency, to 
work with them in terms of what are your long-term programmatic 
needs with respect to space utilization or space needs? We are 
very much involved with that right now with the Department of 
Education, a smaller agency with smaller facility needs. They 
are reconfiguring their use of space in the Washington, D.C., 
area. We are not seeing a reduction overall but a 
consolidation.
    So, Joe, I do not know whether you would like to comment.

                    SPACE NEEDS OF FEDERAL EMPLOYEES

    Mr. Moravec. I would just like to say that the Public 
Buildings Service's mission, to put it simply, is to provide a 
superior work place for the federal worker and also superior 
value for the American taxpayer. That is the goal we keep in 
mind whenever we are in a customer situation.
    Of course, we do not determine what a client's needs will 
be. We attempt to anticipate and fit a facility plan to the 
actual strategic needs of whatever agency is our client.
    Of course, with regard to the questions of outsourcing of 
some of the functions of government, not only federal employees 
are occupying the space that we provide for them. Very often, 
there are government contractors also occupying that space. So 
that may be part of the reason why an overall inventory of 
space that we provide for our client agencies has not been 
decreasing. It has been fairly constant.
    We have to remember--even though 3 million square feet is a 
lot of space, it is on a base of 335 million square feet. So it 
is a huge base and a fairly modest incremental change.
    And I should also point out that the rent that we are now 
paying, just looking at that portion of our inventory, is 
pretty much flat between 2002 and 2003. So the actual cost to 
the Federal Buildings Fund is going to remain pretty much 
constant between those two years.
    Mr. Istook. Sure. Well, that is something obviously I want 
us to pursue further, as to what is the effect of the 
outsourcing and the realignment?
    And as you mentioned, you have some federal agencies that--
you mentioned the Department of Education: decrease in the 
workforce, but the space requirements do not go down with it. 
That is a curious phenomenon. I do not know what is behind it. 
And that involves, also, the department itself. But those are 
the type of questions that we want to explore and go into 
further.

                              VACANT SPACE

    Mr. Moravec. Just to follow up on that, we are very focused 
on trying to reduce the amount of vacant space, both of the 
owned inventory and the leased inventory. About 9 percent of 
our total inventory of owned space, of about 185 million square 
feet, is off-line. It is either vacant or is in transition. 
About 2 percent of the space that we lease from the private 
sector is off-line.
    We are relentlessly focused on trying to reduce the amount 
of space that is off-line. But given the size of the numbers we 
are talking about, 1 percent of our inventory is, you know, 3 
million, 4 million square feet.
    Mr. Istook. And I understand. But frankly, I would 
appreciate a little bit more aggressive approach to 
understanding, if the need is going down, why isn't the space 
going down? That is something I think we want to explore and 
follow up. I know you are not prepared to answer that in more 
detail today.
    I want to give Mr. Hoyer an opportunity to pose questions. 
Mr. Hoyer.
    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Superior work space at superior value, I spoke of that in 
my comments.
    Let me ask you some questions, and if you do not have the 
answers, I would like to have them for the record as soon as 
possible, i.e. within the next 30 days.

                            NEW CONSTRUCTION

    First, I would like to know what GSA's request to OMB for 
new construction--in other words, what you perceive to be the 
need to accomplish superior work space and superior value. Do 
you have any----
    Mr. Moravec. It was a much larger number than actually came 
forward in the president's budget. The total is about $1.9 
billion, in terms of our request.
    Mr. Hoyer. And you got?
    Mr. Moravec. We got $557 million.
    Mr. Hoyer. A little over 30 percent.
    You may not have this. I would like to know what projects 
would have been done with the $1.8 billion, in other words, 
that you determined were priority projects that needed to be 
funded and we will not be able to fund as a result of the 
reduction. And you will probably leave that for the record.
    Mr. Moravec. We can provide that.
    Mr. Perry. We would probably need to submit that for the 
record.
    There were some very important priority projects that did 
come forward in the president's budget, most notably $177 
million for the new Census facility in Suitland $57 million for 
the U.S. Mission to the U.N., and $9 million to conclude the 
construction funding for the new NOAA facility, also in 
Suitland.
    Then five border stations which, given the present state of 
affairs and our war on terrorism, is getting a lot of attention 
these days in terms of funding priority.

                        CONSTRUCTION PRIORITIES

    Mr. Hoyer. Let me make it clear that I an absolutely 
convinced that projects that were included are, in fact, 
priority projects. So I do not have any argument with that. 
Obviously, we have $1.3 billion of projects that you suggested 
should to be done this year that are still on the table. I 
would like to know what they are so that we can consider those.
    I take it--if you know the answer to this question--that 
the money for these projects was not deleted for policy reasons 
but for fiscal reasons, is that correct?
    Mr. Perry. Yes.
    Mr. Hoyer. Would I be, then--when we get the request--in 
other words, projects that are not being done, are not being 
funded, we can conclude that none of those were deleted for 
reasons of policy, but simply because of lack of resources.
    Mr. Perry. That is our understanding, that these 
determinations were based upon fiscal restraints, because we 
had many more requests than the administration was able to 
accommodate.

                        SECURITY CONSIDERATIONS

    Mr. Hoyer. Thank you. How much money is GSA proposing to 
spend? You may have mentioned this figure in your statement, 
and if you did I apologize, for fiscal year 2003 security 
improvements around federal buildings in the nation's capital?
    Mr. Perry. The number--I did not mention it for around the 
nation's capital. I said that the budget included $417 million 
for security. I do not have a number for that region.
    Mr. Hoyer. You do not have a national capital region?
    Mr. Moravec. I do know that we have spent--this is 
retrospective, but we have spent about another $9 million since 
September 11 in the national capital region for security 
functions.
    Mr. Hoyer. Okay. For the record, if you would include which 
agencies in the national capital have their security 
requirements funded through GSA, as opposed to funding them 
within their own budgets.

                           FDA CONSOLIDATION

    Now let me go to the FDA consolidation. Mr. Perry, as I 
think I mentioned in the office, I have been working on this 
FDA consolidation for 10 years now, starting with the first 
Bush administration, in which, frankly, coming out of the last 
years of the Reagan administration, a determination was made 
that FDA needed to be consolidated.
    Dr. Kessler, then, who was Bush's, I guess, FDA 
administrator, put together a project as it came forward. The 
final decision was made to put it at White Oak, and we have 
started with that process.
    My question is, what is the total amount required for phase 
three construction for the FDA project, if you know?
    Mr. Perry. The total amount for construction only for phase 
three is about $207 million.
    Mr. Hoyer. $207 million.
    Mr. Moravec. That would include the centers for devices and 
radiological health, laboratory, office, animal holding areas, 
job care centers, construction parking. It is a pretty big 
program.
    Mr. Hoyer. What amount did GSA seek from OMB for FDA 
consolidation at White Oak?
    Mr. Moravec. Of course in the context of the discussion we 
are having, we have obviously tried to do the best we can with 
the available resources. And so we have tried to prioritize.
    Mr. Hoyer. I understand. This is not an implied criticism. 
I may disagree with the amount of resources applied, but I want 
to have the Committee knowledgeable as to what GSA thought was 
an appropriate expenditure.
    Mr. Moravec. We asked for $221 million for FDA design, 
management and inspection of construction for fiscal year 2003.
    Mr. Hoyer. You may not want to do this at this point in 
time, but for the record or at some point in time just in 
conversation, I would like to know that if the Congress, ifthis 
Committee would see fit to fund an additional increment, I would like 
to know what you believe would--the amount and the most important 
increment that we would take, above the $5.5 million or--I think that 
is what is included now in the budget.
    Mr. Moravec. I have a possible answer, but I would like to 
submit a more detailed answer for the record, if that is 
acceptable.
    Mr. Hoyer. That is fine. If you could do it within the next 
30 days, that would be my request.

                           COURTHOUSE PROGRAM

    Now, what was the total request for new courthouse 
construction?
    Mr. Perry. About a billion dollars.
    Mr. Hoyer. $1 billion. And new courthouse construction is, 
again, at----
    Mr. Perry. $260 million.
    Mr. Hoyer. $260 million. So that is about 25 percent.
    Now, Mr. Perry, I presume you reviewed those requests for 
your people?
    Mr. Perry. Yes, particularly with Joe and his team.
    Mr. Hoyer. You made a determination that the billion 
dollars necessary to proceed with at this point in time?
    Mr. Perry. We made a determination that, consistent with 
the Judiciary's request, we are doing everything we possibly 
can to be supportive of that need.
    We agree wholeheartedly with the points you made, that, as 
we are able to get these projects moving along, that it 
prevents higher expenses later. But again, it is up against the 
constraints that we run into, in terms of total availability.
    Mr. Hoyer. The last question I want to--I have a long 
question I want to submit for the record, but our timeframe, as 
you know, does not allow for extended questions.
    You, I note in your biography, spent time as vice president 
at Timken, as the human resources vice president, in charge of 
human resources.

                PUBLIC'S PERCEPTION OF FEDERAL EMPLOYEES

    Now, I want you to know, I have asked, literally, at this 
point in time maybe a hundred over the 20 years I have been in 
Congress. Federal employees get a lot of flack. There are a lot 
of citizens who have a misperception of the talent, the level 
of commitment, the hard work that is performed by federal 
employees, largely, in my opinion, because the majority of our 
citizens are exposed to federal employees at relatively low 
level--telephone, clerks at a desk or something--that may be 
hassled and they do not really see the inside, unfortunately, 
on a day-to-day basis.
    I want you, if you will, to compare the level of talent, 
the level of work, and the quality of work that you see at GSA 
as compared with Timken Company.
    Mr. Perry. Well, may I begin with a little bit of a longer 
answer to your question, because I will admit to you that, at 
one point, I was one of those private-sector people who 
believed that people who were working in the federal government 
might not measure up.
    My first dispelling of that myth was when I worked for 
then-Governor Voinovich in the state of Ohio for two years. And 
what I realized was, people who are in the public sector are 
every bit as capable, maybe more conscientious in many cases, 
than their counterparts. Clearly, at some higher levels, the 
scope of their responsibilities rival and exceed their 
counterparts in the private sector. And clearly that is true in 
the federal government.

                  COMPARISON OF GSA TO PRIVATE SECTOR

    So I did not have that misconception when I came to the 
federal government. Still, what I found at GSA, in terms of the 
capability, competency, dedication, is startling to me, I guess 
that is the word I would use.
    Now, are there people in my former company, the Timken 
Company, who are conscientious, capable, well-trained and very 
good at what they do? Absolutely, yes. But I would have nothing 
negative to say with respect to the people who work for the 
government.
    In our particular agency, the issue that we have, with 
respect to taking this great group of individuals and asking 
ourselves the question, as we have, is our performance level 
what it should be, and we came back with the answer, no, it is 
not. Not necessarily because we do not have the skills, that is 
not the issue. It is more a case of focus: What are the 
critical few things that we are going to do, and do really 
well? And what may be some things are on the periphery, that 
will take less?
    But my answer to your question is that people within the 
federal government are perhaps not given their due in terms of 
how some suppose their skills and abilities match up with 
people in the private sector.
    Mr. Hoyer. Thank you very much for that answer. I will tell 
you, and Mr. Chairman too and members of this committee, I have 
asked that question, as I said, at least 100 times in 
subcommittees on which I serve and the appropriations 
committee.
    All of the individuals who have had very substantial 
experience and responsibility in the private sector, not to in 
any way diminish private-sector personnel who are obviously 
very able and successful, but to try to educate members who may 
not have as much involvement, as you say, with Mr. Senator 
Voinovich and your experience in Ohio in a similar role as you 
are playing now, to dispel the incorrect notion that somehow 
federal employees, state employees, public-sector employees are 
not as highly motivated or as able as their counterparts. The 
biggest distinction I findis that they are respected less and 
paid less than their private-sector counterparts.
    I certainly appreciate your answer, which is consistent 
with other answers I have received.
    Mr. Chairman, I am going to have to leave in five minutes, 
and I apologize for that.
    As you know, we are having an NIH--unfortunately, the 
chairman is riveted to his seat, but he and I both serve on the 
Labor and Health Committee, and we are starting the overview of 
the NIH. So I do not want my leaving to be interpreted as 
disinterest. I look forward to working closely with you.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Hoyer.
    Mr. Sherwood.

                      SECURITY IN LEASED BUILDINGS

    Mr. Sherwood. It is a very daunting job to manage all these 
buildings, and we have touched on a great deal.
    What I would like to ask you about is, in your leased 
buildings, what concerns do you have about security? Are you as 
well able in leased buildings to provide security as you are in 
the federally owned buildings?
    And do--it seems to me that we are asking you to do 
something that is very difficult. We are asking real estate 
people to provide high-level security. And that is--that might 
not--I think that is a daunting challenge. And would you like 
to comment on that?
    Mr. Perry. Yes, I will. Let me take the last part of your 
question first, if I may, the issue of real estate people 
providing security.
    It is correct that the top manager of our Public Buildings 
Service, Joe Moravec, is a real estate professional. But the 
people who directly run our security are security 
professionals. As a matter of fact, Wendell Shingler is here, 
who is our recently added director of the Federal Protective 
Service. And Wendell has 20-plus years of experience in law 
enforcement and security; was formerly the head of the U.S. 
Marshals Service.
    And then if you go down the ranks of our security 
professionals, they are, in fact, law enforcement and security 
professionals, not lease or real estate people. There are some 
mixture of some people that have real estate experience, but 
for purposes of providing protection, we do use police and 
police-experienced or law-enforcement-experienced people and 
security people.
    In fact, one of the recent initiatives was to establish a 
program by which we would take people who had law enforcement 
experience and couple that with some of the features that you 
need to be able to interact with tenants and to have the 
property management aspect combined. And we call that position 
a law enforcement security officer position, LESOP.
    Then to go to the first part of your question, the issue of 
whether there is a differential between our objectives and 
providing security in a federally owned building versus a 
leased building, and of course there is none. We have the same 
high standard. Whether a federal worker is stationed in a 
building that we own or a building that we do not own, our 
efforts to prevent any kind of mishap are the same.

                        THREAT REDUCTION PROGRAM

    And the way we approach that is through what our security 
people refer to as a threat-reduction program. In recent years, 
we have had greater fortune in being at the table, if you 
will--our security professionals being at the table with the 
other law enforcement agencies--the FBI and other people that 
are in criminal intelligence information gathering.
    We have used that information to develop a security threat 
assessment tool. And we apply that tool on a national basis. We 
apply it, more importantly, on a regional basis, a geographic 
city basis--we can get down to building by building--to try to 
understand the threat that may apply to a particular region of 
the country. And then take that threat assessment index and use 
that to develop countermeasures and install those 
countermeasures in an effort to bring the threat level down.
    So it is sort of like in many law enforcement 
organizations, there may be some civilians who have some 
positions in general management responsibility, but the 
civilians do not, in any shape, way or form, attempt to 
override the professional judgment of the law enforcement 
people who are on the scene and have the primary responsibility 
for delivering security.
    Mr. Moravec. If I could just amplify on that answer, we 
believe that law enforcement and security are integral and 
indivisible from the other services that we provide to our 
customers in GSA-managed buildings.
    We think that it makes a lot of sense to avoid a 
duplicative bureaucracy that is not responsive to our clients' 
needs. In terms of the efficiency and cost-effectiveness, as 
well as the customer convenience that we strive for at GSA, it 
makes sense to us to have these security services folded into a 
total package of services that we offer to our customers.

                SECURITY IN BUILDINGS WITH MIXED TENANTS

    Mr. Sherwood. The one thing we have learned--or one of the 
many things we have learned on security is separation. And we 
see it all around the capital. We are getting the Capitol 
Building separated from the traffic flow. Maybe even got the 
judge in the local courthouse at home, federal courthouse, 
worrying to me about a parking lot that is next to the building 
that you can get a car too close, and I think rightfully 
worried. And it bit us at the Cole. We did notkeep separation.
    How do you keep separation when you lease a floor in a 
public building, or lease offices in a commercial building? 
Now, in all the new courthouses that you are building, you are 
making very sure that you have plenty of separation.
    Mr. Perry. Yes.
    Mr. Sherwood. But how do you do that in these leased 
facilities?
    Mr. Perry. It varies from place to place. We were recently 
in one of our buildings in Philadelphia, and in that case the 
perimeter around the area where the agency is located is, by 
keycard, locked off from the rest of the building. It is 
correct that the public has access to the rest of the building.

                   SECURITY AT RONALD REAGAN BUILDING

    And we have buildings, even federally owned buildings--the 
Ronald Reagan building being an example of that--where there 
are federal agencies in there but, at the same time, it is open 
and the public is encouraged to go there. And in that building, 
to get into for example, the EPA offices, which are in there, 
you have got to go through at least two levels of security to 
get to the federal agency. But the public will have general 
access to the building and to some sections of the parking lot.
    So there are cases, in certain circumstances, where those 
two things can live together and be compatible. Certainly, 
there would be some instances, the courts being a good example 
perhaps, where it would not be compatible and you would not put 
any public access with certain agencies or with certain ports. 
But we do have cases, in both federal buildings and in leased 
buildings, where the public and the agencies habitate together.

                           COURTHOUSE PROGRAM

    Mr. Sherwood. In the courthouse expansion program--in the 
courthouse replacement program, I guess I should say, do you 
think that you have the right kind of rapport with the 
Judiciary? It has been my personal experience that some of 
these courthouses are monuments and built beyond expectation, 
no sharing of--judges do not share courtrooms, et cetera, et 
cetera.
    And in this time of fiscal restraint with lots of competing 
priorities for the money that we have in the federal 
government, do you think that our new courthouses are being 
built to realistic standards, or are we building palaces?

                         COURTS LONG-TERM PLAN

    Mr. Perry. Well, in answer to that question, I will put in 
two categories.
    The first category of my comment, Congressman, concerns the 
process that has been used by the courts to determine their 
long-term needs, their five-year plan--and then they will try 
to address 10 year space needs, in terms of what numbers of 
judges they will have to house. I give lots of kudos to them 
for doing really an outstanding job in terms of thinking longer 
term.
    Many of our other federal agencies could benefit by having 
a property management approach that makes the best effort to 
look at what is happening long term, and to develop a plan 
along those lines, set priorities and so forth.
    Now, within that, of course, reasonable people could 
disagree about some of the criteria that they have arrived at--
provision of courtrooms for senior judges, as an example. But I 
am sure that both of us know some senior judges who are as 
active as their non-retired judge counterparts.
    So I think they have a good process for doing that.

                        FEDERAL COURTHOUSE COSTS

    The second item, with respect to whether the courthouses 
are palatial, I have seen great examples of efficient use of 
courthouse space and courthouse design.
    In fact, Joe has just concluded, or is concluding, a study. 
One of the assumptions made was that the cost of building a 
federal courthouse is substantially higher than the cost of 
building state courthouses, generally speaking.
    What we found was that cost differential was in the 10 to 
12 percent arena, and some of that differential comes from more 
durable materials, which, when you look at it on a return-on-
investment basis, could be justified.
    And then, some of that results from the statutory--I do not 
know if they are statutory, but regulatory requirements as to 
what federal courthouses have to have in them, and perhaps some 
of that comes out of the standards.
    I know that is a bit of a long-winded answer, but I guess 
my bottom line is, in my judgment--and Joe would be more of a 
professional on this--we and the courts are not on a track to 
try to build palatial courthouses. We are trying to build 
stately buildings, buildings that will reflect the stature of 
the Judiciary and our system of government, but by the same 
token, using materials that--I believe it was the courthouse in 
Boston where they used what, when you walk in, appears to be 
wood paneling on the courtroom walls, but it is veneer. And 
cases where, when you look above, what appears to be carved 
marble, is material, poured in place and put up there.
    So I think there are a lot of efforts to make sure that the 
court construction cost is efficient. And again, the best 
example of that we have recently, is this comparison of cost 
per square foot of constructing state courthouses. And in many 
of those state courthouses, a lot of the floors are more 
office-space-type space as opposed to courtroom-type space. So 
when we take that into account, what we are finding is that we 
are not way out of line, in my opinion.

                       UTILIZATION OF COURT SPACE

    Mr. Sherwood. Do you have any studies that show us 
theutilization of the new courtrooms that we have been building? Like, 
on the average, are they utilized 40 days a year or 60 days a year or--
--
    Mr. Perry. No, I personally do not have that.
    Joe, do you have that?
    Mr. Moravec. I am not aware of any such information GSA is 
committed to the design guide which stipulates that there will 
be one courtroom for every active judge and one courtroom for 
every senior judge for 10 years after he goes senior, and then 
chambers thereafter. There are cases where we depart from that 
standard, it is when the Judiciary brings our attention to 
special situations--a particularly heavy caseload, for 
example--at a particular courthouse. That has been our focus.
    Mr. Sherwood. How was that standard devised?
    Mr. Moravec. It was devised in collaboration with the 
Judicial Conference over the last 10 years, and it is 
constantly looked at and reassessed. Within GSA, we have a 
courthouse management group, an actual group of specialists who 
are focused specifically on the Judiciary's special needs.
    Mr. Sherwood. Mr. Chairman, would you think it would be 
appropriate to get some utilization information?
    Mr. Istook. Oh, I think certainly that is accessible both 
through GSA and the Administrative Office of the Courts. I am 
sure we can get that through questions for the record.
    Mr. Sherwood. I would be interested in seeing that.
    Mr. Istook. Certainly. And the challenge is also--it is not 
only the question of utilization, it is the question of surge 
capability too. I mean, it is a challenge. It is a major 
scheduling challenge, as we all witness here in the Capitol 
complex. You know, how many meeting rooms do we need for the 
Congress of the United States? Some days it is hard to find a 
room that is free; other days you will find many that are free. 
That is a significant challenge that we have to deal with on 
this.
    Thank you, Mr. Sherwood.
    I could not help but think, Mr. Perry, when you mentioned, 
you know, the faux carving, having the appearance of carved 
marble, because in this particular room, I have a great example 
of artistry on the ceiling, gives the impression that something 
has been carved or shaped in three dimensions even though it is 
actually only two. Maybe one of the prime examples I have ever 
seen. The artist did a terrific job here, although with today's 
artisans I do not know if it is more or less expensive to have 
the sculpting or the painting. [Laughter.]

                       FEDERAL TECHNOLOGY SERVICE

    Most of the things I think we need to inquire about, we 
will cover with questions submitted for the record. But I 
wanted to ask you--and I am pleased you have Ms. Bates here 
with the Federal Technology Service.

                     DUPLICATION OF CYBER SECURITY

    Within GSA, we have the Federal Technology Service. We have 
the information assurance and critical infrastructure program. 
We have the federal computer incident and response compliance. 
The FBI has the national infrastructure protection center. GSA, 
I believe, has the national security incident response center. 
Cyber warning information network; you have gov.net; you have 
FirstGov as a portal. You have all of these distinct offices.
    And my question is, how much duplication is there, having 
distinct offices as opposed to having distinctive services, 
meaning supply by a common grouping of the expertise and the 
systems that are needed?
    Mr. Perry. Across the government?
    Mr. Istook. Yes. Well, within GSA and across the 
government.
    My concern is that, in our desire to have the level of 
cyber security that we know is very important, are we 
stovepiping it? Are we creating so many distinct offices for 
distinct purposes rather than having those functions centrally 
administered and handled? And perhaps streamline the process by 
expecting some of the same people and resources to have 
multiple capabilities.
    Mr. Perry. Well, Congressman, you raise, obviously, a very 
interesting question. I will tell you that I do not pretend to 
have the complete answer to that.
    I do know as a matter of the way we are attempting to 
organize ourselves within GSA, it is to eliminate stovepiping, 
it is to eliminate duplication. It is to take like kinds of 
activities and have them work together, where that makes sense. 
Now, there are rare occasions when some amount of duplication 
is a useful thing. But typically, it is not useful enough, and 
wasteful.
    So I will ask Sandy if she has some comments about that. I 
have not seen in that particular instance that we have 
stovepipes----
    Mr. Istook. With regard to the offices I mentioned--and I 
know I have not mentioned everything that exists throughout the 
government, but most of these are GSA--have you expressly 
addressed that issue with these offices in GSA?
    Mr. Perry. I will admit to you again, in a general sense, 
not specifically as it relates to that, but an example would be 
our CIO's office, which also gets involved in some cyber 
security issues.
    As you know, we have 11 regional offices, or regions around 
the nation, each of whom has their own CIO people, and they 
were operating fairly autonomously. We made an effort to make 
sure that, with respect to items of computer information that 
need to beadministered across the enterprise, that the CIO is 
responsible and makes sure that is happening, and we eliminate the 11 
or 12 duplications that occur.
    On a smaller scale, we have----
    Mr. Istook. Have those positions been eliminated, are you 
saying?
    Mr. Perry. In this instance, it is a matter of coordinating 
their effort. It is not a matter of saying that, in this case--
well, we have eliminated some functions. We have not eliminated 
people, as yet.
    We had a proliferation, for example, of website 
development. That is gone. They are bringing that together as 
one website within our organization.
    Mr. Istook. One grouping of people with that expertise.
    Mr. Perry. Yes. Now, they will still be physically located 
in the regions, but the reporting structure and the way in 
which their work is organized will be as though they were one 
group sitting side by side.
    Mr. Istook. Having someone on the West working on the 
website with someone on the East, for example.
    Mr. Perry. Exactly.
    Now, you mentioned gov.net, and that is not something that 
is up and running. That is, at this point, an idea. So that one 
would not fit in that category.
    Sandy, do you have a comment to make?
    Ms. Bates. No. Just kind of along, though, what you said, 
Steve, many of the acronyms that you used are certainly ones 
that are familiar in the cyber security community.
    We at FTS are responsible for FedCIRC, which is the Federal 
Computer Incident Response Center. The NIPC is at the FBI.
    Mr. Istook. Yes.
    Ms. Bates. And many of the others, those that are of 
national security, I believe are complementary and 
collaborative efforts focused on specific pieces of the 
community and then come together through collaboration and 
cooperation to avoid duplication.
    With regard to gov.net, as Mr. Perry just referenced, that 
is basically still in the study stages. We were asked by Mr. 
Richard Clarke, the President's cyberspace security advisor, to 
look at the possibility or the feasibility of such a capability 
for specific government applications, which would basically be 
a stand-alone network.
    We issued a request for information to the industry and 
received 170 responses. We are in the process of evaluating 
those, not in terms of the acquisition, but letting the 
industry give us their best thinking on this type of capability 
as a way to provide information to make further decisions.
    Mr. Istook. I suppose part of the question is, who, if 
anyone, has the charge--and not exclusively within GSA, 
obviously; within GSA, Mr. Perry, you have the overall charge--
but within government as a whole? Who has the charge of looking 
at the cyber security offices that have been created, whether 
in GSA or elsewhere, and trying to find the ways to streamline 
it, which I would hope would enhance the operations of those 
and to weed out the redundancy and duplication? Does anyone 
have that responsibility?
    Mr. Perry. I do not know that--and maybe Sandy would know. 
I do not know that there is one person. They do come together 
as an interagency group and try to deal with issues across 
agencies in that way. But I am not sure that there is any one 
individual or one group that is designated to have overarching 
responsibility for making that happen.
    Am I correct?
    Ms. Bates. I believe today it is residing with Mr. Clarke.
    Mr. Istook. Which Mr. Clarke are you talking about?
    Ms. Bates. Richard Clarke, who is the cyberspace security 
advisor appointed by the President, and he is doing that 
between the Office of the President and the Office of Homeland 
Security.
    Mr. Istook. Yes, but you see, you are talking about a 
presidential advisor as opposed to someone who has a 
directionally accountable charge. And I am worried that perhaps 
there is no one at this point.
    Mr. Perry. I think it is sort of symptomatic of what 
happens in other disciplines as well. If you were to say how do 
we look across our CFO activities, or our CIO activities, or 
our human resources activities, or our e-government activities, 
your point is correct that each agency sort of does its own.
    And my understanding is that the way in which you bring it 
together to date is through these interagency councils who do 
meet and share information and hopefully try to establish 
common ground and common principles, but without someone who 
says, you know, ``In the final analysis we are going to do it 
like this.''
    And right now, as a matter of fact, in the e-government 
arena, we are struggling with that very thing, as you know. To 
be able to say that, as we move into something that is entirely 
different for us, let's not do it agency by agency; let's do it 
collaboratively. Now, that makes incredibly good sense. So 
every agency head says, ``Okay, let's do it collaboratively.''
    But then, as you get into that collaborative work, you 
reach points in time where you have to make a decision. Agency 
A wants to go this way; Agency B wants to go this way. And we 
do think that there needs to be the kind of central authority 
that you refer to, that is consultative but then,in the final 
analysis, can be directive and say, ``This is what makes the best sense 
for the government as a whole,'' and move in a direction.
    Mr. Istook. And I would certainly concur that if you have 
collaboration but you do not have someone with authority, you 
do not have accountability. You have to have authority so that 
you can hold them responsible for that. That is my concern.
    As I mentioned, we had a great many questions for the 
record, and I think that will be the most effective way, rather 
than trying to do one-on-one interchanges.
    But this is a significant area of concern, just as the 
other issue I mentioned earlier was, that I want to see what we 
can do and help--and it is not just entirely GSA, I understand 
that thoroughly. But GSA is a central authority, as you 
recognize, with the e-government initiatives that do involve 
the GSA. And it is a logical place for a lot of the 
accountability to reside.
    So we will be pursuing that and some other matters with 
questions for the record.
    Thank you for taking the time. I know other members, they 
might come in later if we were continuing, because we have got 
so many subcommittees meeting today. But we will submit those 
for the record.
    Mr. Perry, again, I appreciate you and everyone else taking 
time today.
    Mr. Perry. Thank you very much, Congressman.
    Mr. Istook. And we will stand adjourned.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                            Tuesday, June 18, 2002.

                     OFFICE OF PERSONNEL MANAGEMENT

                               WITNESSES

DAN BLAIR, DEPUTY DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT, ACCOMPANIED 
    BY
WILLIAM E. FLYNN III, SENIOR POLICY ADVISER;
KATHLEEN McGETTIGAN, CHIEF FINANCIAL OFFICER; AND
PATRICK McFARLAND, INSPECTOR GENERAL
    Mr. Istook. Call the subcommittee to order. Good morning. I 
am pleased to welcome this morning Dan Blair, the deputy 
director of the Office of Personnel Management to be testifying 
on the President's 2003 budget. Director Kay Cole James was 
originally scheduled to be here, but because of urgent matters 
that came up, she is not able to do so, and because of our 
limited time frame we were not able to change the hearing time 
to enable her testimony directly before us.
    OPM, of course, is the Government's chief personnel office. 
It has responsibility for managing the merit systems, the trust 
funds that provide for retirement and health plans of Federal 
employees and annuitants, and to give advisory assistance to 
Federal agencies on personnel matters. With the Federal 
workforce being over 1.8 million, the role of OPM is more 
important than ever on recruitment, management and development 
of Federal worker issues. And we know that in the last decade, 
there has been significant restructuring and outsourcing, 
cutting OPM staff over the last 10 years by some 50 percent. 
And as I mentioned to my counterpart and ranking member, Mr. 
Hoyer, I really believe this morning we will really just 
scratch the surface of a number of things.
    This subcommittee, because of the necessary focus on border 
security and homeland security issues, with Customs and the 
Office of Homeland Security, hasn't given the attention that I 
think is deserved by the Office of Personnel Management, 
something I hope we can correct and work more closely with you 
in the future.
    In theory, of course, the director of OPM is the 
President's chief human resource adviser. However, with 
decentralization, it is clear that many agencies have developed 
their own approaches. OMB has a dominant role on compensation 
policy and anything else that involves funding and legislation. 
We are in a time of great change and expansion since September 
11, in particular. Rapid growth of certain agencies, 
recruitment, including recruitment between Federal agencies in 
a very significant and major way, massive training needs, 
placement of thousands of new government workers, are all 
current issues. At the same time, that inevitably poses issues 
involving classification of positions, compensation policy, 
avoiding unintended competition between agencies.
    Your latest white paper has been issued on modernizing 
compensation policy. That is already generating a lot of 
discussion in and outside of the government about potential 
alternatives to existing structures and incentives and 
especially how to integrate performance measures and management 
into the human resource systems. As part of the trust fund 
responsibility for health and retirement benefits, you have a 
major challenge in keeping foremost the best interest of the 
Federal workforce and the retired members of the Federal 
workforce.
    In particular, one thing we want to look at today is your 
stewardship of the Federal employee health benefits program, 
modernization of retirement systems and introduction of long-
term care retirement programs. I, as many others, am very 
concerned with the recent experience of FEHBP with premiums 
rapidly rising, which is not unique among health insurance 
plans across the country. But that seems to be accompanied by a 
high rate of departure of health carriers. That can affect the 
quality and availability of care for the Federal workforce.
    First among the OPM appropriations is funding for the 
Office of Inspector General, which has been taking additional 
measures to counter the criminal diversion of retirement and 
health payments. It has the lead of investigating instances of 
FEHBP-related fraud and mismanagement. It has a significant new 
work load in relation to that.
    In addition, we are concerned that there may be an 
additional criminal investigative work load that could be 
associated with some aspects of homeland security that cuts 
across, I think, all the different IG offices. So there is much 
to dig into and, unfortunately, we will probably just scratch 
the surface of many issues, but I think it is very important 
that we get that under way.
    Before receiving your testimony, of course, I want to 
recognize our distinguished ranking member, Mr. Hoyer, for his 
remarks.
    Mr. Hoyer. Thank you very much, Mr. Chairman. I want to 
welcome Mr. Blair here, the deputy director. The deputy 
director, as all of us know, has long-time experience both on 
the House and the Senate side in dealing with issues that 
affect Federal employees and the civil service generally in 
management issues. I do, however, regret that Director James 
could not be here. I would hope at some point in time we do 
have an opportunity to hear from Director James. I expect to be 
talking to her soon, but the issues we are dealing with are 
critically important. There are challenges that are of great 
magnitude confronting the Federal civil service and I am 
hopeful that Director James will be able to discuss these and 
to question her at some time in the future.
    I happen to represent, as all of you know, many Federal 
employees who would work under the Department of Homeland 
Security if it were created, and I have a number of concerns 
about that, in particular what authority this new department 
will have in hiring, what authority the department will have to 
pay its employees, what rights will these employees have, and 
what authority will be available for workplace decisions and 
will it be different than the current civil service system that 
most Federal employees work under.
    We also this morning have an opportunity to discuss what 
efforts are being considered to address the human capital 
crises that I think confront our government. I think Senator 
Voinovich and I agree on that issue. Anybody who looks at the 
statistics agrees as well. In 2001, the General Accounting 
Office added human capital management within the Federal 
Government to its high risk list, as you know. By 2006, the 
Office of Personnel Management estimates that 46-and-a-half 
percent of Federal employees will retire. Within the managerial 
ranks, OPM estimates that 49 percent of the Federal workforce 
will retire. This creates a gigantic challenge, it seems to me, 
on the Federal service as we face new challenges that we are at 
risk of losing some of our most experienced talent. We need to 
start thinking about the future, and who will be filling these 
positions, and I know that you're doing that.
    This is an historic opportunity to sell wonderful 
opportunities of the Federal Government to our young people, 
but at the same time we need to retain our best and brightest 
employees by focusing on the things that matter to them, such 
as affordable health plans, and the chairman has mentioned the 
FEHBP, which is itself in crisis.
    Frankly, had we passed legislation in 1995 to cap the 
contribution of the Federal Government to FEHBP, Federal 
employees would have had a net loss in purchasing power as a 
result of increased premiums over that same period of time, 
which, of course, substantially outstripped the 13 percent 
increase in pay. We unfortunately have not kept pace with the 
comparable pay in the private sector, either. Federal Employees 
Pay Comparability Act, which President Bush signed into law in 
1990, and which passed as a part of the Treasury postal bill in 
fiscal year 1991 was intended, of course, to reduce the pay gap 
between the private sector and Federal pay. This administration 
and previous administrations--bipartisan fashion--have not 
followed this requirement while the pay disparity with the 
private sector continues to grow. According to the Bureau of 
Labor Statistics, a 34 percent pay gap exists between the 
Federal employees and their private sector counterparts. 
Whatever else you do with employees, you cannot compete to 
recruit or retain Federal employees with that kind of 
performance.
    Let me say at this point in time as well, and I am going to 
ask questions about, we have a crisis in our Federal law 
enforcement. Federal law enforcement is competing with itself 
very, very keenly. The Transportation Security Agency--I talked 
to a young 24-year-old ex-Capitol police officer. She is now an 
air marshal. She's making $20,000 more as an air marshal than 
she was making as a Capitol police officer; $20,000. And I 
presume, Mr. Blair, you are going to tell me that the 34 
percent disparity really doesn't exist. Either it exists and we 
are not able to pay $10,000 more and recruit from the private 
sector, or we have to steal from our own people and pay them 
$20,000 more to fill up the Transportation Security Agency's 
requirements in a short period of time. We have a real problem 
and we need to deal with it. This year, the administration 
requested that the 2003 pay adjustment for military personnel 
be adjusted upwards by 4.1 percent, but only 2.6 percent for 
civilian employees. On February 2 an administration official 
was quoted--high official was quoted in The Washington Post as 
saying, and I quote, the military pay policy is responsible and 
sensible because they are protecting our citizens and the 
homeland against foreign enemies which is one of the foremost 
priorities of the United States Government. I am not sure what 
the FBI are doing or the CIA are doing, or the thousands of 
people who are in civilian garb and in the civilian sector at 
the Department of Defense or at NSA or DEA or Customs or at ATF 
or at Secret Service or all the other civilians who are 
protecting our homeland, but send them the message we cannot 
have a disparity of one-and-a-half points because our men and 
women in uniform, whether they're here in the United States or 
overseas--I am not talking about hazardous duty pay or wartime 
pay, we're talking about across-the-board deployed or 
undeployed. We have a crisis in the Federal service and this is 
not helping. And I am going to try to change that. And when we 
have a 34 percent disparity, which every administration, 
irrespective of party says, oh, it really doesn't exist. And 
since 1990, do you know how many substantive plans we have had 
to replace FEPCA? Zero. Not one.
    I have told every OMB director, every OPM director, fine, 
put it on the table. If you don't believe this works, put it on 
the table. Put up or shut up, in effect. And again, I want to 
emphasize this is not a partisan issue. Every administration 
takes this position, Democrat or Republican, that, oh, this 
isn't really correct and therefore we don't follow it. You are 
not following the law. The Federal Government is breaking the 
law if we don't give the 34 percent catch-up. Now we are not 
going to do that because we couldn't afford to do that, but we 
are breaking the law. The President has stated many times that 
these employees on the front line--I am going back to my 
comment about the uniformed personnel--don't tell a Customs 
agent that is interdicting these people--or Transportation 
Security Agency now we have to be paying them a lot more. Why? 
Because when the rubber hits the road in reality and we had to 
hire people, we found out this pay disparity existed.
    So what do we do? We simply put it inside the Federal 
Government pay disparity. 24-year-old young woman, good Capitol 
policeman, now making $20,000 more because she's now working as 
an air marshal. I would hope that we would overcome that.
    I look forward to discussing these and many other issues 
with you today, including the budget request for $262 million 
in discretionary funding.
    Mr. Chairman, I thank you for giving me the time to raise 
some of these issues. As you know, I thought this was an 
important hearing. I still think it is an important hearing, 
but I certainly agree with you that we are just going to touch 
the surface. Thank you, sir.
    Mr. Istook. Thank you, Mr. Hoyer.
    Mr. Blair, it is certainly our practice to receive 
testimony under oath. So if I could have the witnesses stand.
    [Witnesses sworn.]
    Mr. Istook. Mr. Blair, of course, we have your written 
statement, which will be placed in the record in its entirety. 
I always encourage witnesses to feel free to depart from it, to 
shorten it, to deviate, however may be best, because we have 
the written information and we are interested in seeing how we 
can expand upon the knowledge that it imparts to us. So we 
would be pleased at this time to hear your testimony.

                           Summary Statement

    Mr. Blair. I do have a longer written statement that I ask 
be included for the record. Thank you, Mr. Chairman and members 
of the subcommittee.
    Director James sends her regrets that she is unable to 
testify before the distinguished subcommittee herself this 
morning. As the members know, the director is intricately 
involved with the formation of the new Department of Homeland 
Security. She is working in close consultation with the 
President's team, and this morning she had a commitment which 
unfortunately precludes her from being here.
    I am pleased to have this opportunity to discuss the 
appropriations request for the Office of Personnel Management 
for fiscal year 2003 on behalf of Director James.
    I am joined today by two of our top executives, Ed Flynn, 
senior policy adviser to Director James and former Associate 
Director of OPM for retirement and insurance, and Kathleen 
McGettigan, our very capable Chief Financial Officer. Also at 
the table is our Inspector General, Pat McFarland.
    The President has requested a total of $40.7 billion for 
OPM, an increase of $11.8 billion for fiscal year 2002. The 
principal reason for the overall increase is inclusion of 
amounts necessary to fully fund future retirement and health 
benefit costs as proposed by the administration's Managerial 
Flexibility Act. That proposal was transmitted to Congress by 
the President on October 15, 2001, and currently is pending as 
S. 1612.
    OPM's requested appropriations are 1 percent discretionary 
and 99 percent mandatory. Of the $273.9 million in 
discretionary funds, $60 million of that will be directed to 
building capacity and systems relating to information 
technology projects, including the five e-government 
initiatives that OPM has been asked to manage.
    Those five initiatives form an interlocking system that 
will play an integral role in streamlining and improving 
procedures for moving Federal employees through the employment 
cycle beginning with recruitment, continuing through all 
aspects of employment and training, and culminating with 
retirement.
    Mr. Hoyer. Mr. Chairman, excuse me. Do we have--this does 
not track, as I can tell, Ms. James' statement. Do we have a 
copy of that statement?
    Mr. Blair. It is a shorter version.
    Mr. Istook. I don't know if we have a written copy of the 
shorter version.
    Mr. Blair. I don't believe you do. I could provide one for 
the record, if that would help.
    Mr. Istook. That would be appreciated.
    [The information follows:]

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    Mr. Blair. As I was saying, the five e-government 
initiatives use technology to remove redundancies, reduce 
response times, eliminate paperwork and improve coordination 
among Federal agencies.
    OPM's administrative accounts will support 2,945 full-time 
equivalent employees in fiscal year 2003, 39 fewer positions 
than in FY 2002. Director James' written statement discusses 
OPM's funding request in greater detail. What I would like to 
do in the remainder of my time is describe for you the new 
direction and initiatives we are pursuing.
    These initiatives will have a direct and tangible impact on 
the executive branch's overall success in hiring and managing 
people efficiently to serve the American public.
    Internally our goal is to create a nimble organization with 
a structure that will enable us to provide better, quicker, 
more responsive policy leadership and support to Federal 
agencies.
    We are using zero-based budgeting, which has helped us 
identify and redirect resources to priorities. Every dollar has 
to be justified in terms of how it relates to the President's 
agenda and contributes measurably to performing our mission at 
OPM.
    We are fostering a results-oriented environment within OPM 
that cultivates and rewards excellence. As an accountability 
measure, we have initiated a 360-degree review of service 
delivery and customer satisfaction and we look forward to the 
results later this summer.
    To hold OPM senior executives accountable for results, our 
new SES Performance Standard for Executive Excellence provides 
direct linkages between what we expect of our executives, how 
we evaluate and rate their performance against these 
expectations and the actions we take as a result of those 
assessments. This standard explicitly requires that our 
executives achieve results against the President's five 
management agenda initiatives.
    OPM plays a key role in supporting the President's human 
capital initiative Governmentwide as well. We truly intend to 
be a model of human capital management and, indeed, overall 
management for the Federal Government.
    We are proud that OPM has received some of the best scores 
in Government on the executive branch management score card. At 
the end of fiscal year 2001, we rated yellow on two of the five 
initiatives, human capital and electronic government. As you 
know, few Federal agencies attained this level. In fact, only 
six agencies received two or more yellows. Since that time, OPM 
is making strong progress implementing our plans to achieve 
additional measurable results.
    As the leader or managing partner of the Human Capital 
initiative, OPM works hand in hand with our OMB colleagues to 
go over each department's proposed human capital action plans, 
reinforcing excellent practices and strategies, assessing them 
for weaknesses, and suggesting new strategies to make them 
successful.
    We also offer direct assistance to departments and agencies 
by sending a strike force composed of top OPM executives to 
solve immediate problems. We have been tested and tempered by 
the events of September 11. OPM teams have been a key technical 
resource for helping establish the Office of Homeland Security 
and for creating the HR systems and performing the security 
investigations associated with staffing the new Transportation 
Security Administration. We anticipate this work will 
accelerate as we help create the new Cabinet-level Department 
of Homeland Security.
    Indeed, we see our job as making sure that all Federal 
agencies and departments have the tools they need to recruit, 
hire, retain, train and manage performance.
    We are undertaking fresh approaches for Federal hiring that 
reflect the best practices in the private sector, while 
respecting the core values of public service, including the 
Merit System and veterans' preference. We are also re-examining 
the Federal Government's compensation systems to see how we 
might improve the linkage with both recruitment and performance 
recognition.
    Benefits are an important part of the overall compensation 
package. I want to emphasize the significant efforts we are 
making to address health insurance premium increases. Director 
James put Federal Employee Health Benefits Program providers on 
notice to expect very, very tough negotiations this year. And 
she challenged carriers to contain costs, maintain quality and 
keep the Government's program a model of consumer choice and on 
the cutting edge of employer-provided health benefits. This 
past Friday, Director James sat down with her OPM negotiating 
team and gave them clear direction: negotiate fiercely on price 
and quality. They have her personal pledge to back them up and 
provide any assistance they need to keep prices affordable for 
our employees.
    I thank you for the opportunity to discuss our budget 
request with you this morning and provide some insights into 
our activities. I am very proud of the significant steps we 
have taken to implement the President's management agenda with 
OPM and our government-wide leadership in the areas of 
strategic human capital management and electronic government. I 
would be pleased to respond to any questions the subcommittee 
may have.
    [The information follows:]

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                            HEALTH CARE COST

    Mr. Istook. Thank you, Mr. Blair. Let me begin with the 
topic you were addressing at the end, the FEHBP. I believe, and 
I will use approximate figures, in recent years, the annual 
increases in premiums have been in the neighborhood of 10 
percent, I think just under. It is projected 12.2 percent 
increases for the current fiscal year. You mentioned strenuous 
negotiations and efforts to accomplish all you can in that. And 
we understand that you both have to have providers that will 
offer the health insurance at affordable rates and providers 
that will remain in business, that will be able to continue to 
provide those policies in the future because, you know, if you 
negotiate in a way that you somehow managed to persuade people 
to take a loss, they wouldn't be around next year in that.
    With that in mind and knowing that negotiation itself isn't 
going to cure some of the underlying factors, I would be 
interested in OPM's assessment of what factors are driving the 
escalation in health care costs and therefore in health care 
premiums, and then especially to address with you the factors 
over which OPM does have some elements of control, for example, 
some of the mandated coverage options for HMOs where you have 
State mandates that are incorporated into the Federal coverage 
because OPM has not chosen to exercise its authority to not 
have providers be bound by those State HMO requirements.
    Also, if you might address the issue of the planned 
variety, whether OPM, by putting different strictures on what a 
plan must be, takes away some of the options they might seek to 
adopt involving higher levels of copayment or coinsurance, 
whatever it might be.
    So that is a very broad question, but if you would address, 
please, what OPM believes is driving the cost and where OPM has 
some control points on some of those elements.
    Mr. Blair. Thank you, Mr. Chairman. I will touch on that 
briefly. These negotiations don't take place in a vacuum. As we 
have seen, health care costs skyrocketing throughout the 
country. And, sadly, these increases that we have seen over the 
years reflect that. We have heard this year CALPERS, the 
California retirement system, will be implementing cost 
increases of around 25 percent. And we have seen reports that 
health care costs generally will increase anywhere from 10 to 
25 percent.
    Given that situation, Director James met with her 
negotiators. I believe that was the first time an OPM director 
has ever met with negotiators to give them clear, explicit 
advice to hang tough and negotiate well.
    Considering that, let us look at the factors leading to the 
cost increases. It's medical inflation, increased utilization, 
an aging workforce, an aging population, and these are all 
things we've seen outside the Federal sector as well. Increased 
use of prescription drugs is another factor that is doing that. 
And so those are things that are driving the cost increases 
that we're going to have to address.
    Secondly, you asked what do we have control over. Some of 
the things that we have urged in the past are to avoid the 
issue of mandates in the Program because we've always felt that 
the strength of the Program lies in competition. And one of the 
issues that you've raised with us is what are State mandates 
doing to the premiums for HMOs. Initially we looked at that and 
we thought it was incremental and not a significant source of 
cost increases. But, that said, we're looking at studying that 
issue further and working with the contractor to see if we can 
just get a better handle on what those costs are. So we hope to 
have that later in the fall.

                  EFFECT OF HEALTH CARE COST INCREASE

    Mr. Istook. Let me look at a couple of things you 
mentioned. First, when we talk about 12 percent or whatever it 
may be, of inflation, since you have the 75 percent cap on the 
Federal payment toward the health insurance, the factors, when 
you add in the deductibles and the cap, the 12 percent doesn't 
necessarily fall equally on the employer and the employee. Do 
you have any breakout of how you expect that to be attributed? 
It's certainly possible, considering those variables that, you 
know, potentially maybe the employee is bearing 10 percent 
extra costs and the employer 15 percent, or you might swap 
those figures. What is that mix as you project it on who will 
bear what proportion of increase?
    Mr. Blair. Well, since it is a 75 percent cap, it does fall 
unevenly, depending on what plan you enroll in. For instance, 
HMOs are community-rated so their prices are going to be 
different depending on which HMO you are participating in, in 
which part of the country. Our fee-for-service plans offer a 
flat rate across the country. And so we have to provide you for 
the record how that more significantly, or in a more detailed 
form how that affects the program, and we'd be happy to do 
that.
    [The information follows:]

    In 2002 the average increase in premiums was 13.3 percent and the 
Government and enrollee shares of this increase were identical, both 
increased by 13.3 percent. In 2001, the average increase in overall 
premiums was 10.5 percent--the enrollee share increased by 11.5 percent 
while the Government share increased by 10.0 percent.

                COSTS AND BENEFITS OF PRESCRIPTION DRUGS

    Mr. Istook. I think that would be helpful because just 
talking about 12 percent in a vacuum doesn't really tell us the 
respective burdens that we might expect to be borne by the 
Government and the enrollees.
    You mentioned among the factors of inflation, utilization 
rate, aging workforce and increased use of prescription drugs. 
Many people present the belief that that use of prescription 
drugs decreases the cost of medical care because it 
substitutes, for example, for surgery or for some other forms 
of invasive treatment. Is it the experience of FEHBP that the 
increased use of prescription drugs is not providing offsetting 
benefits relating to costs--it may provide benefits relating to 
the level of health, but it is not producing cost savings?
    Mr. Blair. I don't know if we have those figures or not. As 
you know, the increasing costs of pharmaceuticals include the 
research and development of those new drugs coming into the 
market, the lack of availability of the generics for the top-
rated drugs, but I don't know if we have that information, and 
I want to ask Mr. Flynn.
    Mr. Flynn. I might just add to that, Mr. Chairman, we don't 
have any information relating to that at OPM. I would say, 
however, that I think that the evidence in sort of society 
generally and in the Federal employee health benefit population 
suggests that we actually do have greater longevity. Long-term 
studies of how long people live and how long they live healthy 
lives is a function of their health care, and prescription 
drugs are more and more a major component of that. But we 
certainly do not see any diminishment of other costs in the 
program as a result of the higher costs or utilization of 
prescription drugs. But there are many, many factors that 
affect that overall equation and I don't know that you would 
see it, in any event.
    More likely it's the case that you're seeing perhaps some 
slight decrease in the rate at which costs would otherwise 
increase as opposed to a true cost savings itself.
    Mr. Istook. Is that something--is that basically a 
speculation that might be the case, or is there any evidence to 
show that it slows the rate of increase?
    Mr. Flynn. It is more speculative on my part, Mr. Chairman, 
but I think there's some evidence to suggest that may be the 
case.
    Mr. Istook. Very good. And this is a topic I think we want 
to explore further and certainly with some questions for the 
record as well, but I need to yield time now to Mr. Hoyer.

                 COMPLIANCES WITH PAY COMPARABILITY ACT

    Mr. Hoyer. Thank you very much, Mr. Chairman. Mr. Blair, 
have you asked for an opinion from counsel as to whether or not 
the administration is in compliance with FEPCA in recommending 
2.6 percent for Federal employees?
    Mr. Blair. No, sir.
    Mr. Hoyer. And I'll ask you a question for the record, if 
you would submit for the record the opinion of OPM as to 
whether or not the administration is in compliance with FEPCA 
in asking for a 2.6 percent raise and, if not, what raise would 
be in compliance with the statute. And we are going to mark up 
pretty soon so if you could give us that pretty soon, I'd 
appreciate it.
    [The information follows:]

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                        FEDERAL LAW ENFORCEMENT

    Mr. Hoyer. You heard me talk about the Capitol Police and 
the TSA. I have indicated in committee, I believe that there's 
a crisis currently in Federal law enforcement. The uniformed 
Secret Service division has lost about 12 percent of its 
personnel in protecting the White House, most of whom who have 
gone to TSA. Are you looking at this? Is there a study as to 
what pay and benefits ought to be in terms of Federal law 
enforcement categories? I presume those categories could be 
broken down to some degree as far as experience necessary and 
risks involved and training required?
    Mr. Blair. Let me address it from two different angles. We 
are looking internally at the cannibalization that is taking 
place among different agencies. Most of this is attributable to 
new agencies like the TSA which are given authorities that are 
normally outside the scope of title 5 and outside the realm of 
OPM's ability to oversee it. And what we have created over the 
past few years is really a patchwork quilt of have and have-not 
agencies who have different authorities, different abilities to 
recruit, retain--the IRS--we can go through the whole history 
of different agencies getting different authorities. So one of 
the things the director wanted to look at is why are agencies 
seeking these authorities. What's wrong with our current title 
5 laws that prohibit the flexibility that agencies feel that 
they need in order to recruit and retain these employees.
    One of the first steps the Director has done, and I know 
you are familiar with it yourself, is her white paper on 
compensation reform. That is a thorough study and a very well 
written analysis of the problems confronting the Federal 
compensation system. The compensation system that we have today 
was drafted and implemented for a workforce in the 1940s, and 
we are in 2002 and we need to update and contemporize the ways 
that we establish compensation systems for our agencies. We 
don't have the flexibilities that are out there. If one agency 
gets a flexibility, either by virtue of other authorizers or in 
an appropriations bill, other agencies would like to see that 
flexibility, too, and they can't do it.

               COMPETITION FOR LAW ENFORCEMENT EMPLOYEES

    Mr. Hoyer. I think you're right on that, but unfortunately 
our time is limited. Let's focus on what you are proposing be 
done with respect to the crisis that is now occurring with 
respect to Federal law enforcement agencies competing with one 
another and the vacancies that are occurring and the risks that 
those create to the White House, to the Capitol, and to others 
in terms of being able to retain and recruit people to those 
agencies?
    Mr. Blair. Well, we have limited authority as an agency to 
prevent TSA from going to another agency. That said, some of 
the things we'd like to see done are contained in the 
Managerial Flexibility Act that would allow for increased 
demonstration projects, and streamlined demonstration projects, 
authority, permit alternative personnel systems be adopted, and 
allow agencies authority to access the flexibilities that have 
already been given to other agencies. That would make 
significant steps toward addressing the problems that you are 
mentioning right there.
    I think the overall problem is a compensation system that 
is not flexible enough to adapt to the changing roles.

                           COMPENSATION STUDY

    Mr. Hoyer. When does OPM expect to submit a plan on 
appropriate compensation?
    Mr. Blair. We are studying and I would expect something in 
the next year. As you know, we've just unveiled that paper. And 
what we are involved in right now is an education process for 
the Federal community of identifying what the overall problems 
are. I know the director is very anxious to move forward on 
something like this.

                     PAY AND BENEFITS COMPARABILITY

    Mr. Hoyer. In the interim, in light of the fact within the 
next five years you heard the figures 46, 47 percent 
managerial, do you believe that we are staying current or 
falling behind private sector analogs in terms of pay and 
benefits?
    Mr. Blair. It's hard to say overall.
    Mr. Hoyer. Do you reject the BLS----

                                PAY GAPS

    Mr. Blair. No, I'm not rejecting it. When we talk about one 
pay gap, it's really multiple pay gaps. Because of our locality 
pay system, in some areas we are actually at market in certain 
occupations and in certain grades. But overall----
    Mr. Hoyer. Can you give me an example?
    Mr. Blair. I would have to provide that for the record.
    Mr. Hoyer. Would you do that, please.
    [The information follows:]

          Pay Gaps Example of Occupation Paid at Market Rates

    After locality payments are taken into account, Federal rates of 
pay for clerical positions in the Huntsville and Orlando locality pay 
areas now exceed the levels that are paid for non-Federal clerical 
positions. We have attached material that provides a fuller picture of 
this situation.
    [Separate file submitted.]

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    Mr. Blair. There are multiple pay gaps out there. Some are 
smaller, some are larger than others. That 34 percent number is 
an average.

                   SELF-INSURANCE FOR HEALTH BENEFITS

    Mr. Hoyer. I agree with that, and I understand that 
entirely.
    With respect to the Federal employees health benefit, is 
OPM looking at an alternative of self insurance?
    Mr. Blair. Not to my knowledge, at this time.
    Mr. Hoyer. Would it be wise, do you think, for OPM to look 
at an alternative for self insurance as it relates to the cost 
to the Federal Government? And let me tell you my premise. My 
premise is that people stay in this system, i.e. The various 
alternative insurers, because they're making a profit. When 
they think they can't make a profit, they're going to drop out 
of this business. That's the way it ought to work. Now if they 
are making a profit, then as long as they don't have any 
competition from us saying we are going to be self insurers, or 
you can do it, I think we are going to have trouble containing 
costs. And I agree with all the reasons that you raised, but it 
seems to me you ought to add to your quiver an arrow of the 
possibility of self insurance in terms of costs to the Federal 
Government and, therefore, the Federal taxpayer.
    Mr. Blair. That's certainly something to consider. I know 
the issue of self insurance has been around for quitesome time. 
Back in the 1980s when we looked at reforming the Federal employee 
health benefit system, that was one of the options that was being 
considered at the time.

                 UNION MEMBERSHIP AND NATIONAL SECURITY

    Mr. Hoyer. I'm not necessarily for that, but the last 
question I want to ask you on this first round is on January 7, 
the President issued an executive order that excludes several 
hundred employees at the Department of Justice from the Federal 
labor management relations program. Justification was that 
union membership or potential union membership in the case of 
the U.S. Attorneys was a threat to national security. Some of 
these employees had been union members, of course, for 20 
years. To my knowledge, up until now, there has never been a 
suggestion that their union membership imperiled national 
security.
    Mr. Blair, I would ask you, you are not going to be able to 
do it now, but I would ask you within the next 10 days to give 
me, one, two, three, four examples where union membership posed 
a threat to the security of the United States in any agency in 
the Federal Government, period. I want that as soon as you can 
provide it for me.
     The Homeland Security Department, which is going to have 
160,000 or more employees, I am fearful that OPM, the 
administration are going to use the rationale that they have 
applied to the Justice Department and applying to TSA 
components to this entire department for the purposes of 
accomplishing an objective. They don't believe in the 
unionization of Federal employees. I understand that's a 
substantive disagreement. I believe in collective bargaining. I 
believe in the trade union movement. I think employees have 
been advantaged by it and need to be advantaged by it. But I 
want to have some specific examples within the next 10 days, 
because this issue is moving very quickly of where OPM believes 
there has been a security threat to the United States or to the 
particular agency as a result of union membership.
    Mr. Blair. We will be happy to provide you the responses 
for the record.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Mr. Hoyer. Thank you very much, sir.
    Mr. Istook. Thank you, Mr. Hoyer. Let me tell the members 
the order in which I intend to call on them under the five-
minute rule, although we may be a little bit slightly lax on 
it, but not very. Mr. Sherwood would be next. He has left the 
room momentarily. So as soon as he returns, I'll put him back 
in the cue of whatever position that may be. We have Mr. Price, 
Mr. Tiahrt, Mrs. Meek, Mr. Visclosky and Mr. Peterson. So I 
will recognize Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.

                     LOSS OF HEALTH BENEFITS PLANS

    Deputy Director Blair, let me add my welcome to you and 
your colleagues here today. I would like to raise a question 
first about the Federal employees health benefit program. As 
you know, there has been some unwelcomed changes in the options 
available to employees and the cost of their premiums, and I 
have been hearing about this, as have many members, from 
Federal employees in our districts, and particularly in my case 
from Federal employees at the Research Triangle Park. They 
raised questions about the changes in the plan. And let me 
focus here on the range of options available among the various 
problems that we might address.
    It is my understanding that 49 plans have pulled out of the 
FEHBP, 50 if the Blue Cross Blue Shield high option plan is 
counted, and that's something like 27 percent of the FEHBP 
plans. In North Carolina there's only one HMO option remaining 
where there were five only last year, and North Carolina is not 
alone. Apparently West Virginia, Rhode Island and South 
Carolina have one HMO option apiece, and Delaware has none.
    What is OPM actively doing to make certain that Federal 
employees in North Carolina and other states have adequate 
health care plans from which they can choose for the coming 
year? What can we do about this and what are you doing about 
this?
    Mr. Blair. Mr. Price, the hallmark of our plan has always 
been choice and we are committed to providing a full range of 
choices for our plan enrollees. That said, you are correct that 
a number of plans have dropped out over the past few years. Of 
the 50 you cited, I would speculate that the 49 are HMOs and 
they dropped out for a variety of business reasons, that their 
rates weren't competitive, that there was consolidation in the 
industry, or a host of other reasons.
    That said, we are working with the States. We are actively 
advertising in Commerce Business Daily. We are working with 
local HMOs. We are urging them to participate in the program, 
and we are doing everything we can to identify HMOs in these 
areas to participate in the program, but it is a tough job 
because a number of times, depending on what the health care 
costs are in that area, maybe the HMO premiumsare not 
competitive with our fee-for-service plans.
    And you also mentioned about the Blue Cross Blue Shield 
high option plan dropping out. Well, my personal view on that, 
is that maybe that was a good thing because I think people were 
buying a Cadillac but instead they were receiving a Chevette 
because it was not the best of plans. It was an expensive plan. 
And I think the actuarial value of the plan was essentially the 
same as that of the standard option. So what we've been trying 
to do is make sure our options are affordable and with the 
dropping out of the high option we now have the basic option 
plan which would be more affordable for those employees who are 
trying to cut costs but still receive comprehensive health care 
coverage through the Federal employee benefit program.

                         BLUE CROSS/BLUE SHIELD

    Mr. Price. The basic option is an HMO plan, the basic Blue 
Cross, Blue Shield----
    Mr. Blair. It's not an HMO plan. It's a PPO plan. You can 
go outside, but I think the reimbursement rates for that are 
substantially less than if you stay within the system.

                            COVERAGE CHANGE

    Mr. Price. Standard Blue Cross Blue Shield plan is still 
available. That's the fee-for-service plan but with somewhat 
less comprehensive coverage, now. Is that true?
    Mr. Blair. I think it has the same comprehensive coverage 
it always has had.
    Mr. Price. Annual physicals provided for in that plan?
    Mr. Blair. I have to get back to you on that.
    [The information follows:]

    Yes, the Standard Option of Blue Cross/Blue Shield Plan covers 
annual physical examinations for enrollees aged 65 and over, for those 
under 65, examinations are covered every three years.

    Mr. Price. I'd appreciate you doing that. That is one point 
of issue here, it's whether not only have plans been dropped 
but has the coverage available under the plans that have been 
retained, has that been altered in ways.
    Mr. Blair. If you don't mind, I would turn to Mr. Flynn, 
who might be a little bit more familiar with the day-to-day 
operation of this.
    Mr. Flynn. Mr. Price, the only thing I would say about the 
benefits themselves is, generally speaking, you don't see an 
elimination of a benefit. You may see an increase in copayments 
or deductibles. So I think Deputy Director Blair is correct.
    When it comes to annual physicals in the standard Blue 
Cross, we'd have to check on that for the record. But my guess 
would be, sir, that it is an increase in copayments and 
deductibles and not the elimination or changing of a benefit.

                     INABILITY OF HMO'S TO COMPLETE

    Mr. Price. I would appreciate you getting back on that. But 
back to what you said, Mr. Blair, about the basic reason for 
this, which, of course, is what we really need to get at. You 
referred to the--these HMO plans simply not being able to 
compete. What's the--what's your diagnosis of that? With the 
authority and resources you're going to have, is there any way 
to fix it?
    Mr. Blair. Well, I think it's a problem--HMOs gained in 
popularity in the 1980s and 1990s. And when there's more 
competition, there's a shake-out in the industry. What we need 
to do is, as a program manager, is make sure that we are 
talking to HMOs in the area that may be medically underserved 
by HMOs or may not have plans participating in the program. We 
are talking to State health care associations, HMO 
associations, trade associations, contacting HMOs locally that 
we know exist in areas that may not be served by those 
participating in the plan. So we are very proactive on that.
    With that said, the industry as a whole has undergone 
consolidations, some plans have gone out of business, and there 
is just a reduction in the number of HMOs being offered. Today, 
I believe we have 180 plans participating nationwide in the 
FEHBP. So we still offer a number of competitive plans with the 
wide range of choices. It's interesting, we are talking about 
the number of plans today because a few years ago, we were 
talking about are there too many plans within the FEHBP. I 
think at one time we had over 300. So it's a question of 
striking an appropriate and proper balance, and we want to make 
sure that customers have choices in all States. Like you 
mentioned Delaware, where they might not have an HMO plan, we 
need to double our efforts to make sure that we can attract 
someone to participate in the program.
    Mr. Price. Yes. And obviously the spotty character of this 
availability is a major concern, the relevant figures.The 
relevant figure is not the number of plans nationwide but State by 
State what employees can actually have access to.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Price. We will go next by Mr. 
Sherwood and he'll be followed by Mr. Tiahrt.

                           SIZE OF WORKFORCE

    Mr. Sherwood. Thank you, Mr. Chairman. A lot of the 
discussion today has been on pay and benefits and we know that 
we're going to have to continue that discussion. But my 
business experience leads me to observe that the Federal 
Government and government in general usually uses more people 
than private industry to do the same amount of jobs. And I'm 
wondering if you and the Office of Personnel Management have a 
responsibility for advising the offices that you serve on 
efficient use of people and so that we can get our rosters 
down. I noticed you said there's 39 fewer people than in the 
last budget. But 39 up or down with the size of this is a 
pretty small number. And I'd like you to comment on that.
    Mr. Blair. Well, I think the 39 is a reduction in full-time 
equivalents. And I think if you look at our agency, and a 
number of your members have a long history with this agency, we 
were at approximately 6500 in the early '90s and we are down to 
around 2945 full-time equivalents. So at OPM, any way, we have 
really tightened our belts and seen a significant downsizing 
and restructuring over the years. But one of the new roles that 
OPM is playing within this administration is looking at the 
ownership and management of the human capital initiative which 
is one of the five cross-cutting Governmentwide agenda items on 
the President's management agenda. We are going to be looking 
at holding managers accountable and how agencies are managing 
themselves in terms of their human resources. So I think that 
gets at your questions of are we looking at the jobs and are we 
looking at the agencies and are they doing the appropriate work 
with the right amount of people. In some cases they may need 
some more and some cases they may need less. I don't think 
there is a blanket statement I can say on something like that.

                STRATEGIC MANAGEMENT OF HUMAN RESOURCES

    Mr. Sherwood. People will normally perform up to their 
expectation. And if the systems are designed efficiently, 
usually you can get the result that you want. It's not that--
but it takes modernization all the time to redesign the 
systems. And if you have cut your workforce in your agency by 
over 50 percent and if you could pass just a little of that 
expertise along to the Federal Government--to the rest of the 
Federal Government, that would be huge, and I wondered if--
you've obviously had to develop some new systems and develop 
some expertise to be able to cut your staff from 6500 down to 
3,000. How is that expertise passed and is it part of your 
mission to pass that expertise on to the rest of the 
government.
    Mr. Blair. I think an integral part of OPM's mission is to 
make sure that agencies have the appropriate human resources 
available to them. And so it is an agency-by-agency, office-by-
office basis. We want to make sure if there are going to be 
efforts at looking at the numbers that it's done strategically. 
And I think that has been part of the problem in the past 10 
years when the Government went through the downsizing is that 
it wasn't done strategically. It was a budget-driven, numbers-
driven exercise. And as GAO has reported, and as both the House 
and Senate committees have looked at, oftentimes the program 
failures that are associated with the Federal Government can be 
directly linked to their people. And so what we want to do in 
this administration and at OPM is make sure the agencies are 
staffed appropriately and have the necessary human resources, 
and not be so much numbers-driven, but looking at it overall 
and saying do you have the resources necessary to carry out 
your mission.

                           WORKFORCE ANALYSIS

    Mr. Sherwood. I understand that, but I was taking it a step 
farther than that. Do you provide counseling on what resources 
are necessary to achieve certain workloads and get certain 
outputs?
    Mr. Blair. I don't say we provide counseling. We look at 
the agencies. But agencies are the best ones to determine what 
their own missions are and what their own needs are. And so we 
counsel in that context of saying agencies know best how to get 
their work done. And once we know what work they need to get 
done, then we will give them the appropriate counseling and 
guidance on their workforce.
    Mr. Sherwood. Of course, I agree 100 percent, it would be 
up to the agency--you are not to set the mission, but I thought 
you were to be the expert of how you achieve that through 
personnel.
    Mr. Blair. We have asked agencies to conduct workforce 
analyses and we have done that for them, and we are advising 
them on that. I just didn't want to lend the impression that we 
were doing more than--that we were doing more in terms of 
establishing the mission. We want to help the agencies perform 
their missions appropriately, and that would include looking at 
their workforce and performing workforce analyses.

                       REDUCTION OF OPM WORKFORCE

    Mr. Sherwood. Would you care to comment on how yours was 
able to come down from 6500 to 2945?
    Mr. Blair. I think it was a deliberative--it was a 
difficult process. I was not part of the agency at that time. I 
was actually watching it from a distance as it happened. It was 
a very difficult process. Some would say it was not done 
strategically. With that said, we are working hard to make sure 
that OPM performs its role well and the director is re-
energizing the agency and has devoted theresources we have to 
what we feel to be the most important missions of our agency. So there 
were lessons learned, both positive and negative, and I think there are 
things that we can take forward in this administration and apply them.
    Mr. Istook. Thank you, Mr. Sherwood. Call on Mr. Tiahrt, 
and he will be followed by Mrs. Meek.
    Mr. Tiahrt. Thank you, Mr. Chairman.

                                 HIRING

    Mr. Blair, is it correct to say that you hire people for 
government agencies; that you provide the talent for the 
government agencies; is that correct?
    Mr. Blair. We have delegated authority to hire, but we are 
involved in the recruitment and retention.
    Mr. Tiahrt. And you provide all government personnel except 
for the military personnel; is that correct?
    Mr. Blair. We do. But most oftentimes we have delegated our 
hiring authority to the agencies.
    Mr. Tiahrt. But you do have even a civilian in the DOD.
    Mr. Blair. Yes, sir.
    Mr. Tiahrt. Is the INS part of the agencies that you 
provide personnel to?
    Mr. Blair. Yes, sir.
    Mr. Tiahrt. Is there anybody in your agency that fires 
anybody or is that done----
    Mr. Blair. That would be through the agency itself.
    Mr. Tiahrt. You just hire, you don't fire.
    Mr. Blair. Right. And I want to make it clear. We don't do 
the actual hiring. It's up to the agency to hire the person. We 
would be the ones who would be making sure they are adhering to 
the principles in hiring and making sure they are following the 
proper processes. But we don't do the actual hiring.
    Mr. Tiahrt. So you have oversight of hiring?
    Mr. Blair. Correct.
    Mr. Tiahrt. But you don't hire anybody.

                                 FIRING

    Mr. Tiahrt. And we don't have anybody that fires anybody?
    Mr. Blair. That would be up to the individual agency.
    Mr. Tiahrt. Well, I'm a little puzzled because the INS, six 
months after terrorists flew airplanes into our structures, two 
of them received an extension for visas, and as far as I know, 
nobody was fired for that gross incompetency. How do people get 
fired? Is there some procedures for someone being fired in the 
government? Has anyone been fired lately? Who is the last 
person that was fired?
    Mr. Blair. I couldn't tell you that, sir, but I think that 
one of the frequent criticisms from people at the Federal 
Government, is that it is too tough to fire people.
    Mr. Tiahrt. So we can hire them and you can have oversight 
over hiring people, but it's very difficult to get fired.
    I don't know--I think I've heard of one guy at the 
Department of Education that was stealing computers that may 
have gotten fired, but I think that was because he committed a 
felony. I don't know if you can get fired for being 
incompetent. Can you be fired for being incompetent in the 
government, or is that just--we just take people on like we 
take on relatives and----
    Mr. Blair. We can fire them for incompetency, for failure 
to perform their work, and I'm told that last year was about 
9,000 people were actually terminated from Federal service.
    Mr. Tiahrt. Nine thousand out of how many?
    Mr. Blair. Out of 1.8 million, but you need to take that in 
context that by the time that you get to actually firing 
people, most people have resigned by that time, because if 
you----
    Mr. Tiahrt. How long of a process is it to--is there a 
series, first a verbal reprimand and then a written reprimand? 
Is that how it goes?
    Mr. Blair. It can be verbal, then written, a series of 
escalating procedures.

                            APPEALS PROCESS

    Mr. Tiahrt. Does anybody have oversight over that? Is there 
a grievance procedure, or is that all handled through the 
unions?
    Mr. Blair. There are grievance procedures and then if 
there's an adverse action to fire or demote, that goes through 
the Merit Systems Protection Board. An employee can appeal 
those actions against him or her.
    Mr. Tiahrt. Do you have oversight over those procedures? Is 
that at the agency level or is that at OPM?
    Mr. Blair. That is done through the independent Merit 
Systems Protection Board which is a quasi-judicial body that 
hears these employee appeals.
    Mr. Tiahrt. And that is not under your jurisdiction?
    Mr. Blair. No, sir.
    Mr. Tiahrt. Whose jurisdiction is that under?
    Mr. Blair. It's an independent agency.
    Mr. Tiahrt. Is that part of ``O'' on TPO? Okay. I'll get to 
them later.
    Your procedures have been--is that something that has been 
established a long time? Who reviews the procedures? Are they 
part of a collective bargaining agreement, or are they part of 
standard operating procedures? When you operate by those 
procedures, how do they evolve?
    Mr. Blair. They evolved over time, and I believe they are 
set in law by statute, primarily through the Civil Service 
Reform Act of 1978, which established an independent MSPB, 
Merit Systems Protection Board.
    Mr. Tiahrt. Interesting. I didn't realize that. I thought 
that we had something that was an accumulation of a collective 
bargaining agreement and just procedure--civil service 
procedures that we've had in the past.
    Mr. Blair. Not to my knowledge. Most of these are grounded 
in statute.

                         COLLECTIVE BARGAINING

    Mr. Tiahrt. Do all union collective bargaining agreements 
that exist comply with civil service acts? Is that how they----
    Mr. Blair. They should.
    Mr. Tiahrt. Okay. So there are some structures that in a 
collective bargaining are not open for change--subject to 
change, then? Part of the negotiation process?
    Mr. Blair. I believe so.
    Mr. Tiahrt. What is confined in a collective bargaining 
agreement now? Is it just wages and health care benefits or----
    Mr. Blair. Wages and health care benefits can't be touched 
by a collective bargaining agreement. I think the term of art 
is conditions of employment, excepting wages and benefits. So 
it would be office-place rules and procedures, but as far as 
adverse actions--and adverse actions are the term of art that 
you use when you're talking about firing an employee or 
disciplining them--then those are statutorily governed.
    Mr. Tiahrt. I'm not sure I understand why we have 
government unions then. It seems like there's not much to 
negotiate, not much for--not much leverage that the collective 
group has. I would----
    Mr. Blair. I'm not sure how you want me to comment on that, 
sir. I think the unions play a vital role in our labor 
management negotiations, labor management procedures, and I 
think I would leave it at that. Very important----
    Mr. Tiahrt. Mr. Chairman, in conclusion, since Mr. Blair 
read his brief statement into the record, I don't think there's 
any reason for him to submit it into the record, and being as 
efficient as he is, I wouldn't want him to conduct a redundant 
procedure.
    Mr. Istook. Well, I understand that, but we have assured 
the members we would have the entirety put in the record, 
nevertheless. But I appreciate the gentleman's concern.
    Mrs. Meek, who will be followed by Mr. Visclosky. Mrs. 
Meek.
    Mrs. Meek. Thank you, Mr. Chairman, and welcome.
    Mr. Blair. Thank you.

                          IMPACT OF RETIREMENT

    Mrs. Meek. I've been reading the report from the deputy 
director. It's quite a--not complex, but very, I would say, 
generic in the application to what is going on in your agency. 
I'm also seeing that you've got a big job of integration, to 
try to integrate all of these departments and agencies 
together. In Monday's Washington Post it was noted that five 
major Federal agencies that are proposed for inclusion in the 
Department of Homeland Security could lose almost a third of 
their staffs in the next five years to retirements. Some 
workers don't fit well with unfamiliar things when they're 
going into a new agency. Therefore, you'll probably have quite 
a few retirements. And they noted the number--the percentage of 
workers that would probably be eligible for retirement in the 
next five years. Have you done any kind of assessment or 
surveys in your job as director there as to the potential 
impact on the Department of Homeland Security on these 
retirements?
    Mr. Blair. I don't think we've done anything specific 
regarding these departments other than the information that's 
already out there, and that the current departments mainly 
mirror what we see across Government, that there will be a 
retirement wave over the course of the next five years, up to 
50 percent eligible, if you include regular retirement and 
early-out. The situation would be worse for senior executives, 
but I think this mirrors Government as a whole. Whether or not 
everyone eligible will go out is another question, but I think 
that we need to make sure that we have systems in place to 
ensure continuity and smooth operations of Government.

                COSTS OF HOMELAND SECURITY CONSOLIDATION

    Mrs. Meek. Do you foresee any additional costs to this big 
consolidation that you intend to take?

                             VOTING RIGHTS

    Mr. Blair. I wouldn't begin to speculate on that.
    Mrs. Meek. My next question has to do with elections. The 
Department of Justice has a strong function it plays in the 
election or election reform and, of course, your agency is the 
one that handles the OPM for this particular part of 
government. And I have not--I've watched--I saw in yourbudget 
plan that you only are authorizing--you're authorized to provide 
examiners and observers for elections, and as--these are to be 
determined by the AG's office.
    Now, I'm from Florida, so therefore I'm very, very 
concerned about what is going to happen in elections and any 
kind of reformation on the election system. The Voter Act gives 
the Attorney General the power to enforce the rights that are 
guaranteed under that, and I know that your budget requests for 
voting rights examiners and observers is flat, and that you're 
requesting five FTEs for that program and that you note that 
you expect that this will be sufficient to meet all of the 
requests from the Department of Justice.
    Now, given all of the massive voting problems that you had 
the last time and in the 2000 presidential election, do you 
expect an increase in the demand for voting rights examiners 
and observers? If not, why not? And I'm sure your answer is 
going to be if they don't request them, you won't get them, but 
if so, how will you handle this increased demand? All over this 
country minorities are asking for not so much more voters, but 
counting of the ones we have. That's all I hear when I move 
from one jurisdiction to the other. Be sure to get an accurate 
vote count. They're not that nearly concerned about how many 
new voters, but whether they will be counted. So my question I 
have, have you thought about that, and if not, will you please 
begin to do so?
    Mr. Blair. Thank you, Mrs. Meek. I appreciate that. It's my 
understanding that our request is for management employees to 
oversee these observers and that it's not for the actual 
maintenance or pay for the observers themselves. And so that is 
why you didn't see an increase in our appropriation for the 
managers who oversee these folks, because they're not OPM. The 
observers are not OPM employees.
    Mrs. Meek. But that would come from the Department of 
Justice, wouldn't it? What kind of coordination do you have 
with them in terms of initiating their requests for the 
managers to oversee this?
    Mr. Blair. I'm----
    Mrs. Meek. Your job is consolidation, as I perceive it. So 
I'm asking, since the Department of Justice is the one that 
will probably be requesting these managers and observers from 
you, what kind of consolidation or coordination will you have 
with the Department of Justice in that regard?
    Mr. Blair. We would meet what they would ask of us to do.
    Mrs. Meek. Okay. You have the listing of Federal registered 
voters maintained as the court provided on this telephone 
preservice. Are you familiar with that?
    Mr. Blair. No, ma'am, but I could be----
    Mrs. Meek. Well, as you begin to get more information on 
this, will you please give this committee some----
    Mr. Blair. Certainly.
    Mrs. Meek [continuing]. Input as to how this will work? 
It's a very important subject. Your agency is extremely 
important, and to have the jobs you have here in consolidating 
and integrating, it's going to really take a phenomenal kind of 
management that your agency itself is going to have.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T1599A.707
    
    Mrs. Meek.  I have another question. Do I have time in this 
round, Mr. Chairman?
    Mr. Istook. Oh, you've got about 30 seconds left in this 
round.
    Mrs. Meek. Mr. Chairman, I'll wait then. And thank you very 
much, Mr. Blair.
    Mr. Istook. Thank you, Mrs. Meek. Mr. Visclosky.
    Mr. Visclosky. Mr. Blair, you have stated that----
    Mr. Istook. And you'll be followed by Mr. Peterson.

                              OUTSOURCING

    Mr. Visclosky [continuing]. Reductions in workforce should 
be strategically driven and not number-driven. Should that 
approach also be the same for outsourcing?
    Mr. Blair. I would say that they serve concurrent and 
complementary purposes, but that the President's initiative 
called for meeting 50 percent of the Fair Act inventories, and 
so that is something that we fully support at OPM.
    Mr. Visclosky. Do you know what the strategy behind that 
number is?
    Mr. Blair. No, sir, I don't. I do know that it is half of 
what the Fair Act inventory, I believe, identifies as those 
jobs that are of a commercial nature and that the call for 
outsourcing has--or the administration's call for outsourcing 
has just identified that we go forward with half of those, 
rather than all of those. But I'm not aware of what the 
strategy was on that.
    Mr. Visclosky. Thank you, Mr. Chairman.
    Mr. Istook. Are you done, Mr. Visclosky?
    Mr. Visclosky. Yes, sir, I am.
    Mr. Istook. All right. Very good. Mr. Peterson.
    Mr. Peterson. Thank you, and welcome, Mr. Blair.

                 INCREASES IN HEALTH BENEFITS PREMIUMS

    Back to the health care issue, I think you gave the 
figures, but what are the annual increases, percentage 
increases for health care for Federal employees?
    Mr. Blair. Last year it was 13.3 percent, I believe.
    Mr. Peterson. The year before that?
    Mr. Blair. I'd have to provide that for the record. I know 
that it was--it's been double digits the last few years.
    [The information follows:]

    The average premium increase in 2001 was 10.5 percent.

    Mr. Peterson. Okay. Do you have any tracking of--does that 
vary by different parts of the country, where systems are more 
or less available to you?
    Mr. Blair. Well, we have the fee-for-service plans which 
have a constant and steady rate across the country, like your 
Blue Cross and Blue Shield standard option. If you're in New 
York, Miami, Washington or other areas, you pay the same fee 
that every--same premium that everyone else pays. HMOs are 
community rates, and so HMOs are going to differ depending on 
the area that they serve.
    Mr. Peterson. But are HMOs or fee-for-service increasing 
the fastest?
    Mr. Blair. That I don't know. We'd have to provide that for 
the record.
    [The information follows:]

    In 2002 the average increase in HMO premiums was 14.0 percent 
compared to 12.9 percent for fee-for-service plans. In 2001 the rate of 
the respective increases was reversed, 10.9 percent for fee-for-service 
versus 8.5 percent for HMOs.

    Mr. Peterson. But do you track, like, in, say, Monopoly 
States where there's not much competition, are rates higher? 
Does it cost you more to provide Federal employees health care 
there?
    Mr. Blair. Well, that I'm not sure, and we can provide that 
for the record, but I would say that in States that are not as 
well served by HMOs, you still have the benefit of the fee-for-
service plans and all the fee-for-service plans apply equally 
across the board to every State.
    [The information follows:]

    Our community rated HMO premiums are based on the rates each plan 
charges to local purchasers that are closest to use in size. So we 
benefit from whatever competition exists in an area, even if the 
competing plans don't contract with us. We are not aware of any data 
that indicates that the number of competing HMO plans has an effect on 
premiums.

    Mr. Peterson. So it's a national----

                     TYPE OF HEALTH BENEFITS PLANS

    Mr. Blair. Yes. The fee-for-service plans are national in 
scope.
    Mr. Peterson. And that is basically the Blues?
    Mr. Blair. Blues. And I believe there are 12 other plans as 
well. They are employee organization plans.
    Mr. Peterson. Of course, I come from a State where my part 
of the State is 75 to 80 percent Blue. So it's Blue--some color 
of Blue.
    Mr. Blair. Well, they are the largest of the plans.

                     PRESCRIPTION DRUG UTILIZATION

    Mr. Peterson. Okay. You were talking about the--everybody 
is talking about the greatest increase in cost is pharmacy, and 
we--and I agree that we're--drugs do save lives. You know, 
people that have strokes today can have a pretty normal life 
because of drugs. There's just a lot of successes, but I've not 
talked to a health care executive or a health care--or doctor 
that isn't concerned about the overutilization of drugs today. 
I mean, you know, we're a drug-addicted society, legal and 
illegal, that everybody wants a drug. Instead of changing 
health care, you know, and instead of changing your diet, they 
want a cholesterol drug. Instead of taking off weight, they 
want a blood pressure drug. I mean, everybody is taking the 
easy way out, and I guess the--but the cost figures are that 
the negative reaction to drugs equal the cost of drugs. I think 
a lot of you may not be aware of that. That's a national 
statistic. So if we spend $4 billion on drugs, we're going to 
have $4 billion worth of health care costs from negative 
reaction to drugs. These powerful drugs do a lot of things to 
us, and when you have people taking multiple drugs, those 
problems arise.
    Is there any effort to study that issue of the 
overutilization of drugs? Because I think that is the direction 
we're headed in this country. We're going to be--we're already 
overutilizing drugs already. We're going to continue to 
overutilize. And I'm not opposed to the new life-saving drugs 
that are coming, but the overuse of drugs, in my view, is going 
to sink our system, and it's not in the long term going to give 
us better health.
    Mr. Blair. Well, we do emphasize and aggressively pursue 
plan management, health care plan management, and looking at 
things like utilization of drugs. We also urge that the plans 
look at using generics and also we have a new three-tier option 
for the prescription plans. So part of that component is 
looking at the utilization of the drugs. I'm not sure it goes 
as far as what you are suggesting.
    Mr. Peterson. I would urge you to look into that, because I 
know Pennsylvania has a prescription plan for seniors, and 
they've had it for years. They've had huge successes at 
monitoring what people are taking and the multiplicity of drugs 
they are taking and the negative reactions. I mean, you'll get 
a letter or a call from them saying, hey, you're on these five 
drugs. These two are going to cause problems.
    Mr. Blair. And I think those are common within the FEHBP, 
that for example for the Blue Cross Blue Shield plan, if you 
utilized their prescription drug plan, you'll receive notices 
much like what you said.
    Mr. Peterson. Okay. I would urge you to pursue that. I 
think there's a savings there.
    You've cut your workforce in half, less than a decade--in a 
decade. Is that technology?
    Mr. Blair. No. I think it was----
    Mr. Peterson. Fact and waste?

                       REDUCTION IN OPM WORKFORCE

    Mr. Blair. It's hard to comment, because I was not there 
during the time of the downsizing, although I was watching it 
from a different perspective, and most of the downsizing took 
place in our investigation service, that was spun off as a for-
profit, and they perform some of the investigation functions 
now.
    Mr. Peterson. Oh. So it wasn't a true 50 percent cut in 
employment.
    Mr. Blair. From the Government it was, but the functions 
are still being carried out through a private sector company.
    Mr. Peterson. All right. Well, that's--because that is a 
huge number. I--okay.

                              E-GOVERNMENT

    What--as technology--how do you rate agencies--the use of 
technology for efficient management, where are we at, and do 
you play any role there?
    Mr. Blair. Well, we do play a very important role. We are 
the managers of five of the 24 Governmentwide electronic 
government initiatives, and those include the human resource 
data network or what has been morphed into the enterprise HR 
integration system, recruitment one-stop, e-clearance, e-
training and e-payroll. And so we are heavily pushing 
technology in our management of our human resources.
    Mr. Peterson. Do you buy it or lease it?
    Mr. Blair. We're going to, I believe, buy although, we're 
in the early planning stage at this point. For example, 
recruitment one-stop, is a portal which you can access, and 
you'll be able to track where your applications are going and 
where you stand in the application process, do resume building, 
and things like that. We put an RFI out recently looking at how 
we want to form this, and so we're going to be working with 
contractors on there.
    Mr. Peterson. But will you be owning the equipment or 
renting it or leasing it?
    Mr. Blair. I think it will depend on the project.
    Mr. Peterson. But I guess from my state background, and I 
think it's the same here, through the complex General Services 
purchasing processes, it's my conclusion that government cannot 
ever stay anywhere near the edge of technology, because that 
process won't let you. I mean, it just doesn't let you bid 
competitively. It doesn't let you get the right systems that--
and so you have this hodgepodge out there of systems that don't 
talk to each other, and we hear about that every day. So in my 
view, the only way government can use technology is to lease 
it, and then not own it. I mean, when you own it, then it's 
your system and you have to--but if you can lease it and then 
you can keep it updated and have systems that are compatible 
and talk to each other, I mean, I think that's the only way you 
can actually get there. That would be my view as a former 
business person, too, is that I--I just don't think the 
government purchasing systems will allow you to--do you have--
--
    Mr. Istook. Mr. Peterson, your time has expired.
    Mr. Peterson. Boy, am I quick.

                      INVESTIGATION PRIVATIZATION

    Mr. Istook. Thank you. Mr. Blair, let me follow up on 
something that Mr. Peterson did touch on. The outsourcing of 
the investigation service has been, I suspect, the most 
significant factor in the downsizing of OPM, and your budget 
submissions in the investigation service has investigations 
conducted for other Federal agencies through a contract with a 
corporation. We're talking about fiscal year 2003 using 
revolving funds, that is, funds that come in from other Federal 
agencies flow through OPM for the purpose of conducting these 
investigations.
    Fiscal year 2003, we're talking about $234 million on this 
particular fund. Your revolving funds are more substantial than 
your appropriated funds. So you have 53 people employed within 
OPM, and I'm not quite sure how many through the corporation, 
but the budget submission says that contract is with a 
corporation. I mean, it's all contracted with a single 
corporation?
    Mr. Blair. Yes.
    Mr. Istook. And who is that?
    Mr. Blair. It's the US Investigations Services.
    Mr. Istook. All right. And that is a private corporation?
    Mr. Blair. It's my understanding.
    Mr. Hoyer. Mr. Chairman, if you'll yield, at the time they 
did this, what they did was--and I forget the phrase that was 
used now. In fact, it's an employee corporation, and--so that 
we could say we had less Federal employees, we simply turned 
them into private sector employees, and we turned them into 
private sector employees by creating--I forget--somebody can 
probably--the phrase, what is the phrase?
    Mr. Blair. An ESOP.
    Mr. Hoyer. We turned it into an ESOP.
    Mr. Istook. Employees Stock Ownership Plan.
    Mr. Hoyer. Right. Frankly, I think it was pretty successful 
and the employees were pretty pleased about it because they 
were going to lose jobs in the downsizing, but whether or not 
we saved money I think is the issue, and Mr. Sherwood was 
looking at that.
    Mr. Istook. Well, actually, I was trying to take it into a 
little bit different direction----
    Mr. Hoyer. Okay.
    Mr. Istook [continuing]. Than necessarily the financial 
savings. And that is this. You're providing in some cases for 
DOD, in other cases for other Federal agencies involving 
security clearances. So, I mean, the threshold question is to 
who and how is this contractor being held responsible with 
which we're expending over $200 million a year to provide 
Federal investigative services, including security clearances, 
at a time of great concern regarding homeland security?
    Mr. Blair. We're doing everything we can to ensure 
accountability there. I'd have to get back with you as to the 
specifics on that.
    [The information follows:]

    OPM's Investigations Service (IS) has in place extensive oversight 
controls of the US Investigations Services (USIS). We monitor the 
quality, guantity, and timeliness of USIS cases. In addition, we have 
an integrity program to assure that USIS is doing the job they say they 
are doing in the way that the contract with them requires. IS maintains 
a staff (Contract Management Services) of Federal employees whose sole 
function is to monitor the performance of USIS on this contract. Also, 
the contract with USIS requires them to provide their own quality and 
integrity controls and supply management reports to IS on a periodic 
basis. These, in combination with IS generated management reports, help 
IS keep constant oversight of USIS's performance.
    The completed investigations supplied to IS from USIS are then 
transmitted to the requesting Federal agency for its use. Some are used 
for security clearance determinations by these other agencies but, 
under the contract with OPM, USIS has no involvement in the 
adjudications/granting of those clearances.

    Mr. Blair. I do know that we--this is part of a revolving 
fund account, which you said, and so the agencies are the ones 
who are utilizing our services on that, and to that extent, I 
think there has been a degree of satisfaction with the level of 
service rendered. But I want to get back with you on more 
specifics, especially how we're holding them accountable.
    Mr. Istook. Certainly, because, I mean, we've had concerns, 
for example, we've had discussions here about TSA, and we've 
talked about whether the people that are conducting passenger 
screening, baggage screening and so forth are American 
citizens. I don't know if the people that are conducting these 
security background checks are themselves required to meet the 
same standards that we require of them to screen passengers or 
to screen baggage. I'm concerned with potential homeland 
security issues that come up through having created a private 
corporation that now is charged with this. Has OPM done--made a 
particular effort to inquire into how the manner which these 
investigations are being done by the private corporation 
impacts and interfaces with homeland security?
    Mr. Blair. I am told that those individuals all have had 
background checks who are in turn doing checks on others.
    Mr. Istook. But are they all American citizens, for 
example?
    Mr. Blair. That I could not comment on. I'd have to get 
back with you on that.
    [The information follows:]

    All USIS Investigators are U.S. citizens. It is stipulated 
in their contract with OPM and, since background investigations 
are conducted on each USIS Investigator, we are able to verify 
this fact. Consequently, USIS Investigators are eligible for a 
``Top Secret'' clearance, but clearances are granted only to 
those Investigators who have a definite need for a clearance to 
perform their work.

    Mr. Istook. Okay. I think that's an area that we certainly 
want to----
    Mr. Blair. Yes. I do want to----
    Mr. Istook [continuing]. Get a lot more information than 
perhaps you have today, but I think it's something very valid 
to looking----
    Mr. Blair. Mr. Chairman, I would assume they are, but 
before I give you a definitive answer, I'd rather feel like I'm 
on firm ground.
    Mr. Istook. Understood. And I think with the type of work 
that has been contracted with them and the serious concerns 
with this, there's probably a number of questions that we need 
to have answered in connection with that, because, I mean, 
we're talking about national security clearances. I do not know 
what portion of Federal security clearances are being 
investigated by this agency as opposed to--through Defense's 
own investigative people or through FBI background checks, and 
I think we want to understand that mix and what that 
relationship is. So that's something that I would certainly 
appreciate your----
    Mr. Blair. Certainly.

                 TRANSPORTATION SECURITY ADMINISTRATION

    Mr. Istook [continuing]. Great amount of attention to that.
    With that--and let me segue from that back into some of the 
issues on TSA and OPM's role. Is it correct that the manner 
which TSA was established does not give OPM any ability to try 
to match what they are paying and what the requirements are for 
those personnel with what we're doing elsewhere in Federal law 
enforcement?
    Mr. Blair. Well, I think we can----
    Mr. Istook. Or do you have a role in that?
    Mr. Blair. We don't really have a role in what TSA offers.
    Mr. Istook. Okay. So there's--what role does OPM have with 
TSA, Transportation Security Agency?
    Mr. Blair. Merely an oversight role, and when you say 
oversight, that conveys a bunch of different ideas as to what 
oversight may include. When Congress enacted the legislation 
authorizing the Transportation Security Agency, it was outside 
the purview of title 5, and we could not establish what their 
pay rates were going to be, and so that was one of the 
challenges that I think we're facing internally within the 
administration of how to deal with this cannibalization that is 
going on.
    Mr. Istook. Does the fact that they were removed from the 
jurisdiction of OPM's normal interaction also have a bearing on 
the number of people that are being talked about at TSA? I 
mean, first we heard figures of 38,000 people. Then we heard 
figures of 45,000 people. Then of 60,000 people and 70,000 
people. Is the fact that OPM does not have its normal relation 
with TSA as it would with other Federalagencies, to your 
knowledge, is that related in--related to the great growth in the plans 
for how many people they will have?
    Mr. Blair. I could not----
    Mr. Istook. That would be something under normal 
circumstances they would have to work with you to establish.
    Mr. Blair. It's hard to say that they've been a normal, 
quote, unquote, title 5 agency. If we would see the same 
estimations with regard to staffing as they would now--I'm not 
privy to why the numbers have gone up or why they're going up 
more, and had we had the authority, I don't know if we'd be at 
the same point that they are now. It's just really hard for me 
to say. I just know that there's a level of frustration 
internally within the administration, and certainly it's 
evidenced by the subcommittee today that there are agencies 
that have authorities and other agencies that don't have 
authorities and that there is a serious case of cherry-picking 
going on.
    Mr. Istook. And does this--if they were under title 5, the 
normal structure, would the size of their payroll, of the 
number of people, be something that they would have to work 
with you to establish?
    Mr. Blair. I'm not sure I understand the question. I 
apologize.
    Mr. Istook. Okay. If they had not been removed from title 5 
jurisdiction, would they have to work with OPM to justify and 
get clearance for the number of people they would be hiring?
    Mr. Blair. I think it would be more OMB than OPM as far as 
their number of employees.
    Mr. Istook. Okay. And has there been by OPM, and would you 
be the proper ones to look at it, an assessment of the extent 
of this cannibalization, of people being hired by TSA from 
other Federal agencies? Mr. Hoyer mentioned 12 percent of the 
uniformed Secret Service people, sometimes in differentials of 
$20,000 per year, for example. Has OPM made any assessment, or 
is one in progress, of trying to measure this cannibalization, 
the displacement, the number of people that are being displaced 
and the cost to the taxpayers, how it influences both the pay 
structure in the receiving agency and in the agency from which 
somebody leaves, what they have to do to retrain and replace 
people?
    Mr. Blair. We do have the data as far as the transfer from 
one agency to another, and we'd be happy to provide for the 
record as to what the--if there are any costs associated with 
that.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    
    Mr. Istook. I appreciate that, because I know that's 
something that we've been very interested in trying to get a 
handle on.

                    DEPARTMENT OF HOMELAND SECURITY

    And finally, Mrs. Meek was asking you about the impact, 
potentially, of establishing the new Department of Homeland 
Security. We're talking about 160,000 Federal workers out of a 
Federal workforce of about 1.8. So almost 10 percent of the 
Federal workforce. Knowing when there have been people that 
have changed between agencies before there's been a 
consolidation, doesn't that normally involve OPM in trying to 
process the job descriptions, the necessary payroll and 
employment transactions and transfers? I'm trying to anticipate 
what might be the workload that could be placed upon OPM as 
part of moving 160,000 Federal workers into a new department.
    Mr. Blair. At this point we don't anticipate any additional 
resources being required.
    Mr. Istook. Would you have to process 160,000 people in 
some way through OPM?
    Mr. Blair. We'll be providing consultative services, to my 
knowledge, but I don't anticipate at this point--or it hasn't 
been brought to our attention at this point whether we would be 
requiring additional resources.

                            REORGANIZATIONS

    Mr. Istook. Would you normally--if somebody switches from 
one Federal agency to another, does OPM become involved in at 
least making some adjustment in their record for retirement 
purposes, if nothing else?
    Mr. Blair. We keep the record, and that's all.
    Mr. Istook. So if someone changes from one agency to 
another, you have to make an adjustment in that record?
    Mr. Blair. There would be a record of that--of that--I 
don't want to use the word transaction, but you know, for lack 
of a choice of a better word, there is evidence of that 
transaction, and we would retain that.
    Mr. Istook. Now, I think it would be good to know 
historically when there have been mergers or other reworkings 
of Federal departments, to what extent OPM has historically 
been involved in being called upon to provide services in 
reworking job descriptions or whatever that might be.
    Mr. Blair. We would probably have a limited history, 
because this is an historic reorganization itself, and from 
what I've read in the papers, we haven't seen anything quite 
like it since 1947, and I'm not sure if that's the accurate 
date or not. And our agency was formed in 1978.

                     TRANSPORTATION SECURITY AGENCY

    That said, I do want to provide you with an idea that--for 
instance, with the Transportation Security Agency, while we had 
little control over how their staffing needs, we did respond in 
a consultative manner by sending what we call some of our 
strike forces over there to help them with staffing, especially 
with their executive staffing. So we are playing a consultative 
role, but we don't have a legislative authority over their 
hiring and personnel procedures.
    Mr. Istook. Any sort of processing that goes through OPM 
because of the people being hired by the new Federal agency, 
the TSA?
    Mr. Blair. I'd have to get back with you. I'm not sure what 
role. I don't think so. I think we were mainly at the executive 
levels, but--and I don't--I'm not sure if we're involved in the 
day-to-day processing of the screeners.
    Mr. Istook. But with the new hires. Very good. Thank you. I 
think that information will be very useful to us, and something 
that could have significant impact, I know, on OPM's funding 
needs.
    Mr. Hoyer.

                                OPM ROLE

    Mr. Hoyer. Mr. Chairman, your questions and Mr. Tiahrt's 
questions, I think--there seems to be--there's a little bit of 
confusion. OPM is not a management agency. The Office of 
Personnel Management is in effect a service agency, and the 
service it provides, it tries to provide to the Federal 
Government a uniformity of policies as it relates to the 
dealing with personnel and to facilitate the management of the 
human resources within the Federal service. But the Office of 
Management and Budget is--Mr. Tiahrt is not here,but in terms 
of level of employees, obviously the OMB does have the authority and 
can impose FTE ceilings on agencies on behalf of the President. The 
Congress obviously can overthrow those, but what the OPM tries to do is 
try to advise the executive agencies, and they are advisers to the 
executive agencies. The executive agencies hire, fire and process their 
own employees. The OPM doesn't process employees in a classic sense of 
being--for instance, Don, in your automobile agency, a central agency 
that processes your employees, they don't do that. The divisions that 
we have in our corporation, i.e., the defense division, processes its 
own employees as if it were a separate corporation for that purpose.
    The importance of the OPM, though, is that it does in fact 
handle obviously a lot of the--certainly in terms of retirees, 
where you do centralize, then it goes from the division. Then 
it goes to a central handling. This is, by the way, why I was 
opposed to the President trying to discretely deal with those 
figures as opposed to unifying them. I hope we're going to 
unify them back or leave them unified, but OPM does deal at the 
retiree level both in terms of FEHBP retirement benefits or 
survivors' benefits. It does deal in a unified fashion at that 
level. I just think it's important for the committee to 
understand what OPM does. Now----
    Mr. Istook. And, Mr. Hoyer, that's exactly what I was 
talking about, if you have to do processing on the 160,000 
employees and their records outside of what would be your 
normal processing numbers.

                           PAY COMPARABILITY

    Mr. Hoyer. And, of course, they don't do that, so that 
won't impact on them in particular. However, let me make an 
observation, Mr. Blair, and you know where I'm coming from, and 
you've known me for a long period of time, and my advocacy. I 
hear about all of this flexibility. You know why most agencies 
want flexibility? Because they don't think we're paying enough. 
They don't think our benefit is good enough, and they can't 
recruit and retain the kind of people they want.
    Now, that directly relates to FEPCA where we're falling 
further and further behind, and you can sit there and everybody 
can sit there and deny it's 34 percent or you have to do 29 
percent or 27 percent adjustments to catch up to your 5 percent 
behind--we're way behind on FEPCA, as you know. And you can do 
it till the cows come home, but the proof is in the eating of 
the pudding, and the eating of the pudding is we didn't cover 
them under title 5. We gave them flexibility. Why? Because we 
felt we needed to do the job and get the job done right and we 
thought we needed the kind of quality people. So what happened? 
They're paying $20,000 more than the Capital Police are paying 
for similar services, law enforcement services. That's a 
frustration you hear in my voice, not an anger, a frustration 
that, come on, fellows, let's deal with it. Not ideologically. 
Let's deal with it on the ground in terms of competition, and I 
would hope that you, OMB and the President, if you think an 
alternative pay process is advisable, come up with it. Put it 
on the table. Let's debate it. Let's discuss it. I'm so tired 
of hearing every administration--I don't care whether it's the 
Clinton administration or the Bush administration, not so much 
the first Bush administration which, of course, signed the 
FEPCA and followed it, the only administration that followed 
it. And they followed it for one year and weren't here.
    But the fact is that we don't deal with this issue 
honestly. We shuck and jive about this issue, and it's not fair 
to the Federal employees. It's not fair to legislators. It's 
not fair to the executive department. We ought to deal with it 
honestly and come up with figures. We passed that 12 years ago. 
No administration has come up with an alternative, but every 
administration talks about--frankly, with all due respect to 
the statement that was submitted, it's very good rhetoric and 
very little substance. It's great governmental rhetoric about 
how we're--and zero-based budgeting. We've all talked about 
zero-based budgeting. Jimmy talked about zero-based budgeting 
and how he was going to bring that new dramatic system. I 
haven't seen it, and there's no substitute for saying--and I 
agree with Mr. Tiahrt--we need to do X job. What does it take 
us to do?
    And we pretend, by the way, that we're reducing--the 
Clinton administration reduced personnel in OPM. Sure. They had 
an ESOP. Hello. The Defense Department claims it's losing a lot 
of people. Baloney. They're just going to the private sector, 
and we're paying a premium for those employees. We're paying 
10, 15, 25 percent for those employees to contract them out. 
That's my premise. I'm willing to have anybody come in and say, 
oh, no, Mr. Hoyer, you're dead wrong. Here are the facts. It 
all sounds good. We need to get government smaller.
    And by the way, the only administration in the last 25 
years that got government smaller was the Clinton 
administration. Reduced over 370,000 Federal employees, in part 
by contracting them out and pretending we were saving 
something. At NIH we had caps on doctors, so they contracted 
that to GW. It cost 30,000 more to have the researchers at 
George Washington University than it did at NIH.
    We're not playing real. A lot of rhetoric. A lot of 
strategic downsizing. I don't want to get into a confrontation 
with you here to explain to me how you would have strategically 
downsized OPM as opposed to doing it in the budget-driven. With 
all due respect, from a Democrat standpoint, we sure don't do 
tax cuts strategically. Nobody gets up on the floor of the 
House of Representatives and says we need X dollars to run this 
government. We need X dollars to fight this war on terrorism. 
We need X dollars to run NIH, and therefore we need a tax level 
of X or Y. What we do is we're going to have a tax level of A, 
and you fit everything that we're doing into it.
    Let me ask one specific question. You've heard my speech. 
Nothing new you heard, but I do get frustrated and, frankly, in 
the recesses of your office, you must get frustrated with this 
rhetoric as well, because you know the facts. You've been here. 
You've been on committees. You know all of this rhetoric and 
all of this stuff sounds good and little hip here and a little 
hip there, and the bottom line is if you want to get something 
done, you've got to pay people to do it. If you don't want to 
do it--and you have never heard me do a deep never once in 21 
years serving in this Congress, about reduction in numbers of 
Federal employees. I don't care if we have 10 Federal 
employees. If we have 10, I'm going to fight that they get paid 
well and they get the kind of benefits that are comparable to 
the private sector, but I don't care whether they have 10, 20, 
30, 40 or 50. Level of employees is irrelevant to me.
    Don, you're absolutely right. The only number we need is 
the number we need to do the job that we want done, and no 
more, not one more. I want every one of them treated fairly.I 
want every one of them paid well, but I don't care what the level is. 
You didn't hear me peep at all when we reduced 370,000 Federal 
employees under the Clinton administration, because I don't think that 
is a relevant number. What is relevant is what we need to get the job 
done.

                    DEPARTMENT OF HOMELAND SECURITY

    Now, with respect to--and this is a question I want to ask 
you. On this creation of the Department of Homeland Security, 
title 5, chapter 23, merit system principles; chapter 43, 
performance standards; Chapter 53, pay, clearly FEPCA; chapter 
63, leave; chapter 71, labor management relations, including 
the right to belong to a union; chapter 72, antidiscrimination, 
including whistle-blower protection, which I think is 
critically--along with Mr. Grassley, this is not a partisan 
issue. Feels it's critically important. Chapter 72, conduct, 
standards; chapter 83, CSRS retirement; and chapter 84, 
retirement FEHBP.
    Which of those titles do you not think ought to be 
incorporated and included as fully operative with respect to 
every employee in the Department of Homeland Security, if any?
    Mr. Blair. I really can't comment on that. I'm told today 
the President will be unveiling his Department of Homeland 
Security proposal, and I would not want to pre-empt the 
President on the presentation of his proposal. I think that you 
bring up some very valid and very important points. They're 
going to be discussed and debated in this body and in the other 
body across the street, and we look forward to those debates, 
but at this point I cannot pre-empt the President in unveiling 
the proposal for the new Department of Homeland Security.
    Mr. Hoyer. Mr. Chairman, I know I've taken more than my 
time.
    Mr. Istook. Thank you, Mr. Hoyer. Mr. Price--I'm sorry. No. 
Mr. Sherwood is--should have been before you. Mr. Sherwood. 
Then we'll come back to Mr. Price.
    Mr. Sherwood. Thank you, Mr. Chairman. And----
    Mr. Hoyer. Don, I apologize. Can I make one observation? 
Then I have to leave, because Mr. Gephardt has a meeting.
    Mr. Sherwood. Certainly.
    Mr. Hoyer. Mr. Blair, I realize you can't preempt the 
President. I don't want you to do that, but I did want to bring 
up a--that I would ask you and particularly Kay Coles James. 
The President was speaking--and this was speaking of global 
warming, but on three different occasions and it was reported 
in New York Times and The Washington Post, et cetera. Too often 
in Washington, particularly, political rhetoric is the use of 
bureaucracy as an epithet, the use of bureaucracy to demean 
those whom we ask to do our jobs for us. That is to say, we set 
policy and we ask somebody to do it.
    I would hope that Ms. James and others would urge the 
President and everybody in the executive department not to 
simply slough off things because they're reports from the 
bureaucracy, not that because that may not be appropriate. I 
don't ask you to respond to this, but in terms of dealing with 
our personnel, if they think the employer doesn't think much of 
them, you can bet your sweet life their morale is not going to 
be very high.
    I thank you for yielding, Don.
    Mr. Istook. Okay. Mr. Sherwood reclaims his time.

                          COMPENSATION REFORM

    Mr. Sherwood. And Mr. Hoyer and I have talked this point a 
little bit before, and we agree in lots of areas. And my point 
is that you also do not need one more--we don't want one more 
person necessary, than it is necessary to do the job, but in an 
area of scarce resources, it's often instructive to critically 
look at our work plans and our work structures to determine 
staffing, and in that regard, I'd be a little interested to 
know if OPM is exploring any ways to make Federal pay more 
performance-oriented or merit-based, and I'm also a little 
concerned that we are probably operating with work level 
descriptions which were derived about 50 years ago and may not 
be too relevant in today's technology-driven organizations.
    In fact, I understand that 75 percent of our employees in 
the 1950s filled clerical positions of GS-7 and below, and 
today only 30 percent of our people have those clerical-type 
employees. And yet we have roughly the same sized organization.
    Now, I realize it's not always the same size, but I'd like 
to know what is being done to help agencies tailor their pay 
programs and their work rules to fulfill the missions that we 
have today.
    Mr. Blair. Well, I think you hit the nail on the head when 
you said our systems were tailored for those of the 1950s, and 
that's something that the director has pointed out in her white 
paper on compensation reform. She undertook a studied review of 
the Federal personnel and compensation systems, and what we 
have portrayed and what many in the field know and what we're 
educating others in the Federal community about is that our pay 
systems don't reflect the realities of today, that a one-size-
fits-all system doesn't work. We've seen that it doesn't work. 
We've seen a number of agencies getting outside of the larger 
system, and that we need to do something that better rewards 
outstanding performance. Our systems today do very little to 
reward performance and incentivize good performance. It does 
very little to reward excellence, and if we are going to have 
scarce dollars devoted to this, we need to make sure that 
they're devoted in such a way that they will be put to the best 
use of encouraging outstanding performance, and we don't have 
that today in our systems.
    Mr. Sherwood. I agree that we don't have it, and the thrust 
of my question is what are we doing about it?
    Mr. Blair. Well, what we're doing about it is looking at a 
way of developing some new proposals, and that's where the 
conversation began with the white paper. It outlined the 
problems, but it didn't outline the solutions, because what we 
wanted to do was educate the Federal community first before we 
engage in the debate about the solutions. So you can expect 
Director James to come forward over the course of the next 
year. I think that the Department of Homeland Security and 
OPM's efforts in that regard may put us back on our track. It 
may set us back a little bit on our timetable in proposing 
compensation reform.
    With that said, the director is committed to coming up with 
proposals to address these problems that we've talked today.
    Mr. Sherwood. Mr. Chairman, could we ask that when those 
proposals are formulated, we would get a chance to see them?
    Mr. Istook. I think that certainly would be the type of 
follow-on that we'd like to have as part of questions for the 
record.
    Mr. Blair. We'll make sure you get them, sir. I think this 
is something that we want to circulate widely.
    [The information follows:]

    We have no pay reform proposals available at this time.

    Mr. Sherwood. Thank you.
    Mr. Istook. Thank you, Mr. Sherwood.
    Mr. Price.

                              LOCALITY PAY

    Mr. Price. Thank you. Mr. Blair, let me ask you about two 
pending matters here, and then I may have some additional 
questions for the record. But first I would like to have a 
status report on the national compensation survey. The Federal 
Salary Council has indicated that it hopes the revised national 
compensation survey will be available for implementation next 
year. I wonder what further you can tell me in this regard. As 
you probably know, the President's pay agent rejected the 
Federal Salary Council's recommendation that Louisville, 
Nashville and Raleigh be made separate locality pay areas on 
the basis of shorter survey versions of the NCS. I don't think 
today we need to go into all of the twists and turns of the 
revision of the NCS, but I do wonder what the status of that 
revision is and also what OPM is going to do for areas like the 
ones I named once the NCS changes are in place.
    Mr. Blair. I can provide you specific information for the 
record regarding those areas.
    [The information follows:]

   LOCALITY PAY STATUS REPORT ON AUSTIN [NASHVILLE], LOUISVILLE, AND 
                                RALEIGH
    [The three areas mentioned by Representative Price should be 
Austin, Louisville, and Raleigh. The Bureau of Labor Statistics does 
not conduct a National Compensation Survey in Nashville.]
    Public Law 105-554 required that the Pay Agent use data collected 
by the Bureau of Labor Statistics (BLS) or data compiled by private 
sector firms to review five additional Metropolitan Statistical Areas 
(MSAs) for locality pay in 2002. The MSAs were those with at least 
2,500 General Schedule employees and large numbers of non-Federal 
workers which had not already been reviewed for locality pay. Las 
Vegas, Nashville, Raleigh, Austin, and Louisville qualified for review.
    Both the Federal Salary Council and the Pay Agent concluded that 
data compiled by private sector firms were not suitable for setting 
Federal pay. The Federal Salary Council recommended that the Pay Agent 
establish Austin, Louisville, and Raleigh as separate locality pay 
areas using small surveys BLS conducts in those locations as part of 
its data collection for the Rest of U.S. locality pay area. BLS does 
not conduct surveys in Las Vegas or Nashville. The Pay Agent did not 
accept the Council's recommendation because we are still working on 
improvements in BLS surveys first recommended by the Council and 
because the surveys conducted in these three MSAs are small sample 
surveys that produce unstable results.
    Three of the five improvements in BLS surveys will be included in 
data submitted this year. The fourth is still being tested and the 
fifth will take five years to fully incorporate. At present, the sample 
size in surveys conducted by BLS in Austin, Louisville, and Raleigh has 
not been expanded and the Pay Agent has not made decisions about when 
to review additional cities as potential locality pay areas.

    Mr. Blair. I do know that we're waiting for revisions in 
the non-Federal sector surveys, and so we're working on that. 
As far as the Louisville area, we can provide you specific 
information for the record.
    [The information follows:]

     LOCALITY PAY STATUS REPORT ON THE NATIONAL COMPENSATION SURVEY
    Three of the five improvements in the National Compensation Survey 
Program will be included in survey results delivered to the Pay Agent 
in Augsut 2002. These are:
           Excluding salary data from non-Federal jobs that 
        would be classified above GS-15 in the Government;
           Use of a model to estimate salaries for jobs not 
        selected by probability sampling but important in the 
        Government's workforce;
           Use of Federal employment weighting based on the 
        Standard Occupational Classification System.
    We have also developed and tested a simplified method of 
determining the grade level of non-Federal work selected by random 
sampling. This approach is based on the Federal Classification System 
but with the nine factors from the Factor Evaluation System reduced to 
four. We also provide grade leveling guides for 20 job families that 
cover the breadth of the Federal General Schedule workforce. The Bureau 
of Labor Statistics (BLS) plans to begin using the new guides late next 
year. However, it will take five years to complete the phase-in because 
BLS only conducts detailed interview surveys the first year a firm 
appears in its sample. Subsequent surveys collect salary update 
information for the remaining four years a firm is in the sample.
    We are still testing procedures to grade supervisory jobs selected 
by probability sampling but hope to incorporate this improvement in 
surveys conducted late next year. AT present, the sample size in 
surveys conducted by BLS in Austin, Louisville, and Raleigh has not 
been expanded and the Pay Agent has not made decisions about when to 
review additional cities as potential locality pay areas.

    Mr. Price. Well, Louisville, Nashville and Raleigh were the 
areas that were pending, so to speak, and that we hoped would 
be addressed when these revisions were available. As far as you 
know, the timetable for next year's implementation is still on 
track?
    Mr. Blair. To the best of my knowledge, and I do know that, 
for areas like Louisville and Nashville, we look at the total 
number of Federal employees in that area, and if they don't 
rise to a certain level, then they fall into the rest of the 
U.S. category.
    Mr. Price. Well, but there were five areas, and it's still 
down to three, that were clearly next in line, and the snag has 
come by this--through this determination by the President's pay 
agent that the NCS data was inadequate. So that's what we're 
waiting on.
    Mr. Blair. Okay. Well, we'll provide you an update, sir.
    [The information follows:]

LOCALITY PAY LOCATIONS IN LINE TO BE REVIEWED AS SEPARATE LOCALITY PAY 
                                 AREAS
    Public Law 106-554 required that the Pay Agent rank order 
Metropolitan Statistical Areas (MSAs) with 2,500 or more General 
Schedule employees by non-farm workers and skip any MSA that had 
already been reviewed for locality pay but were found to have pay 
levels below the Rest of U.S. locality pay area. While the Federal 
Employees Pay Comparability Act does not require such rankings, the 
Federal Salary Council has recommended and the Pay Agent approved using 
such rankings to queue MSAs in the past. At present, we are working on 
implementing the improvements in the National Compensation Survey 
Program so that the data may be used to set locality pay. Decisions 
about what areas should be added and what additional resources would be 
required to do so, and consideration of the effect this would have on 
data available for the Rest of U.S. locality pay area, have not been 
made. The Federal Salary Council has suggested that 2003 might be the 
year to review major aspects of the locality pay program including how 
many locality pay areas are feasible, what constitutes a meaningful 
difference in locality rates, the relative precision of pay gaps, and 
how to treat areas that cannot be surveyed separately.

                            PREVAILING RATES

    Mr. Price. All right. Okay. Second item, the compensation 
of wage-grade employees, and here, too, I'm dealing with a 
specific North Carolina problem, but one that is of long 
standing. This has to do with the central district of North 
Carolina. In March of this year, employees of the Butner Low-
Security Correctional Institute in Butner made a presentation 
to the Federal Prevailing Rate Advisory Committee and requested 
that the facility be considered part of the Richmond, 
Petersburg, Virginia wage area for wage-grade purposes.
    So I have two questions regarding that. First, what is the 
status of the FPRAC review of Butner's request to be part of 
the Richmond, Petersburg wage area following on that March 
presentation? And secondly, more broadly, what does OPM 
recommend as a means of dealing with a wage-grade pay system 
that provides no annual pay rate adjustment? In other words, 
does it really make sense for us to treat general schedule and 
wage-grade employees entirely differently in this regard?
    Mr. Blair. Well, as to your first question, I know that the 
chairman of the Federal Prevailing Rate Advisory Committee has 
personally visited North Carolina to review the situation and 
take it under her advisement. The committee has not made any 
recommendations to OPM at this point and so once they make the 
recommendations, then we'll act upon their recommendations. But 
FPRAC has not made any formal recommendations to OPM as of this 
point regarding that specific situation.
    Mr. Price. Any time frame----
    Mr. Blair. I would imagine----
    Mr. Price [continuing]. It will be completed?
    Mr. Blair. I'd have to get back with you on that.
    [The information follows:]

         TIME FRAME FOR FPRAC REVIEW OF BUTNER, NORTH CAROLINA
    The Federal Prevailing Rate Advisory Committee (FPRAC) reviewed the 
geographic wage area definition of the Central North Carolina Federal 
Wage System wage area in 1997 and recommended by consensus that OPM 
make no changes in the wage area. Because of continued interest 
expressed by management and labor officials from the Federal Correction 
Institution Butner; North Carolina, FPRAC agreed in March to reopen 
discussion of the Central North Carolina wage area. At this time, the 
management members of the Committee are completing a study of the wage 
area definition. Upon completion of their review, they will place the 
issue on FPRAC's agenda for deliberation. Once an item is on FPRAC's 
agenda, it normally takes the management and labor members of FPRAC at 
least two to three months before they can present OPM with a 
recommendation on a wage area. OPM will not know what the Committee's 
recommendation is until the members have completed their deliberations.

    Mr. Blair. I know that she did go down there and visit the 
sites personally, though, and that she's taking this very 
seriously. And as far as your second question goes, the Federal 
wage system really is a true locality system. We have about 132 
different wage areas that we survey, as opposed to 32 that we 
do for the General Schedule system.
    In addition, the Federal wage system has arguably acted 
better than the general schedule system, because if you're 
looking at pay differentials or pay gaps, the pay gap for the 
Federal wage system is--from what I'm told, is at 3 percent, 
and that is measured against step 2 in a five-step system. And 
so we have met comparability to a large degree in the Federal 
wage system.
    Now, the question about whether in some areas you want to 
give increases to match those that are being given in other 
wage areas in the private sector, but if the system is working 
and it's paying comparability wages, there may not be a need 
for any annual adjustment in order to recruit and retain new 
employees.
    To the best of my knowledge, we haven't had a recruitment 
and retention problem in most of those wage areas surveyed, and 
so it's a system that while maybe somewhat flawed, may be 
working as best intended, and so we have focused our attention 
on the General Schedule system.
    Mr. Price. But your view is that the wage-grade employees 
are getting comparable or better treatment in terms of annual 
adjustments?
    Mr. Blair. I'm saying they're getting comparable or better 
treatment than the better scheduled GS employees in terms of 
overall comparability, not in terms of annual adjustments. 
Because what we're paying is basically comparability for these 
wage-grade employees vis-a-vis the private sector.
    Mr. Price. And the annual adjustment, just to refer to your 
testimony, the annual adjustment anticipated in this budget 
does include the blue collar employees, and it--your language 
is--or Ms. James' language is will enable them to remain 
parallel to their white collar colleagues in terms of the pay 
adjustments they receive.
    Mr. Blair. Well, historically there's been a cap to prevent 
wage-grade employees from receiving more than the General 
Schedule, but I think it depends on the specific wage location 
whether or not the wage will be increased at all.
    Mr. Istook. Mr. Price----
    Mr. Price. That is, your language is that they remain 
parallel and you're saying that that will not in every case 
require an increase?
    Mr. Blair. I'm not sure--what are you----
    Mr. Price. I'm reading from your own statement, page 18.
    Mr. Blair. Okay. What I would say is that the wages would 
be capped at the same as the General Schedule. The increases 
would be capped as that of the General Schedule, but not in all 
cases where the wage-grade employees receive locality 
adjustments.
    Mr. Price. Thank you, Mr. Chairman. I would appreciate--if 
that requires further elaboration for the record, I'd 
appreciate your furnishing it.
    [The information follows:]

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    Mr. Istook. We can do that and follow up on the record.
    Mr. Peterson.

                               E-TRAINING

    Mr. Peterson. Thank you. If I could, Mr. Blair, could we go 
back to technology for a moment? We're still in a technology 
explosion in the world, in the country. And you're everywhere, 
and not all parts of America are as much a part of technology 
as other parts, and that is the parts that are declining. But 
do you find or do you have any feedback that some parts of the 
country you struggle to train your people in technology?
    Mr. Blair. I think we've had a problem in recruitment and 
retention of IT workers, and training has been a problem across 
Government in terms of agencies finding the sufficient 
resources to train their folks, and so the answer to your 
question is yes. And what we're doing about it is through one 
of our e-government initiatives, we'll provide what we call e-
training, which will provide for virtual training using up-to-
the-minute and best practices for employees Governmentwide. It 
will save on time, save on expenses and hopefully improve our 
training atmosphere within the Federal Government.

                         EMPLOYMENT INFORMATION

    Mr. Peterson. Okay. Rural areas, you talked about one-stop 
for Federal employment, one-stop shopping, you know. What do I 
tell rural folks who are interested in working for the Federal 
Government? Where do they plug in?
    Mr. Blair. USAjobs.gov.
    Mr. Peterson. If they're not computer literate, they're 
out?
    Mr. Blair. If they're not computer literate, we can provide 
alternative means of taking their applications, but at this 
point, the best place is through the net--Internet and----
    Mr. Peterson. USAjobs----
    Mr. Blair. USAjobs.gov.
    Mr. Peterson. Okay. We'll publish it.
    Mr. Blair. And you can get the same thing, I'm told, from 
toll-free telephone numbers as well.
    Mr. Peterson. Toll-free telephone numbers.

               INSPECTOR GENERAL OVERSIGHT OF TRUST FUNDS

    Mr. McFarland, I just want to read two quick statements of 
yours. The Federal employees health benefits program and the 
civil service retirement, Federal employees retirement 
programs, with current resource levels, we can only provide a 
limited presence in oversight of the trust fund programs. To be 
truly effective guardians of these trust funds, we must expand 
our ability to expose wage, fraud and abuse in these programs.
    You go on in the next paragraph and say, in addition to our 
increased presence, will strengthen the sentinel effect within 
the programs. We must also remember that health care fraud may 
put at risk the health and safety of current Federal employees, 
annuitants and their survivors and eligible family members.
    Would you like to expand on that? That is a pretty strong 
statement.
    Mr. McFarland. Yes, sir, it is, and it's I think right on 
target. A good example, I think, that might help bring this 
home is a case that--in recent months that I've talked about, 
and that was an FEHBP person went to the doctor, and after she 
left the doctor, a few weeks later a bill came in. And the bill 
included that they were treating her for lumps in her breasts. 
As a result of this, an investigation was instigated by our 
office. There are more factors to it, but I'm just trying to 
cut to the chase.
    During the interview of this lady, it was explained to her 
what was on the bill; and at the time of explanation, her 
husband was with her. When she heard about the lumps in her 
breast, she stood up and, in effect, started to take her blouse 
off because she was so distraught. Sixteen years earlier she 
had had a double mastectomy, and this doctor was charging her 
for lumps in her breast.
    Mr. Peterson. Charging you?
    Mr. McFarland. Charging FEHBP ultimately. But this is the 
kind of situation that--as much as we hold, and I am sure most 
of us do, our doctors in awe, these are the kinds of things 
that are happening all the time; and we are seeing it big time, 
of course, in the Federal Employees Health Benefits program. 
Many, many instances of ugly situations.
    So, yes, we are--in my particular office, we are way behind 
what we could be doing, and I say that not as a plea for more 
resources, because I am very pleased that we'll be getting an 
additional five people, but 2 years ago we had something like 
275 cases unassigned. Recently we have, I think, 75 cases 
unassigned.
    Mr. Peterson. Cases where you suspect fraud?
    Mr. McFarland. They are not assigned because we haven't 
been able to give them to a criminal investigator. They are 
simply unassigned. I mean, that is the best categorization of 
this at this point. But the major point I want to make is that 
in OPM, the Office of the Inspector General, we have 10 
criminal investigators. Now, just to draw a quick comparison 
because I think it is very important, the environment we work 
in with the amount of moneys expended and the number of 
subscribers equals that of the Criminal Defense Investigative 
Agency, under the Department of Defense IG, where they have 100 
criminal investigators doing the same work that we are doing 
with 10.
    Now, I only say that to make a comparison because I think 
it is important to know that I am obviously very proud of our 
operation. We do an awful lot with not too many people. So 
anything we can get, we are very appreciative of. But the thing 
is, our people carry 25 health care cases in their portfolio, 
15 retirement cases in their portfolio. HHS is an example, and 
DOD, their agents carry three to five cases. Now the difference 
is, three to five cases is manageable and they have got a lot 
of people to do that.
    I wish we were in a position to do that, but we are not. 
And what we do is exemplary work, and I am pleased to be able 
to say that.
    Mr. Peterson. How many dollars in health care benefits do 
you have to invest? How many dollars of health care costs are 
you dealing with?
    Mr. McFarland. I am not sure, Mr. Peterson, how to answer 
that because if we look at the--and I am just taking a side 
issue for a moment, but just the moneys involved in the assets 
of the--of OPM's administration of benefits program, we are 
looking at over $550 billion; and so much of that, of course, 
is the retirement and so much of that is the health care.
    We have--as an example, last year, our office, our 10 
criminal investigators and all of our auditors total brought 
back to the Government $242 million. Now that was different 
last year. It was one of those years that--we are not going to 
have necessarily the same, recurring things next year. And you 
noted in our paperwork, we have identified probably $100,000 
and then the following year--excuse me, $100 million, $102 
million the following year getting back on track because that 
was an exceptional year. But the point is, it is enormous 
amounts of money.
    Mr. Peterson. And you just don't have the people to 
investigate them?
    Mr. McFarland. No. Not by any stretch of the imagination.
    Mr. Istook. Thank you, Mr. Peterson.
    Mr. Blair, I appreciate the time with you and your staff. I 
hope you will give my best to Director James, and we will 
certainly submit the follow-up questions for the record, and 
0we shall appreciate your getting that information to us as 
promptly as you can, since we are very near needing to mark up 
our bill.
    We are adjourned.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bates, S.N.......................................................   121
Blair, Dan.......................................................   669
Flynn, W.E., III.................................................   669
McFarland, Patrick............................................699, 1105
McGettigan, Kathleen.............................................   669
Moravec, Joseph..................................................   121
Perry, S.A.......................................................   121
Sandstrom, K.J...................................................     1

                               I N D E X
                              ----------                              
                                                                   Page
Federal Election Commission......................................     1
    Questions for the Record.....................................    13
    FY03 Budget Request..........................................    24
General Services Administration..................................   121
    300 N. Los Angeles Boulevard Federal Building................   165
    Alternative Fuel Vehicles..................................234, 293
    Automatic External Defibrillator (AED) Program...............   289
    BIA Bus Rentals..............................................   234
    Billing Improvements.........................................   243
    Border Station Construction..................................   149
    Bow Federal Building, Canton, Ohio...........................   182
    Budget Request...............................................   156
    Building Operations..........................................   170
    Building Repairs.............................................   283
    Cape Girardeau, Missouri, Courthouse.........................   151
    Census Construction..........................................   123
    Census Facility, Suitland, Maryland..........................   147
    Champlain, New York, Border Station..........................   148
    Chattanooga, Tennessee, Courthouse...........................   152
    Columbia, South Carolina, Courthouse.........................   155
    Comparison of GSA to Private Sector..........................   134
    Construction.................................................   143
    Construction Priorities......................................   131
    Consumer Product Safety Commission...........................   186
    Courthouse Construction....................................122, 280
    Courthouse Construction Costs................................   150
    Courthouse Program.........................................133, 137
    Courts Long-Term Plan........................................   137
    Cyber Warning Information Network............................   215
    Damage Mitigation Efforts....................................   294
    Detroit, Michigan, Border Station............................   148
    Duplication of Cyber Security................................   139
    Eisenhower Executive Office Building.........................   166
    El Paso, Texas, Border Station...............................   149
    Electronic Government......................................127, 292
    Electronic Government Fund...................................   262
    Electronic Government Initiatives............................   239
    Energy Efficiency Standards..................................   181
    Erie, Pennsylvania, Courthouse...............................   151
    ETravel......................................................   203
    FDA Consolidation.....................................132, 143, 279
    FDA Construction...........................................123, 126
    Federal Building Inventory...................................   128
    Federal Computer Incident Response Capability................   213
    Federal Courthouse Costs.....................................   137
    Federal Technology Service...................................   139
    FirstGov.....................................................   204
    Former Presidents............................................   256
    GAO Report...................................................   256
    General Construction.........................................   277
    General Supply Fund..........................................   228
    Geothermal Heat Pumps........................................   179
    Government-to-Government Programs............................   202
    Governor's Island............................................   211
    GovNet.......................................................   216
    GSA Advantage................................................   232
    GSA Mission Creep............................................   276
    Hammond, Indiana, Courthouse.................................   154
    Historically Underutilized Business Zones....................   254
    Homeland Security..........................................286, 262
    Homeland Security Budget Review..............................   288
    Hoyer, Opening Statement of Mr...............................   122
    Indian Trust Accounting......................................   226
    Information Technology Fund..................................   243
    Istook, Opening Statement of Mr..............................   121
    Leased Space Inventory.......................................   129
    Lorton Correctional Complex..................................   211
    Los Angeles, California, Courthouse..........................   151
    Miami, Florida, Courthouse...................................   154
    National Center for Environmental Prediction.................   146
    National Security Emergency Preparedness Study...............   218
    New Construction.............................................   131
    New York Recovery............................................   285
    Office of Emergency Management...............................   220
    Office of information Technology.............................   202
    Office of Inspector General..................................   266
    Oklahoma City Federal Building...............................   147
    Operating Expenses...........................................   208
    Orlando, Florida, Courthouse.................................   154
    Perry, Opening Statement of Mr...............................   125
    Personal Property Management.................................   237
    Personal Property Reimbursable Services......................   224
    PKI Reimbursements and Support...............................   208
    Policy and Citizen Services..................................   188
    Property Management Reform...................................   126
    Property Reform Act..........................................   128
    Public Key Infrastructure....................................   225
    Public Perception of Federal Employees.......................   133
    Real Property Disposal.......................................   209
    Recent Reports...............................................   161
    Recognition of Bill Early....................................   122
    Reimbursements...............................................   207
    Rental of Space..............................................   168
    Repairs and Alterations....................................124, 155
    Reserve Requirements.........................................   242
    RFP Criteria.................................................   273
    Salt Lake City, Utah, Courthouse.............................   155
    San Diego, California........................................   153
    San Diego, California, Courthouse............................   165
    Santa Cruz, California, Geological Survey Facility...........   183
    Security at Federal Buildings................................   277
    Security at Ronald Reagan Building...........................   136
    Security Considerations......................................   132
    Security in Building with Mixed Tenants......................   136
    Security in Federal Buildings................................   127
    Security in Leased Buildings.................................   135
    SmartPay Program.............................................   228
    Southeast Federal Center.....................................   143
    Southest Hurricane Risks and Mitigation Strategies...........   184
    Southwest Warehouse Consolidation............................   185
    Space Needs of Federal Employees.............................   130
    Telecommunications...........................................   250
    Terminal Island..............................................   180
    Terrorist Attacks and Security Concerns......................   170
    Threat Reduction Program.....................................   135
    Toledo, Ohio, Courthouse and Federal Building................   147
    Transportation...............................................   236
    Travel.......................................................   236
    Travel and Transportation....................................   235
    Travel Charge Cards..........................................   290
    USA Services.................................................   201
    Utilization of Court Space...................................   138
    Vacant Space.................................................   130
    Vieques, Puerto Rico.........................................   212
National Archives and Record Administration......................   503
    FY03 Budget Request..........................................   547
Office of Personnel Management...................................   669
    Accrual Accounting Changes...................................   807
    Aging Federal Workforce......................................   865
    Appeals Process..............................................   749
    Attracting Young People to Government Service................   872
    Blair, Summary Statement of................................673, 692
    Blue Cross/Blue Shield.......................................   745
    Budget Details...............................................   816
    Budget in Brief..............................................   917
    Collective Bargaining........................................   750
    Compensation Reform..........................................   766
    Compensation Study...........................................   722
    Cost Accounting Standards....................................   813
    Coverage Change..............................................   745
    E-Government.................................................   756
    Employment Information.......................................   774
    Equal Employment Opportunity.................................   909
    E-Training...................................................   774
    Federal Employees Health Benefits Program (FEHBP)..........839, 915
    Federal Employees Pay Comparability Act (FEPCA)..............   845
    Federal Wage System........................................814, 860
    Firing.......................................................   748
    Flexibility in Human Resources Systems.......................   793
    FTE Reduction................................................   785
    General Question...........................................832, 900
    Health Benefits, Self Insurance for..........................   729
    Health Benefits Costs, Shift from Mandatory..................   868
    Health Benefits Plans, Loss of...............................   744
    Health Benefits Plans, Type of...............................   755
    Health Benefits Premiums, Increase in........................   754
    Health Care Cost.............................................   717
    Health Care Cost Increase, Effect of.........................   718
    Hiring.......................................................   748
    Homeland Security, Department of.................762, 765, 831, 833
    Homeland Security Consolidation, Costs of....................   751
    Hoyer, Questions Submitted by Congressman....................   831
    Impact of Retirement.........................................   750
    Inability of HMO's to Compete................................   745
    Information Technology.......................................   804
    Inspector General Oversight of Trust Funds...................   774
    Inspector General Workload...................................   819
    Introduction.................................................   669
    Investigation Privatization..................................   757
    IT Initiatives...............................................   877
    James, Prepared Statement of Ms............................674, 699
    Law Enforcement, Federal.....................................   721
    Law Enforcement Employees, Competition for...................   721
    Locality Pay.................................................   767
    Long-Term Care Insurance.....................................   786
    Meek, Questions Submitted by Congresswoman...................   900
    OPM Role.....................................................   763
    OPM Role in Central Policy Making............................   790
    Organization Question........................................   908
    Outsourcing................................................754, 777
    Outsourcing of Investigations................................   782
    Pay and Benefits...........................................843, 904
    Pay and Benefits Comparability...............................   722
    Pay Comparability............................................   763
    Pay Comparability Act, Compliance with.......................   719
    Pay Gaps.....................................................   722
    Pay Parity.................................................852, 899
    Pay System Modernization.....................................   798
    Personnel Investigations.....................................   911
    Prescription Drug Utilization................................   755
    Prescription Drugs, Cost and Benefits of.....................   718
    Prevailing Rates.............................................   769
    Reduction in OPM Workforce.................................748, 756
    Reorganizations..............................................   762
    Retirement Systems Modernization...........................809, 888
    Revolving Fund.............................................825, 914
    Size of Workforce............................................   746
    Strategic Management of Human Resources......................   747
    Subcommittee, Questions Submitted by.........................   777
    Telework.....................................................   854
    Temporary Employees..........................................   893
    Transition to the New Department.............................   906
    Transportation Security Administration.....................759, 762
    Union Membership and National Security.......................   729
    Union Question.............................................836, 907
    Voting Rights................................................   751
    Workforce Analysis...........................................   747
Committee for Purchase from the People Who Are Blind and Severely 
  Disabled.......................................................   941
Federal Labor Relations Authority................................   965
U.S. Merit System Protection Board...............................  1013
U.S. Office of Government Ethics.................................  1031
Office of Inspector General, Office of Personnel Management......  1105
    Statement for the Record of Honorable Patrick E. McFarland, 
      Inspector General..........................................  1105
Office of Special Counsel........................................  1111
U.S. Tax Court...................................................  1129

                                

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