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



 
             LINKING PROGRAM FUNDING TO PERFORMANCE RESULTS
=======================================================================

                             JOINT HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT EFFICIENCY,
                        FINANCIAL MANAGEMENT AND
                      INTERGOVERNMENTAL RELATIONS

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM

                                and the

                    SUBCOMMITTEE ON LEGISLATIVE AND
                             BUDGET PROCESS

                                 of the

                           COMMITTEE ON RULES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 19, 2002

                               __________

                           Serial No. 107-228

                               __________

  Printed for the use of the Committees on Government Reform and Rules










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


                        U.S. GOVERNMENT PRINTING OFFICE
89-018                         wASHINGTON  : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001











                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
JOHN SULLIVAN, Oklahoma                  (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

    Subcommittee on Government Efficiency, Financial Management and 
                      Intergovernmental Relations

                   STEPHEN HORN, California, Chairman
RON LEWIS, Kentucky                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                 MAJOR R. OWENS, New York
ADAM H. PUTNAM, Florida              PAUL E. KANJORSKI, Pennsylvania
JOHN SULLIVAN, Oklahoma              CAROLYN B. MALONEY, New York

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                      Bonnie Heald, Staff Director
                           Dan Daly, Counsel
                          Chris Barkley, Clerk
           David McMillen, Minority Professional Staff Member
                           COMMITTEE ON RULES

                   DAVID DREIER, California, Chairman
PORTER J. GOSS, Florida              MARTIN FROST, Texas
JOHN LINDER, Georgia                 LOUISE McINTOSH SLAUGHTER, New 
DEBORAH PRYCE, Ohio                      York
LINCOLN DIAZ-BALART, Florida         JAMES P. McGOVERN, Massachusetts
DOC HASTINGS, Washington             ALCEE L. HASTINGS, Florida
SUE WILKINS MYRICK, North Carolina
PETE SESSIONS, Texas
THOMAS M. REYNOLDS, New York


                     Matt Reynolds, Staff Director
             Subcommittee on Legislative and Budget Process
                    DEBORAH PRYCE, Ohio, Chairwoman
PORTER J. GOSS, Florida              LOUISE McINTOSH SLAUGHTER, New 
DOC HASTINGS, Washington                 York
SUE WILKINS MYRICK, North Carolina   MARTIN FROST, Texas
DAVID DREIER, California


                      Chin-Chin Ip, Staff Director

















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 19, 2002...............................     1
Statement of:
    Daniels, Mitchell E., Jr., Director, Office of Management and 
      Budget.....................................................    39
    McGinnis, Patricia, president and CEO, Council for Excellence 
      in Government; and Mortimer L. Downey, principal 
      consultant, PB Consult, Inc................................    52
    Walker, David M., Comptroller General of the United States...    11
Letters, statements, etc., submitted for the record by:
    Daniels, Mitchell E., Jr., Director, Office of Management and 
      Budget, prepared statement of..............................    41
    Downey, Mortimer L., principal consultant, PB Consult, Inc., 
      prepared statement of......................................    86
    Horn, Hon. Stephen Horn, a Representative in Congress from 
      the State of California, prepared statement of.............    96
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............    98
    McGinnis, Patricia, president and CEO, Council for Excellence 
      in Government, prepared statement of.......................    55
    Pryce, Hon. Deborah, a Representative in Congress from the 
      State of Ohio, prepared statement of.......................     9
    Thompson, Hon. Fred, a Senator in Congress from the State of 
      Tennessee, prepared statement of...........................     3
    Walker, David M., Comptroller General of the United States, 
      prepared statement of......................................    14



















             LINKING PROGRAM FUNDING TO PERFORMANCE RESULTS

                              ----------                              


                      THURSDAY, SEPTEMBER 19, 2002

        House of Representatives, Subcommittee on 
            Government Efficiency, Financial Management and 
            Intergovernmental Relations, Committee on 
            Government Reform, joint with the Subcommittee 
            on Legislative and Budget Process, Committee on 
            Rules,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 2 p.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen Horn 
(chairman of the Subcommittee on Government Efficiency, 
Financial Management and Intergovernmental Relations) 
presiding.
    Present for the Subcommittee on Government Efficiency, 
Financial Management and Intergovernmental Relations: 
Representatives Horn, Schakowsky and Maloney.
    Present for the Subcommittee on Legislative and Budget 
Process: Representative Pryce.
    Staff present for the Subcommittee on Government 
Efficiency, Financial Management and Intergovernmental 
Relations: Bonnie Heald, staff director; Henry Wray, senior 
counsel; Dan Daly, counsel; Chris Barkley, clerk; David 
McMillen, minority professional staff member; and Jean Gosa, 
minority clerk.
    Staff present for the Subcommittee on Legislative and 
Budget Process: Chin-Chin Ip, staff director.
    Mr. Horn. A quorum being present, the subcommittees will 
come to order. Today the Subcommittee on Government Efficiency, 
Financial Management and Intergovernmental Relations is holding 
a joint hearing with the Subcommittee on Legislative and Budget 
Process of the House Rules Committee. I welcome my fine 
colleague, Ms. Pryce, who chairs that subcommittee, and the 
distinguished members of both subcommittees.
    Today's hearing is on the important subject of linking 
program funding to performance results. Washington 
policymakers, both in the executive branch and Congress, devote 
an enormous amount of time each year deciding how to spend the 
taxpayers' money. However, too little time is devoted to 
determining what that spending accomplishes.
    We tend to measure success by how many job training 
programs we enact, how much money we appropriate for them, and 
how many training grants we award. We rarely look at what those 
programs actually achieve, such as how many trainees actually 
obtain and retain jobs.
    In recent years, the focus has begun to shift from process 
to results. The Government Performance and Results Act of 1993, 
appropriately called the ``Results Act,'' provided the impetus 
for this change. However, the transition toward results-
oriented, performance-based decisionmaking involves many 
challenges, and the pace has been slow.
    Federal agencies are using their Results Act plans and 
reports to try to define and measure the results of their 
performance. Many agencies have made significant progress. 
However, an important link has been missing. Policymakers have 
failed to establish a connection between performance results 
and their funding decisions. Until that link is fully in place, 
the Results Act will remain largely a paperwork exercise, and 
the effectiveness of funding decisions will remain largely 
untested.
    Fortunately, the current administration is intent on 
establishing this link. President Bush designated budget and 
performance integration as one of the five governmentwide 
initiatives in the President's management Agenda.
    In furtherance of this initiative, the Office of Management 
and Budget has developed a Program Assessment Rating Tool known 
as PART--PART being Program Assessment and Rating Tool. We will 
hear much about this assessment tool today, and we are 
delighted to hear it. During the fiscal year 2004 budget cycle, 
the PART process will be used to evaluate the performance of 
Federal programs that account for more than 20 percent of all 
Federal spending. In future budget cycles, these evaluations 
will be extended to all other Federal programs.
    The PART process and the broader Presidential initiative to 
integrate budgets and performance represent an important effort 
to launch the Federal Government on the road toward results-
oriented, performance-based decisionmaking.
    All of our outstanding witnesses today are important 
leaders in this quest. I welcome you and look forward to your 
testimony.
    I am also pleased that another outstanding leader in this 
effort, Senator Fred Thompson, has submitted a written 
statement for the hearing; and, without objection, his 
statement, which is very excellent, will be put in the hearing 
at this particular point. Senator Thompson wanted to join us 
today, but he is unable to attend due the press of Senate 
business, and we would sure like them to get that business and 
get it back to the House. Without objection, his statement will 
be included in the record.
    [The prepared statement of Senator Thompson follows:]




    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Horn. I now yield to my cochair of today's--she's 
coming soon--and that will be Mrs. Pryce.
    So we will then start with the Comptroller General of the 
United States. Mr. Walker has done an outstanding job in his 
role as the Comptroller General in his 15-year term, and we are 
delighted to have him here. He has been in many of our 
hearings, and we thank not only him but his very fine staff 
throughout the Nation. In our recent program of terrorism, 
about 15, 20 hearings, there has always been help from the GAO, 
so thank you.
    Ms. Pryce, come right here. We were just about to interview 
the Comptroller General, but you have an opening statement, so 
please join us.
    Ms. Pryce. Well, Mr. Chairman, I appreciate your waiting or 
your proceeding, and I'll just put this in the record--I don't 
need to read it. Thank you--in the interest of time.
    Mr. Horn. OK. You mean, there aren't pearls we should be 
looking at right now.
    Ms. Pryce. Go right ahead.
    Mr. Horn. OK.
    [The prepared statement of Hon. Deborah Pryce follows:]




    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Horn. Mr. Walker knows the routine of this committee, 
so----
    [Witness sworn.]
    Mr. Horn. It is a great pleasure to have you here.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL OF THE UNITED 
                             STATES

    Mr. Walker. Thank you, Chairman Horn, Chairwoman Pryce, 
other members of the subcommittee. It is a pleasure to be here 
today to discuss efforts to link resources with results, what 
some people have referred to as performance budgeting.
    The current administration has made linking resources to 
results one of its top five priorities and a key item on the 
President's management agenda. In this regard, the Office of 
Management and Budget's latest initiative, the Program 
Assessment Rating Tool, also referred to as PART, has been 
designed to use performance information more explicitly in the 
Federal budget formulation process by summarizing performance 
and evaluation information.
    In my testimony today, I outline a lot of information. At 
this time, Mr. Chairman, with the concurrence of you and the 
other subcommittee members, I would like to have my full 
statement included into the record so I can just summarize key 
elements. Is that all right, Mr. Chairman? Thank you. Then I 
will move on to summarizing key elements.
    Three key points at the out set. First, our Nation faces a 
very serious long-range fiscal challenge, which should serve to 
frame our discussion. The first board that I have illustrates 
that, and it is also in my testimony.
    If you look at how the composition of the Federal budget 
has changed in the last 40 years, it's been very dramatic. In 
1962, when John F. Kennedy was President, 68 percent of the 
budget was discretionary. Congress could decide each and every 
year how to spend those funds. In 2002, it's down to 37 
percent; and trends show that it's going to continue to 
decline, which means that you, Members of Congress, will have 
less and less discretion unless something is done in deciding 
how to meet current and emerging national needs.
    Given our longer-range fiscal imbalance, which I'm going to 
show now, there is also a need to broaden the measures and 
focus of the Federal budget process to accommodate these goals. 
What this board represents is GAO's 50-year-long range 
simulation of what the future of the Federal budget looks like 
if you assume current law for tax policy as a percentage of the 
economy and if you assume that discretionary spending grows by 
the rate of the economy, which some would argue is a 
conservative assumption, and that the Social Security and 
Medicare trustees are correct in what they expect for the 
spending on those programs to be based on their best estimate 
assumptions. If you assume they're correct, if you assume the 
discretionary spending grows by the rate of the economy, this 
is our future.
    The bottom line is this. Due to known demographic trends 
and rising health care costs, starting in a little over 10 
years, we will start experiencing a period of rapidly 
escalating deficits as far as the eye can see.
    Now, what does this mean? This means at least a couple of 
things. We need to somehow figure out how we can have different 
metrics and mechanisms to consider the longer-term implications 
of current legislative of proposals because we might be able to 
afford some things today that we won't be able to sustain 
tomorrow. Second, it means we need to start looking at the 
base--the base of Federal spending, the base of tax policy, the 
base of everything that causes this gap to arise in the future 
years because the numbers don't add up.
    The status quo is unsustainable. Something is going to have 
to give. And it's more than just looking at entitlement 
programs. It's also looking at discretionary spending 
programs--which ones are working, which ones aren't working, 
which ones are generating a higher return, which ones may have 
made sense in the past but may not make sense today or for the 
future.
    So in order to address these emerging challenges it's 
necessary to address not only the entitlement programs but also 
the base of the budget. And it's important not just to look at 
spending, traditional spending, which the PART is intended to 
do. It's also important to look at tax preferences which all 
too frequently are off the radar screen, and I will show you an 
example of that if we can.
    If you look at the health care area as an example, you can 
see that 72 percent of the, ``expenditures'' that relate to 
health care at the Federal level are mandatory outlays. There 
is a discretionary component. But tax expenditures represent 20 
percent of the Federal commitment to the health area. Health 
care represents the No. 1 tax preference in the Internal 
Revenue Code, and yet it's largely off the radar screen. Are 
those tax preferences achieving what they're intended to or 
not? I think that has to be part of the equation.
    We are mindful that this kind of review will also in the 
end require a proper national debate, because the American 
people do not understand the nature, extent and significance of 
this gap and, from a practical standpoint, elected officials 
will have to make sure that they are educated so that you don't 
get too far ahead of the public.
    But back now to performance budgeting. Credible outcome-
based performance information is absolutely critical to foster 
the type of intelligent debate in understanding what's working, 
what's not working and how do we go about re-examining the 
base. Performance information can help us in this regard, but 
it will not provide mechanistic answers for budget decisions 
nor can performance data eliminate the need for considered 
judgment and political choice. If budget decisions are to be 
based in part on performance data, the integrity, credibility 
and quality of this data and the related analyses become even 
more important.
    Moreover, in seeking to link resources to results, it is 
necessary to improve government's capacity to account for and 
measure the total cost of Federal programs and activities. It's 
not just what results are achieved but at what cost; what is 
the return on investment, what is the cost/benefit relationship 
and what are the alternatives if the Federal Government is not 
part of the equation?
    The Government Performance and Results Act, also known as 
GPRA or the Results Act, expanded the supply of performance 
information generated by Federal agencies. It provided the 
foundation. But progress has been relatively slow.
    We now need to take it to the next level. We need to make 
sure that there are outcome-based measures, that they're linked 
with cost and that we have a rigorous process by which the 
administration can end up making recommendations to Congress 
and Congress can make decisions through the appropriations 
process, and can take actions through the oversight process, 
authorization process, etc.
    OMB's PART proposes to build on GPRA by improving the 
demand for results-oriented information in the budget. It has 
the potential to promote a more explicit discussion and debate 
between OMB, the agencies and the Congress about the 
performance of selected programs. Improving budgetary debates 
is always a good idea, but caution is in order at this stage 
about expectations from this process. The accuracy and quality 
of the evaluation information necessary to make informed 
judgments is highly uneven throughout the Federal Government. 
In the long run, sustaining a credible performance-based focus 
in budgeting will require significant improvements in 
evaluation capacities and information quality across Federal 
agencies as well as with third parties who implement many 
Federal programs.
    Finally, and most critically, the Congress must play an 
active role with regard to the performance-based budgeting 
concept. Congress has to buy into this concept. It has to 
devote sustained attention to this issue. And Congress needs to 
take this performance information that is coming out of GPRA 
and use it in making its own decisions with regard to the 
annual appropriations process. Congress also needs to take this 
type of information and use it for purposes of oversight. 
Congress needs to consider this type of information in 
conjunction with the authorization process.
    In my testimony I lay out some suggestions that Congress 
may want to consider about how it might be able to go about 
playing an active role, because only through the sustained 
attention by the Congress as well as the executive branch over 
a period of years can this concept become a realty. We have 
seen predecessors like ZBB, zero based budgeting, and other 
types of concepts come and go; and it's only through sustained 
commitment by both the executive and the legislative branch 
that this approach can bear fruit.
    The graphics that I showed you serve as demonstrable 
evidence that we really have no choice. We must begin to look 
at the base. We must begin to separate the wheat from the 
chaff.
    Thank you.
    Mr. Horn. Thank you, General.
    [The prepared statement of Mr. Walker follows:]




    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Horn. I will now yield to Mrs. Schakowsky. She has also 
participation in another committee, I believe; and then we 
will----
    Ms. Schakowsky. Thank you, Mr. Chairman; and I thank the 
witnesses for their participation today.
    As one of our witnesses points out, the primary result of 
the Results Act has been deforestation. Agencies produce glossy 
reports full of performance goals and little changes. These 
goals are often so general that they're meaningless. One agency 
had as a performance goal to complete its plans for work to be 
done in the following year. For another project, the goal was 
to achieve a customer satisfaction rating of 80 percent.
    I share the concerns that these performance measures are 
not achieving the intentions of the legislation. However, I am 
not sure that linking vague measures to the budget process will 
achieve better government, and I have strong concerns about the 
objective of that process.
    It is all well and good to hold hearings to talk about 
accountability in the budget process. It is particularly 
important at a time when the country is faced with a crisis in 
corporate responsibility. However, we have to make sure that 
this is not an effort to single out programs that are political 
targets like welfare and public support programs.
    It was interesting to me in the charts that you presented 
that Social Security, Medicare, Medicaid, health care were 
mentioned. It must not be an effort to go after the low-hanging 
fruit and not go after the really bad actors that waste 
billions. If we don't clean up the financial management at the 
Department of Defense, which this subcommittee has had numerous 
hearings about, then all of the rest of this is a wasted 
effort.
    The newspapers continue to be full of stories of the 
accounting failures at Enron, WorldCom and Tyco. There are 
still stories about document shredding at Arthur Andersen. For 
years we have asked the Government to behave more like 
business, and I'm afraid the Department of Defense chose the 
wrong models.
    Last year, the Inspector General reported that the Defense 
Department had $1.2 trillion in expenditures that could not 
properly be accounted for in the annual audit. The GAO has 
repeatedly testified that the failure of the Defense Department 
to be able to audit its books is what is keeping the entire 
Government from being able to have a clean audit.
    A few weeks ago, Representative Shays and I held a hearing 
where it was revealed that the Department of Defense was 
selling surplus chemical production suits on the Internet for 
$3. At the same time, it was purchasing those same suits from 
the manufacturer for $200.
    Mr. Horn and I have held hearing after hearing documenting 
the waste, fraud and abuse of Government credit cards 
throughout the Department of Defense. In one of our first 
hearings on credit cards, the GAO testified that the Navy 
policy was to not inventory items that are easily stolen. Quite 
frankly, I found that hard to believe.
    At our July hearing, I asked Dee Lee to explain the policy. 
She said, ``the policy was always that sensitive property 
should be recorded and tracked.'' The Navy, however, continues 
to argue that Palm Pilots and digital cameras don't have to go 
on an inventory list. I guess the Navy performance goal is buy, 
buy, buy.
    If the performance measure was balancing the books, the 
Department of Defense would fail. If the performance measure 
was accounting for property, the Department of Defense would 
fail. If the performance measure was responsible management of 
procurement through Government credit cards, the Department of 
Defense would fail.
    At the same time, DOD is instituting an entirely new 
procurement system that eliminates goals entirely in the guise 
of reform. DOD will no longer lay out requirements that weapons 
systems have to meet, let alone time lines by which they have 
to meet them. Indeed, the Department of Defense will allow 
weapons programs to build whatever they can. Then every 2 years 
or so DOD will check in to see whether the technology has 
matured enough to deploy something. That is what the Pentagon 
is doing with missile defense, and it has resulted in a giant 
slush fund with absolutely no accountability. This is the model 
DOD wants to copy for all of the programs.
    I am pleased that missile defense is one of the programs on 
the list today. However, I am surprised.
    In July, Thomas Christie, Director of Test and Evaluation 
for the missile defense program, testified before one of our 
subcommittees that there are no objective measures against 
which the missile defense program will be judged. This is a $8 
billion a year program with no objective performance measures.
    This morning, the Defense News reported that Secretary 
Rumsfeld was developing a plan to streamline the legislative 
requirements on the Defense Department to make the Department 
more efficient. Notably absent from this plan were any 
specifics on improving accountability at the Department.
    I remain skeptical about linking vague measures of 
performance to the budget process. However, if Congress is to 
be convinced that this administration is serious about 
management accountability, it can be done by cleaning up the 
mess at DOD.
    Some criticize as unpatriotic those who are questioning 
blanket budget increases for the DOD during a time of war. I 
believe just the opposite is true. Those who refuse to hold the 
Defense Department accountable are endangering the safety of 
the men and women who risk their lives to protect us and 
endangering the very safety of each and every one of us and our 
constituents in this country.
    Thank you, Mr. Chairman.
    Mr. Horn. I thank the gentlelady from Illinois.
    We will now have the testimony of Mr. Daniels, and I think, 
as you know, this is an investigating committee, so we do ask 
you to affirm the oath.
    [Witness sworn.]
    Mr. Horn. We are delighted to have you here, and please 
proceed in any way you'd like.

  STATEMENT OF MITCHELL E. DANIELS, JR., DIRECTOR, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Daniels. The way I would like, I would guess, is the 
way the committee would like, that's that I will be very brief. 
I've submitted written testimony. Let me just summarize it 
quickly for you, Mr. Chairman.
    I do want to start by sincerely thanking this committee for 
paying attention to a subject that's been paid too little 
attention, I would say, by the Congress in the aggregate over 
time and for holding this particular hearing. Sometimes these 
occasions are burdens, and then sometimes they're really very 
welcome, and this is in the latter category, and I cannot 
salute you enough for, as I say, devoting your time to a 
subject that many would prefer to ignore.
    I think I can sum up in plain English the subject that 
brings us together and the approach that the administration has 
embarked on to address it. For far too long, the only questions 
that we seemed to address as spending is enacted year on year 
is how much, and never how well, is the money being spent.
    Several brave Members of Congress and innovative Members of 
Congress, some years back, bothered by this, passed a statute 
and some related measures that did attempt to inaugurate an era 
of accountability, to demand proof of performance as a 
condition for continued spending, let alone increased spending. 
But, after 10 years, we find that the ambitions of that 
legislation had not been realized or really even, I would say, 
approached.
    We've taken it very seriously. We promised the Congress at 
the time this administration came to office that we would, and 
the specific subject on which you summoned us here today is the 
manifestation, or the latest, of our seriousness of purpose. 
Very simply, we believe that it's time to put the burden of 
proof for Government spending where it should be, on the 
proponent of each dollar that should be spent.
    Frankly, here in Washington, and only here, the burden is 
almost always on the person who would challenge the embedded 
base of spending, to which the Comptroller General referred. In 
all my years in business, I was always on the hot seat in 
proposing to my colleagues and to a board of directors spending 
for a given fiscal year, first to prove that the dollars my 
unit had spent in the past had realized the appropriate 
results, the required rate of return; and only having proven 
that did I have standing to ask for that money again, let alone 
an increase. That's the way the world works and the way one day 
we hope it will work here.
    The principles on which we are operating again are very, 
very simple. They are transparency and visibility and 
accountability.
    In terms of transparency, we hope to elevate and to publish 
in the budget, in all future budgets, measures of results, done 
as credibly and openly as we can. The instrument that we have 
used, we assigned some of the best people in OMB to work on 
this. We've called on outside academic and past practitioners 
from administrations of both parties to help us. We feel an 
obligation that the measures being employed be nonideological, 
be neutral, be objective, be based on the best evidence 
available, which everyone knows is still in most cases far too 
imperfect.
    But we're only after one answer, and that is, does a given 
program or activity work or not? To what extent does it deliver 
on the purposes Congress determined were in the public 
interest?
    There's a separate argument that quite properly goes on 
about whether a given activity should be undertaken at all, but 
we want to separate that argument and leave it for its proper 
place in the political arena and focus on the question, if 
Congress has decided that a given activity should occur, is it 
being done well or not? It has always seemed to me that this 
ought to be a quest that people of all ideologies could 
embrace. Those who believe that Government ought to be more 
limited than it is, I guess not surprisingly, would want to put 
programs under close scrutiny. But those who sincerely believe 
in a more activist role for Government, I would think, would be 
the most offended of all to find money being spent poorly to 
achieve a given purpose, when there were better options 
available.
    So we hope this is something we can unite around, and we 
thank this committee for its past work and its current 
attention to a subject that--about which we feel great 
excitement and to which we feel great commitment.
    [The prepared statement of Mr. Daniels follows:]




    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Horn. We're going to have a couple of votes pretty 
soon, so let me get a couple of paragraphs in and maybe see how 
we respond to it.
    In both Senator Thompson's statement and my own over the 
various years are the following: that every good, well-managed 
corporation, and the same for a university, that they take 
their executives and their boards out to a retreat to start 
saying, look, what are we doing here and how do we deal with 
it. Management problems come up, and that's certainly helpful.
    I would hope that we would have Presidential appointees 
such as the Director of OMB and the, say, Deputy Secretary of a 
particular agency or a Cabinet officer, him or her, and we need 
to have the Presidential appointees connected with the 
authorization committees, the appropriations committees, where 
they can sit around and then see what ought to be done. Some of 
it can be done in open things, and some they ought to just get 
off in the woods and say let's really deal with this problem. 
And I would hope that the President's appointees would be 
matched by the elected officials to Congress in the Senate and 
the House, and they can discuss and talk about deadbeat 
programs that they all know they have in some of these various 
committees.
    I would hope that there would be that connection and not 
just say, oh, well, here, let the staff do it, and--either OMB 
or up here. No. Let's get the person that has the authority, 
either of the President of the United States or the people of 
the United States. So--and the Comptroller General has--at the 
beginning of every single Congress, a sort of red light book, I 
call it, even though they're nice and blue and white. But the 
fact is that they are right on the mark in terms of certain 
problems we ought to face up to here at this end of 
Pennsylvania Avenue and there at that stage.
    I was delighted when you put in that management booklet. 
And even if the Xeroxes didn't quite say which was yellow and 
green and what not, it showed you were very frugal in terms of 
your Xerox machines because the Armed Forces around here are in 
rainbow's colors and all the rest. So we sort of laugh about 
that a little. But it does make a point. And so the Rules 
Committee is the ones that they can help do it.
    Now, my biggest supporter here in the Congress was the 
majority leader, Mr. Armey, and he was very supportive of all 
the bits and pieces of hearings; and we don't know who the next 
majority or minority will be. But whoever they are, they ought 
to deal with this; and if you've got better ideas, I'm all for 
them. I would like to leave them to the Rules Committee.
    Mrs. Pryce is the chairman of the Rules Subcommittee on 
Legislative and Budget Process, and I would think that--and if 
you want to comment on this, Deborah, that we just--we need to 
have some of the system, shall we say, of both ends of the town 
and both ends of the Capitol. So I don't know if you want to 
say something on this.
    Ms. Pryce. Well, thank you, Mr. Chairman. I'm basically 
here to learn about this and to see where we can take it as a 
part of our Rules Committee package, if anywhere, and it's 
something that I think this committee has looked at more 
thoroughly than we have in Rules. So I appreciate the testimony 
of the gentlemen and wonder if you might share for me how you--
either one of you--how you believe we could--what troubles you 
would see us having if we try to implement this: where we would 
start? Where it would go? How much resistance there would be? 
And the pitfalls that we would face along the way, if you have 
given that any consideration.
    Mr. Daniels. Ultimately, of course, the effectiveness of 
this endeavor rests on the seriousness with which Congress in 
its spending functions views the findings that are produced. 
That starts with having well-grounded findings, as I said, a 
neutral way of measuring and the best information, demanding 
better--ever better information from the departments.
    Again, I think there is a burden of proof issue here. The 
departments have to understand that the absence of information 
is their problem. If they can't prove their case, then they 
ought--their future--our future budget proposals and hopefully 
Congress's reaction to them will be a skeptical one. So the 
first burden I think is on the administration to hold itself to 
high standards, to improve the quality of data that is produced 
and measured and to present it in a neutral and credible way to 
the Congress.
    That still leaves the largest question, will anybody care? 
Will proponents of a program, those with pride of authorship or 
an emotional attachment, care at all that their pride and joy 
isn't delivering what they hoped it would or what they 
intended? And our only answer to that will be ever greater 
visibility. Visibility matters, we find, Ms. Pryce.
    In a related accountability step to which the chairman made 
reference, we are grading our departments on their management, 
everyday management of their problem areas. In fact, some of 
these problem areas are drawn from the general watch list that 
you referred to and we found has a remarkably tonic effect in 
terms of the attention of management and the seriousness with 
which they view these problems, that somebody's keeping score 
and somebody's watching in the world. Someone out there might 
notice that they're doing a poor job.
    Ms. Schakowsky is now gone, but I agree completely with her 
view about the importance of management at the Defense 
Department. They got a very red report card because the 
problems she's talking about are very real and we see them the 
same way. So in just that way, I'm hoping that as we 
systematically begin to analyze and report on the performance 
of specific programs and activities that those responsible for 
those programs will work harder to improve their performance 
and the data that proves their performance and, finally, that 
Members of Congress will find it inconvenient or uncomfortable 
or awkward to vote year after year for more money, more money, 
more money for a program that's demonstrably failing.
    Mr. Horn. General.
    Mr. Walker. Thank you, Mr. Chairman.
    First, I think both the Congress and the administration 
have a responsibility to be focused on linking resources with 
results. I think we have provided some fairly compelling 
graphics as to why the status quo is unsustainable. We need to 
start looking at the base. That means in the appropriations 
process, that means in the authorization process, and the 
oversight process as well.
    In our testimony we lay out the idea that the Congress may 
want to consider having a performance resolution. It may want 
to have a set of principles and decide that there are certain 
types of areas or functions or activities that it would like to 
single out to focus on.
    The administration is using the PART process as a tool to 
try to be able to help further progress in the area of linking 
resources to results; and I think it's appropriate that the 
executive branch, you know, take the lead to do this in a 
comprehensive manner. That's part of what management is all 
about. That's part of the reason why you have OMB to link the 
management with resource allocation decisions.
    I think it is also going to be important if the executive 
branch is going to be making recommendations to the Congress, 
the Congress will need to have a reasonable degree of assurance 
as to the credibility of the data, the methods, the analysis, 
and the basis for the recommendations. The Congress at some 
point in time may want GAO to be involved in doing related 
reviews; and, obviously, if you do, we're happy to work in that 
direction.
    I also think that, as Mitch alluded to, one of the things 
that I have said quite frequently is you've got to have three 
things to make any system, program or policy work effectively.
    First, incentives for people to do the right thing. 
Incentives are inherent in linking resources to results. If it 
has consequences on resources, I mean, that is an incentive. In 
other words, we want you to accomplish certain objectives; and 
if you don't accomplish certain objectives then you know it is 
going to have a negative consequence. It's not just linking 
resources to results. It's also tying agency and individual 
performance measurement rewards systems to those desired 
results, too. So it's the budget process, but it's also the 
individual performance appraisal process as well. It goes down 
to that level of people and Government has not done that in the 
past.
    The second thing is transparency, to show that somebody's 
watching and to provide an incentive for people to do the right 
thing, which Mitch talked about.
    And the third thing you have to have, and the Congress has 
a critically important role to play here, is accountability. If 
the right thing is not done, if the results aren't achieved, if 
the resources aren't used judiciously and prudently, then there 
has to be a consequence. And if you don't have that, then 
people are going to ignore you. They'll just absolutely ignore 
you. And it doesn't matter whether it's in the public sector, 
private sector, not-for-profit sector.
    So incentives, transparency and accountability. Linking 
resources to results is one step. But we also have to deal with 
the human capital dimension, which involves performance 
appraisal systems and other actions.
    Mr. Horn. Would you like to add anything, Director?
    Mr. Daniels. No, it's well said.
    Ms. Pryce. Mr. Chairman, may I just ask--you talk about 
consequences. Do you have anything in mind other than monetary 
consequences, budgetary consequences, or is that what you're 
referring to? I mean, do you have other thoughts?
    Mr. Walker. I think there can and should be consequences to 
a program. There should be consequences to the departments and 
agencies, and there should be consequences to individuals as 
well. Obviously, to the extent that you link it from a monetary 
standpoint, it is going to have an effect on how much resources 
you're going to be given or not given. It is going to have an 
impact on how much of a raise you're going to receive or bonus 
you're going to receive or not receive. In time it could be 
that if appropriate steps aren't taken, there would be a 
consequence as to whether or not the program continues or the 
policy continues in total or in part.
    While OMB is from a conceptual standpoint doing a very good 
thing by trying to look at these programs, on the spending 
side, I think it's important we don't forget about tax 
preferences. There's a tremendous amount of money involved in 
tax preferences. What are we getting for those? Like, for 
example, the health care preference.
    In some cases, I would argue the incentives that are being 
provided on the tax side and the spending side are working at 
cross purposes. They're not well aligned, and they exacerbate 
our problem, and I will be happy at some point in time to 
elaborate on that, if you want.
    Mr. Daniels. And I would chime in, if I may. I think that, 
first of all, ultimately there should and will need to be 
consequences for managers who fail to deliver. And that happens 
all too rarely. Now, some harsh things were said; and, as I've 
indicated, I agree with most of them about the Department of 
Defense. But a captain who runs a ship aground will suffer 
immediate consequences, and throughout that branch of our 
Government it's not at all unusual for failures of performance 
to result rather quickly in sanctions and, conversely, great 
success to be rewarded. That happens very rarely in most of the 
rest of the Government, and that will need to be part of the 
picture ultimately.
    I also agree about tax expenditures. The only thing I want 
to say about this is that it is going to be a long journey, and 
we've tried to start where we thought it was most practical to. 
We certainly agree in theory that as soon as we can we want 
them moved to all the programmatic activity and ultimately to 
the things like tax expenditures. We chose--we tried to be 
selective in this first year in identifying those activities 
that were most susceptible to measurement, and we'll value the 
committees' and the whole Congress' input as we try to make 
that process better next year than it was this.
    Mr. Horn. You know this, and the General knows this, but 
let's get it on the record. Many Federal programs lack reliable 
data to serve as a basis for evaluating their performance 
results. Also, according to the GAO, many agencies have a 
limited capacity to conduct program evaluations. How will the 
PART process deal with those challenges?
    Mr. Daniels. Again, it starts by putting the burden of 
proof on the program that it will be an expectation that 
evidence of performance--quantitative and concrete and reliable 
evidence be provided. And the--no one is blind to the 
difficulties here of measurement, but we can't any longer let 
the perfect be the enemy of the good. We've got to get started. 
That's what we've embarked on. And, let's be honest, most 
programs would prefer and the people running them would prefer 
not to be measured. So some programs haven't made an attempt, 
any honest or any genuine attempt to develop the kind of 
evaluations that are readily available.
    So I once heard George Shultz tell what must be an old 
diplomatic joke. Why does the Frenchman kiss the lady's hand? 
And the answer is, he has to start somewhere. And that's what 
this year is about.
    Mr. Horn. I think Benjamin Franklin got ahead of George 
Shultz on that one.
    Mr. Walker. Mr. Chairman, could I mention something on 
that? That's a hard one to follow, but I'll try. Mine won't be 
as exciting as Mitch's.
    But I think all departments and agencies basically have to 
do certain things. One, they have to say, why were we created? 
What was the statutory basis for our creation? What is our 
mission? What are we trying to accomplish? How do we measure 
success?
    And success has to be measured in terms of outcomes. There 
may be intermediate measures that they also track because they 
know that these intermediate measures, over time, will end up 
leading to positive outcomes, but in the end, what it's all 
about outcomes. It's about results.
    They need to figure out who the key players are who can 
contribute toward the desired outcome. Many times it's multiple 
departments and agencies within the Federal Government. 
Sometimes it's Federal, State and local entities. It could also 
be public, private sector players. The Federal Government may 
not be the only player in the ball game. Which tools are being 
brought to bear? What is the cost? How do you compare the cost 
to the positive outcomes, and therefore get a cost benefit 
analysis?
    That's the type of rigor that people have to be forced to 
go through. We need to move from activity-based performance 
measures to outcome-based performance measures, and that means 
that there has to be some independent assurance above and 
beyond what the agencies say. Because human nature being what 
it is, whether it's public sector, private sector, not-for-
profit sector, people are going to take the measures that they 
are comfortable with and that they think they can look good at. 
So you have to have an independent party involved to be able to 
assure that the measure is reasonable, relevant and that the 
data that is reported is reliable. That's critically important 
or else you really haven't accomplished very much other than 
another paperwork exercise.
    Mr. Horn. Well, we're going to have to--and there's no 
use--you're busy people, and so are we. But I want to get in a 
few questions now.
    What do you think of what I had to say that we get these 
people from various parts of the American Government, the 
executive branch and the legislative branch, and to get them 
to--both authorization and appropriations--and get them off in 
the woods, whether it is a Republican at the White House and a 
Democrat in the wherever. So what do you think of getting them 
together after you've had some staff work out of the OMB and 
the Comptroller General's Office?
    Mr. Daniels. I think it is a very intriguing idea. I mean, 
I don't think we can consult too closely about this. If we were 
gathered together, as I understand your suggestion, around the 
subject of how well are the programs of today working or not 
working, I think this would be very useful. As I said, there's 
been so little attention paid to this, so little information, 
frankly, available on many accounts, I think it could be a very 
healthy and I hope productive exercise.
    We need the Congress to begin behaving somewhat more in the 
mode of a board of directors. The business analogy is not 
perfect, and it shouldn't be, but we ought to, I would hope, be 
more aligned than we are around the idea that animates this 
discussion. Namely, every dollar taken from a taxpayer and 
spent by this Government ought to be spent to good effect, or 
we ought to find a different purpose for it. And too often we 
don't reach that question.
    Mr. Horn. The Congress over 25 years, started with 
inspectors general and then we had for about 10 or so years, 
the chief financial officer, then the chief information 
officer. And I think to--in one way, that we certainly have, I 
think, because I read some of these when they come in, and 
they're very good about that. So I'd be curious if you think 
there's anything else that ought to be done that would aid 
people in both the agencies, the White House and OMB and up 
here and so how did--is there a better way we can move what 
people are doing under the Inspector General, financial and 
communications?
    Mr. Daniels. I don't know about the--oh, go ahead, David.
    Mr. Walker. I think that--first on your other question. 
Then I'll answer this one.
    I think it would be great if Congress could get together 
for half a day with GAO and OMB experts, selected members of 
leadership, and leaders of the Budget, Appropriations and 
Government Reform Committees in the House and Governmental 
Affairs in the Senate to focus on the issue that we're talking 
about. Because it's going to take the combined efforts of those 
people to make this concept become reality. No matter what the 
administration does and no matter what administration it is, if 
the Congress doesn't buy into it and if it doesn't have real 
implications with regard to appropriations, oversight and 
authorization matters, then it isn't going to matter. And so 
it's important to do that.
    Second, I think one of the dangers that we have right now 
at our current management structure is we've got a lot of 
silos. We have CFOs, CIOs. We may soon have chief human capital 
officer. People also talk about chief acquisition officers and 
opther key players.
    We're going to have a report that we're going to publish 
within the next week, Mr. Chairman, that, as a result of a 
roundtable we held last week, I would commend to you and this 
committee the summary of that roundtable. I'm confident it will 
have some ideas for consideration in this area to try to take a 
more integrated approach to this major challenge.
    Mr. Horn. Mrs. Pryce and I are going to have to respond to 
the Chamber in two votes, and then we want to hear the two 
experts in Panel Two, Mortimer Downey, Principal Consultant for 
PB Consult, Incorporated, and Patricia McInnis, President and 
Chief Executive Officer of Council for Excellence in 
Government. So if you can bear with us, we'll be back.
    I know both of you are--so you can either stay or go 
because----
    Ms. Pryce. I just want to thank the gentlemen for their 
input today; and, as far as I'm concerned, we can followup 
informally on these discussions. We appreciate your testimony; 
and I--as far as I'm concerned, you're free to go. Thank you.
    Mr. Walker. Thank you very much. I appreciate it.
    Mrs. Maloney. I likewise would like to join my colleagues 
in congratulating you for your work. I was a cosponsor if this 
bill. It's actually the first bill I managed on the floor, so I 
have a tremendous interest in seeing that it's implemented. I 
appreciate very much your work and will be in touch. Thank you.
    Mr. Horn. The recess of the committee with the four votes 
that we had to cast on in the Chamber is over. So we thank you 
for patience, and that's the way this place is. We never know.
    Mr. Downey and Mrs. McGinnis, if you don't mind, we'd like 
you to take the oath.
    [Witnesses sworn.]
    Mr. Horn. Thank you. Thank you for coming. You're well 
known to this committee, and so we look forward to your 
comments.
    Now, we've--all of the written ones automatically go into 
our hearing. And you know the thing, both of you, I think. So 
we'd be glad to hear from you.

STATEMENTS OF PATRICIA MCGINNIS, PRESIDENT AND CEO, COUNCIL FOR 
  EXCELLENCE IN GOVERNMENT; AND MORTIMER L. DOWNEY, PRINCIPAL 
                  CONSULTANT, PB CONSULT, INC.

    Ms. McGinnis. Thank you, Mr. Chairman.
    Mr. Horn. It's modern technology. I was a string-in-a-can 
man as a little kid.
    Ms. McGinnis. Thank you very much. I really commend your 
leadership.
    I was asking while you were voting whether this is the 
first time these two subcommittees have held a joint hearing, 
and it seems to be perhaps even historic. So this is a 
wonderful precedent, and we hope that will be many more of 
these hearings on this subject.
    You know the Council for Excellence in Government well, and 
you know our ambitious mission and strategic priorities. We are 
interested in attracting and developing the best and brightest 
in public service, engaging citizens and improving their trust 
and confidence in Government. We have focused a lot of 
attention on electronic government as a tool to improve 
operations and connect government to the American people and, 
finally, to encourage innovation and results-oriented 
performance. That's what we're talking about today.
    We believe very strongly, as you do, that improving the 
development and use of performance and evaluation data to 
inform decisionmaking both in the executive branch and Congress 
will go a long way toward this view of excellence in government 
and raising the public's trust.
    GPRA was a big step in the right direction in terms of 
linking decisions about the design and funding of programs to 
their performance, and that movement has been given renewed 
impetus by the budget and performance integration focus and the 
President's management agenda.
    But, as you well know, this is not the first time the 
Government and Congress have thought about managing for 
results, and I certainly won't go through the history. I've 
included some of it in my written testimony. But the acronyms 
are even hard to keep track of because there are so many of 
them, from the Hoover Commission to President Johnson's 
Planning, Programming and Budget Systems; to President Nixon's 
MBO, Management by Objective; to President Carter's Zero Based 
Budgeting, ZBB. This concept is a consistent, basic theme 
throughout the decades.
    So what's different now? I think the enactment of GPRA is a 
significant difference because we do have a statutory framework 
for this.
    Again, the seriousness of this administration and the 
President's management agenda are exemplified through this 
excellent work on the Program Assessment Rating Tool. But, 
despite all that, and even with GPRA, as David Walker and Mitch 
Daniels both said, we don't see decisions being made in the 
Congress and executive branch very much based on the use of 
performance data and the results of high-quality evaluations at 
this point. We see promising potential, but that promise has 
yet to be realized.
    I want to take my few minutes today to go over a series of 
recommendations to promote the effective use of this 
performance and evaluation data, particularly by Congress, that 
were developed and are detailed in a discussion paper called 
Linking Resources to Results. This was a study that was done 
jointly by the Council for Excellence in Government and the 
Committee for Economic Development which, as you know, is a 
business group which focuses very much on the performance of 
Government.
    We have come up with a series of institutional and 
procedural changes that we think would--could, if they were 
implemented and taken seriously, lead to a quantum improvement 
in the quality, quantity, timeliness and utility of performance 
and evaluation data.
    The central recommendation is the creation of a 
congressionally chartered, nonpartisan Center for Domestic 
Program Assessment. That's our name. It may not be the perfect 
name. We could work on that. But I think it describes what 
we're talking about.
    The sole mission would be to strengthen and help 
institutionalize the link between Government resource 
allocation and program design decisions and demonstrated 
program effectiveness. And here we're talking not only about 
discretionary programs but entitlements and tax expenditures in 
this domestic program area.
    Such an entity would assess and report regularly and 
publicly, and this is a big part of the value of this on the 
progress in resolving the country's most significant domestic 
issues. It would provide high-quality analysis of performance, 
present it in a timely fashion. We imagine that the issues 
would be taken up based on some sense of the reauthorization 
cycle in Congress, and we would have the ability--this 
organization would have the ability to look at programs across 
agencies and across committees and subcommittees in the 
Congress.
    We also called for statutory setasides for program 
evaluation which are not consistently used in program 
authorizations in order to support independent, high-quality 
evaluation of individual programs by Federal agencies. The new 
congressional oversight and evaluation procedures, including 
some powerful enforcement provisions that we recommend, would 
ensure full use of evidence on program effectiveness.
    Some of the changes in the House and Senate rules that we 
are suggesting: We would suggest requiring that authorizations 
for appropriated programs, mandatory spending programs and 
significant tax expenditures must have a mandate for an 
evaluation of net impact as a condition for floor 
consideration; oversight hearings and reports on documented 
performance before reauthorization; evidence and potential 
effectiveness for new programs would be required before floor 
consideration; sunset provisions at least every 5 years for all 
major authorizations, mandatory spending programs or tax 
expenditures so that Congress could take into account the 
performance record before voting on the extension or redesign 
of a program.
    We would also subject requiring the inclusion in all such 
bills, statements of program goals and expected impact which 
would also be included in the GPRA strategic and operating 
plans.
    The enforcement provision: We propose that there be in the 
Senate a requirement of a 60-vote majority to waive any of the 
above rules and an analogous provision for the House of 
Representatives.
    We make some suggestions to strengthen the Government 
Performance and Results Act and I--with a main suggestion that 
I would bring to your attention is our recommendation to amend 
GPRA to merge strategic and operating planned segments and 
annual performance report segments for similar programs in 
multiple agencies so we can look at goals and measures and 
results across agencies and programs, rather than just 
strategic plans by strategic plan, performance report by 
performance report. We think this is consistent with the 
administration's initiative in the 2004 budget to pilot the 
development of common performance measures across similar 
programs, which we applaud.
    So, thank you very much, Mr. Chairman and the members of 
both subcommittees. We're really encouraged by your interest in 
this, and we would like to offer our support and assistance as 
you take this issue further. Thank you very much.
    Mr. Horn. Well, thank you for that comment.
    [The prepared statement of Ms. McGinnis follows:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Horn. Mr. Downey is well known here, and you both have 
MBAs, one at Harvard and one at Yale, and I don't know if that 
has any great meaning except that the bricks around the place 
are a little different.
    But I think I was glad to see the emphasis here. Because 
what has burned me over the last few years is that there's been 
a lot of schools that have said, oh, we've got a policy school. 
And none of them have thought about management, and that really 
gets to me. We need people just like you to say the emperor has 
no clothes.
    Mr. Downey. Well, thank you, Mr. Chairman, for having this 
hearing and for your interest in this subject.
    It's an interest, obviously, that we share; and I think it 
is an interest in managing government better as we all ought to 
try to do. That's certainly what we tried to do in my 8 years 
at the Department of Transportation, and we really used the 
processes of GPRA to the greatest extent possible during that 
time period. I think an even stronger linkage between resources 
and decisionmaking will make GPRA an even more powerful tool.
    Let me just briefly describe what we did. We seized the 
opportunities in the act. We became a test bed in the pre-
implementation period. We developed a strategic plan with a lot 
of input from outside sources so that we knew what our 
constituency and our partners believed. This is very important 
in managing what you sometimes think of as a holding company, 
creating common goals that everyone in the Department would 
understand. We went to greater lengths with the annual 
performance plan and with our performance reports.
    I think as the process has matured the measures that were 
created are transparent and consistent, and there's a lot of 
concern within the Department for meeting them. These were 
enforced. They were enforced with performance contracts. There 
was continuous followup.
    It's often said that what gets measured is what gets 
managed, something you and I learned during the Y2K experience, 
that if you're watching it a better job gets done; and I think 
the fact that Secretary Mineta and his team have moved 
seamlessly into the office and kept the same measures and the 
same goals suggests that we got them at least reasonably right.
    Resource availability was a clear part of the process. One 
thing we did I don't think some other departments did was 
rebalance our performance plans in accordance with the 
resources. If Congress gave us less than we asked for, we came 
back and said, here's what we can accomplish. Sometimes 
Congress gives more than the President asks, and we would say 
to the agency, now you have more money. How much more are you 
going to achieve? And that became their new performance 
contract.
    But I think with OMB participating now through the PART 
there may be even more of a sense of reality and, if the 
Congress adopted some of the same approaches, even more 
benefit.
    The steps that OMB has taken so far are a good start. Their 
willingness to publish the results is a very important step, 
taking transparency into the budget process, something that 
hasn't always been there before.
    The Director does point out that these are not the only 
factors that he'll use this decisionmaking, and we understand 
that. But these will now be decisions that can be measured 
against the outcome of a relatively open assessment. A 
President will find it harder to not fund programs that are 
effective and well managed, even if he doesn't agree with the 
necessity for them. And, vice versa, it will be hard to ask for 
funding of politically attractive programs if the results are 
not there. So I think the public and the Congress will be 
better informed.
    Like any process, it's not going to be perfect the first 
time out. The administration recognizes that. They've reached 
out in a number of directions. They have created an advisory 
council which I'm serving on. They have involved a lot of 
institutions in test runs and discussion. And they have a goal 
of implementing this over a period of time, which is the right 
way to do it.
    There are risks, but certainly the largest risk is that 
this initiative, like many of its predecessors that Pat 
mentioned, disappears, goes on that list of PPBS and ZBB and 
NPR and others. If you believe that performance is something 
that should not drop away, maybe something can be done about 
that.
    I think one reason that GPRA has been a success is that it 
is a statute. In our Department, for example we said this is 
going to be around a while. It is worth investing in the 
infrastructure and the learning process to do it well. So if 
there's a linkage between the Government Performance Results 
Act and the budget process this may encourage further efforts.
    I know there are concerns about jurisdiction and about 
tradition and about roles and responsibilities and authorizers 
and appropriators. Years ago, I worked on the Budget Committee 
staff when the committee first started, and we had to find our 
way into the process. But that also has sustained and continues 
to provide leadership at the macro level. I think similar 
efforts to assure that performance is part of the debate and 
results are--in fact, the measure of success will benefit all 
of us, particularly benefit the taxpayers and constituents who 
want us to do a good job.
    So thank you very much for the hearing, and I would be 
happy to answer any questions you might have.
    Mr. Horn. Well, thank you.
    [The prepared statement of Mr. Downey follows:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Horn. As a former agency official, what advice would 
you give the Office of Management and Budget on how to work 
with the agencies to get their support and affirmative 
cooperation for the PART evaluations?
    Mr. Downey. I think the key one will be to make it a 
collaborative process, to listen, to learn. Departments can 
learn as well, but I think OMB will benefit from the discussion 
and then recognize results with resource decisions. If in fact 
at the end of the day the better-managed, better-achieving 
programs are raised in terms of resources and perhaps some 
others are not, the process will go forward. But keeping the 
discussion at the professional level and the fact-based level 
will be an important part of that process.
    Mr. Horn. Do you believe that the--and you might get in, 
Ms. McGinnis any time you want, because they're really for both 
of you--do you believe the Results Act should be amended in any 
way to incorporate the concept of PART evaluations? If so, what 
would you recommend?
    Mr. Downey. I haven't looked specifically at language. I 
certainly would not suggest that in all of its specific detail 
that become statutory. But if, in fact, the Results Act 
indicated that budget presentations and other actions would 
relate to performance, I think it would help if authorizers, as 
they come in with new programs, and reauthorize programs, state 
what they believe the results should be. We'll enter into that 
discussion and similarly on the appropriations.
    So anything that would symbolize and assure that this 
linkage continues will be a positive step. But I would not 
embody every piece of the process in a legislative 
prescription.
    Ms. McGinnis. I think I would reiterate the recommendation 
in my testimony that GPRA be amended to give more emphasis to 
cross-cutting issues and the results of a cumulative impact of 
several programs across agencies. I think that's consistent 
with what's happening with budget and performance integration 
and the use of common measures, but it's also an area of the 
PART that could be strengthened.
    Mr. Horn. Well, let me go back to what I asked the 
Comptroller General and the Director of OMB. As you know, the 
Congress put into law inspectors general and we also, 10 years 
later, put inthe office of--the committee decided first to put 
the financial part there and then with high technology we had a 
communications there. And those--some of them I thought were 
just not doing much, and some were dumped on the old assistant 
people in management and administration and put it in that.
    Well, the whole purpose of it was to focus in one area and 
to, in the case of chief financial officer, chief information 
officer. And do you think that's good? And how do you integrate 
their thoughts with this?
    Ms. McGinnis. I think integration is a key word, because 
one thing, one danger of creating all of these different chiefs 
is that they are working in their own stovepipes. So that's why 
this model of deputy secretary as chief operating officer which 
has evolved I think is so important as a place to bring all of 
these pieces together and also why the President's Management 
Council I think is such an important integrating organization. 
And it has--it was started in the Clinton administration, it 
has continued in the Bush administration, and I think matured 
over time to the point where it is more and more being seen as 
a strategic group of managers who are charged with pulling 
together financial management, information management, human 
capital management, the inspectors general. And that's all a 
good thing.
    The fact that budget and performance integration is one of 
five elements of a coherent management strategy, I think it's 
woven together actually quite well. And anything that you and 
we can do to strengthen that capacity and integration would 
only be a step in the right direction.
    Mr. Downey. I think if there is a point of accountability 
for good management, that person, that institution should 
benefit from the work of all of those players, the IG, the 
chief financial officer and the like, but somebody needs to 
have the job of pulling them together and linking what they do, 
which sometimes is more narrow in focus to achievement of 
results within the Department.
    In our Department, for example, the IG has been a very 
strong contributor to management, even as he maintains 
independence. He's a participant in the process and brings a 
valuable insight. But it's only one piece. The CIO only brings 
one piece. Someone else has to look at how they all come 
together and how do they relate to what the Department is 
indeed achieving.
    Mr. Horn. Well, you were well-known as the Deputy Secretary 
for Management there, and that's where people would go to, I 
would think, and I agree with you on that.
    What bothered me is we've gone through this homeland bit. 
We had proposals before them, and they just wipe them out on 
management. Presumably, those were on orders of the White 
House. I don't know who's calling that or what they're trying 
to do, but maybe they ought to ask their own Office of 
Management and Budget.
    Because when you're merging all of these things that go 
back 200 years there a corporate culture, be it Coast Guard or 
Customs or whatever, and we tried to put it in there because if 
you look on it as a corporate--three different companies 
merged, it's very difficult.
    My example for that is the Atlantic Arco. They moved one 
night from New York over to Los Angeles, and they had three 
cultures to work. That meant that one of the top people, in 
this case, the Executive Vice President, got the people and 
worked them in together. So when one part of the system comes 
in, they don't gripe a lot and they put in somebody from that 
in order to get good management.
    When we've got ones that have dozens of things, much more 
than a few of them, and I don't know how they're going to put 
them together without a deputy secretary for management.
    Now, the appropriators 2 years ago demanded it and put it 
in the State Department money and I don't know how that's going 
out right now. Do you have any thoughts and that?
    Mr. Downey. I certainly agree that the Homeland Security 
Department will need that kind of attention. You use the word 
``cultures,'' and that's indeed what they're going to have to 
deal with.
    Bringing a lot of different agencies together in one 
department doesn't always work well. It takes particular 
attention to make it happen.
    DOT, for example, 35 years old, it's still got a lot of the 
remnants of past ways of doing business. I think we changed it 
substantially. We changed it, actually, by deliberately 
attacking the culture, as opposed to the organization. When 
Secretary Slater came in, he said, let's throw away ideas of 
reorganizing. Let's just figure out how everybody can work 
together as one DOT. Having those common goals was really the 
first step.
    I'm sure the Coast Guard will work out well in the new 
department, but I have been in the Coast Guard in two different 
departments, and this will be my third.
    Mr. Horn. Yeah, well, Admiral Loy is doing a great job now. 
He's got the heat. A lot of us were at a luncheon with him 
yesterday.
    I was curious, I have great respect for Secretary Mineta. 
He was sort of a mentor for me when I came to Congress. In that 
luncheon he had, just after he was sworn in, he said he was 
going to move the Senior Executive Service around. And I 
thought, gee, there's a good idea. Because with some agencies, 
when they move people around, they say, oh, we're trying to get 
rid of that guy. But the fact is, we ought to get growth and 
get different things and have it made that they're really part 
of the team. And how's that going in the executive branch 
generally?
    Ms. McGinnis. Actually, I was thinking in order to create a 
culture a performance culture where the whole is greater than 
the sum of the parts, you do have to shake things up a little 
bit. It's about management and placing an emphasis on this.
    But the example that comes to my mind is FEMA. When FEMA 
was transformed from what some of your colleagues called the 
worst agency in Government to what the same colleagues called a 
couple of years later one of the best agencies in Government, 
one of the strategies that was used was to ask every single one 
of the career senior executives to change jobs. And you can 
imagine there was some resistance to that. But they all ended 
up changing jobs, and it does provide--I think it helped to 
create a coherent and effective culture.
    Now, FEMA is a much smaller agency than we're talking about 
on the scale of Homeland Security, but I think it's a concept 
and a lesson and a practice that ought to be applied there. Not 
just within agencies, but across agencies.
    Mr. Horn. That's well said. Because my organization that I 
am the--really, I can't say more for it, and that was that 
1990's where they turned that around. And you're right. And 
with every disaster that seemed to happen every week, and they 
had great leadership and that's what's key.
    So, is there anything in the Results Act that you feel 
needs anything legislatively?
    Ms. McGinnis. Well, again, revisiting this issue of calling 
for cross-cutting planning and reporting on performance, so 
that you're looking at an issue in the way that the American 
people would think about it, not agency by agency but around a 
specific set of programs focused on health or education or 
whatever other subject. I think that's the one area where some 
attention and change may be in order.
    Mr. Downey. I would agree with that. It could be done 
without legislative change, but the legislative change sends 
the right message.
    We did some of that as well. I had a lot of discussions 
with the Interior Department fisheries people and the Coast 
Guard trying to define how would we measure success in those 
common programs, and we finally all agreed it was from the 
point of view of the fish.
    Mr. Horn. That's the great Benchley joke. Do you remember 
that one when he was at Harvard? He was studying international 
law. And this is Benchley, the great comedian. He said to the 
professor that I've read a lot of the books and he said I've 
felt that there's a lot said about America in this and a lot 
from Great Britain, but he said I want to write about the use 
of the fish. And so that was it. He probably got an A.
    So, yes, that is something now. I agree with you. You don't 
really need legislation if OMB is working it under PART. I 
think that would solve the problem. And they're doing it. So 
that's great.
    So anything else you'd like to add, put on the record?
    OK. Well, thank you very much for sharing your experience 
and your talents. So thank you very much.
    We're going to thank--Mrs. Maloney did not have a chance to 
be here and she's been a wonderful right hand for us over the 
last years. Without objection, her statement will be put in the 
record after my comments.
    Now I'd like to thank the people on the staff that put all 
this together and does it all the time.
    That's Bonnie Heald is the staff director; Henry Wray is 
the senior counsel right behind me; and Dan Daly, counsel. Dan, 
where are you? There you are. And Chris Barkley, our faithful 
majority clerk. And there he is.
    Believe me, when you move around America you appreciate all 
the things the clerk does. Because then my back is not broken, 
his is. And if the Federal compensation wants a witness I'm a 
witness to you.
    Minority staff: David McMillen, really wonderful 
professional. He's been around here how many years now--8 
years. Yeah, and we all depend on him. It isn't a minority or 
majority thing. We get good ideas from him. Jean Gosa same way, 
minority clerk.
    The Rules subcommittee staff that is with Mr. Dreier and 
Ms. Pryce is Chin-Chin Ip, the staff director. Is he right back 
here--or her? Yeah. I never know who is backing up that wall.
    Court reporters: Christina Smith and Julia Thomas. Thank 
you very much. We appreciate what you're doing.
    With that, we are adjourned.
    [Whereupon, at 4:10 p.m., the subcommittees were 
adjourned.]
    [The prepared statements of Hon. Stephen Horn and Hon. 
Carolyn B. Maloney follow:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                   - 



