[Senate Hearing 109-42]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 109-42

        PROGRAMS IN PERIL: AN OVERVIEW OF THE GAO HIGH-RISK LIST

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

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                THE FEDERAL WORKFORCE, AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 17, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs














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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk


  OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                       Tara E. Baird, Chief Clerk



















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     3
    Senator Lautenberg...........................................     5
    Senator Stevens..............................................    17

                               WITNESSES
                      Thursday, February 17, 2005

Hon. David M. Walker, Comptroller General, U.S. Government 
  Accountability Office..........................................     7
Hon. Clay Johnson III, Deputy Director for Management, Office of 
  Management and Budget..........................................    10

                     Alphabetical List of Witnesses

Johnson, Hon. Clay III:
    Testimony....................................................    10
    Prepared statement...........................................    61
Walker, Hon. David M.:
    Testimony....................................................     7
    Prepared statement...........................................    27

                                Appendix

Charts submitted for the record from Mr. Walker..................    57
Questions and responses for the record from Senator Akaka for:
    Mr. Walker...................................................    63
    Mr. Johnson..................................................    67

















 
        PROGRAMS IN PERIL: AN OVERVIEW OF THE GAO HIGH-RISK LIST

                              ----------                              


                      THURSDAY, FEBRUARY 17, 2005

                                       U.S. Senate,
          Oversight of Government Management, the Federal  
           Workforce, and the District of Columbia Subcommittee,   
                        of the Committee on Homeland Security and  
                                            Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:07 a.m., in 
room SD-342 Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Stevens, Akaka, and 
Lautenberg.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The Committee will please come to order. 
I want to thank you all for coming.
    Today, the Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia 
meets to discuss the Government Accountability Office's 2005 
high-risk series, and I am very pleased that Comptroller 
General David Walker and the Office of Management and Budget's 
Deputy Director for Management Clay Johnson are with us today. 
Thank you for being here. They are both leaders in improving 
the management and efficiency of Federal Government operations.
    Just yesterday, the Comptroller General testified before 
the Committee on Homeland Security and Governmental Affairs to 
discuss GAO's comprehensive examination of the Federal 
Government's structural base, including programs, policies and 
long-term financial outlook. This review dovetails well with 
GAO's work on the High-Risk List, and I commend Comptroller 
General Walker for initiating this report.
    Fifteen years ago, GAO first issued its High-Risk Series to 
examine Federal programs that are especially vulnerable to 
waste, fraud, abuse and mismanagement. Over time, GAO expanded 
their biannual High-Risk Series to include areas of broad 
transformation in the hopes of improving the effectiveness, 
accountability and sustainability of government programs and 
operations.
    Each of the 25 programs listed in this year's High-Risk 
Series impact the daily lives of citizens across the country. 
Many programs are dysfunctional and fail to deliver the 
intended services to the taxpayer; for example, last year, I 
chaired a field hearing in Cleveland to examine the Social 
Security disability process, which has been on the High-Risk 
List since 2003. I was impressed with Social Security 
Commissioner Joanne Barnhart's commitment to resolving this 
issue; however, based on the letters I receive from my 
constituents in Ohio, it appears that progress has been slow if 
not at all.
    In other instances, high-risk programs are wasting billions 
of dollars that could be better used for higher-priority 
programs or cutting the deficit. Needless to say, the High-Risk 
Series provides a road map for oversight and reform, and it 
should be taken seriously by Federal agencies, the 
Administration and Congress. For instance, in 2001, GAO 
designated strategic human capital management as high risk. 
Senator Akaka and I are very familiar with the Comptroller 
General's expertise on this issue, and together, we have 
dedicated time and energy in order to facilitate government-
wide human capital improvements.
    In fact, during my tenure of this Subcommittee, we have 
held 16 hearings to examine the Federal Government's human 
capital challenges. Furthermore, over the past 2 years, seven 
human capital reform bills in whole or part have become law. 
This significant accomplishment does not include the human 
capital reforms enacted specifically for the Departments of 
Defense and Homeland Security. Clearly, the interest of the 
Congress and the GAO designation of human capital management 
coupled with the prominence of this issue in the President's 
management agenda, and I want to underscore this, the 
prominence of human capital in the President's management 
agenda, created a confluence of ideas and synergy which led to 
the most dramatic civil service reform since 1978.
    I believe strongly that this level of scrutiny should be 
focused on each of the high-risk areas. Unfortunately, this 
Subcommittee cannot do it alone. We would need the help of the 
authorization and appropriations committees in other areas. I 
would also suggest that human capital oversight on the 
legislative model could be replicated for other high-risk 
areas. Understanding that this Subcommittee cannot focus on 
each high-risk area, we are going to urge our colleagues on the 
authorizing and appropriations committees to examine ways to 
improve the performance of these programs and activities within 
their jurisdictions.
    Of course, the problem around this place is that we spend 
all our time on the budget and on appropriations, about 60 
percent of it, and we do not have 2-year budgets, so there is 
very little Congressional oversight. Too often, people come in 
to talk with Members of Congress about a problem area. They 
make a pledge to fix it and walk out of the room knowing that 
little follow-up will be conducted. So there is no serious real 
oversight here, and it bothers me substantially. In addition, 
this Subcommittee will focus on a few additional high-risk 
areas during the next couple of years.
    Looking more closely at this year's report, we find that 
GAO designated four new high-risk areas. One, establishing 
appropriate and effective information sharing mechanisms to 
improve homeland security, and we know how important that is, 
because we saw after September 11 how that kind of information 
was not being shared; two, DOD's approach to business 
transformation; three, DOD's personnel security clearance 
program, and four, management of interagency contracting.
    While it is troubling when GAO adds new programs to the 
list, it does not mean that high-risk designation lasts 
indefinitely. Fortunately, this year, GAO found sufficient 
progress to remove the high-risk designation for three specific 
programs, including the Student Financial Aid program, FAA 
financial management, and the Forest Service Financial 
Management System. Mr. Johnson, I applaud the Administration's 
work on this effort, because if you had not done it, they would 
not have gone off the list.
    However, some programs simply cannot break free from their 
high-risk albatross. In fact, six high-risk areas in this 
report have been on the list for 15 years. Clearly, this is not 
an anniversary worth celebrating. These programs are DOD's 
supply chain management, DOD's weapons system acquisition, 
DOE's contract management, NASA's contract management, the 
Medicare program and collection of unpaid taxes.
    And fixing the ones at the Department of Defense could save 
billions and billions of dollars by instituting the change 
mechanisms that have been suggested by GAO. I am extremely 
interested in hearing from Mr. Walker why these programs have 
been on the list so long and even more importantly learning 
from Mr. Johnson what steps has the Administration taken in 
improving them?
    And one of the benefits of having the President reelected 
is you got started with a whole bunch of reforms in the first 
term, and now, you have an opportunity to spend the next 4 
years really making necessary changes. And I know, Mr. Johnson, 
that you are as concerned about that as I am, maybe even more 
concerned, and the real issue here is to pick the ones that we 
can make the biggest impact and then just zero in on it and 
stay on it so that 4 years from now, you can say we really did 
make a big difference, and that would be one of the most 
significant contributions that this administration could make 
to the American people.
    Effective Congressional oversight and a commitment from the 
Administration are imperative to enhance the performance of and 
instill accountability in the areas designated. As Chairman of 
the Government Management Subcommittee, I want our witnesses to 
know that this is the first of a series of high-risk hearings 
that I will be chairing with the Congress. I have talked this 
over with the Chairman of the Committee, Senator Collins, and 
we are going to have the opportunity to add a couple more staff 
people, and we are going to stay on top of this and try to work 
harder and smarter, to make a difference on these issues.
    I thank our witnesses, David Walker and Clay Johnson. I 
look forward to an in-depth discussion about this year's High-
Risk List. I now yield to the Ranking Member of the 
Subcommittee, my good friend, Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    As you mentioned, today's hearing will review the GAO's 
High-Risk List with our friend Comptroller General Walker and 
the OMB Deputy Director for Management, Mr. Johnson. Mr. 
Chairman, I cannot think of two more fitting witnesses than the 
ones we have before us today to discuss how we can strengthen 
critical Federal programs. The oversight of government programs 
is the legacy of this Subcommittee, and as such, we have 
tremendous latitude to investigate a wide range of issues 
relating to government efficiency and accountability of 
taxpayers' dollars.
    Since 1990, the Government Accountability Office has 
identified high-risk programs in need of urgent attention 
either through transformation, as with the Postal Service, or 
significant modernization, such as the business systems at the 
Department of Defense. Transparency and accountability are the 
underpinnings of good government. Too often, the focus is on 
funding levels and policy decisions without considering the 
internal structure of an agency.
    The attention by GAO on high-risk areas sharpens the debate 
by highlighting fundamental management weaknesses such as 
inadequate financial and contract management. Unfortunately, it 
has become routine for agencies to make decisions without 
having sound business cases for change or without taking into 
account agency mission. I believe the high-risk list provides 
all agencies with an opportunity to undertake a critical review 
of their operations and implement best practices.
    I am disappointed that so many areas within the Department 
of Defense remain on the updated High-Risk List. As the Ranking 
Member and former Chairman of the Armed Services Readiness 
Subcommittee, I have worked hard to improve the efficiency of 
DOD programs and operations. We built on our past efforts to 
require improved management of the $50 billion DOD spends 
annually on services by establishing specific goals for the use 
of competitive contracts and performance-based contracting. We 
also have required DOD to develop a comprehensive financial 
management enterprise architecture because DOD has been unable 
to produce reliable financial information or clean financial 
statements.
    However, as the GAO update shows, there continues to be 
fundamental deficiencies within DOD despite our longstanding 
efforts. Take, for example, human capital management within the 
Department of Defense. It is hard to think of any one function 
that cuts across all of DOD more than human capital management. 
Despite the issuance of proposed regulations for its new 
personnel system, DOD does not have in place a strategic human 
capital plan. No document identifies DOD recruitment and 
retention strategy or goes for its future workforce.
    For some time, the Comptroller General has recommended that 
DOD have a chief management officer who would be accountable 
for agency-wide management just as the Deputy Director for 
Management at OMB is responsible for government-wide 
management. I plan to use my position as Ranking Member on the 
Readiness Subcommittee to work towards this objective.
    Chairman Voinovich, your willingness to take on some of the 
very issues that we confront on the Armed Services Committee is 
welcomed, and I look forward to working with you on this 
effort. The bottom line is we need sound management practices 
in place so that Federal agencies can spend taxpayer money 
wisely. We need sound financial systems in place so that 
taxpayer dollars can be tracked, and we need the right people 
and the right skills in place so that agencies can carry out 
their missions successfully.
    I look forward to the testimony of our distinguished 
panelists today, Comptroller General Walker and OMB Deputy 
Director Johnson. Mr. Chairman, I look forward, as I always do, 
to working with you and tackling the inefficiencies spotlighted 
by GAO. I look forward to the months ahead as we continue 
hearings like this issue.
    Thank you very much, Mr. Chairman.
    Senator Voinovich. Thank you very much, Senator Akaka.
    Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Yes, thank you very much Mr. Chairman. 
It looks like Comptroller General Walker is a regular visitor 
to our hearing room, and we welcome him, and we will keep on 
giving him challenges to respond to, and we do look forward to 
hearing from him today.
    And we are going to be looking at 25 specific programs 
identified by GAO at high-risk waste, fraud, abuse, or 
mismanagement. And I noted with interest that you had 
relieved--if I can call it that--a bit of a stigma from several 
areas--three of them specifically, and I will make reference to 
them when we have a chance after we hear your statement to talk 
about them.
    I want to focus on a couple of things. One of them is DOD 
and their contract management--I have had a continuing interest 
in the area--and the modernization of FAA and its air traffic 
control operation. Now, I see that they were commended somewhat 
for their financial management side of things, and for $11.7 
billion in property accounting. These are mindblowing numbers, 
and the fact that they got better at it is really encouraging, 
and I hope that will enable us to examine the possibility of 
privatization of air traffic controllers more clearly, more 
deeply.
    DOD is the largest government purchaser, with $200 billion 
spent on goods and services each year, but GAO is critical of 
DOD's contracting procedures, especially with regard to 
contracts being awarded in Iraq, and we continue to stumble 
across information that is discouraging, Mr. Chairman, about 
funds that were appropriated, delivered, but not appropriately 
used. And I quote GAO's report here: ``DOD's extensive use of 
military logistical support contracts in Iraq and elsewhere 
require strengthened oversight.''
    That is terrible news to hear, because when we see the 
effort of our service people--beyond description in many 
cases--if we do not make sure that everything they need is 
properly delivered, it is a worrisome thing. And I think DOD 
has been negligent in several instances. The personnel waive 
competition requirements for nearly half of the task orders 
reviewed in your report, Mr. Walker. DOD lacks safeguards to 
ensure that waivers were granted only under appropriate 
circumstances.
    Each one of these things, nowhere were they encouraging, 
Mr. Chairman, to see as we try to finance this; we want to 
provide whatever support we can for our troops and our mission, 
but any waste or abuse, and I hesitate to call it fraud, 
because it is still under examination, is unacceptable. Over 
the past couple of years, on four separate occasions, I have 
made written requests to the full Committee to hold hearings on 
DOD contracting abuses. Now, we are not able to hold such 
hearings, and now that GAO bolsters the case, it seems to me 
that we are seriously abdicating our oversight responsibility 
and putting our men and women in uniform in some greater 
danger.
    Another thing, Mr. Chairman, that I want to focus on is the 
air traffic control system. Since 1995, GAO has designated 
FAA's air traffic control modernization project at high risk. 
Now, I come out of the computer business, and I sat in my years 
in the Senate looking at failed plans that were initiated and 
dropped, paid for, by the way, to some of the best companies in 
America. I know one thing from my personal experience, and that 
is when you have an assignment of the magnitude like this one 
that you cannot do the whole thing in one exercise, that it has 
to be segmented; it has to be brought down to bite-sized 
pieces, to use the expression, and we have seen it with plans 
for Medicare and other things as well. You have to work on 
those things where you can see the change taking place.
    Another thing, and I will not get into much of a discussion 
about this, but, Mr. Chairman, you have got a very respectable 
record in public service, and I commend you for it, and you 
continue the service that you brought to Ohio into the Senate, 
and it is excellent. But we know that when you have turnover at 
the highest level of a department or an organization, that it 
is always tough to recapture the starting place where you left 
off, and I am convinced that the FAA Chairman ought to not be 
simply a political appointment, but it ought to be a term of 
office and given a chance to be there to see programs through 
instead of turned over as the political mainstream changes as 
well. And this is Republican or Democrat; I do not care. I 
think it is the kind of assignment that needs a chairperson to 
do this and to be able to follow through on the details, but we 
will save that lecture for another day.
    FAA's failures are largely technical. They bring into 
question the agency's ability to simultaneously undertake a 
risky plan to privatize certain ATC functions. Because of their 
poor record on overseeing contract work on ATC modernization, I 
think it is clear that privatizing other ATC operations poses 
an unacceptable safety risk to all travelers. And I use as the 
classic example what happened with the screeners at the 
airports. When they were in private hands, they did a terrible 
job. When they were in government hands, work improved 
immeasurably, and now, we want to go back there to the old way 
of doing it.
    As usual, Mr. Walker, GAO has done an outstanding job 
identifying problems that we should address, and we look 
forward to your testimony once again and yours, Mr. Johnson, as 
well.
    Thank you, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Lautenberg.
    As is the custom here in this Subcommittee, if you would 
both rise so we can swear you in.
    [Witnesses sworn.]
    Senator Voinovich. Let the record show that the witnesses 
answered in the affirmative. Mr. Walker.

 TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF 
    THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Thank you, Mr. Chairman, Senator Akaka, and 
Senator Lautenberg. I appreciate the opportunity to be back 
before this very important Subcommittee of the Senate to 
address our 2005 High-Risk List. I also appreciate the 
opportunity to be here with my friend Clay Johnson from the 
Office of Management and Budget who I can say at the outset 
takes this subject very seriously.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 27.
---------------------------------------------------------------------------
    I would respectfully request that my entire statement be 
included in the record, Mr. Chairman, so I can just summarize 
the highlights for you.
    Senator Voinovich. It will be taken into the record along 
with yours, Mr. Johnson.
    Mr. Walker. Thank you very much.
    With regard to the highlights, first, as you know, GAO 
started the High-Risk List under the tenure of my predecessor, 
Chuck Bowser, in 1990. Every 2 years commencing in 1993, we 
have published a new High-Risk List at the beginning of each 
Congress. In our view, these are not policy issues as much as 
they are just sound management issues that need to have 
continuous focus over time.
    In doing that, there has been progress made over the years. 
It is possible to come off the High-Risk List, and it is 
important to note that we have clearly defined criteria that 
were circulated for comment by the various agencies early in my 
tenure as Comptroller General as to what it takes to get on the 
High-Risk List and what it takes to get off the High-Risk List, 
and that is very important. In fact, one of the things that 
Deputy Director Clay Johnson did early in his tenure was to 
assign particular individuals within the Executive Branch 
responsibility for every high-risk area as we did at GAO with 
the idea that you want to make sure there is effective 
communication about what is it going to take to get off the 
high-risk list in order to make progress and ultimately achieve 
that objective. He has recently recommitted to me that he 
intends to do the same thing based on this new High-Risk List 
to try to make as much progress over the next 4 years as 
possible, and I am absolutely confident that he is serious 
about that.
    As you know, the purpose of the High-Risk List is to bring 
light to areas, because with light comes heat, and with heat 
normally comes action. And while the High-Risk List started out 
primarily as a list dealing with areas susceptible to higher 
degrees of fraud, waste, abuse and mismanagement, and yes, 
there are a number of those items still on the list. During my 
tenure, we have modified the High-Risk List to not just focus 
on areas of higher risk of fraud, waste, abuse and 
mismanagement but also to recognize areas that are in need of 
fundamental transformation. The human capital issue was the 
first in January 2001. At that time, we also began to note 
issues that might require concerted effort not only by the 
Executive Branch but also by the Congress, such as authorizing 
legislation.
    I would like to commend this Subcommittee and full 
Committee for the tremendous work that has been done in the 
area of human capital, because I agree that more has been done 
in the last 3 years than the last 30 years, and yet, I am 
confident that more will be accomplished in the next 3 years 
than has been accomplished in the last 3 years.
    If I can, let me summarize what the results of the latest 
High-Risk List are. As you noted, there are three areas that 
have been removed from the High-Risk List as a result of the 
latest update.
    Senator Voinovich. Could you take those charts and bring 
them around just a little bit so I can see them better? \1\
---------------------------------------------------------------------------
    \1\ The charts referred to appears in the Appendix on page 57.
---------------------------------------------------------------------------
    Mr. Walker. Face the Senators?
    Senator Voinovich. Thank you.
    Mr. Walker. Student Financial Aid programs, FAA financial 
management, and Forest Service financial management made 
sufficient progress according to our criteria to be removed 
from the High-Risk List, and I would like to commend the 
departments and agencies and personnel involved in achieving 
that objective. That does not mean that these areas are 
perfect. Nobody is ever perfect, nor will anybody ever be, but 
they have made significant progress and enough to be able to 
come off the list, and we commend them for that.
    There are four new areas that have been added to the High-
Risk List as a result of our January 2005 update: Establishing 
appropriate and effective information sharing mechanisms to 
improve homeland security, the Department of Defense's approach 
to business transformation, the Department of Defense's 
personnel security clearance program; and the management of 
interagency contracting.
    If I can, let me touch briefly on DOD's business 
transformation item, and I would imagine that we will get into 
that in a little more detail in the Q and A session. 
Unfortunately, the Department of Defense now has 14 of 25 high-
risk areas, when you count the fact that they have 8 on their 
own, and they also share 6 government-wide. That is up 2 from 2 
years ago. The numbers are moving in the wrong direction.
    Our military is unparalleled in its capabilities, but the 
Department of Defense is a D, poor graded on a curve, on 
economy, efficiency, transparency and accountability. We have 
become convinced at GAO that DOD will not be successful in 
their business transformation effort unless they have a person 
with a proven track record at the right level focused full-time 
and over a sustained period of time for making business 
transformation happen.
    If you go to the Defense Department right now, there is no 
one person that you could point to to say who is responsible 
and accountable for making the business transformation effort 
happen. Now, some would say Secretary Rumsfeld. With all due 
respect, while he is ultimately responsible and accountable 
because he is Secretary, he does not have enough time to work 
on this. Some would say Deputy Secretary Wolfowitz. Quite 
frankly, he has got his hands full as well.
    And there are a lot of players below that level that are 
very involved and very dedicated and are trying to do their 
best, but there is not a comprehensive plan and there is not a 
point person. We do not have the appropriate milestones and 
accountability mechanisms in place. And this is nothing to do 
with politics, partisanship or policy. This is basic good 
government, basic management that is necessary irrespective of 
who the President of the United States is, who the Secretary of 
Defense is, or otherwise.
    So it is absolutely critical, because I can assure you: 
Billions and billions are wasted every year, and it is getting 
worse, not better. I will be happy to answer questions on that.
    We revised four high-risk areas by consolidating four into 
two dealing with the Internal Revenue Service. The two new 
areas are enforcement of tax laws. It is much broader than 
Earned Income Tax Credit and overdue taxes. There is also a 
need to focus more time, attention and resources on 
enforcement, and I note within the President's budget, he is 
proposing additional resources for enforcement. We also 
consolidated the financial management with the business systems 
modernization, because significant progress has been made on 
the financial management area at the IRS. The biggest remaining 
challenge has to do with the business systems modernization, 
including the financial elements of that.
    And last, as noted in the report, while this area did not 
rise to the level of being deemed to be high risk yet, it is 
noteworthy. Specifically, there is a need, not only in the 
Department of Defense but also in the Department of Homeland 
Security as well as other departments to take a more strategic, 
a more comprehensive threat and risk-based approach in 
determining how best to allocate their resources to generate 
maximum results with whatever level of resources might be 
available, which level of resources are going to come under 
increasing constraints based upon our long range fiscal 
imbalances.
    Next chart, please. As you can see, since the beginning in 
1990, our original list had 14.
    Senator Lautenberg. Mr. Chairman, if you could give me a 
moment, is there a distribution of these charts?
    Mr. Walker. I believe it is in my testimony, Senator, and 
we will get you copies of these boards as well.
    Fourteen was the original list in 1990. During the past 15 
years, we have added 29. We have removed 18 and consolidated 
some such that the balance is 25.
    And last, on my left, is the current list, the entire list, 
which is in the testimony. The last thing I would like to share 
with you, Senators, is something that came up yesterday in the 
hearing in which we released the new 21st Century Challenges 
report. As you know, the high-risk report looks like this, 
which came out at the end of January; I believe all of you have 
a copy of it.
    I would really commend this report to you, because this is 
a very strategic document. It is a document that among other 
things has three basic bottom line points: First, we face large 
and growing structural deficits in the future due primarily to 
known demographic trends, rising health care costs. Second, we 
are not going to grow our way out of this problem. It is going 
to require tough choices. Third, a significant majority of the 
Federal Government's policies, programs, functions, and 
activities are based upon conditions that existed in the 1950's 
and 1960's. Furthermore, they have not been subject to 
fundamental review or reexamination since then, whether it is 
discretionary spending, mandatory spending on entitlement 
programs, or tax policies. As a result, we are going to need to 
engage in such a fundamental review, reassessment, 
reprioritization, in some cases, reengineering of the base of 
the Federal Government that will take the balance of my tenure 
as Comptroller General, 8-plus years and beyond.
    There are over 200 questions raised in this report that 
illustrate areas that need to be reviewed and reconsidered, and 
we stand ready to help this Subcommittee, the full Committee, 
as well as others in trying to engage in this fundamental 
review and examination in the coming years.
    One of the compelling reasons we need to do so is 
illustrated on the next chart. Based on GAO's latest budget 
simulation, if you take CBO's baseline assumptions, if you 
assume that discretionary spending grows by the rate of the 
economy beyond the 10-year horizon, which includes national 
security, homeland security, the judicial system, 
transportation, education, etc., if you assume that the Social 
Security and Medicare trustees are correct in their good faith 
estimate of what the cost of those programs are going to be 
over the next 35 years and if you assume that all tax cuts are 
made permanent, this is our fiscal future.
    Under the scenario we will not be able to do much more than 
pay interest on the debt in 2040. Now, there are other 
simulations that we have run that obviously are not as bad as 
this, but even the ones that have optimistic assumptions show 
that we face large and growing structural deficits that are 
going to require tough choices.
    The High-Risk List is the place to start. There is no 
question about it. But I think we are also going to have to get 
into the questions raised in our 21st Century Challenges 
report, as well. Hopefully, we will have an opportunity to do 
that at some point.
    Thank you.
    Senator Voinovich. Thank you, Mr. Walker. Mr. Johnson.

  TESTIMONY OF HON. CLAY JOHNSON III,\1\ DEPUTY DIRECTOR FOR 
          MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Johnson. Mr. Chairman, Senators, thank you for inviting 
me up here today to speak with David Walker.
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    \1\ The prepared statement of Mr. Johnson appears in the Appendix 
on page 61.
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    The GAO High-Risk List, like the President's Management 
Agenda, brings very clear attention to the areas in the Federal 
Government that are not working like we want them to, where 
there is great opportunity for the taxpayers' money being spent 
unwisely. Three areas this past year came off the High-Risk 
List: Federal Student Aid, Financial Management at the Federal 
Aviation Administration (FAA), and the Forest Service. They 
came off because top management was committed to solving those 
management deficiencies. They had a very detailed action plan. 
They had a clear definition of success, and they had clear 
accountability for who is supposed to do which one of those 
individual actions by when, with, or to whom. And they set 
their mind to it, and they did it.
    This is the key to any item coming off this high-risk list. 
It is the key to any change being realized in management in the 
Federal Government, and it is also the key to making sure that 
there is a continued focus on these high-risk areas and other 
areas of management opportunity as administration changes and 
as agency and department leadership changes. If there is a 
detailed action plan, a detailed definition of success, 
detailed dates, detailed accountability that you and the 
Executive Branch agree on, we should be held accountable for 
implementing that plan, no matter who the President is, no 
matter who the Secretary is, no matter who the relevant 
assistant secretary is.
    The big opportunity here is for the thing that we need to 
do better as a government and the things that OMB needs to do 
even better than it has been doing is that we need to make sure 
for each one of these 20-some-odd high-risk items, there is a 
very clear definition of success. We have a clearer definition 
of success with some of them than with others. We need to make 
sure that all of those definitions of success are equally 
acceptable to you. We need to make sure there are detailed 
action plans that are all equally acceptable to you.
    We need to make sure there is clear accountability for 
accomplishing those different milestones. My recommendation is 
that you charge us to come back to you and suggest a timetable, 
within months not years or weeks, to engage the agencies, 
develop those detailed action plans, detailed definitions of 
success and come back to you and tell you here is how we 
anticipate, how the agencies anticipate tackling the risks that 
GAO and others have identified as being unacceptable.
    This is a role that OMB can play. We can make sure that 
proper attention over and above what the High-Risk List itself 
brings to these matters, that the agencies understand that this 
is important. In addition to the items that they are focusing 
on through the President's Management Agenda, they are focused 
on these high-risk areas, and they are giving it appropriate 
attention, and they are working to define with the proper level 
of clarity what we are trying to do, how we are trying to do 
it, and who is responsible for getting it done. Thank you.
    Senator Voinovich. Thank you, Mr. Johnson.
    I appreciate the testimony of the witnesses here today. The 
President has submitted his budget to the Congress, and I 
applaud the fact that he is looking at entitlement spending and 
is looking at the discretionary part of the budget.
    But when you look at the fact of that discretionary budget, 
half of it is going to defense, and the other half of it is 
going to domestic spending, and when you look at the flat 
funding in many programs that are so important to the American 
people, and then to be at this hearing and to hear Mr. Walker 
say there is no plan, no person, no milestone, no transparency, 
it is getting worse and not getting better in the Defense 
Department is outrageous.
    It is outrageous, and I want you to know that this 
Subcommittee is going to get on that, because that is where we 
can get the biggest bang for our effort, just as I did on human 
capital reform, we are going to keep monitoring that to make 
sure it gets done, but we are going to take this issue on. It 
is outrageous: Billions of dollars being wasted, and you are 
cutting the CDBG program, billions of dollars being wasted, and 
cutting other programs.
    And I am a hawk, but I want to know, Mr. Johnson, what in 
the world is going on over there? What kind of plans have you 
received from Secretary Rumsfeld? Have they given you a written 
plan of what they are doing and who the people are who are 
going to implement it and what progress is being made on it? I 
would like you to answer that.
    Mr. Johnson. As I said a minute ago, sir, we will come back 
to you with detailed plans. Tina Jonas, the chief financial 
officer there, understands the problem, understands the 
opportunity. There is not the clear assignment of 
accountability that Mr. Walker talked about. I think they would 
be hard pressed to present these plans to address these high-
risk areas at DOD to you now, but I will offer to you that we 
will come back to you in months with their recommended plans 
for how those will be attacked.
    Mr. Walker. Senator, can I come back on that, please?
    Senator Voinovich. Yes, I would, because even though we 
have a separation of powers between the Legislative and 
Executive Branches of government. I would get Mr. Walker in and 
sit down with your people over in Defense, look at the plans, 
get the best information that you can out of what he has to say 
and then start to implement it.
    Now, look: I know we are at war. I understand that we have 
challenges. But somebody has to be at home working on 
management. Now, when I was governor, I had a chief of staff, 
and he had all kinds of issues to deal with. He was always 
putting out fires, but I put a team together where I had 
somebody who got up every morning and went to bed late at night 
and who worked on the management programs, and they ground away 
at it and ground away at it and held people responsible, and we 
got results. And it does not seem like that is happening in the 
Defense Department.
    Mr. Walker. Senator, can I put this in context? I think it 
is important.
    First, there is no doubt in my mind that Secretary Rumsfeld 
and a lot of other top officials at the Defense Department are 
committed to business transformation. However, you have to have 
a plan. You have to have a point person. You have to have 
effective accountability mechanisms. The difficulty is, as you 
know, that on September 10, 2001, Rumsfeld gave a speech 
declaring war on the bureaucracy at DOD and announcing that he 
wanted to make great progress on business transformation. We 
all know what happened on September 11th.
    I come back to one of the things that I included in my 
testimony in the High-Risk Report: We need a pro at the top, a 
Deputy Secretary for Management with a proven track record of 
success, with some government experience and private sector 
experience, to get in there who is responsible and accountable 
for developing a plan, for making sure that we are taking an 
integrated approach, because many of these areas are 
interrelated, and you have to deal with business transformation 
in a comprehensive, strategic and integrated fashion over a 
sustained period of time.
    Ideally, that person should have a term appointment. Coming 
back to what Senator Lautenberg said, ideally, that person 
should not be a political person, although they may be a 
political appointee. They should be a professional person with 
a 7-year term appointment, because it is going to take longer 
than that to deal with these problems. But we need somebody who 
is going to be there long enough to achieve some sustainable 
progress.
    Senator Voinovich. I have run out of my time, but why do 
you not just follow up on that?
    Mr. Johnson. Just one comment on that: Dave and I have 
talked before about whether there should be a termed person at 
every agency, particularly at DOD, who focuses on management, 
and there are pros and cons with that. Personally, I do not 
believe that a termed person focused on management solves the 
problem. If the Secretary of Defense and the Deputy Secretary 
of Defense are not themselves committed in thought, word and 
deed to the management of the Department, no term, no level of 
competency in this management person is going to get the job 
done.
    So there is no way you can wall off the focus on management 
from the leadership of the Department. It is ultimately their 
responsibility to see that it has happened. Whether the person 
is termed or not, individual people with clear accountability 
need to be defined. Whether they are termed or not is a minor 
part of the opportunity to do it better, in my opinion.
    Senator Voinovich. OK; but we have a Secretary of Defense 
who has said that he is declaring war on inefficiency. The fact 
of the matter is that he does not have anybody there that has 
the clout and stature to get the job done. And what happens so 
often, it takes 7 or 8 years. I know this. I was a mayor for 10 
years. I was a governor for 8 years. When I was mayor, I did 
not see some of the efficiencies take place until the sixth or 
seventh year. As governor, it was some of it in my last year, 
and some of it happened after I left office.
    And you must have some continuity there, especially if you 
have a situation that is as bad as it is in the Defense 
Department, and it is eating up billions of dollars that could 
either be directed toward reducing the deficit or putting the 
money in some other areas where we have great needs for the 
American people.
    Given all that is going on at the Defense Department, I 
don't think the rigors of the Secretary's position allow that 
individual to focus the needed attention on managing the 
Department. Somebody has to be back homeworking on managing the 
Department.
    Mr. Johnson. What needs to be brought forward to you and 
OMB and others are the plans of DOD and the other agencies on 
the High-Risk List to reduce the list to acceptable levels. 
What is the definition of success? What are the milestones, the 
actions test to be taken, and who is responsible for taking 
them and on what date? That is what is owed to you.
    Senator Voinovich. Well, I am glad that you believe that 
you owe it to us because we expect it, and we are going to 
start off with those hearings, and I am going to ask Mr. Walker 
to look at it so that the plan that we have in place is one 
everybody agrees on that really is going to make a difference, 
and the next issue is how do we get the people in there to get 
the job done? And it is tough. I understand from the grapevine 
this morning from my colleagues in the Senate that Ambassador 
Negroponte is rumored to be the head of the new national 
intelligence director.
    We need to get some more people in government, because if 
he gets the job, who is going to go over there to Iraq and be 
our ambassador? He seems to be doing a pretty good job in Iraq. 
So the American people have to understand that we are going to 
have some really good private sector employees who are going to 
have to step forward and come into government to help improve 
the Federal Government. We have to identify some brighter 
people in the mid level to move them up and take over managing 
agencies.
    Mr. Walker. One quick point, Mr. Chairman, if I can: First, 
I agree with Deputy Director Johnson that if the Secretary is 
not committed, no matter who that person is, you are not going 
to be successful. So I agree with that. Second, I do not 
believe that term appointments are appropriate for every agency 
in government. I do believe you have to have somebody 
responsible and accountable for the basic management issues, 
and I believe the current Deputy Secretary can get that done in 
certain departments and agencies, and in many cases, they are 
focused on that.
    But I can tell you this: I would not bet a plug nickel on 
DOD solving its business transformation challenges unless you 
have somebody at the right level focused on this full-time for 
a sustained period of time. You don't need it everywhere, but 
you absolutely, positively need it within DOD.
    Senator Lautenberg. Absolutely right.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you, Mr. Chairman.
    I do not think I can be as forceful as you are in the 
volume of your voice, but this is very serious. I just want to 
take the time to tell you what I tried to do when I was 
Chairman of the Readiness Committee to deal with this and to be 
specific, I will use names. We brought on Mr. Zakheim as the 
Comptroller, primarily to do what you are talking about in DOD. 
And before we confirmed him, I had a good chat with him about 
what needs to be done, which is what we are talking about now. 
And he said he would do it.
    After 2 years, Mr. Zakheim resigned. When he came in to say 
farewell to me, we talked again. And I asked him what happened? 
And he said, and I must tell you, he made some difference 
there, and he improved some. But the message he left with me 
was that there are so many systems in DOD and to try to work 
with these systems is impossible. And so, he was trying to 
bring this whole thing together.
    And so, as a result, Tina Jonas came in and was confirmed 
in his position. But that is an example of how difficult this 
job is. But I agree with you that this position must be on a 
higher level than it is. It should be on a Secretary level for 
it to make any difference. But we must do it, because as you 
pointed out, we are wasting billions of dollars. It is slipping 
by because people just do not know what is happening. And it is 
because there are so many systems in DOD, and it is very 
difficult to bring them together to get information that is 
needed.
    Mr. Johnson, as Senator Voinovich said, DOD spends almost 
$20 billion annually on its business systems. However, these 
investments have failed to resolve the serious problems that 
exist at DOD. The Readiness Subcommittee, as I said, did find 
problems there and tried to work on some of these systems. We 
found things stovepiped, and DOD has not made agency-wide 
improvements.
    Mr. Johnson, and this is a comment to you, I urge you to 
get back to us as soon as possible on this because we must make 
a dent in this problem.
    Mr. Walker, some programs have been on the High-Risk List 
since its inception, as you noted. A good example is contract 
management at DOE, the Department of Energy. DOE is the largest 
nondefense contracting agency in the Federal Government and 
approximately 90 percent of its annual budget is spent on 
contracts.
    In your opinion, General Walker, why has DOE been unable to 
establish more effective oversight in this area?
    Mr. Walker. Well, DOE has a problem, Senator, as does DOD 
has and many other departments and agencies in the Federal 
Government to differing extents. While they do a lot of 
contracting, they do not necessarily have enough people within 
the respective departments with the requisite skills and 
knowledge in order to be able to effectively manage cost, 
quality and performance and to engage in effective oversight on 
an ongoing basis.
    There are a lot of things that you can, and in many cases 
should, contract out, because it might be more cost-effective 
or market forces may dictate that result. However, you should 
not contract out the ultimate responsibility and accountability 
for managing cost, quality and performance. We need to do more 
in that area. And if I can quickly come back to your comment, 
on DOD, there are good people there who are trying to do the 
right thing, and who are committed.
    But quite frankly, there are too many layers, too many 
players, too many systems, and too many hardened silos within 
DOD. In order to get this job done, you have to have somebody 
who rises above that, who reports directly to the Secretary, 
who can deal with the Under Secretaries and the Service 
Secretaries.
    No matter who the Comptroller is, they are not at the right 
level. Plus, as you properly pointed out, they are not there 
long enough. And by the way, that is a problem in the 
acquisitions area at DOD, too. They typically turn people over 
every 2 to 3 years on weapons systems that cost tens or 
hundreds of billions of dollars, and that is a major 
accountability problem, as well.
    Senator Akaka. Well, I thank you for your statement and 
your comments. As I said earlier, we are here to discuss how we 
can strengthen critical Federal programs, and thanks for your 
message. I really appreciate it, Mr. Chairman.
    Senator Voinovich. Senator Lautenberg.
    Senator Lautenberg. Yes, Mr. Chairman, unfortunately, I 
have got another meeting to go to, but there are a couple of 
things that I would like to put out on the table; first of all, 
I thank Mr. Walker for your forthright statement of what you 
see, because I think in your commentary, you have hit the nail 
on the head as I see it.
    It is one thing to manage a military operation. It is 
another thing to manage and administer the business side of 
things. And I think that one day this whole thing is going to 
be looked at and divided in such a way that it is not simply 
another part of the military management. It is business 
management, pure and simple, and you can, in the military, tell 
someone to jump and not come down until you say so, but you 
cannot do that on the other side of things.
    And I look at, for instance, the question with Halliburton 
and the KBR subsidy, they were given full payment for cost-plus 
logcap task orders in Iraq, even though the Defense Department 
orders ruled that Halliburton had not provided the proper 
accounting. Are you aware of that?
    Mr. Walker. I am aware of some of the problems with 
contracting in Iraq, Senator.
    Senator Lautenberg. We had an opportunity to talk to 
someone who was willing to speak out, a person named Bunny 
Greenhouse, and she was a top contracting officer for the Army 
Corps of Engineers. She came forward, because her conscience 
bothered her so much on abuses surrounding the no-bid contract 
awarded to Halliburton that cost the taxpayers $2.5 billion. 
And not to pay attention to that and say, listen, something was 
terribly wrong here, we tried to get hearings in the Committee 
to review that and were never able to do so, but I think that 
is an area that is just rife with mistakes and waste, and I 
think that we are not going to have that happen again. No big 
contracts should be awarded by the military. As a matter of 
fact, much of the contracting ought to be done outside of the 
periphery or the perimeter of the military operation.
    The military is a wonderful group. We have terrific people 
who are serving on the line. When I hear people who are 
severely wounded say they would want to go back and help 
further, it is a remarkable human endeavor.
    Last, Mr. Walker, the FAA performance on the modernization 
program, what kind of faith can we put in the FAA ability to 
effectively move some of the ATC operation, the private 
contractors, and still maintain safety standards? There is not 
a lot of encouragement there that that can happen.
    Mr. Walker. Well, as you know, the FAA air traffic control 
modernization is on our High-Risk List. It is also illustrative 
of problems that many major systems efforts have in the Federal 
Government. Namely, if you do not adequately determine the 
system requirements up front and nail them down and make sure 
that you have an appropriate project plan with key milestones 
and accountability mechanisms, along with effective oversight, 
you will get into trouble over time.
    And so, the item that is on the High-Risk List, Senator 
Lautenberg, is really more the issue of the systems 
modernization rather than the safety issues that you are 
raising. I would be happy to get back with you and your staff 
on some of those issues, if you would like.
    Senator Lautenberg. Well, you have been assigned kind of 
the task of Paul Revere here of sounding the alarm, and you 
have done it appropriately. And for us to have been discussing 
the same problems for over so many years and knowing that the 
cost for these problems is so enormous; the Chairman described 
it as outrageous; it is outrageous. I mean, here, we sit, and 
we drum up the verbiage to go along with our indignation, but 
there we are: next year or 2 years from now, we will be 
discussing the same problem unless we make fundamental changes 
to the system.
    Senator Voinovich. Thank you, Senator Lautenberg. We are 
joined by Senator Stevens.

              OPENING STATEMENT OF SENATOR STEVENS

    Senator Stevens. Thank you, Mr. Chairman. I am sorry to be 
late. I have been in another committee.
    I am glad to see you here, Mr. Walker and Mr. Johnson.
    I want to ask questions probably beyond the scope of the 
hearing. You two have comparable jobs, but OMB has come up with 
a list now that the President has approved of 150 programs that 
ought to be terminated. You have come up with a list of 
programs that are at high risk. What is the difference?
    Mr. Walker. Well, one, I can tell you, Senator, is with 
regard to our High-Risk List, we have certain criteria that 
have to be met in order to determine whether or not something 
is high risk, and one of those is it has to be something of 
national significance, and it has to involve large amounts of 
money. So there are many programs that the President may end up 
having on his proposed termination list that may not meet the 
criteria of being high risk, because they may not be national 
in scope, or they may not involve enough money.
    Senator Stevens. But do you determine that they should be 
saved before you work on what the risks are? Are you sure the 
programs should continue when you make your study of what the 
risks are and how to save them?
    Mr. Walker. Oh, absolutely not, Senator. In fact, one of 
the important points is since I have been Comptroller General, 
in addition to focusing on fraud, waste, abuse, and 
mismanagement and trying to fight that and minimize that, we 
have also noted on the High-Risk List that there are a number 
of items that are in fundamental need of transformation. You 
need to reexamine whether or not they should continue.
    Senator Stevens. But you made a determination that they 
should be saved, if they should be transformed. Have you made 
any determination they should be terminated?
    Mr. Walker. With regard to the High-Risk List itself, no. I 
would, however, respectfully suggest----
    Senator Stevens. No, I mean with regard to the programs you 
review. You must review a whole series of programs to determine 
which ones are high risk.
    Mr. Walker. Senator, you should have a copy; I sent one to 
your office, we released this report, which is called 21st 
Century Challenges. It raises over 200 questions about existing 
Federal Government policies, programs and functions and 
activities that I think it is appropriate to review and 
determine whether or not they ought to be continued, and if so, 
in what size and in what manner.
    Senator Stevens. Have you reviewed that, Mr. Johnson?
    Mr. Johnson. This report? No, I just got it this morning.
    Senator Stevens. Do you do a similar function? How do you 
make a determination and recommend to the President what 150 
programs should be terminated?
    Mr. Johnson. OMB is 3 years into a 5-year process of 
evaluating all the 1,200 programs in the Federal Government, 
and our going in approach is we want programs to work. But you 
cannot figure out what you need to do to make them work the 
best unless you have assessed whether they are working or not, 
unless you have a very specific, measurable outcome; you have 
an efficiency goal, and you have an assessment of management 
and an assessment of what is keeping you from having the best-
performing program possible.
    So our going in approach to your question is we want the 
program to work. The 150 programs that have been recommended 
for elimination or for significant reductions are programs that 
we assess are not high priority, have accomplished their stated 
purpose, or do not work. We have made attempts to fix them. 
There are other programs that deal with the same issue, and 
continued spending in these areas are not warranted. The return 
on that investment is less than the investment itself.
    Senator Stevens. That was going to be my next question to 
Mr. Walker.
    As you go through these high risks, what we see in the 
private sector entities that both are going to fail, and they 
find a way to come together and merge, and they survive. Now, 
do you make such a suggestion to us as to how some of these 
high-risk things could be merged?
    Mr. Walker. Senator, I am happy to take a look at that and 
get back to you on it. I do think that there are opportunities, 
to take a look, for example, at the budget categories and 
determine how many departments and agencies have similar 
programs and activities that they are engaging in in a 
particular area.
    For example, there are 44 programs dealing with job 
training that cross over 20 agencies. There are 22 agencies 
that are involved in financial literacy. And the question is 
why? The simple fact of understanding that and whether there is 
duplication of effort or redundancy or inefficiency is 
something that I think it is prudent to go forward on.
    Senator Stevens. Well, they estimate that you have to have 
79 applications to various Federal agencies to drill a well for 
oil in Alaska. Have you ever looked into the redundancy of the 
programs that demand these studies and studies and studies and 
applications and applications?
    When I was in China this last summer, we literally saw a 
building go up in a week. And then, I said, well, how in the 
world can you do that? It would take 2 years to get one started 
in Alaska or anywhere else in the United States. And they said 
we only need one permit, one permit. We have never looked at 
trying to consolidate all these permit applications--at a 
tremendous cost, by the way, because all of these things have 
to be done.
    And I am serious. It is 79 different things you have to 
have before you drill wells in Alaska. I would think that 
rather than look at it high risk from the point of view of 
government function we would look at the question of what are 
they doing for the society? Do we need all those applications? 
Have you ever looked at that? Is that a function of the GAO?
    Mr. Walker. That is something we could look at. To my 
knowledge, Senator, we have not looked at that specific 
example, but I think there are plenty of opportunities to do 
so.
    Senator Stevens. I do not mean to be abrupt, but you are 
the one, your predecessor or you decided that you have the 
right to make these studies. They are not mandated by Congress.
    Mr. Walker. You mean the high-risk list?
    Senator Stevens. Yes.
    Mr. Walker. That is correct; we have done it since 1990.
    Senator Stevens. But you have never looked at the question 
of should they survive, nor should they merge, nor are they 
required in the beginning.
    Mr. Walker. Well, Senator, I will tell you: I think this 
document, which I would really commend to you----
    Senator Stevens. I will take it with me on the trip that I 
am going on tomorrow.
    Mr. Walker. It gets to some of those issues, because let me 
give you an example, Senator: Based upon our work, our high 
risk work and other work that we do for the Congress, which, as 
you know, 90 percent of the work that we do is requested or 
mandated by Congress, so we are very focused on serving the 
Congress. But based upon that work----
    Senator Stevens. You are an arm of Congress. You are not 
independent of Congress.
    Mr. Walker. I understand that we are in the Legislative 
Branch. I understand that, Senator. But my point to you is that 
I think this makes a pretty clear and compelling case that 
there is a need to look at the base of government. There is a 
need to look at potential redundancies, and there is also a 
need to be able to ask questions like: Why did we create this 
program? What were the conditions that existed then? Do they 
still exist today? Is this program successful? If so, on what 
basis?
    I think we need to do that, and we look forward to working 
with this Subcommittee and others in doing that, because we 
find a serious situation.
    Senator Stevens. Well, I commend the Administration, 
because I think they are finally looking at the question of 
whether Federal lands should be used to try and find ways to 
really ameliorate the shortage of energy in this country, but I 
was just told the other day that even with the new policy of 
saying let us look at these Federal lands, those lands will not 
be available for really exploration for 4 years, maybe 5 years, 
because of all the things a person has to do to get a permit to 
go into those lands and to explore for and drill for, if 
necessary, for oil or gas.
    I do think, Clay, you ought to take a look at that, too. 
These two agencies together ought to find some way to cut 
through the red tape is what I am really saying.
    Mr. Johnson. There are different ways to think about the 
Federal Government. One of them is as a huge service 
organization. Let us define all the different areas where we 
serve. We serve drillers; we serve retirees; we serve many 
others; and take the most important ones where the most money 
is involved or the most number of people involved and make sure 
we have a clear definition of success of high level service.
    And so, in the case of drillers, the definition of success 
would include whether they get their rigs out on the field in a 
reasonable period of time and start looking for oil. Whether 
they can build a building in a reasonable period of time. Let 
us define that and then hold those people accountable for 
achieving those levels of success. We tend to focus on the 
outcome we are producing, but looking at it from a service 
standpoint is probably something we should do at the same time.
    Senator Stevens. Perhaps I am too impatient, because we 
obtained approval of Congress proceeding with the Alaska Gas 
Pipeline in the last Congress. I was told yesterday that the 
earliest we can expect the beginning of that construction is 
2009. And it is because of the procedures that are in existing 
law, redundant procedures that have to be pursued between now 
and then and at the same time came the study that said by 2014, 
we will be importing 40 percent of our natural gas.
    Why? Because we have this gap now in supply and demand, and 
the cost is going to go up and up and up. By the time that the 
price gets high enough, people are going to start to bring in 
LNG. But we have enough natural gas in this country in areas 
that are known to be valuable for oil and gas, and if we just 
had the right to drill, we could bring it in before 2014, but 
again, it would take 4 or 5 years to start any one of those 
developments.
    And I think, in this process that you are in, I would 
encourage you to see if we could not set off on a task how to 
reduce the delay. We are not against environmental review. We 
are not against economic review. We are not against project 
analysis. But there ought to be a way to do them and to do them 
in a compatible way and move them forward so that--well, in 
engineering, I learned about a critical path? There is no 
critical path available to deal with the Federal Government in 
terms of development of energy in this country today.
    Mr. Johnson. Well, there is a general view, when you say 
the Federal Government, one image that comes to mind is a long 
line, a line to get into the country, a line to get a visa, a 
line to get a document, or a line to get a permit or whatever, 
and we need to get out of the long line business.
    Senator Stevens. Potential litigation all the way.
    Mr. Johnson. Right.
    Senator Stevens. Potential litigation all the way, and that 
is part of the delay.
    Well, I appreciate your time, Mr. Chairman. Glad to see you 
two here, and I am going to read that book on our trip coming 
up tomorrow. Thank you very much.
    Mr. Walker. Thank you, Senator.
    Senator Voinovich. You ought to maybe get Senator Dominici 
involved in this right away.
    Senator Stevens. Yes. [Laughter.]
    Senator Voinovich. There are several areas, Mr. Johnson, 
that I am concerned about in addition to the Defense 
Department. One of them is----
    Mr. Johnson. I welcome your change of subject, sir. 
[Laughter.]
    Senator Voinovich. We are looking for revenue, and the 
Internal Revenue, in terms of collecting unpaid taxes, has been 
on the list since 1990. And I know that many States have 
incorporated programs and have enhanced their collections 
measurably. And it is frustrating that since 1990, it has been 
on the High-Risk List, and I wonder have you looked into that 
at all?
    Mr. Johnson. I have not personally, but again, Mark 
Iverson, my predecessor is over there and is a very talented 
fellow and has all the ability in the world to focus on things, 
and we need to get back to you with how we are going to tackle 
that.
    Senator Voinovich. You know, I would go back and talk to 
Mr. Bolton and say: We need more revenue, and here is an area 
that if we really get at it, we can bring some more money into 
the Treasury.
    Mr. Johnson. The specific areas that I know that are being 
looked at that have revenue implications are, related to 
improper payments. We think there is a net, our improper 
payments are net $35 billion higher than they need to be. If we 
are going to eliminate improper payments, we create $35 billion 
that does not exist now.
    Competitive sourcing addresses the incurred to commit to 
perform commercial activities; we think those are $6 billion to 
$7 billion higher than they need to be. Overall, it does not 
increase revenue, but reduces costs, with an overall focus on 
efficiency. A one percent improvement in efficiency across the 
Federal Government is tens of billions of dollars a year.
    Those are basic mindset changes, procedural changes that we 
are effectively implementing today to create tens of billions 
of dollars in additional available revenue to be spent in the 
form of reduced costs. So there are a lot of things being 
looked at, and there are many more things still to be examined.
    Senator Voinovich. Well, I think the question is why has it 
not happened, and what are you going to do to fix the problems 
at the Internal Revenue Service.
    Last year, in April, I had CMS in here, and the title of 
the hearing was ``Does CMS Have the Right Prescription in 
Implementing the Prescription Drug Program?'' And we are going 
to have another hearing. I told Mark McClellan, who spent a lot 
of time in Ohio last year, that we are going to do it. But the 
Medicare program has been identified by the High-Risk Series 
since 1990. GAO identifies the recently-enacted Medicare 
Prescription Drug Improvement and Modernization Act as 
creating, ``new challenges for administering the Medicare 
program.''
    The question is do we need legislative changes that will 
help deal with challenges faced by the Medicare Modernization 
Act, and the High-Risk Series identifies that only in some 
cases has GAO--or CMS is taking steps to do something. And the 
bottom line is this: We are going to implement this new 
prescription drug program next year. And I have to tell you as 
one who went to almost 40 meetings last year on this issue of 
this program that the card issuance was a disaster. You can 
talk to anybody about it. I mean, the Department worked, they 
had the numbers, but the system that was in place did not work.
    And if we have the same problem with implementing the 
prescription drug program that we had with the card that was 
the transition to the new program, I think that this wonderful 
program that the President wanted and we wanted will be 
discredited and will cast a large shadow over anything that we 
intend to do in terms of Social Security, because people will 
say if they failed, they will fail this too.
    And so, I think somebody in the Administration ought to 
really get involved, look at what is going on over there, does 
he have enough people to get the job done, what is the system 
that we are going to use to cascade this out to the American 
people, are we going to let them make a choice, are we going to 
empower them to put them in a program and let them opt out? But 
unless that is looked at, this could be a disaster next year, 
and so, I bring that to your attention.
    The other issue that is on the high risk, an emerging high-
risk area, and this is another one that is really important in 
terms of spending money: The need for a comprehensive national 
risk and threat assessment, OK? If I were Osama bin Laden, I 
would be the happiest person in the world. That one individual 
has wreaked more havoc on the United States than any person, in 
over 200-year history in terms of changing the way we do things 
to respond to terrorism.
    And one of the things that is of concern to me and I know 
of my colleagues, and you know, we are part of the Homeland 
Security Committee, is that everybody and his brother wants 
something done. If we do everything that everyone identifies 
that we must do, we will bankrupt the country.
    And somehow, we need to have in place, and Mr. Walker, I 
would like you to comment; maybe I am off on the wrong track on 
this, but we must have some system to do a threat assessment 
and say these are the priorities and where are we to make a 
difference. The No. 1 thing is if we had--that is why we have 
the new Director of National Intelligence is that we do a great 
job with that, and we keep these people out; we are in good 
shape.
    But last night, I watched on C-SPAN where they had a 
hearing--I think it was before one of the committees, and 
George Tenet--not Tenet, but who runs the FBI, Mueller?
    Mr. Walker. Mueller.
    Senator Voinovich. Yes, Director Mueller was talking about 
all of the terrorist organizations that we have right now in 
the United States. Hamas is still in the United States and some 
other groups too.
    So we do have that problem, but in terms of how do we 
respond to that, is anybody over there putting a chart in place 
and saying this is where we should allocate our monies to make 
the difference in terms of securing the homeland?
    Mr. Johnson. You are asking me?
    Senator Voinovich. Yes, I am.
    Mr. Johnson. I do not know what form it takes, but I know 
they pay a lot of attention to where they think the 
vulnerabilities are where the bad guys think our 
vulnerabilities are; and therefore, where we should be most 
attentive to keep them from getting in the country or 
minimizing those vulnerabilities. But the exact form it takes, 
I do not know.
    Senator Voinovich. Mr. Walker, would you comment on that, 
and then, I will wrap it up, because Senator Akaka has a speech 
to give on the floor.
    Mr. Walker. Sure, they need to develop a more comprehensive 
and integrated threat and risk assessment both within the 
Department of Homeland Security as well as other agencies, 
including the Department of Defense. I think it is important, 
as you pointed out, that there will never be such a thing as 
zero risk in today's world, but we need to end up allocating 
our resources to try to mitigate as much risk as possible.
    Now, on that, Mr. Chairman, I would respectfully suggest 
that Congress is going to have a role to play, too, because one 
of the issues that is going to be there is after you end up 
conducting that comprehensive threat and risk assessment, and 
after the Congress ends up allocating resources, how much of 
those resources should be allocated on a per capita basis 
versus how much of those resources should be allocated in 
accordance with the comprehensive risk and threat assessment.
    Senator Voinovich. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman. Mr. 
Johnson, you recently announced the Administration's goal of 
expanding the personnel flexibilities granted to the Department 
of Homeland Security and the Department of Defense to the rest 
of the Federal Government.
    My question to you is why do you believe it is appropriate 
to expand these flexibilities across government without 
Congress and the Administration having an opportunity to gauge 
the success or failure of these new personnel systems?
    Mr. Johnson. Well, I think most everybody would agree that 
expanded flexibilities will be adopted government-wide. I do 
not think anybody disagrees about whether they will be adopted; 
the only question is ``when?'' David had a conference a year 
ago or so that he co-chaired with Paul Volcker, and there was 
representatives from all the different interested parties and a 
lot of discussion about this. I think the group was unanimous 
in their belief that we would change the flexibilities that 
management has to manage its people, and there was a question 
of should we do it piecemeal, or should we do it all at once 
with the rest of the Federal Government.
    And the feeling was we should not do it piecemeal. The 
feeling was we should do it all at once, and so, the question 
was do we do it this next year or the year after that? We do 
not want to do anything that represents high risk, since that 
is the subject of today's hearing. We do not want to jump into 
a swimming pool full of sharks. We do not want to go where 
there are a lot of unknowns, and we do not know how to deal 
with those unknowns. I contend that almost all the risk 
associated with spreading new human resource flexibilities 
government-wide are in implementation.
    The risks are not in what the regulations should be. The 
risks are on how are they implemented. How good are we at 
training managers? How good are we communicating and 
alleviating anxieties and fears with employees? For instance, 
the Department of Homeland Security has a 4-year plan for 
implementing their new system. The last group at Homeland 
Security that will adopt their new system in 2009. President 
Bush will not be President; I will not be here; a lot of us 
will not be here. So it is a very long system for the very 
purpose of managing risk to acceptable levels.
    DOD has a long plan also to implement theirs. I do not know 
what the time frame is, but it is all about managing risk. So I 
believe that, one, we will not do this without Congress. I 
believe you all are still involved in this unless someone 
changed the Constitution. What I propose is that we commit to 
extend these government-wide and to deal with the most 
important ones, initially, which are the ones that do not 
involve labor relations, which are the most controversial, but 
with the least amount of value added to the improvement of the 
system.
    Let us focus on the ones that are the least controversial, 
that have the greatest value added capability. Let us agree 
that we are going to do that, and let us agree on a reasonably 
long period of time for implementation that will allow us to 
manage the risks of implementation to you all's satisfaction 
and to ours and to the unions' and to the employees' 
satisfaction.
    Senator Akaka. Yes, well thank you for that statement. I 
know that the Chairman and I, and the Subcommittee have been 
very concerned about expanding these regulations immediately to 
the whole government.
    Mr. Johnson. This is not a rush out there. No, we have to 
be prudent, because this is going to be and must be with great 
certainty very successful.
    Senator Akaka. And of course we have been concerned about 
the flexibilities.
    Mr. Johnson. Yes.
    Senator Akaka. And we do not know what they are at this 
time.
    Mr. Johnson. Excuse me; one of the things I talked to 
Senator Voinovich about was coming back to him and to Susan 
Collins and you, sir, and Congressman Davis about talking 
through where we think, and let us make sure we understand 
where the risks are, where the opportunities are. We hope to do 
this with you all, obviously, and seek your input on this. I 
think the opportunity is to commit now, so we can all get in 
the business of doing it and making these benefits available to 
the entire Federal Government.
    Mr. Walker. Senator, may I comment on this? I think it is 
important that certain concepts ultimately be applied 
government-wide. For example, right now, you have a 
circumstance where individuals who are not performing at an 
acceptable level, or, stated differently, unacceptable 
performers are guaranteed the across-the-board pay increase 
that Congress passes every year, and for many Executive Branch 
agencies, 85 percent of the pay increases that occur every year 
are directly tied to that and to length of service, neither of 
which have anything to do with performance.
    Our current system for determining market-based 
compensation is fundamentally flawed. So I think over time, we 
need to move to a market-based and performance-oriented 
compensation system. At the same point in time, it is 
critically important to have adequate safeguards in place to 
prevent abuse of employees, and those safeguards need to be in 
place before you operationalize the authorities. So I think 
there is an opportunity to expand this, but you have to have 
certain principles that go across government, certain 
safeguards that should be in place before you operationalize 
the authority to maximize the chance of success and to minimize 
the possibility of problems.
    Senator Akaka. Thank you, Mr. Walker. My time has expired. 
I just want to say I certainly appreciate your statements, and 
for me they have been helpful.
    Senator Voinovich. Yes, thank you, Senator Akaka.
    On that issue, we are concerned that we must start to see 
some examples of how this is going to happen, and I think that 
there is a reluctance to make government-wide personnel reforms 
until we see how it works in several areas. Now, you have it 
working in the GAO, but we would like to see just how is this 
going to be cascaded throughout the government, and I think how 
that is done initially will have a lot to do with whether or 
not we are going to agree to do it on a government-wide basis. 
What is your plan, the plan of the agencies, what training will 
be provided to managers for filling out performance evaluations 
which is much easier said than done. I have done it, and I 
suspect you have. It is tough stuff. It takes time.
    And I think also that we need to look at the concerns of 
the unions regarding collective bargaining. I think they are 
raising some legitimate issues. I think we need to look at them 
in terms of responding to some of their concerns, because their 
cooperation in all of this is very important. If they decide 
that they are just going to throw up roadblocks and discourage 
people from doing this, they can really bring this thing almost 
to a halt. Now I have made it very clear that they cannot 
afford to do that, because this is too important, particularly 
in the Department of Homeland Security, to the security of the 
United States of America, so the unions have to put aside some 
of those things.
    On the other hand, I think that they have some legitimate 
complaints. One of the witnesses discussed the job losses in 
the agriculture inspection function. We are looking into his 
concerns, but he said about a third of the people who were 
serving as agriculture inspectors have left, and I am pulling 
together anecdotal stories from very professional employees. 
Some feel like they have been demeaned, and are thus leaving 
the government, and so, we have to look at that also.
    We forget that this is, particularly in Homeland,--180,000 
people that we are trying to bring together--is a very 
formidable management task. Sometimes, the public hears the 
government is going to do something, and you snap your fingers, 
and it is going to happen. Unfortunately, it does not work like 
that. It takes years to complete some of our tasks. So we need 
to work together on it, and we are open to it.
    In terms of the high-risk area, we are going to share with 
you, Mr. Johnson, where we are going to put our effort, and I 
want to publicly say to you we are going to get into the DOD 
thing. I am one of those guys who I set out early on, and I 
talked to Mr. Walker, and he was very helpful. We are going to 
do something about human capital, and we are like a bulldog, 
and we hung onto it, and we made some success there.
    Now, we must explore whether agencies are using the 
flexibilities that they have been given. But I will say this 
for both of you: It is working, because I have talked to one 
agency; I talked to Sean O'Keefe from NASA. He told me that 
NASA is already reaping the rewards of the personnel 
flexibilities granted by Congress. But the thing is, we need to 
open this up government-wide and make sure agencies are using 
the flexibilities. Some of the agencies still have not utilized 
the new hiring program and not moved away from the rule of 
three.
    So we are going to stay on top of that and kind of monitor 
that and do some oversight. But this Subcommittee is going to 
shift into oversight of the high-risk areas. I really believe 
that we can put our minds to it and spend the time, stay on top 
of this, we can help remove some DOD programs off the High-Risk 
List. It is important for efficient operation of the Department 
of Defense, and it is so very important now with the growing 
deficits, and we are trying to find money, and we have to do 
something to make a difference.
    As I mentioned to you, Mr. Johnson, I find it difficult to 
tell certain programs, like health care, education, or 
childcare, that they are receiving funding cuts when the DOD 
wastes $22 billion because of poor management practices. This 
simply is not fair.
    So I thank you for being here, and I really appreciate the 
work both of you are doing for our Nation. You have been 
wonderful. You are friends, and I look forward to working with 
both of you.
    Mr. Johnson. Thank you, sir.
    Senator Voinovich. The Committee is adjourned.
    [Whereupon, at 11:38 a.m., the Subcommittee adjourned.]



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