[Senate Hearing 109-573]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-573
 
                      BUREAU OF RECLAMATION PLAN 
                          FOR THE 21ST CENTURY

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   TO

  RECEIVE TESTIMONY ON THE NATIONAL RESEARCH COUNCIL REPORT, MANAGING 
     CONSTRUCTION AND INFRASTRUCTURE IN THE 21ST CENTURY BUREAU OF 
 RECLAMATION, AND THE U.S. BUREAU OF RECLAMATION REPORT, MANAGING FOR 
            EXCELLENCE: AN ACTION PLAN FOR THE 21ST CENTURY

                               __________

                              MAY 23, 2006


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               KEN SALAZAR, Colorado
GORDON SMITH, Oregon                 ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky

                     Bruce M. Evans, Staff Director
                   Judith K. Pensabene, Chief Counsel
                  Bob Simon, Democratic Staff Director
                  Sam Fowler, Democratic Chief Counsel
                          Nate Gentry, Counsel
                    Mike Connor, Democratic Counsel



                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Burns, Hon. Conrad, U.S. Senator from Montana....................     2
Craig, Hon. Larry E., U.S. Senator from Idaho....................     3
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Donnelly, Thomas F., Executive Vice President, National Water 
  Resources Association..........................................    36
Duscha, Lloyd A., Consulting Engineer, National Research Council.     5
Keppen, Dan, Executive Director, The Family Farm Alliance........    25
Rinne, William E., Acting Commissioner, Bureau of Reclamation, 
  Department of the Interior.....................................    10
Snyder, H. Diane, Executive Director, American Council of 
  Engineering Companies..........................................    31
Yates, Scott, Director, Wyoming Water Project, Trout Unlimited...    39

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    47

                              Appendix II

Additional material submitted for the record.....................    65


                      BUREAU OF RECLAMATION PLAN 
                          FOR THE 21ST CENTURY

                              ----------                              


                         TUESDAY, MAY 23, 2006

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Pete V. 
Domenici, chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMINICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. The Senate Room will please come to order. I 
did want to mention that Mr. Raley, who ordered this report and 
was supposed to testify, has gotten real sick this morning, and 
is not able to attend, so he will not be testifying here today. 
We'll arrange to do that. We'll see how we do then, as we 
proceed through.
    First of all, I'd like to welcome you today to our hearing 
on the National Research Council's report on the U.S. Bureau of 
Reclamation.
    Since the Reclamation Act was signed into law over 100 
years ago, the Reclamation Act has accumulated an impressive 
record of achievements. It is responsible for some of the most 
architecturally and historically significant projects of the 
21st century, including the Hoover Dam and Grand Coulee Dam. 
Reclamation facilities have contributed significantly in 
providing the water and the power necessary to populate the 
Western United States and the development of its agricultural 
economy.
    Reclamation facilities provide water to over 30 million 
people, 10 million acres of farmland and generate more than 40 
billion kilowatts of hours of electricity annually.
    However, the Bureau of Reclamation's mission has changed 
significantly over the past 30 years. A combination of factors 
has transformed Reclamation from an agency that constructs 
large water and power projects to one that manages existing 
facilities and operates them according to applicable law. For 
this reason, it is time for Reclamation to evaluate its mission 
for the 21st century, and to determine what capabilities are no 
longer needed, and what additional capabilities may be required 
to fulfill its mission.
    The NRC report provided a good review of what changes will 
be required of Reclamation over the coming years. However, the 
NRC report and the Reclamation Action Plan are the beginning of 
a long process. There are serious challenges facing Reclamation 
that require a long hard look, including aging infrastructure, 
human resources, stakeholder relations, outsourcing and the 
promulgation of policies. I fully intend to hold additional 
hearings to monitor Reclamation's implementation of the 
findings of the NRC report, and the Reclamation Action Plan. I 
take the NRC report seriously, and expect Reclamation to take 
it seriously as well.
    I'd like to welcome our witnesses for today's hearing, but 
before we proceed, we will ask the Senators if any of them 
desires to engage in some brief comments before we proceed to 
the two witnesses in the first panel. Starting with those who 
were here first, Senator Thomas, if you have any comments, and 
then over to you, the Senator from Montana, then you, Senator 
Craig.
    Senator Thomas. Thank you, Mr. Chairman, I really don't 
have an opening statement. I am interested, of course, in the 
Reclamation Department and what they're doing, and I know in 
the State of Wyoming, Reclamation is very active and lots of 
things go on there. So, I'm interested in hearing the reaction 
to the study, and more than anything, what the plans are for 
the future. So, thank you, I look forward to the witnesses.
    The Chairman. Thank you very much.
    The Senator from Montana.

        STATEMENT OF HON. CONRAD R. BURNS, U.S. SENATOR 
                          FROM MONTANA

    Senator Burns. Thank you very much, Senator Domenici. I 
have a statement I will put in the record, and I'll have some 
questions for the witnesses. It's a very interesting report.
    [The prepared statement of Senator Burns follows:]
 Prepared Statement of Hon. Conrad R. Burns, U.S. Senator From Montana
    Thank you all for coming today to update us on this very important 
topic.
    The Bureau of Reclamation has an impressive history of bringing 
water and power to the Western States. In 1903, Secretary of the 
Interior Hitchcock authorized construction of the Milk River Project as 
one of the first five reclamation projects under the new Reclamation 
Service. Two years later he authorized construction of the St. Mary 
Diversion Facilities. Completed in 1915, the Milk River Project and the 
St. Mary Diversion Facilities have been in operation for nearly 100 
years with minimum repairs and improvements.
    The Milk River Project and the accompanying St. Mary Diversion 
Facilities are known as the Lifeline of the Hi-Line. The St. Mary and 
Milk River basins are home to approximately 70,000 people with a meager 
per capita income of approximately $19,500. Most of these people 
depend--directly or indirectly--on the project and would be 
dramatically impacted by its failure and the loss of water in the Milk 
River Project.
    It is the backbone of the region's agricultural economy. It 
provides water to irrigate over 110,000 acres on approximately 660 
farms. The project also provides municipal water to approximately 
14,000 people. Fisheries, recreation, tourism, water quality and 
wildlife are all additional beneficiaries.
    But now the St. Mary Diversion Facilities and the Milk River 
Project are facing catastrophic failure. The steel siphons have leaks 
and slope stability problems. Landslides along the canal and 
deteriorated condition of the structure make the project an unreliable 
water source.
    As authorized in 1903, the Milk River Project is operated as a 
single-use irrigation project. Since completion, nearly 100% of the 
cost to operate and maintain the diversion infrastructure has been 
borne by irrigators. The average annual O&M cost from 1998 to 2003 was 
$420,000, of which irrigators were responsible for 98%. In addition, 
irrigators are responsible for reimbursing the Reclamation for the 
initial construction costs of the diversion facilities. Maintenance 
costs have increased with the accelerating deterioration of the aging 
facilities.
    The National Research Council's report entitled, ``Managing 
Construction and Infrastructure in the 21st Century Bureau of 
Reclamation'' pinpointed many of the problems facing the Milk River 
Project and St. Mary Diversion facilities. I am interested to hearing 
more about the Council's findings and action the Bureau of Reclamation 
is taking to find workable solutions.
    Thank you again for joining us here today. I look forward to your 
testimony.

    Senator Burns. And I think it sort of reflects some of the 
frustration that we feel here in the legislative branch with 
regard to water and water development and because the--I think 
the Bureau of Rec has done a great job in the West, and we 
couldn't have done it without them and the policy since these 
great projects were undertaken and developed and became very, 
very successful. The Report points out where our failings are 
and I think we ought to take some kind of action to deal with 
that.
    I have a situation in Montana that we are working very 
strongly on, and I think when you look across the country, 
you've got many of those kinds of situations facing us, and I 
would be interested in hearing how we're going to sit down and 
develop a master plan on how we start dealing with these 
challenges of aging and old systems that have been sort of 
pushed back on the back burner for so long by both Congress and 
the administrations of the past. So, I thank you for these 
hearings today.
    The Chairman. Thank you very much.
    Senator Craig.

        STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR 
                           FROM IDAHO

    Senator Craig. Mr. Chairman, let me ask unanimous consent 
that my full statement be a part of----
    The Chairman. It will be part of the record.
    Senator Craig. I'm looking at the witnesses, and when I see 
The Family Farm Alliance and Trout Unlimited, that's a 
fascinating and important combination. We in the West are 
growing at an unprecedented rate. We're arid. We're in a 
limited water environment. We're going to build new 
infrastructure. We need more water. We're going to change the 
way it's used. We have new principles and ethics in the way 
that water gets used. We have no water budget here. Somehow we 
have to figure out how to do all of that, and I have. The 
Bureau of Rec plays a very valuable role in it, historically 
and in the future.
    But I think relationships have to be different, 
understandings have to be different, Mr. Chairman, and this 
study will help us a great deal. Because, if the day of 
building water infrastructure is over in the West, the day of 
growth must stop--it isn't stopping. Three of the most arid 
States in the Nation are now three of the fastest growing 
States in the Nation. They will not grow without effective and 
responsible use of water. Thank you.
    [The prepared statement of Senator Craig follows:]
   Prepared Statement of Hon. Larry E. Craig, U.S. Senator From Idaho
    The Bureau of Reclamation has been a vital part of western 
expansion over the last 100 years and continues to support safe food 
supply, jobs, communities, and wildlife habitat. I commend the Bureau 
for recognizing the need to review their business approach as we 
continue into the 21st Century. Having said that, I would urge the 
Bureau to actively pursue our goal of efficient and effective 
government and not allow this to be just another bureaucratic report.
    The arid West is experiencing unprecedented growth. Along with the 
growth there is an increased need for water, not only for 
municipalities, but also for a sustainable food supply and wildlife 
habitat. I DO NOT believe our days of building infrastructure are over 
and would like to think the Bureau will continue to work with our 
states and water users to increase water supply that will support life 
across the west.
    The National Research Council's (NRC) report has been helpful in 
identifying several governmental inefficiencies as well as reinforcing 
concerns I have had for several years. We know in many cases that 
outsourcing could financially benefit both our water users and 
contracting firms. We also know that we have an aging infrastructure 
that is facing high rehabilitation cost with declining budgets. It is 
time that we take these findings and change the way business is done. 
The Bureau must provide a fiscally responsible service with appropriate 
expertise. We must be able to repair and build infrastructure without 
financially overburdening our water users.
    Currently in my state, we have a great example of why business as 
usual will simply not work. In arid Southern Idaho, there is the 100-
year-old Mindoka dam that feeds thousands of acres of farm ground while 
supporting a wildlife refuge and water for late fish flows. 
Additionally, this water supports several farms, communities and hosts 
recreation from boating to fishing. However, our irrigators pay a large 
sum of money to keep that facility in working condition for the benefit 
of many. This facility, because of its considerable age and faulty 
original construction, needs a new spillway. This spillway is estimated 
to cost nearly $35 million, increasing the irrigators' assessments by 
nearly 30%. As the NRC study found, the Bureau has not been 
particularly good at keeping costs down through the construction 
process, which raises another concern of the final price tag. These 
farmers are already paying $45 per acre. This increase will shut down 
many farms in the area and severely impact communities. If the cost of 
this project could be spread over 15 more years, these irrigators would 
be able to afford their share of construction. Because this option is 
not currently available, farmers are financially strapped and scared of 
losing their land and community.
    I am interested to hear all of your testimony after this thorough 
report. I appreciate all of your hard work and time during this study 
and am very interested to see how the Bureau of Reclamation ``takes the 
bull by the horns.''

    The Chairman. Very good observation. Senator, I might make 
a comment in your presence, while you are here. Since I was 
thinking this morning of calling you and congratulating you, 
I'll do that here publicly. Since you went way out front on the 
issue of asking the President of the United States to take a 
more active role on the border by bringing in the National 
Guard, I guess you must wake up each morning now as things are 
progressing feeling a little better about your suggestion. And 
I want to compliment you for taking that lead.
    Senator Craig. Well, thank you, Mr. Chairman. The public 
got it before we got it.
    The Chairman. Yes.
    Senator Craig. They understand border security. They also 
understand a good immigration policy. One cannot go without the 
other.
    The Chairman. They also understood the National Guard could 
be a very big help.
    Senator Craig. Well, thank you for that observation.
    The Chairman. That was what you were talking about.
    Senator Craig. That's right.
    The Chairman. And I heard you and I heard you well.
    Senator Craig. Thank you.
    The Chairman. And I truly--what I just said a while ago is 
true, I wanted to call you, and now I call you right here in 
public.
    Senator Craig. Thank you much. I appreciate it.
    The Chairman. Now, with that, we're going to proceed with 
the witnesses. The two whose names are here, would you please 
take your seats. The first one, although spelled R-I-N-N-E, I 
understand is pronounced Rinne.
    Mr. Rinne. That's correct, Mr. Chairman.
    The Chairman. Is that correct?
    Mr. Rinne. Yes.
    The Chairman. Wow. That's pretty good for me. And Mr.--do 
you pronounce it Lloyd Duscha?
    Mr. Duscha. Duscha. Yes, sir, Mr. Chairman.
    The Chairman. OK, we're going to have your written 
testimony made a part of the record immediately. The Bureau of 
Reclamation is Rinne, and the National Research Council is 
Duscha. I think we'll proceed with you first, Mr. Duscha.

      STATEMENT OF LLOYD A. DUSCHA, CONSULTING ENGINEER, 
                   NATIONAL RESEARCH COUNCIL

    Mr. Duscha. Thank you, Mr. Chairman and members of the 
committee. I served on a National Research Council Committee 
that authored the report entitled, ``Managing Construction and 
Infrastructure in the 21st Century Bureau of Reclamation.'' And 
I appreciate the opportunity to summarize my written testimony.
    In recent years, Reclamation's focus and work load have 
shifted from building infrastructure to operating, maintaining 
and modernizing the infrastructure, from constructing dams to 
evaluating dam safety and to addressing environmental issues. 
At the same time, growth in the West has spurred demands for 
more water and power resources. Reclamation will be challenged 
to find ways to manage these resources so that it can meet 
future demands. Reclamation has recognized the challenge and 
the necessity of making the transition from largely a 
construction organization to a resource management 
organization.
    Although its mission continues to be the effective 
management of power and water resources in ways that protect 
the health, safety, and welfare of the public, as well as being 
environmentally and economically sound, achieving these 
objectives is a dynamic, complex and uncertain matter.
    The Committee observed that Reclamation's five regions have 
different organization structures, capabilities and workloads. 
In general, the regions appear to be functioning well in 
encountering the usual challenges. Staff morale and loyalty are 
commendable. Nevertheless, like most Federal agencies, 
Reclamation is challenged by changing requirements and the need 
to maintain the core competencies.
    While examples of excellence were evident, in general, the 
regions will need to evaluate their asset inventory and to 
manage their assets more aggressively and to engage in 
collaborative relationships with customers and stakeholders. If 
Reclamation wants to demonstrate consistency under the 
centralized management, it will need clear policy directives 
and standards to enable all elements to implement a uniform, 
structured approach. A delicate balance needs to be maintained 
so as not to impede decentralized units from demonstrating 
initiative and self-development. At the same time, we emphasize 
that Reclamation has a responsibility to ensure that its 
facilities are planned, designed, constructed and managed with 
a level of quality that is consistent throughout the 
organization. We believe that Reclamation will have a continued 
need for a centralized technical service, research and 
oversight. But the committee also sees a need to evaluate the 
size and configuration of the central units, to ensure that 
services are delivered efficiently.
    The study committee recognizes that organizations can and 
do take on a variety of forms with varying degrees of success. 
Some will function well despite their form, while others will 
fall through despite the best of forms.
    The internal culture and history of the organization play a 
significant role in determining the appropriate structure and 
the ultimate outcome. We believe that the organization 
structure of Reclamation is basically appropriate for its 
customer-driven mission. Nevertheless, we also believe there 
are opportunities to improve the configuration as well as the 
management.
    I should point out that our recommendations were purposely 
general, as the study team believed that the specifics could be 
best developed internally, where more detailed knowledge 
resides. Such approach also enables those affected to play a 
role in establishing ownership of the plan.
    The Committee also offered some concepts on potential 
future scenarios for the operation of Reclamation which should 
not be construed as recommendations.
    Because reviewing Reclamation's action plan for managing 
excellence was not part of our assignment, the ensuing comments 
reflect my opinion only. I was impressed by the depth and 
content of the plan. It professionally addresses all the 
recommendations in our report, albeit in a different format. 
The action plan is also a reflection of the serious commitment 
by the senior leadership of the Department and the Bureau 
toward enhancing their effectiveness in executing their 
assigned mission. This concludes my comments. Thank you.
    [The prepared statement of Mr. Duscha follows:]
  Prepared Statement of Lloyd A. Duscha, U.S. Army Corps of Engineers 
 (retired), and Member, Committee on Organizing to Manage Construction 
and Infrastructure in the 21st Century Bureau of Reclamation, Board on 
Infrastructure and the Constructed Environment, Division on Engineering 
            and Physical Sciences, National Research Council
    Good morning, Mr. Chairman and members of the committee. My name is 
Lloyd Duscha. I am retired from the U.S. Army Corps of Engineers, and I 
served on the National Research Council committee that authored the 
report Managing Construction and Infrastructure in the 21st Century 
Bureau of Reclamation. The report was requested by the Department of 
Interior. The National Research Council is the operating arm of the 
National Academy of Sciences, National Academy of Engineering, and the 
Institute of Medicine of the National Academies, chartered by Congress 
in 1863 to advise the government on matters of science and technology. 
It is a pleasure to be here to discuss our report on this important 
topic.
                           general summation
    The study committee was comprised of 12 experts from the public and 
private sectors and academia assembled for the purpose of advising the 
Bureau of Reclamation and the Department of the Interior on the 
``appropriate organizational, management, and resource configurations 
to meet its construction, maintenance, and infrastructure requirements 
for its missions of the 21st century.'' To accomplish its task, the 
study committee met as a whole four times from February to August 2005 
and conducted small-group site visits to offices and projects in each 
of the five Reclamation regions. We received briefings from and had 
discussions with Reclamation staff, its customers, and other 
stakeholders. We also spoke with representatives of organizations with 
missions similar to Reclamation's including the U.S. Army Corps of 
Engineers, the Tennessee Valley Authority, and the California 
Department of Water Resources.
    In recent years, Reclamation's focus and workload have shifted from 
building dams, power plants, and other infrastructure to operating, 
maintaining, repairing, and modernizing them, from constructing dams to 
evaluating dam safety and mitigating the risk of potential failure, and 
to addressing environmental issues. At the same time, growth in the 
western states has spurred demand for water and power. Reclamation will 
be challenged to find ways to manage water and power so that it can 
meet future demands. The Department of Interior and Bureau of 
Reclamation have recognized this challenge for the twenty-first century 
and the need for the bureau to make the transition from construction to 
resources management. Its mission continues to be the effective 
management of power and water resources in ways that protect the 
health, safety, and welfare of the American public and that are 
environmentally and economically sound. Achieving these objectives is a 
dynamic, complex, and uncertain matter.
    The study committee observed that Reclamation's five regions have 
different organizational structures, capabilities, and workloads. In 
general, the regions appeared to be functioning well in the face of 
challenges typical to this type of endeavor. Staff morale and loyalty 
to Reclamation's mission are commendable. Nevertheless, Reclamation, 
like most federal agencies, is challenged by changing requirements and 
the need to maintain its core competencies.
    Each of the five regions is responsible for sustaining a 
significant portfolio of facilities. Examples of excellence were 
evident. However, in general, the regions need to evaluate their 
inventory of assets and manage them more aggressively over the life 
cycle, and to engage in constructive relationships with customers and 
stakeholders. If Reclamation wants to demonstrate consistency 
throughout the organization under its style of decentralized 
management, clear, detailed policy directives and standards are needed 
to enable all elements to implement a uniform, structured approach. A 
delicate balance needs to be maintained so as not to impede 
decentralized units from demonstrating initiative and increasing their 
capabilities. At the same time, we emphasize that Reclamation, as the 
owner, has the responsibility to ensure that its facilities are 
planned, designed, constructed, and managed with a level of quality 
that is consistent throughout the organization.
    We believe that Reclamation will continue to require centralized 
technical services, research, and oversight to support the local 
management of resources; however, the study committee also sees a need 
to evaluate the size and organizational structure of the central units 
to ensure that services are delivered efficiently and at a reasonable 
cost to Reclamation customers. Both the organization and quantity of 
services provided at the central, regional, and area offices are 
affected by how services that are not inherently government functions 
are outsourced.
    The study committee recognizes that organizations can and do take 
on a variety of structures with varying degrees of success. Some will 
function successfully despite their structure, while others will falter 
even as they deploy the best of theoretical forms. The internal culture 
and history of an organization play a significant role in determining 
the appropriate structure and the ultimate outcome. We believe that the 
organizational structure of Reclamation is basically appropriate for 
its customer-driven mission to deliver power and water. Nevertheless, 
we also believe that there are opportunities to improve the 
construction and management of its facilities and infrastructure, as 
well as the management, development, and protection of water and 
related resources in an environmentally sound manner.
                    conclusions and recommendations
    A number of important factors, realities, and issues have major 
impacts on Reclamation's ability to respond quickly and effectively to 
the many diverse pressures and rapid changes occurring today. Equally 
important are the capabilities that are needed within Reclamation to 
deal effectively with the challenges posed by these impacts. Although 
the core of Reclamation's basic mission remains much the same to 
deliver water and to generate power in 17 western states--how that 
mission is carried out is constrained by and must be responsive to 
several realities:

   Environmental factors. The environmental revolution of the 
        last decades of the twentieth century imposed new requirements 
        to protect ecosystems and mitigate the impact of development on 
        fish and wildlife. Engineers and builders must be both 
        environmental experts and water resource experts.
   American Indian water rights and rural water needs. American 
        Indian water agreements and growing demands to provide adequate 
        supplies of good quality water to small rural communities place 
        new demands on the regulation of river flow and storage and 
        distribution systems.
   Urbanization. Land is being taken out of agricultural 
        production in many areas of the West and being developed for 
        industrial, commercial, and residential purposes.
   Increasing budget constraints. Reclamation's budget has been 
        effectively shrinking for many years, even as the needs have 
        increased.
   Broader set of stakeholders. Water users of all types--
        farmers, power distributors, consumers, homeowners, 
        environmentalists, Indian tribes, and virtually everyone else 
        who uses water and power in the 17 western states--are impacted 
        by and pay in some way for what the bureau does.
   Aging workforce. Reclamation's skilled and experienced 
        personnel will be retiring in large numbers over the next 5 to 
        15 years.
   Aging infrastructure. Most of Reclamation's major dams, 
        reservoirs, hydroelectric plants, and irrigation systems are 50 
        or more years old.
   Shift from design and construction to operations and 
        maintenance. Operations and maintenance (O&M) activities will 
        form a major part of the workload.
   Title transfer. Transferring ownership of government-owned 
        facilities to nonfederal agencies and the private sector, while 
        reducing Reclamation's O&M workload, introduces budgetary and 
        oversight issues that may necessitate new business models.
   Water user operation of government-owned facilities. 
        Reclamation has turned over and will undoubtedly continue to 
        turn over some of its facilities to water user groups, often 
        local water districts, for operation, maintenance and--
        sometimesrehabilitation and new construction.
   New modes of augmenting the water supply. In the absence of 
        significant climate change or major technological 
        breakthroughs, water resources will remain constant, while 
        demand can be anticipated to increase.
   Increase in the number of small projects. Although demand 
        for large new projects will remain low, it is likely that 
        demand for small water storage, irrigation, and distribution 
        projects will increase.

    In view of the preceding constraints, the study committee made 
several recommendations for Reclamation to develop the appropriate 
organizational, managerial, and resource configurations to meet its 
construction, maintenance, and infrastructure requirements for its 
twenty-first century missions. I should point out that our 
recommendations were purposely general in nature. The study committee 
believed that the specifics could be best developed internally where 
more detailed knowledge resides. Such an approach also enables those 
affected to play a role in establishing ownership and developing 
loyalty to the plan.
            centralized policy and decentralized operations
    To optimize the benefits of decentralization, Reclamation should 
promulgate policy guidance, directives, standards, and how-to documents 
that are consistent with the current workload. The commissioner should 
expedite the preparation of such documents, their distribution, and 
instructions for their consistent implementation. Reclamation's 
operations should remain decentralized and guided and restrained by 
policy but empowered at each level by authority commensurate with 
assigned responsibility to respond to customer and stakeholder needs. 
Policies, procedures, and standards should be developed centrally and 
implemented locally. The design groups in area and project offices 
should be consolidated in regional offices or regional technical groups 
to create a critical mass that will allow optimizing technical 
competencies and provide efficient service. Technical skills in the 
area offices should focus on data collection, facility inspection and 
evaluation, and routine operations and maintenance (O&M).
   technical service center and reclamation laboratory and research 
                               activities
    The commissioner should undertake an in-depth review and analysis 
of the Technical Service Center (TSC) to identify the needed core 
technical competencies, the number of technical personnel, and how the 
TSC should be structured for maximum efficiency to support the high-
level and complex technical needs of Reclamation and its customers. The 
proper size and composition of the TSC are dependent on multiple 
factors, some interrelated:

   Forecasted workload,
   Type of work anticipated,
   Definition of activities deemed to be inherently 
        governmental,
   Situations where outsourcing may not be practical,
   Particular expertise needed to fulfill the government's 
        oversight and liability roles,
   Personnel turnover factors that could affect the retention 
        of expertise, and
   The need to maintain institutional capability.

    This assessment and analysis should be undertaken by Reclamation's 
management and reviewed by an independent panel of experts, including 
stakeholders.
    The workforce should be sized to maintain the critical core 
competencies and technical leadership, and to increase outsourcing of 
much of the engineering and laboratory testing work. Alternative means 
should be explored for funding the staff and operating costs necessary 
for maintaining core TSC competencies, thereby reducing the engineering 
service costs reimbursable by customers.
    Reclamation's Research Office and TSC laboratory facilities should 
be analyzed to determine which specific research and testing 
capabilities are required now, and in the future; which of capabilities 
can be found in other government organizations, academic institutions, 
or the private sector; which physical components should be retained; 
and which kinds of staffing are necessary. The assessment should 
recognize that too great a reliance on outside organizations can 
deplete an effective engineering capability that, once lost, is not 
likely to be regained. In making this assessment Reclamation should 
take into account duplication of facilities at other government 
agencies, opportunities for collaboration, and the possibility for 
broader application of numerical modeling of complex problems and 
systems. Because many of the same factors that influence the optimum 
size and configuration of the TSC engineering services also apply to 
the research activities and laboratories, Reclamation should consider 
coordinating the reviews of these two functions.
                              outsourcing
    Reclamation should establish an agency-wide policy on the 
appropriate types and proportions of work to be outsourced to the 
private sector. O&M and other functions at Reclamation-owned 
facilities, including field data collection, drilling operations, 
routine engineering, and environmental studies, should be more 
aggressively outsourced where objectively determined to be feasible and 
economically beneficial.
                     planning for asset sustainment
    Benchmarking of water distribution and irrigation activities by 
Reclamation and its contractors should be a regular part of their 
ongoing activities. Because effective planning is the key to effective 
operations and maintenance, Reclamation should identify, adapt, and 
adopt good practices for inspections and O&M plan development for 
bureau-wide use. Those now in use by the Lower Colorado and Pacific 
Northwest regions would be good models. Reclamation should formulate 
comprehensive O&M plans as the basis for financial management and the 
development of fair and affordable repayment schedules. Reclamation 
should assist its customers in their efforts to address economic 
constraints by adopting repayment requirements that ease borrowing 
requirements and extend repayment periods.
                           project management
    Reclamation should establish a comprehensive set of directives for 
a structured project management process for managing projects and 
stakeholder engagement from inception through completion and the 
beginning of O&M. Reclamation should also give high priority to 
completing and publishing cost estimating directives and resist 
pressures to submit projects for congressional authorization with 
incomplete project planning. Cost estimates that are submitted should 
be supported by a conceptual plan, environmental assessment, and design 
documents that are sufficiently complete to support the estimates.
    Reclamation should establish a structured project review process to 
ensure effective oversight from inception through completion of 
construction and the beginning of O&M. The level of review should be 
consistent with the cost and inherent risk of the project. Oversight of 
large or high-risk projects should include the direct participation of 
the commissioner or his or her designated representative. The criteria 
for review procedures, processes, documentation, and expectations at 
each phase of the project need to be developed and applied to all 
projects, including those approved at the regional level.
    A training program that incorporates current project management and 
stakeholder engagement tools should be developed and required for all 
personnel with project management responsibilities. In addition, 
project managers should have professional certification and experience 
commensurate with their responsibilities.
                      acquisition and contracting
    Reclamation should establish a procedure and a central repository 
for examples of contracting approaches and templates that could be 
applied to the wide array of contracts in use. This repository should 
be continually maintained and upgraded to allow staff to access lessons 
learned from use of these instruments.
              relationships with sponsors and stakeholders
    Making information readily available about processes and practices, 
both in general and for specific projects and activities, should be a 
Reclamation priority. Successful practices, such as those used in the 
Lower Colorado Dams Office, should be analyzed and the lessons learned 
should be transferred, where practical, throughout the bureau.
                     workforce and human resources
    Reclamation should analyze the competencies required for its 
personnel to oversee and provide contract administration for outsourced 
activities. Training programs should ensure that those undertaking the 
functions of the contracting officer's technical representative are 
equipped to provide the appropriate oversight to ensure that 
Reclamation needs continue to be met by the contractor.
    In light of the large number of retirements projected over the next 
few years and the potential loss of institutional memory inherent in 
these retirements, a formal review should be conducted to determine 
what level of core capability should be maintained to ensure that 
Reclamation remains an effective and informed buyer of contracted 
services. Reclamation should recruit, train, and nurture personnel who 
have the skills needed to manage processes involving technical 
capabilities as well as communications and collaborative processes. 
Collaborative competencies should be systematically related to job 
categories and the processes of hiring, training, evaluating the 
performance of, and promoting employees. Reclamation should facilitate 
development of the skills needed for succeeding at socially and 
politically complex tasks by adapting and adopting a small-wins 
approach to organizing employee efforts and taking advantage of the 
opportunities to celebrate and build on successes.
                     bureau of reclamation response
    An important element in the study committee's ability to complete 
its assigned tasks was the support and participation of the bureau 
staff at all levels. The study committee appreciated the cooperation 
and support of all of the Reclamation officials who assisted the 
committee in this review. Before completing our work, we became aware 
that former Commissioner Keys had directed the development of a 
detailed response to our recommendations. The NRC committee applauds 
this rapid and enthusiastic response. We are not in a position to 
provide a detailed analysis, but it appears that Reclamation's 
response, Managing for Excellence, sets forth an action plan to address 
all of the issues identified in the NRC study. Many of the study 
committee's recommendations will require further analysis by 
Reclamation personnel, and changes that implement these initiatives may 
take considerable time. As noted in the NRC report,
    Reclamation should seek independent reviews of its assessments and 
organizational changes. Nevertheless, it appears that the Bureau, under 
strong leadership commitment, has made a good start.
    This concludes my testimony. Thank you for the opportunity to 
discuss our report with you.

 STATEMENT OF WILLIAM E. RINNE, ACTING COMMISSIONER, BUREAU OF 
            RECLAMATION, DEPARTMENT OF THE INTERIOR

    Mr. Rinne. Thank you, Mr. Chairman, members of the 
committee. It's a pleasure to be here today to discuss the 
``Managing for Excellence'' action plan. With me today, sitting 
right behind me, is my Deputy Commissioner, Larry Todd. And 
with your permission, we may confer to answer some of your more 
specific questions. Larry's been our executive lead in 
developing the ``Managing for Excellence'' action plan.
    The catalyst for the ``Managing for Excellence'' action 
plan was the recently completed report of the National Research 
Council. The Department of the Interior and Reclamation asked 
the council to undertake this review in 2004 to receive an 
evaluation of our business practices and capabilities from 
outside experts to help us prepare for current and future 
challenges. During its review, the committee consulted with 
Interior and Reclamation policymakers, employees, water and 
power customers, congressional staff and other Federal 
agencies. Some of the key findings of that that I would like to 
point out for your attention: Our customers want close contact 
with Reclamation officials, consistency in Reclamation 
policies, and decisionmakers with demonstrated professional 
competence; Reclamation should perform an in-depth review of 
its technical services center to identify core lead staffing 
levels and optimum structure; Reclamation laboratory 
organization and physical structures may be too large; admin 
and other functions should be more aggressively outsourced; 
long-term sustainment of aging infrastructure is a major 
challenge; Reclamation should focus on completing and 
publishing cost estimate directives and resist efforts to 
submit projects to Congress with incomplete project planning 
and cost estimates; and the growing need to include a broad 
spectrum of stakeholders alters Reclamation's tasks and skills 
required to accomplish them.
    Mr. Chairman, Reclamation recognizes the seriousness of 
these and other challenges detailed in the NRC report, and has 
a plan to meet them. We have support for addressing these 
issues at the highest levels of the Department of the Interior. 
Deputy--and now-acting--Secretary Lynn Scarlett directed us to 
devise a plan to address each finding and recommendation in the 
NRC Report. With input from an array of stakeholders, the team 
produced the action plan in February of this year. That plan 
was developed in consultation with congressional committees, as 
well as key stakeholders and Federal employees from rank and 
file and also then-Secretary Gale Norton.
    Some key aspects of the ``Managing for Excellence'' action 
plan NRC report addressed in the action plan--excuse me, each 
specific finding and recommendation in the NRC Report is 
addressed in the action plan. The plan also draws on key 
Presidential management initiatives and Reclamation customer 
satisfaction surveys and other internal reports. It contains 41 
separate action items that require critical analysis.
    The timetable is ambitious. All but 12 of the 41 action 
items are scheduled to be completed in 2006--calendar year 
2006, with the remainder to be finished in 2007. Turning to the 
action teams themselves, in terms of how they were selected in 
the process, for team members, we had only two criteria: We 
wanted to get the best and brightest. These are people we found 
internally who were known for intellectual honesty and also had 
a reputation with the outside stakeholders.
    All teams have prepared a business plan as of this date for 
each action item. We held a meeting in Denver in April--on 
April 27 in Denver with the national stakeholder group. I think 
the meeting was successful in developing an external outreach 
plan. We'll have several stakeholder public meetings. The first 
one is scheduled in early July.
    We have also developed an internal communication plan for 
Reclamation employees to submit some feedback, and we keep them 
informed. We have an area management meeting, which is really 
our program level, on June 5 to ensure that we're ready to work 
with customers and employees.
    Mr. Chairman, to succeed in this timeframe will require 
active involvement of the stakeholders, leadership from 
Congress and extra value from government agencies. This would 
ultimately translate into improved capacity to carry out all 
aspects of Reclamation's mission, including operation, 
maintenance, and environmental compliance.
    In summary, to move forward we must answer some important 
questions, and I'll just hit four of these and then close. Can 
we restore consistency and clarity to agency policy while 
leaving operations decentralized? Do we have the courage and 
wisdom to right-size technical services and throughout 
Reclamation, to outsource more of our workload, when that makes 
good business sense? Will we share O&M management 
decisionmaking with a variety of customers and even transfer it 
to them? And will we restore confidence in cost estimating? 
These are just some of the questions we tackle.
    Mr. Chairman, I would like to submit for the record a chart 
describing each of the 41 action items, with each item's start 
and end date, as well as one that depicts the schedule for our 
action.
    This concludes my remarks, and thank you for the 
opportunity to speak today.
    [The prepared statement of Mr. Rinne follows:]
     Prepared Statement of William E. Rinne, Acting Commissioner, 
           Bureau of Reclamation, Department of the Interior
    Mr. Chairman and Members of the Committee, it is a pleasure to 
appear today to discuss Managing for Excellence, an action plan for the 
21st Century Bureau of Reclamation.
    The principal catalyst for Managing for Excellence was a recently 
completed report of the National Academies' National Research Council 
(NRC) entitled, ``Managing Construction and Infrastructure in the 21st 
Century Bureau of Reclamation.'' Reclamation asked the NRC to undertake 
this review in 2004 to get expert review and comment from third parties 
on our business practices and capabilities as we face the decades 
ahead.
    In preparing its report, the NRC Committee spent most of 2005 
consulting with Reclamation and Department of the Interior policy 
makers (both career and Presidentially appointed), Reclamation 
operations staff, water and power customers of Reclamation, 
Congressional staff, and other government water agencies, both Federal 
and state.
    The NRC focused its recommendations for Reclamation in nine issue 
areas:

   centralized policy and decentralized operations;
   Reclamation's technical service center;
   Laboratory and research activities;
   Outsourcing;
   Asset sustainment planning;
   Project management;
   Acquisition and contracting;
   Relationships with sponsors and stakeholders; and
   Workforce and human resources.

    Instead of detailing each of the NBC's 22 distinct findings and 24 
recommendations, we would like to mention a few to give the Committee a 
sense of the scope of the NRC's work.

    1. Reclamation's customers and other stakeholders want close 
contact with empowered Reclamation officials, but they also want 
consistency in Reclamation policies and decisions, and decision makers 
with demonstrated professional competence.
    2. Policies, procedures, and standards should be developed 
centrally and implemented locally.
    3. Reclamation should perform an in-depth review of its own 
Technical Services Center (TSC) to identify the core competencies it 
needs, the number of personnel it needs, and its optimum structure. 
This TSC assessment should be reviewed by independent experts and 
stakeholders.
    4. Reclamation's laboratory organization and its physical 
structures may be too large.
    5. O&M and other functions should be more aggressively outsourced.
    6. Long-term sustainment of aging infrastructure will require more 
innovation and greater efficiency.
    7. Reclamation should give high priority to completing and 
publishing cost estimating directives and resist efforts to submit 
projects to Congress with incomplete project planning.
    8. The growing need to include a broad spectrum of stakeholders 
alters Reclamation's tasks and the skills required to accomplish them. 
Personnel must be equipped to address both technical uncertainties and 
the ambiguities of future social and environmental outcomes.

    Mr. Chairman, you know Reclamation and its water and power 
customers well enough to appreciate how serious these and other 
challenges detailed in the NRC's report are.
    Reclamation is up to the challenge. We are determined to take 
advantage of this opportunity to implement reforms with the goal of 
reinvigorating our program and ensuring that we will be able to provide 
optimum value to our stakeholders well into the future.
    Before the ink was dry on the NRC report, Deputy Secretary Lynn 
Scarlett, (now Acting Secretary) directed us to develop a plan whereby 
Reclamation would address each finding and recommendation in the NRC 
report. The Commissioner appointed a Reclamation executive team led by 
Deputy Commissioner Larry Todd. With helpful input from an array of 
stakeholders, the team produced Managing for Excellence, An Action Plan 
for the 21st Century Bureau of Reclamation and delivered it to 
Secretary Gale Norton in February.
    Stakeholders with whom the Reclamation team consulted in preparing 
Managing for Excellence included:

   staff of Congressional Committees (authorizing and 
        appropriating, majority and minority, House and Senate);
   the Family Farm Alliance, National Water Resources 
        Association, and Trout Unlimited; and
   the federal employees who care so much about the Bureau 
        mission from rank-and-file Reclamation field workers to 
        Secretary Norton, herself, who offered several crucial comments 
        as the document was being developed.

    Perspectives shared by Reclamation employees on a special web page 
set up just for that purpose were enlightening and highly constructive.
    The result, Mr. Chairman, is a plan for decision-making that 
exceeds the original expectations of many of us involved.
    Now let's turn to what is in Managing for Excellence and how 
Reclamation expects to carry it out.
    First, each specific finding and recommendation in the NRC report 
is addressed in Managing for Excellence. But the Reclamation team went 
further. Managing for Excellence also draws on key Presidential 
Management Initiatives, a Reclamation customer satisfaction survey, and 
other internal reports and recommendations. Moreover, when stakeholders 
weighed in with their suggestions, they did not confine themselves to 
the four corners of the NRC report. The result is a far more 
comprehensive and cohesive product.
    Managing for Excellence is actually a catalogue of 41 separate 
``action items,'' each of which requires critical analysis, serious 
thought, and some tough decision-making. However, the decision-making 
schedule is not open-ended. Each action item has a specific start date 
and end date. The schedule was carefully considered to make certain 
that each decision was afforded enough time to get it right but not so 
much time that the benefits of implementing decisions would be 
needlessly delayed. The timetable is ambitious. All but twelve of the 
41 action items are scheduled to be completed (i.e., recommendations 
forwarded to Reclamation senior management) in 2006. Most of the rest 
cannot be completed sooner for logistical reasons. For example, one 
action item is to evaluate the effectiveness of an earlier action item.
    Now let's turn to the action teams that are charged with carrying 
out the action items. The teams are made up of individuals known for 
intellectual honesty and for being committed to carrying out the 
Reclamation mission. They have established a reputation for ingenuity 
and achievement in communication, consultation, and cooperation with 
diverse stakeholders.
    The teams have already started working. Each one has prepared a 
work plan which includes timelines for steps from gathering data and 
perspectives, to analysis, to final decision recommendations on the 
schedule set out in Managing for Excellence.
    Will each action item succeed? The answer may turn on the 
involvement of stakeholders. For example, roughly half of the action 
items cannot be credibly addressed without direct input from water and 
power customers. Other action items depend on wisdom of rank-and-file 
employees, changes to legislation, or expert guidance from government 
management experts inside and outside of the Department of the 
Interior. We will seek help and support from all these sources.
    Funding to carry out the tasks contemplated in the plan will be 
made available by reprioritizing existing activities. Reclamation's 
reprioritization of funds will be carried out consistent with an 
absolute commitment to ensure that all activities vital to 
Reclamation's core mission, including ongoing operation, maintenance, 
and environmental compliance responsibilities, are unaffected. We 
anticipate that implementation of the action items will result in 
significant improvements in the efficiency of Reclamation's management. 
This would ultimately translate into improved capacity to carry out all 
aspects of Reclamation's mission, including operation, maintenance, and 
environmental compliance.
    The significant investment of Reclamation staff time and resources 
is warranted: these 41 action items may well shape the future of 
Reclamation for years or even generations to come.
    Will we be able to weave cooperative conservation throughout 
Reclamation's culture? Can we restore consistency and clarity to agency 
policy while ensuring that operational organization is decentralized? 
Do we have the courage and wisdom to right-size technical services and, 
throughout Reclamation, to outsource more of our workload when that 
makes good business sense? Will we share O&M management and decision-
making with a wide array of customers, or even transfer it to them? 
Will we restore confidence in project cost-estimating? And can we 
integrate these goals with Reclamation's existing statutory mission?
    Finally, the Administration has long been concerned about many of 
the challenges identified by the NRC report. These have been identified 
or clarified in PART assessments conducted over the past several years. 
In particular, the PART conducted in 2005 on Reclamation's Water 
Management: Operations and Maintenance program stated as one of the 
follow-up actions to improve the program that Reclamation will follow 
up on the recommendations identified in the NRC report. Additionally, 
the PART directed the Bureau to, ``[D]evelop a comprehensive, long-term 
strategy to operate, maintain, and rehabilitate Reclamation 
facilities''. Clearly, this dovetails with many of the issues 
identified by the National Academies, and we are moving forward to 
ensure that we are addressing these long-term challenges.
    These are just some of the questions that we will tackle and answer 
in coming months. We need your guidance, encouragement, and moral 
support--and that of our many stakeholders, particularly our water and 
power customers--to make sure the answers we develop are the best for 
all Americans whom we are privileged to serve.
    Mr. Chairman, we would like to submit for the record a chart 
describing each of the 41 action items with each item's start and end 
date and team leader, as well as a chart that depicts the integrated 
schedule for all action items.* We are pleased to answer any questions.
---------------------------------------------------------------------------
    * The charts have been retained in committee files.

    The Chairman. The charts will be made part of the record. 
We thank you for your brief, but very good testimony. We very 
much appreciate it.
    Now, I'm going to ask the Senators, as they arrived, if 
they have questions. Senator Thomas, do you have any questions?
    Senator Thomas. Yes, thank you. Well, I'm interested in 
your study, but what we talked about, the changes that have 
taken place and the responsibilities and the role of the 
Reclamation, as a result of the study, what differences are 
there going to be in the Department, as opposed to what's been 
in the past? What changes are talked about here, other than 
just doing good things? Both of you, I wish you to respond.
    Mr. Rinne. Senator, one of the things I would emphasize, I 
think it was mentioned earlier, pretty early in the process, 
but what we hope will come out of this is, where there--it 
could be changes like the--it could be, in some places, numbers 
of employees and the types of employees we have. I think what 
we really want to get to is making sure that whatever we're 
doing we're really meeting the needs of customers. We want to 
be much more transparent in our active process. We don't know--
we've looked at things ranging from human resources to our 
financial accounting. We want to look at that, and we want to 
look at our technical services.
    Senator Thomas. You're going to be doing what differently? 
What's the difference in the Department from what it was 20 
years ago as opposed to what your challenges are in the future? 
Everybody wants to have more quality and do all of those kinds 
of things, but what do you see as the role of the Department in 
the future?
    Mr. Rinne. I think one of the key goals, Senator, would be, 
in the next 20 years, you have in Reclamation, as an example, 
over half of our facilities are 50 years or older. I think the 
challenge of maintaining that infrastructure, and in some 
places enhancing that infrastructure for the future, is a 
definite challenge. So I don't want to call it caretaking, but 
it's very much different than constructing these facilities. 
Now there may be some cases where we need more things for water 
supply, but that's an example of the kind of thing we would--I 
think we will try to position ourselves correctly, so we'll be 
able to follow up.
    The Chairman. I see. Thank you.
    Mr. Duscha. I think basically when you're looking at this, 
you're looking at a long-term change in culture here. That's 
what you're driving at. I think you're looking at a long-term 
change in culture, I mean, within an organization. Simply, we 
have to look at--they're going to have to look at doing things 
differently than they have in the past. The organization is not 
going to be interested in doing the same things. The Big Dam 
Era is over. You're going to have to get down to the 
maintenance era, which is going to have to take a different 
dedication than construction.
    And so I think you'll find that the organization will be 
different. But it's going to take time, it's not something that 
can be done overnight, unless you just shake up the 
organization thoroughly and bring a whole new crowd in. But I 
don't think you want to do that, because I think that will 
cause more problems than you bargained for.
    Senator Thomas. Well, there's going to be differences from 
the construction aspect. What about the environmental aspect of 
the water management? Is that going to be different than it has 
been in the past?
    Mr. Rinne. Senator, what my reaction would be--obviously, 
we're going to follow whatever the laws are. And I'll just use 
the Endangered Species Act and the National Environment Act. 
We're going to--we will look toward the idea of continuing to 
deliver water, generating power, and do the other things that 
are necessary. So, I think, to an extent, you have to be 
realistic about that and say that there are going to be those 
things that we must address. So, I think--you know, I don't see 
that we discard it.
    Senator Thomas. We need more energy. Are you going to be 
able to orient yourself toward more efficiency and more 
production out of your facilities?
    Mr. Rinne. I think wherever the opportunity presents 
itself. And some of that is underway, whether it's rewiring or 
upgrades or things that make them more efficient and can 
produce more energy. So I would say yes, if that opportunity 
presents itself.
    Senator Thomas. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The Senator from Montana.
    Senator Burns. When we look at the--you say a lot of 
changes, and there are a lot of changes--I don't think you're 
going to be building very many more irrigation systems or any 
of that, but I will tell you, as the Senator from Idaho noted, 
that even though our water use is right now, our population 
continues to grow.
    We've got a finite amount of water, it's called snow pack 
for a lot of us, and if you've got a low snow pack, well, 
you're going to have low water. And I would suggest that in 
that somewhere--the California situation is an interesting 
situation. When we talk to the Western farmers or the San 
Joaquin, those people who--the water users out of the 
Sacramento or those rivers, we've got to make more water. The 
only way you do that is you hold the water that you've got. So 
that means off-stream storage. We haven't built much off-stream 
storage here lately. We haven't even seen it in the designs or 
if the Bureau of Reclamation is even taking a look at that or 
increasing the pool sizes of the storage that we have today. 
You can probably raise Shasta a foot and you'd produce a lot of 
water for the San Joaquin. But you have the forces that want to 
deal with the delta, and then you've got those forces who 
actually want to cut back on agricultural production. They want 
to do those kinds of things.
    Mr. Rinne, are you telling us that in the future we're 
going to deal with holding more water in its place? Off-stream 
storage, is that in your plans anywhere?
    Mr. Rinne. Well, Senator, a couple of examples, on the 
Colorado River. And of course this isn't a Bureau of 
Reclamation, as you're aware, but the States have a vital role. 
But the process is going on. Like shortage guidelines that are 
developing right now, one of the hopes out of that would be to 
have better coordinated reservoir management between Glen 
Canyon, Lake Powell and Lake Mead, which are really the two big 
cups on the Colorado River that we use to manage the water 
supply. There is, in fact, also, off-stream storage agreements 
in southern Arizona and some in Nevada and the southern part of 
California. In northern California the one thing I would say is 
that we have some feasibility as to at least looking at 
additional storage. Now, where those go to, obviously none of 
us in Reclamation quite know, but we're always looking at ways 
to better manage that water supply. And we're very, very much 
aware of what the state of the challenge is: The growing 
population, urban needs, the agriculture needs and other uses. 
So it's a--I think that will be one of the biggest challenges 
we face in the next 20 to 25 years, just being able to maintain 
that very issue.
    Senator Burns. Don't worry about 25 years, it's now.
    Mr. Rinne. That's true.
    Senator Burns. The challenge is now. Because we've got--our 
population continues to grow and the demand for the water. We 
know that all the water feeds off of the recharging of those 
rivers, and in-stream flow is very, very important, but we've 
just got it during the spring of the year. Look at the 
Yellowstone River today. We're flooding now. Now, that water 
ought to be going into some reservoir somewhere, being held for 
August, September and October somewhere, and even into 
December, for in-stream flow. But if you try to bring up this 
thing of building off-stream storage and holding some of that 
water, I'm telling you what, you create a furor like you can't 
believe. Now one of these days we're going to have to take a 
realistic look at that and say, ``OK'', because we can't live 
without water. It's just not going to happen. So the root of 
our debate, the bottom line of our development is going to be 
how much water we have available for not only agriculture, but 
just the people who seem to be migrating to the West. Some of 
them, I would doubt are very good neighbors, but nonetheless 
they're showing up.
    And also, irrigation systems that we have appealed to 
Congress, saying, ``We'd like to take over our system and get 
the Bureau of Rec out. We're ready to assume, under the old 
system of years ago, that this irrigation system, once we got 
it paid off, back to the Government. We'd like to have it and 
manage it ourselves. We always get pushed back from the 
Department of the Interior; why?''
    Mr. Rinne. I think what I would say is, that is one of the 
very areas, Senator, that we're taking a real close look at. 
The area being transfer or owning our facilities. And I think 
both in transfer of owning--and even looking at title 
transfers, that's one of the things we're looking at during 
this period. We're going into where we really look at that. 
Your comments--and I'm aware of it. I think the key thing would 
be--I agree it has been that there are parts of those areas, 
districts that have paid out, they're ready to take over and 
operate and maintain them, and we should go along with that. 
And I think you'll probably see more of that, as an outcome of 
this, in the longer term.
    Senator Burns. Well, I've got two or three that are pending 
right now, and I see no reason why that transfer isn't made. It 
goes to the owners, but there's no such thing as title, as land 
title or water rights title. There's nothing to transfer, 
there's just the business of who controls the O&M dollars. And 
basically, I think it should be a fairly easy kind of transfer, 
because those irrigators, those water users, they want to 
control their own fate.
    Mr. Rinne. Senator, there may be currently, as we speak--I 
think if Mr. Raley were to testify, one of the areas that we're 
evaluating right now, which is actually part of--I would say 
our ``Managing for Excellence'' action plan is looking at our 
northern Colorado water-consuming district and we're actually 
going into the process right now to see if that makes sense to 
turn over the owning of not only the infrastructure, but this 
would be in collaborating and maintaining the dammings as well. 
We're going through that process, and I expect it will be done 
by the end of this year. So it's, I think, along the lines of 
what you're talking about.
    Senator Burns. Well, if we think of anything about our kids 
or our grandkids--and I don't care if they're urban or rural, 
irrigators or municipalities, or whatever--we've got to start 
thinking water storage now. I don't think we can wait any 
longer. Because, basically, if you look at the California 
situation--and I was part of that 1991 settlement, and now 
they're trying to do something else. I would have--going to be 
a part of both of those. And it's not that we don't have the 
water, the demands for the water has outstripped what we have 
available.
    So now I want to talk to you about the St. Mary Project. 
Here's a project that was built a hundred years ago. It is the 
lifeline of the Highline. It runs from St. Mary to Wolf Point, 
MT. And you have all kinds of moving parts in that--you have a 
Canadian situation, you have two Native American reservations 
involved in that. And we're starting to build a master plan on 
how we're going to re-do that whole system, because it's 
falling apart. On most of our Indian reservations, I will tell 
you, they haven't been managed very well. We've got the same 
situation down on the Bighorn River, and some on the Little 
Bighorn that are systems that the management has not been very 
good. And it's not due to the local farmers, it's been the 
government agencies that have been responsible for getting it 
done. And the blame falls, I think, right here in Washington, 
DC. So we want to tackle that problem also.
    But I would tell you, in the long run, in the long haul, 
for every one of us who have sat on this committee who have 
grandchildren, the water storage and water availability in the 
West now is the most challenging problem we have. We cannot 
store too much water during the run-off right now. We had a 
great snow pack last winter, but that's the first one we've had 
in the last 7 years. And I would tell you that we'd like to 
hang on to that if we possible could, it's good for the 
environment, it's good for recreation, it's good for in-stream 
flow, and it's also good for water users and everybody that's 
around there. But I will tell you, it is one of the toughest 
challenges we face. And we've got to figure out some way to 
move beyond the objections of people who probably don't know 
the difference between ``Sic 'em.'' and ``Come here.'' when it 
comes to dealing with water, and trying to make the West work. 
Thank you very much, and I'll go on and do some other things 
and let these guys handle it. Thank you, Mr. Chairman.
    The Chairman. Thank you. First, let me say to you, Mr. 
Rinne, you and the Department, I'm not a professional, nor is 
it my job to pass judgment on what you have done in response to 
the critique, but I hope the way you've characterized it is 
true--where you have no holds barred, you are doing the best 
you can, you've got professional help, it's a real effort to 
provide reorganization. Is that a fair assessment?
    Mr. Rinne. Yes, it is, Mr. Chairman. We're striving. If 
this is going to be successful--and maybe I ought to just say 
it this way--me, just speaking personally--I think one of the 
hardest things we're going to do is look at ourselves and look 
at the organization, and I'll just be honest about that. And 
that's the hard thing to do.
    Having said that, I think if you're going to be successful 
in this effort, we have to get help from others. And that's 
what we're trying to do with our partners and stakeholders. If 
we continue down the path we're going with the action plan and 
the involvement of the stakeholders and obviously leadership 
from Congress--and I heard your remarks about later hearings--I 
think that kind of interest helps us. We need to stay 
objective, so our intent is pure in this. We're not--we don't 
like hearing everything we hear, but that's beside the point. 
So, that's where--we're very serious about this.
    The Chairman. Well, you know, when I got ready for this 
hearing, the first thing I asked was how many people work for 
the Bureau of Reclamation, and it's astounding--5,900 people. 
It's a big organization. That means you're responsible, and 
we're responsible, for an awful lot of lives and an awful lot 
of activities, and an awful lot of status quos. People are not 
expecting too Draconian a change in their--what they do for the 
Department, even though we start this with a report that says 
obviously things have to change rather drastically, because the 
Department isn't doing its job, not because of the people, 
they're nice people, good people, it's just that the work 
changed right under them. They don't do the kind of work now 
that they did when we started, and we haven't--the Department 
hasn't changed, based upon the workload. That's the way I see 
it, anyway. That's just my observation. That means there's a 
lot of things you do that other people could do better than you 
do, and do it cheaper, and there's a lot that you outsource and 
have it done by others; right? That's part of the problem 
you've got and you recognize that, I assume.
    Mr. Rinne. Yes, Senator. In fact, that is one of several of 
those action items that is really supposed to drill in on that 
very thing. And where it makes sense, I think I used the word 
in my comments about good business sense. I mean there are 
things that we'll be using the jargon of. They are not 
necessarily governmental, but others could do it, and that's 
what we need to try to tease out for the great American public 
and the tax payer and what we're doing.
    The Chairman. Well, we obviously are going to have to 
follow it carefully. And the Department is going to have to 
follow it carefully--the big Department--and OMB, and we'll 
just have to see how it turns out. I am rather pleased with the 
first cut of what I've seen, the work that you've done, led by 
you, that your Department has done. I think it's rather honest, 
but I'm sure it's not total. A lot more is going to be done 
before you're finished.
    Let me ask you what your thoughts are about that.
    Mr. Duscha. I was going to ask permission to comment on 
this very thing.
    The Chairman. Please.
    Mr. Duscha. As I've participated in similar studies for 
different Federal organizations and private organizations, you 
know, on re-organization and so forth, I will have to say that 
the Bureau of Reclamation has jumped into the report with a lot 
more enthusiasm than I've seen in the other departments and has 
made more progress than I've seen in this length of time. So, 
I'm very, very convinced that they're dedicated to coming out 
and doing a good job on this thing and doing the right thing.
    The Chairman. Sometimes doing the right thing means that 
some of them aren't going to be doing their same kind of work 
that they've been doing now, for their government, later on. 
Maybe some won't even be working for the government at all 
later on. That still means the job of analyzing has to take 
place.
    With that, I want to yield to Senator Craig. And then I 
know we have a new Senator from the other side of the aisle in 
whose State part of this activity takes place. Senator Craig.
    Senator Craig. Let me give you--not a hypothetical, a 
reality--and see how it fits within your thinking, based on 
your new management or approach toward that. Currently, in my 
State, we have a great example of why business as usual just 
isn't going to work. In arid southern Idaho there's a 100-year-
old irrigation/dam project known as Mindoka. It feeds thousands 
of acres of farmland while supporting wildlife refuges and 
waterflows for fish. Additionally, this water supports several 
farms and communities, and hosts phenomenal recreation for 
boating and all of that.
    However, our irrigators pay a large sum of money to keep 
the facility working. They are largely the only ones who pay. 
This facility, because of its considerable age and the original 
construction, needs a new spillway. The spillway is estimated 
to cost nearly $35 million, increasing irrigators' assessment 
by nearly 30 percent. And as the NRC study has found, the 
Bureau has not been particularly good at keeping costs down 
through construction processes, which raises another concern on 
the final price tag. These farmers are already paying $45 an 
acre. They're going to pay a lot more, obviously.
    Now, we find out, and appropriately so, there are a lot of 
other stakeholders involved. Should other stakeholders 
participate in and pay for some of the value of the project 
itself? It's a reasonable thing to be thinking about. At the 
same time, cost of the project could be spread over 15 years. 
Impacts are real, so we're at a loggerhead. We need it, for the 
security of the project, for all that it brings for farming, 
for ranching for communities, for recreation, now for water 
quality, now for wetlands, and we have a price tag that is 
almost unaffordable. This is probably a story played out across 
the country today to that aging infrastructure you talked 
about. How do we get creative here?
    Mr. Rinne. If I strike out on this or not, I'll strike out 
speaking.
    Senator Craig. Well, I just pitched it, and it's a fairly 
slow-moving softball.
    Mr. Rinne. It's very much--it's a very fair question. I 
would say as a general matter that we would expect--and I'm 
trying, maybe to look into the future a little bit--we have to 
have more and more of the beneficiaries pay. And sometimes that 
does require looking at the way things were in the past--that 
is the way you've characterized that--and for new uses, new 
benefits we have a need to work toward that.
    I say that, and that's not a slam dunk, and we are 
concerned about areas such as, in this case, the costs go up. 
And the other part of that, of course, are the things that 
Congress directs us. And I guess just like everyone else, we 
have budget pressures, and I want to point out the cost 
containment. I think one of the things in our ``Managing for 
Excellence'' action plan activity we hope to get to is there 
may be--and there should be, in the case of Bureau of 
Reclamation in design and construction, maybe it should be 
contracted off away to save those dollars. The problem is that 
I do think things like that--people who are interested in 
benefits should probably need to look at their own paying, and 
also need to look at the Federal need.
    Senator Craig. We're playing out something right now in the 
new Energy Act that is, I think, fascinating because frankly 
when we try to design something here, to the best of our 
knowledge we don't always know that it will work as well as we 
hoped it would. But reports coming in right now would suggest 
to me that it is working as well as we hoped it would and maybe 
even working better, and that's the new hydro re-licensing 
approach toward dams.
    All of a sudden, when all the parties involved have to get 
honest, when you just can't pass through costs because a law 
says you've got to do it and that's what you're in the business 
of doing--complying with and passing through costs--when you 
turn to the private sector and say, ``Here are the standards, 
meet them.''--we may not have all the best ideas, because maybe 
the private sectors move much more quickly into that arena than 
we have. It appears that that's beginning to happen with these 
re-licensed hydro projects. And also when there is a bit of 
arbitration involved in a public arena, no longer can the 
demands just be flat out. They have to be partly conditioned, 
standards have to be met, all of those kinds of things for all 
of the parties involved.
    Maybe one of the advantages--I don't know that it's 
applicable elsewhere, but I do know that it appears to be 
working at the moment, the reports coming are in. Now, there 
are critics to it, but when we have--and my time is up--when 
Commissioner Keys was brought on, one of the things I asked of 
him was quite simple: Don't ever allow a Klamath to happen 
again. We ought to be brighter and better and more nimble at 
dealing with all of the parties involved than just to shut the 
place down and let farmers starve. It was built for them 
originally, they still have a stake in it, although laws will 
argue that it's a broader one, and his commitment to me was 
that it won't happen again, and it hasn't, thank goodness. That 
doesn't mean it won't happen somewhere down the road, with all 
of the competition for and the concern about water and usage, 
but I think that kind of nimbleness is critical. And I will 
also tell you that if you think you can operate like a 
business, I have not yet seen a Federal agency successfully do 
that. You just--it is not within your culture and your 
character, it's not a criticism. So, contracting out and 
allowing participation from the outside is clearly one 
approach.
    Last, Mr. Chairman, we're trying to get creative here. The 
Chairman's done a lot of work in it, in trying to figure out 
how to finance. If you're going to expect the private sector to 
finance these projects to a large degree, then you must allow 
them to participate in them in a very creative way. You may set 
the standards, and you should. A lot of public policy involved 
in the standards needs to be met for all of the interested 
stakeholders. But water is the commodity of concern today in 
the West and if we can't figure out how to do it better, 
accomplish some of what the Senator from Montana has talked 
about, then we have increasing problems that are going to 
demand that ultimately we break away and figure out a way to do 
it.
    So, I thank you. I certainly believe these studies are 
worthwhile. At the same time, don't forget that maybe policy 
adjustment is also necessary to allow you to create greater 
flexibility, and that's where the chairman and I and this 
committee can help you play a role in all of this. Thank you.
    The Chairman. The Senator is correct. Now we're going to 
ask Senator Salazar from the State of Colorado if he'd like to 
comment.
    Senator Salazar. Thank you very much, Chairman Domenici, 
and thank you also to the witnesses for being here today.
    Let me just--for all of us here in the West, we recognize 
very much the importance of the Bureau of Reclamation and the 
legacy that it has left across the West. And I know in my State 
there are many Bureau of Reclamation facilities and we work 
well with the Bureau of Reclamation and I appreciate that work.
    Today in the audience, for example, we have people from the 
Southeastern Colorado Water Conservatory District in Jim 
Broderick, Bill Long, Bill Reynolds and Christine Arbogast and 
obviously the Fryingpan-Arkansas Project is of great importance 
to us in Colorado. We have a number of other Bureau of 
Reclamation projects throughout the State, including the ones 
that are operated by the Northern Colorado Water Conservatory 
District.
    Bennett Raley who asked for this report has been a good 
friend of mine for many years, probably some 20 years, and I've 
seen him as being one of the foremost experts on water issues. 
And I was delighted when he became the Assistant Secretary for 
Water and Science in the Department of the Interior.
    I think that Bennett was correct in making the request for 
review of the Bureau of Reclamation and I think the findings 
that we have here today are important findings as the Agency 
looks at itself and tries to figure out how it's going to move 
forward in the next century.
    I have one comment and then just one question. The comment 
is, I appreciate the Bureau of Reclamation continuing to put 
its focus on completing the Animas-La Plata Project. It's 
something Senator Domenici and myself and others worked on for 
a very long time, and it's very important as a project that not 
only deals with the issues between States, but between the 
States and tribes in a way that ought to be a model with how we 
deal with Indian reserve rights in other places in our Nation.
    My question to you, Commissioner Rinne and Mr. Duscha, has 
to do with--one of the recommendations out of the report was 
increasing the number of small projects--you say, although the 
demand for large new projects will remain low, it is likely 
that the demand for small water storage irrigation and 
distribution projects will increase. That's your recommendation 
in the report. How would you implement, if you will, that 
recommendation coming out of the report?
    Mr. Duscha. Well, I think basically when we put that 
recommendation in there, as we look at it, I think we see that 
there are opportunities there yet for water storage and water 
distribution but they have to be on the smaller scale involved 
in smaller projects, and that sort of ties in with Senators 
Burns's comments earlier about off-stream storage.
    I think, with that, you're going to have to--these more 
localized projects that will require local cooperation and 
perhaps--I'm sure they'll require some Federal help someplace 
in the mix, but----
    Senator Salazar. When you speak about smaller projects, Mr. 
Duscha, what size of project are you talking about?
    Mr. Duscha. Well, it's not going to be a Roosevelt or 
something like that. You're talking probably about a half-a-
million-dollar project, $5 million, $10 million projects.
    Senator Salazar. Projects in that magnitude.
    Mr. Rinne, on that question, I know we have a vote coming 
up, so just----
    Mr. Rinne. I'll make it real quick. I thought I would save 
us on how we implement it, but I was thinking about an example, 
trying to give you one. We're working on an example, a 
temporary kind of regulated reservoir, like around the All-
American Canal, which in actuality, when it opened, it could 
get up in that area where we actually have funding from non-
Federal sources, and then in turn they would get a portion of 
our water. I think that's probably the key to getting there, 
and I think that's an example.
    The Chairman. We have a vote up and I'm going to go.
    Senator Salazar [presiding]. I'll take over the committee, 
Mr. Chairman. So we'll go ahead and revolutionize the Bureau of 
Reclamation in your absence, sir.
    We do have a vote that's underway, so in order to keep the 
hearing moving, why don't we go ahead and continue this 
conversation. I recognize the era of the big dams, Hoover and 
Lake Mead, that's probably an era that has passed us by. But on 
the other hand, there's a reality about water storage in the 
West, and that is without water storage we would not have the 
greening of the West in the way that we have it. And we also 
have the reality of the huge competing demands that we have for 
a limited water supply in the West and huge challenges are 
being place on the Bureau of Reclamation, so I want you to, if 
you will, bore down a little deeper on how it is that the 
Bureau of Reclamation, moving into the 21st century, can look 
at the possibility of the smaller projects, where the Bureau of 
Reclamation can play a constructive role in making these 
projects a reality. So if you would continue on that vein of 
your answer, I would appreciate it.
    Mr. Rinne. I'll try. A couple of things--and maybe it will 
help me think on talking a little bit, too. One example, when 
we talk about--I'll be responsive to your question. Another 
example I was thinking about was on the Klamath Project that 
was brought up earlier--it was actually a smaller project, or a 
somewhat smaller project--and one example is we have actually 
had some land purchases at the upper end of the reservoir of 
Klamath Lake, the upper end of the lake, and what's significant 
about that is, Senator, there are some lands that historically 
have been used for other purposes and the non-return plan would 
be that when the Lake is providing water and there's good 
water, we can get water there. Those are small projects. 
Reclamation would be able to work with the local planning 
project people who try and absolve the interest in the area, 
more in the facilitation.
    I think for me a lot of the answer in the smaller projects 
is going to be more along the lines of refinements of 
operations. That may mean something a little bit out of stream. 
It may just mean that we're managing the water that goes 
through. There's just a lot of things with that that I would 
put in a class with the smaller projects.
    The peculiar thing would be it isn't something Reclamation, 
say, is going to design and construct, but we're being partners 
to allow them. And I think the more partners involved, the more 
we must do that. And that's how we are going to get some of 
these things done, by defending and getting the good ideas, and 
do them in so many cases cheaper, too.
    Senator Salazar. Does the Bureau of Reclamation, through 
the Commissioner's office or anywhere else within the agency, 
have a program that would be called a small projects program? 
Let's suppose I know of a river, which I do, somewhere in 
southern Colorado that might be looking at a small off-channel 
reservoir project, and I want to come and find out what it is 
that the Bureau of Reclamation might be able to do to help me 
out, is there a door that says ``Bureau of Reclamation Small 
Projects: we're here to help you''?
    Mr. Rinne. We used to have a Small Reclamation Projects 
Act, but that is not something in the 1990's. We actually 
endcapped cooperation with stakeholders and others and actually 
moved toward wrapping that program up. When we had loans, there 
were small Reclamation projects that we gave loans for 
different kinds of activity. We have not sought funding for 
that and I would say, at this time, we don't have current plans 
to do that.
    And I suppose the other thing is--and you would be well 
aware of this--short of maybe a specific authorization to do 
something like a project that was--we were directed to that, we 
probably wouldn't, on our own, move out and do something like 
that.
    I would say, though, that there are a couple of tools in 
the box around. Water 2025 has been one of the tools that has 
been very successful that way, in general. I'm sure many of you 
have been briefed on this. We've had roughly a 41 percent 
return on investment, or in round dollars I think we put in $14 
or $15 million and we've had projects with non-Federal funding 
come in up around $70 million. Most of the reason for doing it 
right now is improvement of infrastructure. Some of that can 
be--you can better manage the others for not using the sample 
vignettes. I think that some of the Water 2025 will be a very 
good tool. And then, in the area, in the one we continue to 
look for, I believe it was appreciated when the Senate passed 
the rural water legislation which included the future loan 
guarantee. That's an area that, again, is not a panacea but 
something that may provide the opportunity for ways to kind of 
fix up our aging infrastructure and continue to improve the 
efficiencies.
    Senator Salazar. I appreciate your comments. And I do think 
that that's a key part in terms of at least the water 
management issues and opportunities as the West is looking at 
some of these smaller projects.
    We are getting close. I think we have about 5 minutes left 
in the vote, so what we're going to do is put the hearing into 
recess and then, in the meantime, Senator Domenici will come 
back. So if we can maybe get the second panel ready to go, and 
continue on with the hearing.
    Thank you very much for attending the hearing today, Mr. 
Rinne and Mr. Duscha.
    [Recess.]
    The Chairman. Sorry for the delay, but I had to attend 
another hearing in between to make a quorum for another 
chairman.
    The second panel will be made up of Dan Keppen, executive 
director of The Family Farm Alliance. Are you ready?
    Mr. Keppen. Yes, Mr. Chairman.
    The Chairman. The Honorable Diane Snyder, executive 
director of the American Council of Engineering Companies, from 
New Mexico. Are you here and ready? Nice to have you here. And 
Thomas Donnelly, executive vice president of the National Water 
Resources Association, Arlington, VA, and Scott Yates, director 
of the Wyoming Water Project at Trout Unlimited, Arlington, VA.
    We're going to start in that order. We'll ask that each one 
keep their testimony brief. If you have prepared remarks, we'll 
make it part of the record. And we'll try to get out of here in 
the next 15 to 20 minutes. Thank you very much for being here. 
Let's start on your end. Let's go with you, sir.

         STATEMENT OF DAN KEPPEN, EXECUTIVE DIRECTOR, 
                    THE FAMILY FARM ALLIANCE

    Mr. Keppen. Thank you, Mr. Chairman. My name is Dan Keppen. 
I'm the executive director of The Family Farm Alliance. We're a 
non-profit organization that advocates for family farmers and 
ranchers in 17 western States, I'm from Klamath Falls, OR.
    I guess I'm going to modify my prepared comments a little 
bit just to respond to some of the commentary on the first 
panel. I think maybe, in a nutshell, how you can encapsulate 
our views on this whole Reclamation action plan and the NRC 
report is absolutely--we share your concerns that new storage 
is needed in the West right now, and perhaps the best way to 
address that concern is for Reclamation and other agencies, in 
certain ways, to get out of the way and help streamline the 
regulatory process so that we can move some of these processes 
forward. Because right now we've got population growth going on 
and there are no new major supplies being developed. And what's 
happening by default is agriculture is becoming the reservoir 
to meet these new demands. And we're concerned about national 
implications and policy implications associated with all the ag 
that is possibly going out of production right now, because 
without new supplies, the water is going to be taken from ag by 
default.
    So, I guess I would just like to say that The Family Farm 
Alliance, in this particular process, has been involved for a 
year. We spent a good portion of our time last year developing 
case studies to provide to the academy that would provide input 
on how our folks dealt with Reclamation, both from a good point 
and a bad point. We had both good examples and bad examples. 
The academy came out with a report. They obviously listened to 
what we had to say. We pretty much agreed with the findings of 
the National Academy. And then the big question was, how is the 
Bureau of Reclamation going to address those findings?
    They rolled out their action plan, and for the most part, I 
think we're really encouraged with how they are going about 
addressing those findings. They set up this ``Managing for 
Excellence'' process. They've been very open with the 
stakeholders. They've given us a place--The Family Farm 
Alliance--a place at the table. And I think that the forum they 
set up, if it's actually implemented the way they've laid it 
out, will give us an opportunity to have our concerns addressed 
and, I think, ultimately, make the Bureau of Reclamation a more 
efficient agency, which is an important thing for our 
membership, because our members actually do pay for a portion 
of the operations that go on at the Bureau of Reclamation.
    I think we just have a few specific ideas that we're 
looking to see accomplished here in the next year. We'd like to 
see Reclamation address this, or Congress if necessary, and 
give the sponsor who pays over 50 percent of the cost the right 
to have the design, procurement, and construction outsourced, 
as previously mentioned. We'd like to see better improvements 
to the transparency of decisionmaking, especially where 
Reclamation customers are responsible for payment of costs. And 
we'd like to see impediments to project title transfers 
investigated and reclamations developed that allow locals to 
have a better sense that they're actually going to get a title 
transfer accomplished in a short period of time.
    The Chairman. What about that? I don't get that.
    Mr. Keppen. Well, it was mentioned earlier that title 
transfers from the Federal Government to a local entity--
there's opportunities out there to do it, certain districts 
have done that, but there's definitely a perception out there 
that it's a very lengthy, expensive process, and we've got case 
studies that prove that. We'd like to find ways to encourage 
districts to do more of those by removing some of the 
regulatory impediments, especially those associated with NEPA 
and the National Historic Preservation Act.
    The Chairman. OK.
    Mr. Keppen. So, we'll look forward to working with your 
committee and the Bureau of Reclamation on those and the other 
recommendations we've identified in our written testimony. 
Thank you.
    [The prepared statement of Mr. Keppen follows:]
         Prepared Statement of Dan Keppen, Executive Director, 
                        The Family Farm Alliance
    Chairman Domenici and Members of the Committee:
    Thank you for this opportunity to submit testimony on behalf of the 
Family Farm Alliance (Alliance). My name is Dan Keppen, and I serve as 
the executive director for the Alliance, which advocates for family 
farmers, ranchers, irrigation districts, and allied industries in 
seventeen Western states. The Alliance is focused on one mission--To 
ensure the availability of reliable, affordable irrigation water 
supplies to Western farmers and ranchers. In short, we are the Bureau 
of Reclamation's agricultural water customers.
    I will provide the Family Farm Alliance perspective on a recently 
completed National Research Council report (``Report'') that examined 
the Bureau of Reclamation's (BOR) organization, practices and culture. 
This Report made a number of recommendations to change the way 
Reclamation operates. Reclamation in turn has responded with its 
Managing for Excellence Action Plan (``Action Plan''). This testimony 
provides the Alliance's assessment of the Report and Action Plan.
              overview of family farm alliance philosophy
    The members of the Family Farm Alliance believe that streamlined 
federal regulation and decision-making are the keys to sound Western 
water policy. Wherever possible, meaningful delegation of decision-
making authority and responsibility should be transferred to the local 
level, with less federal intrusion in basin issues. The Alliance 
believes strongly that Reclamation should focus on fulfilling its core 
mission of delivering water and power in accordance with applicable 
contracts, water rights, interstate compacts, and other requirements of 
state and federal law. Inherent in this definition of core mission is 
the need to prioritize the expenditure of federal funds and other 
resources of the Department of the Interior.
    The Alliance is engaged in this process to ensure that water users 
are being served in the most cost-efficient manner. We are encouraged 
that the Subcommittee is focusing on this important matter, and we're 
certain that the Subcommittee and the Administration share the 
Alliance's goal of improving Reclamation's long-term management and 
transparency at a time when resources must be maximized to better 
develop water and power supplies in the western United States.
                  similar family farm alliance efforts
    A number of years ago, the Family Farm Alliance took the lead in an 
effort to improve containment and accountability for work by the Bureau 
of Reclamation that was either funded in advance by water users or 
subject to repayment obligations. With the cooperation of the Bureau of 
Reclamation, great progress was made in this regard. That effort 
ultimately yielded improved clarity and opportunity for customers to 
participate in development of O&M programs for facilities in which they 
share the cost. In fact, Reclamation's recent Action Plan favorably 
comments on that earlier Alliance-Reclamation interaction. Given that 
federal, state, local, and private funds will be scarce, it is 
imperative that these efforts continue.
            family farm alliance involvement in this process
    We have spent considerable time and resources in the past year 
working with the NRC Committee and Reclamation as the Committee 
developed Managing Construction and Infrastructure in the 21st 
Century--Bureau of Reclamation, which was finalized earlier this year. 
In June of 2005, the Alliance completed our own collection of case 
studies, titled: The Bureau of Reclamation's Capability to Fulfill Its 
Core Mission: The Customer's Perspective (``Alliance Report''). On June 
23, 2005 in Washington, D.C., the Alliance presented its final case 
study report to the Committee. In May and June of 2005, the NRC 
Committee also sent out teams of three to tour ``case study'' sites 
throughout the West, and committee members met with Alliance 
representatives at three of these site visits (Boise, Denver and 
Sacramento).
                     2005 alliance report findings
    Overall, there is considerable agreement between the NRC Report and 
the Alliance case studies report. Our report compiled experiences from 
around the West--both good and bad--to provide the Committee with 
observations, findings and recommendations intended to be used 
constructively by Congress, the Bureau of Reclamation and other 
Interior Department agencies in dealing with the issues. Nine 
individual case studies were developed for irrigation districts served 
by six Reclamation projects in California, Colorado, Idaho, Nevada and 
Oregon. Our report found that:

          1. Reclamation frequently demands that design work on water 
        projects be performed by Reclamation staff.
          2. Cost estimates prepared by Reclamation for proposed work 
        are often significantly higher than reasonably anticipated 
        costs.
          3. Some customers reported unsatisfactory contract management 
        by Reclamation staff.
          4. Customers were skeptical of the technical abilities 
        (especially relative to engineering and inspection) of 
        Reclamation staff, particularly newer hires.
          5. Reclamation sometimes shows an apparently unwillingness to 
        document the basis for accounting of construction, NEPA work, 
        and other cost estimates.
          6. Customers believe they do not have recourse to fully 
        understand and engage with Reclamation in decision-making and 
        related cost estimates.
          7. Reclamation tends to over-staff meetings or work on some 
        projects.
          8. Reclamation needs to improve ``turn-around'' times for 
        design work or decisions.

    Several contributors to our report observed that Reclamation in 
recent years has carried out few major new construction projects. As a 
consequence, the agency's engineers and management staff lack practical 
construction experience. The designers and builders of Reclamation's 
most impressive works have long since retired, and the current 
generation of engineers, planners and managers has not had the 
opportunity to develop the skills of their predecessors. Moreover, many 
contributors believe that Reclamation has too few licensed engineers.
    Despite these negative findings, there is also evidence that 
Reclamation staff members from regional and area offices can play a key 
role in helping to find the right path to make multi-agency processes 
and projects work. When strong relationships are developed between 
Reclamation employees (especially in area or regional offices) and 
local water users, cooperative and innovative solutions can be reached. 
There are other models in the West--such as state water project grant 
and loan programs in California--where successful projects have been 
completed. A template for success might be one where state and federal 
agency regulators establish criteria, funding agencies write the 
checks, and local districts and their consultants implement and satisfy 
regulatory criteria and funding eligibility requirements.
                 alliance perspective on the nrc report
    It appears that the NRC Committee heard the Alliance's concerns. 
When we transmitted our report to the Committee last June, we noted 
that a template for success might be one where ``state and federal 
agency regulators establish criteria, funding agencies write the 
checks, and local districts and their consultants implement and satisfy 
regulatory criteria and funding eligibility requirements''. We also 
observed that meeting the challenge of modernizing the West's aging 
water infrastructure will require a corps of highly qualified 
professionals serving in the public and private sectors. We recommended 
that Reclamation must either hire skilled and experienced engineers and 
managers, or turn to the private sector to provide the human resources 
necessary to maintain and improve the agency's facilities.
    You will note a similar flavor in the NRC Report recommendations:

   Recommendation 2a: ``The commissioner should undertake an 
        in-depth review and analysis of the Technical Service Center 
        (TSC) to identify the needed core technical competencies, the 
        number of technical personnel, and how the TSC should be 
        structured for maximum efficiency to support the high-level and 
        complex technical needs of Reclamation and its customers . . . 
        This assessment and analysis should be undertaken by 
        Reclamation's management and reviewed by an independent panel 
        of experts, including stakeholders.''
   Recommendation 2b: ``The workforce should be sized to 
        maintain the critical core competencies and technical 
        leadership but to increase outsourcing of much of the 
        engineering and laboratory testing work''.
   Recommendation 2c: ``Alternative means should be developed 
        for funding the staff and operating costs necessary for 
        maintaining core Technical Service Center competencies, thereby 
        reducing the proportion of engineering service costs 
        reimbursable by customers.''
   Recommendation 4 suggests that ``Reclamation should 
        establish an agency-wide policy on the appropriate types and 
        proportions of work to be outsourced to the private sector. 
        Operations and maintenance and other functions at Reclamation-
        owned facilities, including field data collection, drilling 
        operations, routine engineering, and environmental studies, 
        should be more aggressively outsourced where objectively 
        determined to be feasible and economically beneficial.''
   Recommendation 5b: ``. . . Reclamation should assist its 
        customers in their efforts to address economic constraints by 
        adapting repayment requirements that ease borrowing 
        requirements and extend repayment periods.''
   Recommendation 6d: ``A training program that incorporates 
        current project management and stakeholder engagement tools 
        should be developed and required for all personnel with project 
        management responsibilities. In addition, project managers 
        should have professional certification and experience 
        commensurate with their responsibilities.''
   Recommendation 6e. ``Reclamation should give high priority 
        to completing and publishing cost estimating directives and 
        resist pressures to submit projects to Congress with incomplete 
        project planning. Cost estimates that are submitted should be 
        supported by a design concept and planning, environmental 
        assessment, and design development documents that are 
        sufficiently complete to support the estimates. Reclamation 
        should develop a consistent process for evaluating project 
        planning and the accuracy of cost estimates.''

    The philosophy embedded in future management scenario discussed in 
the Report--``federal funding and local execution''--closely matches 
the philosophy observed in the most successful of the case studies we 
presented to the NRC Committee.
           reclamation's action plan: managing for excellence
    As previously noted, Reclamation has analyzed-the report's findings 
and recommendations and has developed an action plan called Managing 
for Excellence. In presentations at the Alliance's annual conference in 
Las Vegas last March, Interior Department and Reclamation officials 
emphasized that they are taking the findings of the NRC very seriously. 
There appears to be genuine enthusiasm within Reclamation about 
proceeding with its Action Plan. Team leaders for 41 different action 
items have been identified, and these leaders, senior executives, and 
the regional directors appear to be very organized and focused on this 
process.
    On April 27 of this year, the Alliance participated in a workshop 
with Reclamation and water and power customers to help set priorities 
for Reclamation as it moves forward with implementing its ``Managing 
for Excellence'' Action Plan. The workshop was held in Denver. The 
general issues of concern that were raised related primarily to 
Reclamation's engineering and design services, asset sustainment, and 
major repair challenges. Overall, we were pleased with the constructive 
dialogue and brainstorming that occurred between Reclamation and its 
customers at the day-long Denver meeting.
specific recommendations regarding design, construction and procurement
    In general, we believe that Reclamation's Action Plan will provide 
opportunities to address the concerns identified in last year's 
Alliance report. We do have a few specific ideas on how we think key 
Report recommendations can be realized, either through the process 
proposed in the Action Plan, or, if necessary, by Congress. As we work 
further with Reclamation in this process, we intend to define our 
expectations in a manner that easily demonstrates whether Reclamation 
has met them or not. Key initial expectations include the following:

   Reclamation revises the customer interaction process to 
        include written procedures for customer input on current 
        financial circumstances of all Reclamation infrastructure, 
        including cost invested, repayment status, O&M cost allocation, 
        design life, facility condition, etc, and a documented means 
        through which Reclamation used (or didn't use) this input;
   Reclamation develops and implements a transition plan to 
        achieve an agency with ``right-sized'' design, estimating and 
        construction management staff;
   Reclamation adopts a policy that contractors who pay for 50% 
        or more of specific work can elect to use irrigation district 
        personnel or private consultants for design, procurement, 
        construction, and contract and construction management;
   Reclamation proposes reductions at Technical Service Center 
        that are real and not achieved by reassignments to the Regions 
        or reclassifications of existing job categories;
   Standards for construction and O&M are based on an 
        assessment of the relative risk, consequences of failure, 
        marginal return, and subject to appeal to policy level 
        officials;
   Reclamation moves to use ``performance-based'' instead of 
        ``design-based'' standards for any work which is paid for in 
        part by contractors, and emphasize use of ``off-the-shelf' 
        components, as opposed to redesigning projects.
   Reclamation requires reporting of actual costs of work 
        charged to contractors by function and specific employee (or at 
        least job title and classification, with description of work 
        performed) within a reasonable time period (perhaps six 
        months).
   Reclamation does not perform design, construction, and 
        procurement work unless the Commissioner certifies that there 
        is a substantial likelihood that Reclamation can perform the 
        work at issue at a cost equal to or less than if outsourced 
        (based on a defined Reclamation project cost).
   Reclamation requires reporting/tracking for projects that 
        monitor actual Reclamation costs, as well as providing for 
        advance notification to contractors and Congress that there is 
        a material risk that Reclamation will exceed defined 
        Reclamation project costs.

    In summary, fundamental fairness requires that when a water user is 
paying for work in advance or through repayment mechanisms, that water 
user should have the option to have the work executed in the manner 
that provides the most return for the investment. Qualified districts 
or water user organizations should be provided with the option to 
perform or contract with qualified private contractors any work on 
federal facilities that does not fall within the category of 
``essential governmental functions'' so long as appropriate standards 
are met.
   specific recommendations regarding reclamation's role with title 
                               transfers
    Reclamation has talked about the benefit of transferring title of 
some Reclamation facilities to non-federal authorities that can 
demonstrate capability to continue operating the project. It is seen as 
a benefit to the federal government because of the loss of liability 
and future financial responsibility for non-reimbursable purposes as 
non-reimbursable OM&R. There appears to be a handful of districts that 
are currently pursuing title transfers, and we hear complaints from 
some that title transfers of federal water projects to local sponsors 
are unappealing. We expect Reclamation to develop goals that require 
transfer of facility title or O&M responsibilities for an increasing 
percentage of Reclamation facilities to project beneficiaries.
    The Action Plan provides a process where Reclamation can address 
this important issue directly with customers. We have asked Reclamation 
to investigate impediments to project title transfer, and then develop 
recommendations to help streamline unrealistic regulatory processes.
    Several of our members who have participated in title transfers 
have identified the cumbersome National Environmental Policy Act (NEPA) 
and National Historic Preservation Act (NHPA) processes as primary 
reasons for difficulties. The attached summary of one Nevada water 
district's experience on this matter further details this issue and is 
included with this testimony as ``Exhibit A''.
    We will continue to engage with Reclamation and Congress this year 
as we seek to implement the NRC Committee's recommendations.
                               next steps
    Transparency and value of Reclamation's construction and O&M costs 
are of critical importance to our organization. The Family Farm 
Alliance Board of Directors earlier this year formed a subcommittee of 
Western landowners and water professionals to engage in the process 
proposed by the Action Plan. This group will continue to assess how the 
Report and the Action Plan may be used as a basis for potential policy 
and management changes at the Bureau of Reclamation.
    Interior Assistant Secretary Mark Limbaugh has assured the Alliance 
and other stakeholders that we will have an active role in working with 
Reclamation to implement the Report's recommendations. This is very 
encouraging. Regular briefings and interaction with Reclamation and 
Congress will be needed to keep the momentum moving on this important 
process. However, we will not be able to fully judge whether Managing 
for Excellence has been a success until the action items are completed 
in December 2007.
    The Family Farm Alliance looks forward continuing to work with the 
Committee and the Bureau of Reclamation to ensure that water users who 
pay for Reclamation's services get the best value for their investment.
    Thank you for this opportunity to present our views today.
                                 ______
                                 
               Exhibit A--Incentives for Title Transfers
    Although the Bureau of Reclamation has for several years touted the 
benefits of transferring ownership of certain Bureau facilities to 
local authorities, there remain significant hurdles to such title 
transfers. These include:

   Significant ``up-front'' costs that must be borne by the 
        local entity.
   Reclamation bears little, if any, of the costs associated 
        with transfers.
   If the title transfer fails, the district is totally 
        responsible for the sunk cost of the process, even if specific 
        activities required by Reclamation would have otherwise 
        eventually been paid by Reclamation (e.g. cultural resources 
        inventories).
   The infrastructure is often in a state of deterioration. 
        Many projects are old and in need of major maintenance.
   Title transfer processes can take several years, and some 
        participating districts have had problems with getting the 
        proposed transfer to score positively.

    Several of Alliance members who have participated in title 
transfers have identified the cumbersome NEPA (National Environmental 
Policy Act) and National Historic Preservation Act (NHPA) processes as 
primary reasons for difficulties. In some areas, our members have 
observed that much of the resistance associated with title transfer 
NEPA and NHPA issues comes from internal staff at the Bureau of 
Reclamation.
    For example, the Environmental Impact Statement for the Humboldt 
Project Conveyance in Nevada--informally called the Humboldt Title 
Transfer--has been completed and the Record of Decision issued. This 
process was informally started in 1991 and formally began in 1997.
    Thus far Pershing County Water Control District (PCWCD or District) 
has expended more than $1 million in pursuit the transfer of title to 
the District. However, in order to comply with federal statutes 
addressing archaeological and other cultural resources concerns, 
Reclamation, with the District's financial assistance, will need to 
complete identification of cultural resources efforts on the transfer 
lands under the NHPA, as well as other legislation including the Native 
American Graves Protection and Repatriation Act and the Archaeological 
Resources Protection Act. This process may take an additional 5-7 years 
and is estimated to cost over $1.3 million for research design and 
inventory. PCWCD is obligated to pay half of the costs. Not included in 
this figure are any mitigation costs which would add significantly to 
the projected expenses.
    The justification for this enormous expenditure of time and money 
is based on Section 106 regulation, 36 CFR Part 800.5(a) (2) (viii), 
that defines transfers of property out of Federal ownership or control 
as adverse effects if the agency transferring the property determines 
that there are inadequate legally enforceable restrictions or 
conditions to ensure long term preservation of the property's historic 
significance.
    We appreciate the need for identification and protection of 
cultural resources in circumstances where there is the potential for 
alteration or destruction of the historic properties. However, in the 
case of the Humboldt Conveyance, the lands being transferred to PCWCD 
will continue to be used for exactly the same purposes and in the same 
manner that they are currently used under Reclamation's stewardship. 
Ironically, some the lands that are to be transferred to PCWCD are 
acquired lands, that is, patented lands held by private individuals 
that were acquired by United States specifically for Project purposes. 
In the District's view, acquired properties ought to be exempt from 
Section 106 regulation because in such cases the federal government is 
placed in the chain of title after patent and the lands are not 
``public'' in the same sense as unpatented lands.
    Reclamation and Congress should investigate these impediments to 
title transfer and suggest or support, as may be appropriate, language 
that would modify the requirements of Section 106 in such instances.

    The Chairman. Thank you. Excellent. Let's proceed now to 
Mr. Snyder. Is that the way we did it? Oh, no. Ms. Snyder, nice 
to have you with us.

       STATEMENT OF H. DIANE SNYDER, EXECUTIVE DIRECTOR, 
           AMERICAN COUNCIL OF ENGINEERING COMPANIES

    Ms. Snyder. Thank you, Mr. Chairman, it's always a pleasure 
to see you and be here.
    I am the executive director for ACEC-New Mexico, the 
American Council of Engineering Companies. I also serve as a 
New Mexico State Senator, and have the pleasure and honor of 
representing about 44,000 of New Mexicans.
    ACEC, Mr. Chairman and members of the committee, is the 
voice of America's engineering industry. Our council members 
number up to 5,500 firms throughout the country, and we 
represent a broad spectrum of engineering. ACEC today is a 
large federation of 51 State and regional councils. Our member 
firms employ over 300,000 engineers, architects and related 
specialists, and we are annually responsible, Mr. Chairman, for 
over $100 billion worth of projects both in the private and the 
public sector. So we know what we're doing, Mr. Chairman.
    Our member firms range in size, like many in New Mexico, 
from a single engineer up to firms that employ thousands. Our 
mission is to simply contribute to the prosperity and welfare 
of the United States by advancing the business interests of our 
member firms. I appreciate the opportunity to come before you 
today.
    ACEC, Mr. Chairman, as you know, we have spoken with you 
and Senator Bingaman and your staffs. We've previously raised 
concerns about the practice of the Bureau for offering and 
providing consulting engineering services to customers in 
direct competition with the private sector. We're particularly 
concerned and disturbed by the fact that tax dollars are the 
ones being used to perform services that are readily available 
from the private firms.
    One example, particularly, that leaps out to all of us as 
unfair government competition is the Animas-La Plata Water 
Supply Project in southern Colorado and northwestern New 
Mexico. Engineering firms were lining up, Mr. Chairman, when 
the original appropriation of $344 million was put out, knowing 
full well that teams were being formed, that we had the 
expertise within the engineering firms even in New Mexico and 
Colorado to do this work. However, the Bureau convinced the 
tribes involved that, in fact, they could do the design and 
construction.
    Unfortunately, they ended up contracting out less than 10 
percent of the front-end engineering work, and none of the 
construction costs. That's direct competition, and with all due 
respect to the Bureau, Mr. Chairman, we know that today's 
results of the Animas-La Plata Project--the increase in funding 
has gone from $344 million to a request of over $500 million, 
and the most alarming concern, of course, for most of us, and 
I'm sure you share this concern, is that the local cost share 
has risen from a little over $3 million to $7 million. There 
are very few small communities in New Mexico who can afford 
this, and certainly in other States.
    Another example that has directly impacted New Mexico is 
the----
    The Chairman. Are you suggesting that that would have been 
different had they not done it that way and put it out for--
outsourced it?
    Ms. Snyder. Yes, Mr. Chairman, I respectfully submit that 
it would. One of the things that I do know, because I'm very 
familiar with the members in New Mexico, is that we understand 
the geology. We do a special training for the geology of New 
Mexico and the hydrology and what needs to be done, and there's 
no way we would have ended up with not understanding the 
bedrock that the project was being built on. And if such a 
mistake--information had been misinterpreted, as the Bureau 
indicated to you in your prior hearing, then in fact, our 
engineering firms would have eaten a large share of that cost, 
of the $162 million. So, yes, the cost would have been 
different and much less.
    The Ute Dam Project, sir, was built--the reservoir was 
actually built for storage in the 1950's and 1960's--the early 
1960's, based on the understanding of the very limited life of 
the Ogallala Aquifer. We now know that it's even a shorter and 
more limited life. The most recent projections I've heard are 
less than 20 years' reserve of water.
    During the 1960's, 1970's, 1980's and 1990's, Mr. Chairman 
and members of the committee, the Bureau of Reclamation did a 
series of studies, and finally received authorization to 
conduct a feasibility study. They spent millions of dollars, 
but to this day they have advanced the project one degree 
closer to a design or construction stage. The local water 
association in 1998 then went out to the private sector. They 
hired an engineering firm which developed a feasibility study. 
In 2004, Mr. Chairman, I believe they came to this committee 
first and asked for your support. The people of eastern New 
Mexico brought the feasibility study to Congress to secure 
Federal funding. Unfortunately, the Bureau criticized the 
report and concluded the report did not conform to their U.S. 
Bureau of Reclamation standards. The project was immediately 
withdrawn and the entire process was started over. Currently, 
this project has not been moved past the feasibility study, and 
Mr. Chairman, it is my belief, and those of many of us in New 
Mexico, that if we continue at the same rate of study and 
design and work that's been accomplished year to date in this 
project, that the people in eastern New Mexico will bet getting 
dirt and dust out of their water taps before we have a 
feasibility study and the funding in place. It's a great 
concern, and I know you share that concern, Mr. Chairman.
    One of the things that, in retrospect, we believe is that 
the Bureau should have served in the oversight capacity and 
that both the local State government and the private sector 
should have proceeded as full partners in the process.
    We agree--ACEC agrees with the report of the National 
Research Council, with the finding of inconsistencies in the 
areas of acquisition and contracting policies. The 
inconsistency and the implementing of the acquisition policies 
is in how each region or district makes the determination as to 
what functions they will keep in-house, even though some of 
them are considered inherently--not inherently governmental 
functions. What we believe is the Bureau needs to establish a 
centralized and consistent acquisition policy and procedures at 
headquarters, rather than allowing each region to make up their 
own policies.
    We certainly--ACEC agrees with the report's recommendation 
that the commissioner needs to undertake a detailed analysis of 
how the agency should be structured. We also support the fact 
that they do need to maintain their critical core competencies, 
but as the report says, increase outsourcing of as much of the 
engineering and laboratory testing work. This would reduce the 
proportion of engineering service cost chargeable to the 
customer. It also states that the functions--most of them are 
not inherently governmental functions and concludes that it 
should be contracted out to the public sector.
    In addition, Mr. Chairman, many people say that that goal 
is impossible, it can't be done. And I'm so sorry that Senator 
Thomas had to leave, but as you well know, he chairs your 
subcommittee on the National Park Service. The National Park 
Service has done a complete change since 1988. They have 
restructured their process for acquiring construction design 
and construction project supervision. And while the Government 
previously provided all of these services, now all of the 
construction supervision and 90 percent of the design services 
are satisfied through private sector contracts. That's a 
remarkable record, Mr. Chairman, and they've been incredibly 
successful.
    And, again, ACEC wants to thank Senator Thomas, yourself 
and his subcommittee. By shifting from a project-focused 
activity to project management and standards activity, the 
National Park Service has achieved incredible successes. 
Greater emphasis on common structure specifications has been 
helpful in both private and public sector, and finally, Mr. 
Chairman, it's simplified the funding for the entire 
construction program.
    The National Park Service has done an incredible job. ACEC 
encourages the Bureau to follow this successful model that is 
already in place. They have proven how successful it is. They 
can--it demonstrates clearly how Federal agencies can 
effectively partner with the private sector to carry out 
successful programs on behalf of the taxpayer.
    The action plan, Mr. Chairman, we believe is a great step 
in the right direction. We commend the Bureau for its long 
history of providing service to the West and to our citizens, 
but we certainly encourage and believe that you and your 
leadership and Congress needs to keep a strict oversight to 
make sure that the Bureau stays on track in its changes.
    In conclusion, Mr. Chairman, ACEC believes that the 
taxpayers, the people of the United States, ultimately win when 
there is fair competition and when Federal agencies and the 
private sector partner together. We look forward to working 
with you, Mr. Chairman, the members of your Committee and the 
Bureau of Reclamation toward achieving these common goals.
    And with that, I thank you again for allowing me to come, 
and I look forward to any questions, Mr. Chairman.
    [The prepared statement of Ms. Snyder follows:]
      Prepared Statement of H. Diane Snyder, Executive Director, 
             the American Council of Engineering Companies,
    Mr. Chairman and Members of the Committee, my name is H. Diane 
Snyder and I am testifying today on behalf of the American Council of 
Engineering Companies (ACEC). ACEC is the voice of America's 
engineering industry. Council members--numbering more than 5,500 firms 
throughout the country--are engaged in a wide range of engineering 
works that propel the nation's economy, and enhance and safeguard 
America's quality of life.
    I am the Executive Director of ACEC New Mexico a membership 
organization for 48 engineering firms. The Council represents the 
business of engineering for over 40,000 New Mexicans employed in the 
engineering industry.
    In addition, I am a New Mexico State Senator in the middle of my 
second four-year term. My district is in Albuquerque and I have the 
honor and privilege of representing 44,000 New Mexicans. Prior to being 
elected to office I served as--what has recently become a four-letter 
word--a lobbyist for our state chamber of commerce, small business 
issues, and water and wastewater regulation and infrastructure 
development.
    Today ACEC is a large federation of 51 state and regional councils 
representing the great breadth of America's engineering industry. ACEC 
member firms employ more than 300,000 engineers, architects, land 
surveyors, scientists, and other specialists, responsible for more than 
$100 billion of private and public works annually. Member firms range 
in size from a single registered professional engineer to corporations 
employing thousands of professionals. The Council's mission is to 
contribute to America's prosperity and welfare by advancing the 
business interests of member firms.
    I appreciate this opportunity to come before you today to discuss 
the business practices of the U.S. Bureau of Reclamation, and how that 
not only affects engineering firms, but the very people it is suppose 
to help.
              problems with the u.s. bureau of reclamation
    ACEC has raised concerns previously regarding the U.S. Bureau of 
Reclamation's (USBR) practice of offering and providing consulting 
engineering services to customers in direct competition with private 
engineering firms. What is particularly disturbing is that the USBR 
uses taxpayer dollars to compete directly with the private sector, and 
often performs engineering work in-house where the agency lacks the 
manpower or expertise necessary to perform the work.
    One example of unfair government competition by the USBR raised by 
ACEC members is the Animas La Plata Water Supply Project in Colorado. 
Engineering firms with the capability to perform the work began to form 
teaming arrangements in anticipation of a RFP to design/construct the 
$344 million project. However, USBR convinced the tribes to allow it to 
do the design and construction management for this project with in-
house staff. According to firms familiar with the project, USBR only 
contracted out approximately 5-10% of the front-end engineering work, 
and none of its construction management functions.
    Another noteworthy example of where USBR could have more 
effectively utilized the private sector on behalf of their client and 
the taxpayer is the Indian water rights settlement with the Chippewa-
Cree Tribe. Under the ``Chippewa Cree Tribe of the Rocky Boy's 
Reservations Indian Reserved Water Rights Settlement and Water Supply 
Enhancement Act of 1999'' (106-163), USBR was allocated $3 million to 
conduct a feasibility study to evaluate alternatives for municipal, 
rural, and industrial water supply for the Chippewa Cree Tribe 
Reservation. In addition, the report was to include a regional 
feasibility study to evaluate water issues, and outline how water 
resources can best be managed to serve the needs of Montana's citizens.
    Instead of allowing the private sector to undertake the studies, 
however, USBR designated itself as the entity to accomplish the work. 
The study was supposed to identify a preferred alternative, conduct a 
National Environmental Policy Act (NEPA) evaluation, a cultural 
resources survey, and an economic evaluation. In the end, USBR 
completed the study late, and later determined that it was not a 
``true'' feasibility study under the agency's own standards. USBR did 
not identify a preferred alternative but simply screened the options 
from twelve to six. No further work was performed, and since the report 
did not identify a preferred alterative as required under agency 
guidelines, the work product could not be presented to Congress to 
secure additional federal funding.
    Since then, the State of Montana has taken the lead in doing the 
feasibility study. The State completed an engineering and economics 
report using a private engineering firm in 1 year (while USBR had over 
3 years to complete their $3 million dollar study). What is particular 
disturbing is that USBR had proposed to obtain another $8 million from 
Congress to compete the another feasibility study over 3 more years, 
while the state believes that this work can be completed in 1-2 years 
at a fraction of the cost.
    The last example which directly affects New Mexico (NM) is Ute Dam 
project. The state of New Mexico built Ute Dam and reservoir in 1950-60 
as a water supply storage reservoir realizing that the limited life of 
the Ogallala aquifer serving the east side of New Mexico. In 1963-64, 
17 eastern New Mexico communities and counties formed the Eastern NM 
Inter-Community Water Supply Association and developed a feasibility 
study to put the storage in Ute to beneficial use. The feasibility 
study was to be 100% privately financed and owned/operated by the 
Associations' members.
    The USBR did a series of studies and received federal authorization 
to conduct a feasibility study, and in the process spend lots of money, 
but not advancing the project to a design or construction stage, 
however, project never got off the ground so the project went out to 
the private sector and a private sector firm was picked to finish the 
feasibility study.
    In 2004, there was an attempt to secure federal funding for the Ute 
Dam project. However, USBR criticized the report and concluded that the 
report did not conform to USBR standards. The project was immediately 
withdrawn and the entire process started all over again. Currently, the 
project has not moved beyond the feasibility study stage.
    ACEC believes that the proper role for USBR should have been to 
oversee the work done by both the state and the private sector--not 
taking the lead away from the state and the work away from qualified 
engineering companies.
    Unfortunately, USBR does not seem to stop in competing directly 
with the private sector. USBR's 2004 Federal Activities Inventory 
Reform Act (FAIR) reveals that USBR intends to increase its water 
recovery/reuse program by expanding the number of technical assistance 
programs it offers to Tribes for water programs. In fact from 1999-
2005, USBR's FAIR Act inventory reveals that it currently has 680 
federal time equivalence (FTE) working in engineering functions that 
have been deemed commercial.
    USBR should follow the example of the National Park Service (NPS) 
in making effective use of private sector engineering services. Since 
1998, the NPS has restructured its processes for acquiring construction 
design and construction project supervision. While Government personnel 
previously provided these services, the agency now has all construction 
supervision and 90% of all design requirements satisfied through 
support contracts with private firms.
    By shifting from a project-focused activity to a project management 
and standards activity, the NPS has experienced new successes and 
achievements. NPS has established more meaningful and professional 
associations with the design community on both a national and local 
level. Greater emphasis on the development of common construction 
specifications is helping to standardize the facilities maintenance and 
support function. These efforts are foundational to increasing the 
authority of superintendents to execute projects at the local level, 
within the standards and specifications developed. This transformation 
has simplified the funding of the entire construction program, 
providing for base funding of the Denver Service Center activities 
within established funding metrics developed to reflect significant 
major project components and cost drivers.
    ACEC encourages USBR to follow the successful model established by 
the NPS, which demonstrates how federal agencies can effectively 
partner with the private sector to carry out successful programs on 
behalf of the taxpayer.
             comments on national research council's report
    ACEC agrees with the report of the National Research Council of the 
National Academies of Science ``Managing Construction and 
Infrastructure in the 21st Century Bureau of Reclamation'' of finding 
inconsistencies in the areas of acquisition and contracting policies. 
The inconsistency in implementing acquisition policies is in how each 
region or water district makes the determination what functions to keep 
in-house even though it is not considered an inherently governmental 
function. USBR needs to establish a centralized and consistent 
acquisition policy and procedures at USBR headquarters rather than 
allowing each region or water district to make-up their own policies.
    ACEC agrees with the report's recommendations that the USBR's 
Commissioner needs to undertake a detailed analysis of how the agency 
should be structured for maximum efficiency in order to retain the 
``critical core competencies and technical leadership but increase 
outsourcing of much of the engineering and laboratory testing work'', 
which would assist in ``reducing the proportion of engineering service 
costs chargeable to the customer.'' What's more, the report states that 
many of USBR's activities are not considered inherently governmental 
functions as defined by the Office of Management and Budget (OMB) 
Policy Letter 92-1, and concludes that USBR should establish an agency-
wide detailed review of functions or activities that should be 
contracted out to the private sector.
        response to reclamation action plan for the 21st century
    ACEC believes that the action plan detailed by USBR to implement 
the report's recommendations is a good first step in the right, and 
encourages USBR to work with the private sector. However, ACEC believes 
that for the action plan to work, Congress needs to engage in proper 
oversight to make sure that USBR stays on track.
                              conclusion,
    ACEC believes that taxpayers ultimately win when there is 
competition. ACEC looks forward to working with you to promote that 
goal.
    Again, thank you for allowing me to come here today and I look 
forward to any questions that you have.

    The Chairman. Thank you very much.
    Now, we'll proceed to Mr. Donnelly, executive vice 
president of the National Water Resource Association.

  STATEMENT OF THOMAS F. DONNELLY, EXECUTIVE VICE PRESIDENT, 
              NATIONAL WATER RESOURCES ASSOCIATION

    Mr. Donnelly. Thank you, Mr. Chairman.
    We applaud the National Research Council on its report and 
the Bureau of Reclamation and its plan to address the 
recommendations in that report. However, in order to ensure 
that the effort accomplishes its purpose, it's necessary that 
we are in complete agreement on what the overriding mission of 
the Bureau of Reclamation should be over the next several 
decades.
    The council's report identifies ``construction, maintenance 
and infrastructure requirements'' as the Bureau's 21st century 
mission without weight. The major construction mission of the 
Bureau of Reclamation has been completed. While future projects 
or programs may be authorized and funded by Congress, we 
believe construction will be a secondary mission for the Bureau 
in the future.
    We believe the primary and overriding mission of the Bureau 
of Reclamation is maintaining the existing water and power 
infrastructure at peak operational efficiency. Many of these 
projects have met or exceeded their designed life and are now 
in need of modernization and/or rehabilitation. Today the 
Bureau of Reclamation does not have all of the tools necessary 
to address this emerging problem.
    For example, Reclamation does not have a program which 
enables water users to modernize and rehabilitate their 
projects and pay those costs over time under reasonable terms 
and conditions. In addition, it's not clear that the Bureau of 
Reclamation has an accurate grasp of the scope of the problem 
West-wide.
    Our association, with the support of The Family Farm 
Alliance and the Western States Water Council, is in the 
process of conducting a survey of water infrastructure needs 
throughout the Western United States. It is our hope that with 
the information that we obtain, and with Reclamation's 
assistance, we will be able to provide Congress with a 
blueprint of the rehabilitation and modernization requirements 
and associated costs over the next several decades.
    In February, then-Commissioner John Keys requested that the 
National Water Resources Association coordinate and facilitate 
the participation and input from the Bureau's customers on 
their ``Managing for Excellence'' action plan. Representatives 
from our Association, the Family Farm Alliance, the Western 
States Water Council and the American Public Power Association 
met in Denver on April 27. The Bureau's ``Managing for 
Excellence'' team leaders briefed us on their plan, and engaged 
in a frank and open discussion about our concerns and 
expectations. We have agreed to meet again at the end of June 
with the Bureau, and we expect to get more detailed information 
at that time.
    In summary, we looked at the ``Managing for Excellence'' 
action plan as an opportunity for the Bureau of Reclamation and 
its customers to re-cast the Bureau's capabilities to meet the 
fundamental challenge of operating and maintaining its existing 
facilities at peak efficiency. We greatly appreciate the 
opportunity to present this testimony today and we will work 
with you, Mr. Chairman, and the committee in any way that we 
can.
    [The prepared statement of Mr. Donnelly follows:]
  Prepared Statement of Thomas F. Donnelly, Executive Vice President, 
                  National Water Resources Association
    The National Water Resources Association (NWRA) is a nonprofit 
federation of state associations and individuals dedicated to the 
conservation, enhancement, and efficient management of our Nation's 
most precious natural resource,--WATER. The NWRA is the oldest and most 
active national association concerned with water resources policy and 
development. Its strength is a reflection of the tremendous 
``grassroots'' participation it has generated on virtually every 
national issue affecting western water conservation, management, and 
development.
    In the West, water infrastructure is every bit as important as 
transportation infrastructure. It is essential to the continued 
economic growth and development of the region and the nation. Water 
infrastructure needs continue to exist, particularly considering the 
West's rapid population growth [8 out of 10 of the fastest growing 
states are Reclamation States]. The Bureau of Reclamation operates and 
maintains a vast array of water supply facilities built over the past 
hundred years. Many of these facilities are approaching or have 
exceeded their design life. That is not to say they are no longer 
serviceable. Properly managed and maintained these facilities will 
continue to operate efficiently and deliver water well into the future.
    The purpose of the National Research Council's report, Managing 
Construction and Infrastructure in the 21st Century Bureau of 
Reclamation and the U.S. Bureau of Reclamation's response, Managing for 
Excellence: An Action Plan for the 21st Century is to define the 
principle mission of the Bureau of Reclamation for the next several 
decades and ensure that Bureau's resources and capabilities are 
adequate to carry out that mission.
    Over the past twenty years the Bureau of Reclamation has struggled 
with its transition from construction agency to water management agency 
amid confusing and often conflicting Congressional directives and 
fluctuating policies of various Administrations. Unlike the National 
Park Service, the Bureau of Land Management and most other federal 
agencies, the Bureau of Reclamation has never had a comprehensive 
Organic Act defining its mission.
    With Reclamation's construction program essentially completed and 
lacking clear direction on its future mission, the agency has struggled 
over the past two decades to define that mission. Beginning in the mid-
1980's, Reclamation's leadership went through a series of internal 
assessments. These efforts were intended to set a clear direction for 
the future of Reclamation. However, under three different 
Administrations with basic differences in philosophy, the result was 
confusing to Reclamation's customers and often demoralizing to the 
agency's professional staff.
    As a result of this confusion and in light of mounting complains 
from water users concerning increasing and often questionable 
administrative costs, then Assistant Secretary of the Interior Bennett 
Raley requested that the National Research Council conduct an 
independent study advising the Department on the appropriate 
organizational, management, and resource capabilities necessary to meet 
its mission into the 21st Century.
    We applaud the National Research Council on its report and the 
Bureau of Reclamation on its plan to address the recommendations in 
that report. However, in order to insure that this effort accomplishes 
the purpose and task requested of the Council, it is fundamentally 
necessary that we are in complete agreement on what the overriding 
mission of the Bureau of Reclamation must be over the next several 
decades. Nowhere in the Council's report is this question addressed in 
detail. The report identifies ``construction, maintenance and 
infrastructure requirement'' as the Bureau's 21st Century mission 
without weight.
    For the most part, the construction mission of the Reclamation 
Program has been completed or in the process of being completed. While 
future projects or programs may be authorized and funded by Congress, 
we believe construction will be a secondary mission for the Bureau in 
the future.
    Reclamation projects authorized by Congress continue to provide 
numerous and substantial benefits for the entire United States and will 
well into the future if efficiently managed and maintained. The Bureau 
currently manages over 300 projects. In the next several decades, we 
believe, that the primary and overriding mission of the Bureau of 
Reclamation is maintaining the existing water and power infrastructure 
at peak operational efficiency. As previously stated, many projects 
have met or exceeded their design life and are in need of modernization 
and/or rehabilitation.
    Today, the Bureau of Reclamation does not have all of the tools 
necessary to address emerging aging infrastructure problems. For 
example, Reclamation does not have a program which enables water users 
to modernize or rehabilitate their projects and payoff those costs over 
time under reasonable terms and conditions. Such works are considered 
operation and maintenance and consequently the costs must be paid back 
in the year that they occur. This is a problem that, if not addressed 
as part of this evaluation, will result in severe consequences sooner 
rather than later.
    In addition, it is not clear to us that the Bureau of Reclamation 
has an accurate grasp of the scope of the problem West-wide. The 
National Water Resources Association is in the process of attempting to 
conduct a survey of water infrastructure repair needs throughout the 
West. It is our hope that, with the information we obtain through our 
survey and with Reclamation's assistance and the information they 
currently possess on the condition of their projects, we will be able 
to provide Congress with a ``blue print'' of the rehabilitation and 
modernization requirements and associated costs over the next several 
decades.
    In February, Commissioner John Keys requested that the National 
Water Resources Association coordinate and facilitate the participation 
and input from the Bureau's customers on their ``Managing for 
Excellence'' Action Plan. Representatives from NWRA, the Family Farm 
Alliance, Western States Water Council and the American Public Power 
Association met in Denver on April 27. The Bureau's ``Managing for 
Excellence'' team leaders briefed us on their plan and engaged in a 
frank and open discussion about our concerns and expectations. We have 
agreed to meet again at the end of June when the Bureau is expected to 
have more detailed recommendations to present and discuss.
    In summary, we look at the ``Managing for Excellence'' Action Plan 
as an opportunity for the Bureau of Reclamation and its customers to 
recast the Bureau's capabilities to meet the fundamental challenge of 
operating and maintaining its existing facilities at peak efficiency. 
We greatly appreciate the opportunity to present to the Committee our 
concerns and vision for the future mission of the U.S. Bureau of 
Reclamation and are prepared to answer any question members of the 
Committee may have either today or in the future.

    The Chairman. That was a very, very good summary. And I 
think you're right on, we must do exactly what you've said.
    Mr. Donnelly. Thank you, Mr. Chairman.
    The Chairman. Scott Yates, Trout Unlimited.

  STATEMENT OF SCOTT YATES, DIRECTOR, WYOMING WATER PROJECT, 
                        TROUT UNLIMITED

    Mr. Yates. Thank you, Mr. Chairman. Trout Unlimited truly 
appreciates the opportunity to come and comment today. We truly 
appreciate the opportunity to come today and talk a little bit 
about the NRC report and the Bureau's response. I direct our 
water project based in Lander, WY, it's part of a Western Water 
Project that we have where we work in States like Wyoming, 
Montana, Colorado and Utah on streamflow issues. And while a 
lot of that is State-based, obviously some of our greatest 
trout fisheries are below big Bureau of Reclamation dams and 
our members and the associated businesses that depend on those 
fisheries are very interested in how those projects are 
managed.
    Our focus comes from the written testimony I have provided, 
focused on four primary issues. And I'm going to just throw 
those out there just briefly, and then I'm going to throw out a 
little bit of a field example of how some of that has played 
out in a factual context.
    We focused on kind of the new mission of the Bureau, I 
guess. A lot of folks have focused on the old mission of the 
Bureau today. I think that mission has expanded in the--
certainly in the last 10 years, and maybe in the last 20, to 
include more and more environmental measures, so we focused on 
that issue and strengthening the Bureau's outreach, diverse 
stakeholder partnerships, and policy consistency. As we move 
from region to region working on these issues, a lot of times 
we just don't see policy consistency in area offices, regional 
offices.
    There is a need, perhaps, for some organic legislation to 
allow the good work that the Bureau does in the field with 
their technical field staff to get some good things done on the 
ground, perhaps not on the mainstreams, but in important 
tributary environments.
    And then for policies that do involve shifts in O&M 
maintenance and construction in terms of outsourcing, that we 
allow the Bureau to impose regulations or environmental 
standards to ensure that whatever the public resources are 
involved they're protected in that type of shift. We're 
certainly not opposed to those types of efforts, I think that 
makes a lot of sense. We've even looked at some of that stuff 
ourselves in recent years. It's become more efficient in what 
we do.
    What I want to talk about a little bit is the South Fork of 
the Snake River. I just moved around it about 3 weeks ago and 
I'm looking forward to participating in Reclamation projects 
and management activities and the Shoshone here in the future. 
But my field experience has been in the South Fork of the 
Snake.
    I directed our Idaho Water Office. I initiated and directed 
that project for 5 years down at Idaho Falls and helped kick 
off the watershed project on the South Fork Snake.
    On the South Fork, like our other Western States where we 
operate, we really focus on the ground and trying to develop 
stakeholder partnerships that involve Federal-State resource 
agencies and, of course, the agricultural community, because we 
feel that those are going to be integral to protecting strong 
fisheries in the future.
    On the South Fork, back in 2001, the commission kicked off 
a very aggressive scientific study called the Ecologically 
Based System Management Project. And the main concern is the 
Yellowstone cutthroat trout was petitioned for listing under 
the Federal ESA. And I think the Bureau and the other 
stakeholders in the basin, including the irrigation community 
and fisherman, were a little bit concerned about what the 
implications were in terms of additional regulatory 
constraints, and the stakeholder groups got together and 
started talking about the issue early.
    By 2001 the Bureau had come up with this Ecologically Based 
System Management Project where they had a biological station--
one of the foremost leaders in the world in terms of big river 
study and big river ecology--to take a look at the South Fork 
Snake. And I think the advantage of looking at the South Fork 
Snake is there is an area below a large Federal dam, where they 
still had some relatively intact living environment. And the 
study went on for 20 years and really didn't finish up--
actually, I think it's still finishing up on some of the lower 
sections of the Snake where the other fork comes in. But some 
of the conclusions were that there were ways to manage 
Palisades Dam to protect and restore some of that river 
environment, and I think it's important to note that those 
conclusions were judged in the light of the fact that they 
really needed to operate--they specifically stated they wanted 
to operate within the existing river constraints and the water 
operation constraints and stream storage and operations.
    But all that data dovetailed with good data from the Idaho 
Department of Fish and Game in terms of fish populations and 
hydrologic data, instead of the assessment that was being 
carried out by the Idaho State University. And what it involved 
was a change in operations in the winter to actually stay a 
little bit more warmer. We did not let as much water down, but 
then had that hold there for a strategic time period in the 
spring to release as fresher, which would then benefit the 
native Yellowstone cutthroat trout.
    Now the importance of this as an informational point is 
that it is a little bit counterintuitive from a fishery 
standpoint. We've argued for years about the importance of 
waterflows. They're still important, but I think, in this 
context, more important is to have a little bit of flexibility 
in the winter and to move water a little bit creatively in the 
spring. And I think while this is early in the stages of 
implementation--we've actually implemented it for 2 years--
we're going to look forward to fish population data in the 
future years to see if it is helping out. And this is not going 
to be an every-year occurrence. In fact, it is unusual that we 
have a lot of water like this year, as Senator Craig and 
Senator Thomas noted, we may not have as much flexibility. But 
the fact is the Bureau took a leadership role in developing 
this information in trying to get stakeholders together where 
they have not partnered as much in the past, such as the 
irrigation districts and District One in Idaho, the folks at 
Trout Unlimited, the Fork Foundation and then the State and 
Federal agencies. We've been able to more forward, and I think 
frankly it's one of the real success stories in the last few 
years, and I wanted to just highlight that.
    There are a lot of ways out there, as the Bureau looks at 
the way it works, that we can work together to come up with 
creative solutions with a lot of different stakeholders. With 
the assumption that fishers and farmers can get together, I 
don't think that's always the case. I appreciate the 
opportunity, thank you.
    [The prepared statement of Mr. Yates follows:]
  Prepared Statement of Scott Yates, Director, Wyoming Water Project, 
                            Trout Unlimited
    Mr. Chairman, Members of the Committee, I appreciate the 
opportunity to appear before you today to provide Trout Unlimited's 
views and perspective on the National Research Council (NRC) report 
entitled, ``Managing Construction and Infrastructure in the 21st 
Century, Bureau of Reclamation'' and Reclamation's action plan 
completed in response to the NRC's findings and recommendations.
    Trout Unlimited (TU) is the nation's largest coldwater fisheries 
conservation organization dedicated to the protection and restoration 
of our nation's trout and salmon resources, and the watersheds that 
sustain those resources. TU has more than 160,000 members organized 
into 450 chapters in 38 states. Our members generally are trout and 
salmon anglers who give back to the resources they love by voluntarily 
contributing substantial amounts of their personal time and resources 
to fisheries habitat protection and restoration efforts on public and 
private land. The average TU chapter donates 1,000 hours of volunteer 
time on an annual basis.
    My name is Scott Yates and I serve as Trout Unlimited's Wyoming 
Water Project Director, however, I am fortunate to have lived and 
worked in a few different places across the west. Prior to accepting my 
current position, I initiated and led TU's Idaho Water Project for four 
years including an overlapping six month stint as the interim Executive 
Director for the Henry's Fork Foundation, and recently gained useful 
private sector experience having worked for Portland General Electric 
in Oregon as the license manager for the largest hydroelectric project 
located wholly inside the State of Oregon--the Pelton Round Butte 
Project on the Deschutes River.
    The mission of TU's Western Water Project is to conserve, protect 
and restore healthy flows in the coldwater fisheries of Colorado, 
Idaho, Montana, Utah and Wyoming. All of our activities are guided by 
two key tenants; 1) healthy rivers are a necessary part of the 
ecosystem and 2) restoring rivers strengthen adjacent communities. Some 
of our nation's greatest trout fisheries in the West are below federal 
dams, including blue ribbon trout fisheries on river systems like the 
Snake, Henry's Fork, Green, Beaverhead, Shoshone, North Platte, 
Gunnison, and numerous others.
    As stated on its website, the current mission statement for the 
Bureau of Reclamation (Reclamation) is to manage, develop, and protect 
water and related resources in an environmentally-sound manner in the 
interest of the American public. Clearly, this broad mandate 
encompasses much more than ``delivering water and generating power,'' 
the two historically prominent and primary purposes for large 
Reclamation dams. In recent committee briefings and meetings, some 
still describe Reclamation's mission as limited to such activities and 
``whatever it takes'' to accomplish water delivery and power 
generation. (See page 22 of NRC report). But the mission has broadened 
to include numerous other drivers, not the least of which includes 
protecting and restoring river resources.
    TU believes the NRC accurately and poignantly described the 
underlying challenge for Reclamation, namely, that the agency must 
embrace change and adapt to the 21st century by recognizing that its 
mission encompasses more than just delivering water and producing 
power. Moreover, adapting to today's circumstances is not optional. As 
the NRC states in its report, Reclamation must (emphasis added) be 
responsive to several realities including environmental factors to 
thrive and survive into the future.
    On page 10 of its report, NRC states that the ``predominant 
workload has changed from new construction to O&M, repair, . . . 
modernization of aging infrastructure, . . . and environmental 
restoration and enhancement.'' As such, it is imperative that 
Reclamation transition into a pro-active river management agency, by 
developing and implementing programs and designing budgets to ensure 
river health needs are met.
    Consistent with the NRC findings and recommendations, there are 
four key components to address as Reclamation transitions into the 21st 
Century: (1) strengthening outreach and diverse stakeholder 
participation; (2) policy consistency--improve consistency between 
national policy directives and programs and implementation at the 
regional, area, and local offices; (3) the need for either organic 
legislation or use of existing authority (i.e. the Fish and Wildlife 
Coordination Act) to expand the reach of Reclamation's technical 
services division in a coordinated and consistent way; and (4) 
retaining identifiable substantive environmental and natural resource 
protection measures when future proposals involving shifting operations 
and maintenance and construction to project beneficiaries or other 
outside sources.
    i. strengthening outreach and diverse stakeholder participation
    As the NRC report states, upfront, ongoing and inclusive 
collaboration with diverse stakeholders will strengthen and enhance 
Reclamation's decisions and processes. In part, NRC Recommendation lb 
states that Reclamation's stakeholders want close contact with 
empowered officials. Similarly, on page 95 of its report, NRC notes 
that ``consideration of the effects of a project on environmental costs 
and opportunities to increase sustainability must become ingrained from 
the outset, not simply an add-on to business as usual.'' Upfront 
consideration of environmental issues in a collaborative way ensures 
far less controversy, increases the chance for multi-stakeholder buy-
in, and hopefully, leads to final decisions that are more likely to be 
technically and legally defensible. From TU's perspective, 
collaboration must be broader than just project beneficiaries.
    In some areas of the country, Reclamation already has a proven 
track record of conducting its business in this way. One example 
involves Palisades Dam on Idaho's South Fork Snake River. The South 
Fork Snake River is one of the West's great native trout fisheries, and 
is frequented by anglers from all over the country, including on an 
annual basis, by Vice President Cheney. However, federal and state 
resource agencies and other stakeholders such as TU and the Upper Snake 
River irrigation community have been grappling in recent years with the 
possibility that Yellowstone cutthroat (YCT) may be listed under the 
federal Endangered Species Act. The South Fork represents the last big 
river population of YCT in Idaho, but YCT numbers had dwindled in 
recent years and non-native but naturally reproducing rainbow trout 
threatened the genetic integrity of the South Fork populations.
    During 2000 to 2001 Reclamation officials from the Pacific 
Northwest Region initiated the Ecologically Based System Management 
(EBSM) Project--a three-phase pilot study funded by Reclamation and 
conducted by the Flathead Lake Biological Station. The goal of the EBSM 
Project was clear--determine the hydrologic regimes necessary to 
provide a functioning South Fork ecosystem within the constraints of 
state water law and contractual obligations. The information generated 
by the Reclamation study was incredibly important in putting together 
the ecological picture for the South Fork, and dovetailed completely 
with excellent fish population data collected and analyzed by the Idaho 
Department of Fish and Game and critical hydrologic analysis by Idaho 
State University.
    Perhaps the most impressive part of Reclamation's EBSM efforts 
involved the agency's ability to coalesce a diverse group of 
stakeholders regarding implementation of the EBSM flow recommendations. 
The agency was able to present complex findings in an organized and 
understandable manner, including recommendations that required creative 
operations during certain water years that challenged historic 
assumptions about not only how water could be stored and delivered in 
the Upper Snake River system, but also about fishery needs and the 
relationship between native cutthroat year class production and 
survival and the hydrograph. The Reclamation accomplished re-operation 
of a major BOR dam with the support of non-traditional partners--and in 
doing so was able to both meet traditional water needs during drought 
years and expand flexibility regarding the timing and movement of water 
to benefit the struggling native cutthroat fishery.
    I would argue that the South Fork Snake River effort is one of the 
most comprehensive and successful native trout restoration efforts in 
the West and Reclamation is right in the middle developing sound 
science, proposing dam operations that incorporate such principles 
while still fulfilling project purposes, and helping disseminate 
information and ensure multi-stakeholder participation and support. 
Reclamation's effort on the South Fork is also a good example of a 
federal resource management agency doing more than just sitting back 
and waiting for a species to be listed under the ESA prior to taking 
action. If Yellowstone cutthroat are not listed under the ESA, 
Reclamation's activities over the past five years will be one of the 
primary reasons.
 ii. policy consistency--improving consistency between national policy 
 directives and programs and implementation at the regional, area, and 
                             local offices
    With the focus TU places on river protection and restoration, it is 
often confounding for our Western Water Project offices when 
Reclamation river management or programmatic activities vary from 
project to project. Obviously, some of these differences are based on 
ecological conditions in a specific river system or on the water 
storage and delivery dynamics that either limit or constrain re-
operation or management flexibility. Further, in some areas consensus 
amongst stakeholders is either non-existent or in the initial stages of 
fruition. There are some river systems, however, where the table has 
been set for creative management below a Reclamation dam and the agency 
has failed to take advantage. The Sun River in Montana is a good 
example of where Reclamation efforts have limited the success of a 
stakeholder group convened to assess both irrigation rights and obvious 
ecological river needs.
    The Sun River's headwaters drain the pristine Bob Marshall 
Wilderness area below Glacier National Park. The Sun River joins the 
upper Missouri River near Great Falls, Montana. The Reclamation 
reservoir behind Gibson Dam, lies just beyond the Forest Service 
boundary, and serves two downstream irrigation districts. The Sun River 
has suffered from severe and chronic dewatering due to substantial 
irrigation water withdrawals for many decades. However, in recent 
years, productive discussions have begun among the irrigation districts 
and interested stakeholders, Trout Unlimited among them, on finding 
ways to restore flows to the Sun River and thereby protect and enhance 
the Sun's wild trout fishery.
    These discussions have taken place through the Sun River Watershed 
Group and have focused on ways to meet federal Clean Water Act 
requirements--the Sun River is a Section 303(d) listed stream below 
Gibson Dam--by addressing the probable causes for river impairment 
including flow alteration and resultant thermal modification and 
habitat modification. The Sun River Watershed Group worked closely with 
DEQ to develop TMDLs that effectively address environmental and 
agricultural concerns. One of the most difficult issues in this process 
was finding cooperative ways to address the Sun's water quantity, or 
flow, problems.
    While chronic low flows were identified as a limiting factor for 
both water quality and the Sun River fishery, river flows are an 
important source of irrigation water for basin farmers. The river is 
the site of a large Reclamation water project, which includes Gibson 
dam and reservoir, a secondary diversion dam, two smaller storage 
reservoirs, and numerous irrigation canals. The Reclamation project 
provides water to the Greenfields Irrigation District (GID) and the 
Fort Shaw Irrigation District (FSID). Several other major ranches have 
additional water right claims from the Sun River downstream of the 
Gibson reservoir. During drought years, the river barely contains 
enough water to satisfy the irrigators' water rights, and the riverbed 
is nearly run dry.
    Despite assessing complex and historically contentious issues, the 
Sun River Watershed Group has maintained a diverse membership list that 
includes representatives of the Cascade, Lewis and Clark, and Teton 
County Conservation Districts; Reclamation; GID; FSID; DEQ; the Broken 
0 Ranch; the USDA Natural Resources Conservation Service; Montana Fish, 
Wildlife and Parks; Pacific Power and Light; Trout Unlimited; the 
Medicine River Canoe Club; Missouri River Flyfishers; Audubon Chapter; 
and the Russell Country Sportsmen's Association. The Group also 
receives support from numerous local businesses and organizations, as 
well as all three of Montana's Congressmen and has received numerous 
awards for finding innovative and cooperative solutions to 
environmental and agricultural problems.
    The Group's diverse membership grappled with the hard issues of 
stream flows and water rights during the TMDL process. The Watershed 
Group came up with an approach for exploring flow restoration that was 
acceptable to all stakeholders, tied these flow restoration goals to 
thermal TMDL targets, and the Sun River TMDL was approved by the EPA 
last year. A first-step in the flow restoration goals is improving 
river winter flows below Reclamation's Gibson Dam, by taking a close 
look at reservoir operations and the current reservoir fill regime to 
determine whether some flexibility could be found in the operational 
regime to increase winter flows without jeopardizing the ability of 
Gibson Reservoir to fill with the spring peak flows due to snow-melt.
    Unfortunately, Watershed Group momentum and efforts to assess 
reservoir operations have been stymied by a lack of cooperation from 
Reclamation. For nearly two years, Reclamation has been promising the 
Watershed Group and its stakeholders that it would re-run the reservoir 
operations model to determine if there was in fact some flexibility to 
increase winter flows. There is reason to believe that this flexibility 
does in fact exist, because the reservoir has never failed to fill in 
its 70-year history due to the large spring peak flows coming from the 
east side of the Bob Marshall Wilderness Area. In addition, the Sun 
River Watershed Group invested significant resources in a detailed 
review of flow regime and snow pack data that should aid Reclamation's 
model re-run. Nevertheless, Reclamation has consistently failed to meet 
its promise to re-run the reservoir operations model, and has been 
extending its deadline to do so in 6-month increments for nearly two 
years. Despite support from the Sun River Watershed Group, and despite 
a consensus recommendation from all stakeholders--including the two 
irrigation districts that the Reclamation project serves--Reclamation 
has still not come through.
    When juxtaposed with successful Reclamation partnership efforts on 
the South Fork Snake River, there is little discernible excuse for the 
agency approach in the Sun River Basin. The agency needs to continually 
strive for transparency and consistency on reservoir reoperation 
issues, and take advantage of existing partnership mechanisms such as 
the Sun River Watershed Group. The South Fork Snake River example cited 
above is a good example of the agency identifying a programmatic vision 
that was coordinated at the Regional level and supported by staff at 
the area office and local staff levels and moving forward to achieve 
multiple and diverse river management goals. There is no reason a 
similar situation should not occur in the Sun River Basin.
    iii. the need for either organic legislation or flexible use of 
                               existing 
 authority to expand the coordinated and consistent reach of technical 
                           services division
    TU recognizes the importance of Recommendation 1c in NRC's report 
stating that ``[d]ecentralization has meant that some area and project 
offices housing a dedicated technical office are staffed by only one or 
two individuals. The committee is concerned about the effectiveness of 
such small units and whether their technical competencies can be 
maintained.'' This recommendation has obvious implications for project 
beneficiaries as it relates to increasing institutional capacity via 
outsourcing certain traditional Reclamation activities. However, the 
increased role for Reclamation technical field staff in addressing 
environmental issues must be preserved and even expanded in order for 
the agency to fulfill its expanded mission in the 21st century 
including assessing and addressing river health issues associated with 
its projects. This should include Reclamation either seeking additional 
statutory authority or utilizing existing legal mechanisms--such as the 
Fish & Wildlife Coordination Act--in order to fully address complex 
resource issues.
    The Columbia River Basin is replete with examples of where 
Reclamation Water Conservation Field Service Program (WCFSP) 
representatives have made a difference regarding the design of fish 
passage or water use efficiency projects that benefits ESA-listed 
salmon and steelhead. The Federal Columbia River Power System (FCRPS) 
off-site habitat program is designed to meet Biological Opinion (BiOp) 
requirements for tributary stream flow and habitat improvements. 
However, while program funding for this ESA-driven program has been 
reasonable, the agency lacks full authority to accomplish program 
tasks. Reclamation technical staff is able to provide technical 
assistance such as up-front data collection, engineering, and design 
for specific projects but lack statutory authority to construct or 
provide financial assistance necessary to truly ensure BiOp obligations 
are met. At no cost, or some reasonable additional cost, to taxpayers, 
more could be accomplished with technical service programs with 
adequate authority.
    Reclamation technical services programs have also had a positive 
impact outside ESA-listed salmonid drainages in the Snake River Basin. 
TU has developed a large-scale watershed restoration project in the 
Rainey Creek drainage--an important South Fork Snake River Yellowstone 
cutthroat trout spawning tributary. The key to project success has been 
the willingness of landowners to assess the fish migration and 
entrainment issues. Reclamation has provided funding from the Snake 
River Area Office via the Technical Assistance to States Program that 
enabled a WCFSP staffer to help assess Rainey Creek water use and 
management issues and identify cost-effective and technically-
defensible solutions. Reclamation staff looked at all major diversion 
points and measured several of the key ditches for water loss and then 
developed a report entitled Water Use and Efficiency Analysis for 
Rainey Creek--Idaho that details mitigation measures to eliminate the 
fish barriers and improve stream flows in the Rainey Creek system.
    These types of efforts by Reclamation staff are invaluable to non-
profit conservation groups such as TU whose mission includes working 
on-the-ground with the agricultural community in high priority native 
and wild trout drainages to protect and restore habitat. Such efforts 
should not be limited to river basins where ESA-listed fish are present 
or to areas within a specific Reclamation project boundary. Reasonable 
and locally supported solutions in places like Rainey Creek--high 
priority restoration areas that are outside project boundaries but 
certainly located in a river basin with at least one Reclamation 
storage dam--should be encouraged. Such projects include water 
conservation, fish passage, and habitat improvement projects in off-
Project tributaries that may alleviate the need for project water or at 
the least, reduce the overall conservation burden on dam operators and 
project beneficiaries. Reclamation needs the authority and consistent 
funding to explore these opportunities.
 iv. to the extent that reclamation reorganization results in shifting 
  responsibility for o&m and construction to project beneficiaries or 
  other non-governmental entities, reclamation must ensure that these 
    entities fulfill the agency's core mission of natural resource 
                       management and protection.
    In the event that, in response to the National Research Council's 
report, Reclamation's leadership decides to reorganize the agency in a 
way that greatly increases the outsourcing of technical work, it will 
be critical that the instruments used to achieve this outsourcing bind 
the entities doing this work in the future to fulfill both 
Reclamation's stewardship responsibility, and its core natural resource 
management mission. This will be necessary particularly where 
Reclamation considers transferring its own responsibilities to project 
beneficiaries who have no historical experience with being responsible 
for the conservation, protection or restoration of rivers or aquatic 
species.
    The NRC report and Reclamation's response reveal at least three 
different examples of potential transfers of responsibility where 
assurance of the means, will and accountability for on-going 
stewardship will be important: title transfers, O&M, and performance-
based construction standards.
A. Title Transfers
    Reclamation should contemplate project ownership transfers only 
when doing so results in certain and sustained improvement in the 
ability to meet future needs of the west. We should not be satisfied 
with fundamental changes to the current system, such as change in 
ownership, unless there is a very substantial return on the enormous 
federal investment in Reclamation projects. Much of this return should 
be in the form of improved fish and wildlife benefits, both because 
they were harmed during construction and operation of Reclamation 
facilities, but more importantly, continued economic growth in the west 
demands restoration of river health.
    Meeting this requirement has been particularly problematic with 
regard to title transfers because the project beneficiary who assumes 
ownership has rarely, if ever, had a mission which included ESA 
compliance or river restoration goals. Given that title transfers will, 
as a matter of course, dilute the project's federal nexus, there is a 
very real possibility that the new owner will not sustain any 
stewardship mission, absent explicit directives in the transfer 
instruments.
    Reclamation's action plan includes the following action item--
determine where opportunities exist for mutually beneficial transfer of 
title to project sponsors in order to eliminate Reclamation's 
responsibility and costs for those facilities, and encourage any that 
are appropriate. As Reclamation proceeds with this task, we urge its 
leadership adhere to the NRC's recommendation that open communication 
and an inclusive process are keys to moving forward in a successful 
way. This is imperative to meeting the requirement that title transfers 
produce a return on the substantial federal investment in Reclamation 
projects.
B. Operations and Maintenance
    Finding 5b in the NRC report states that the O&M burden for an 
aging infrastructure will increase, and that ``long term sustainment 
will require more innovation and greater efficiency in order to get the 
job done.'' This finding should not be used to justify haphazard and 
wholesale transfers of O&M. To the contrary, Reclamation's action plan 
set forth key issues that must be addressed prior to contemplating any 
future transfers of O&M, including:

   How much O&M of our reserved works can be beneficially 
        outsourced while maintaining the core capabilities necessary to 
        ensure the agency remains a smart buyer of services and 
        effectively fulfills its mission responsibilities; and
   How can we ensure that Federal responsibilities such as 
        environmental, recreation and cultural resources are met? (See 
        page 10 of Reclamation Action Plan).

    Similar to title transfers, Reclamation must proceed cautiously 
when contemplating O&M transfers or outsourcing. Project beneficiaries 
do not have a mission that includes river restoration and we cannot 
lose that key component of Reclamation's mission. Any O&M transfers 
must include provisions to retain the stewardship and resource 
protection and restoration components of Reclamation's mission.
    The NRC report and Reclamation's response suggest that Reclamation 
is poised to ramp up its outsourcing of operation and maintenance 
responsibilities for existing projects and facilities. While TU 
appreciates that outsourcing may be cost-effective at some level, and 
may not threaten a loss of core competencies within the agency, it is 
important that Reclamation only proceed with such outsourcing on a 
case-by-case basis, after a complete review of all of the costs of this 
strategy. In a thorough cost assessment, Reclamation must include third 
party benefits and costs, such as those associated with river 
restoration. Operating Reclamation facilities on the South Fork Snake 
and Sun rivers demonstrates that there may be significant positive 
benefits to reoperation of such facilities. But, with non-federal 
operators, they may be unlikely to identify, explore, or seek to 
achieve such benefits absent explicit language in their contracts 
providing either requirements or incentives to do so.
C. Performance-based construction standards
    Trout Unlimited believes that there is no reason for Reclamation 
not to move to performance-based standards for contractors who are 
constructing and/or rehabilitating federal facilities. However, because 
of the broad nature of Reclamation's mandate, it will be imperative 
that Reclamation provide uniform policy guidance regarding the scope of 
such standards. For example, performance based standards must 
incorporate environmental compliance and resource protection measures. 
Given the nature of Reclamation's mission, performance based standards 
could provide bonuses to contractors who go ``beyond compliance,'' who 
incorporate green building standards, who incorporate energy efficiency 
components into their work and whose work ultimately allows for river 
and fishery restoration.
    Thank you again for the opportunity to testify today. I look 
forward to answering any questions you may have.

    The Chairman. Very interesting. As you know, we're 
approaching noon, and you've all been here a long time. I think 
this is one of the more constructive hearings we've had, and I 
hope that we can continue it forward. I don't know where the 
momentum will come from, but I hope it comes from within the 
Bureau as they push to try to accomplish what they set forth. 
You can rest assured we will watch through our oversight and we 
will pursue vigorously seeing to it that significant changes in 
the way you do business occur so that you can remain a viable 
organization in a changing environment. Thank to all of you who 
came so far to help us today, we greatly appreciate it, and 
your testimony will certainly be very valid and used. Thank you 
very much.
    The committee stands in recess.
    [Whereupon, at 12:03 p.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

    Responses of Lloyd A. Duscha to Questions From Senator Domenici
    Question 1. Generally, do you feel that Reclamation's Action Plan 
is a good first step towards meeting the challenges it is currently 
facing? If not, what would you suggest?
    Answer. I consider the Action Plan an excellent first step. All the 
issues raised by the NRC committee have been addressed. It will take 
some time to develop the details and even more time to implement the 
changes. I should note that the NRC report recommended that 
implementation of the action plan undergo an independent review.
    Question 2. Mr. Duscha, as you are aware, many complaints from 
Reclamation customers focus on the cost of Reclamation services as 
compared with those of the private sector.
    In general, do you believe that Reclamation is overstaffed? If so, 
where is it overstaffed?
    Answer. The NRC committee did not review the personnel complement 
in sufficient detail to draw any firm conclusions on staffing. In the 
committee's review, the regional and area offices did not appear to be 
overstaffed; however, there was concern that TSC might be overstaffed. 
The committee recognized that additional study was needed to determine 
appropriate complements. The committee provided a list of criteria that 
should be considered by Reclamation as it assesses the staffing levels.
    Question 3. In undertaking the report, did you find successful 
examples of Reclamation outsourcing?
    Answer. The answer is somewhat dependent on the definition of 
outsourcing. Traditionally, Reclamation outsources its construction 
activities to the private sector, as well as operation and maintenance 
of Reclamation-owned facilities to local water contractors. 
Observations indicated that most other outsourcing was for the more 
routine support services. In the case of Parker Dam generator 
rehabilitation, the committee observed successful outsourcing of 
engineering and a combination of in-house and outsourced rework. The 
engineering in this case was outsourced at the request of the power 
customers. The committee also heard that there were instances of 
outsourcing at TSC.
    Question 4. Did you find instances in which Reclamation projects 
were ``over-engineered,'' adding to the total cost to Reclamation 
customers?
    Answer. Over-engineering is a term often overused without context. 
A rightful determination of over-engineering would require detailed 
review of specific projects, which was beyond the committee's scope. 
Many charges of over-engineering emanate from a difference in 
understanding of the respective responsibilities of the involved 
parties, and in viewing a short-term solution versus a life-cycle 
approach. The committee did review correspondence regarding the design 
of an outflow for the Carter Lakes reservoir. In this instance, 
Reclamation's more conservative approach increased the cost of the 
project but seemed to be justified.
    Question 5. Did you find instances in which Reclamation cost 
estimates were ``padded'' in order to ensure that the ultimate costs 
were not above original cost estimates?
    Answer. Presumably, you are referring to estimates of engineering 
costs. The committee did not review such estimates. Customers claimed 
that TSC was more expensive and that they added unneeded staff to the 
project. This would be difficult to verify.
    Question 6. How did costs of those services undertaken by 
Reclamation compare with similar services undertaken by the private 
sector?
    Answer. The committee did not make such comparison. A detailed 
study covering a representative sample of projects would be needed.
    Question 7. You recognize in the NRC report that O&M, field data 
collection, drilling operations, routine engineering, and environmental 
studies should be ``more aggressively outsourced.''
    What did you find was the greatest impediment to increasing work 
outsourcing by Reclamation?
    Answer. The report did not address impediments, but it appears to 
me that inertia and overcoming an attitude that the private sector and 
other outside interests have lesser capabilities were factors.
    Question 8. What activities should not be outsourced?
    Answer. Reclamation should continue to manage its high risk 
facilities against physical and operational failure. This requires the 
requisite management and technical competence, which can only be 
maintained with institutional, hands-on experience. Overextending 
outsourcing can erode these capabilities, and once the core 
competencies are lost, they are difficult to regain.
    Question 9. Based on the fact that few, if any, large construction 
projects are undertaken by Reclamation, should any capabilities 
necessary for construction of large facilities be retained in 
Reclamation? If so, for what purpose?
    Answer. In many instances, the repair and modernization of existing 
facilities require the same or greater level of engineering and 
construction expertise as required for new construction. This is 
especially true for safety of dams and hydropower facilities.
    Question 10. There is, from my perspective, a double-edged sword 
with respect to outsourcing. While Reclamation customers want cheaper 
services, we want to make sure that private-sector services are 
performed competently.
    How can Reclamation ensure that outsourced activities are performed 
competently?
    Answer. As mentioned previously, Reclamation will need to develop 
and maintain the requisite managerial competence to mange private 
contractors. To develop such individuals will require maintaining some 
technically challenging work for in-house execution. The committee 
noted that additional detailed study is needed to determine the 
appropriate size and configuration of the TSC, and that such study 
should be undertaken by Reclamation and be subject to external peer 
review.
    Question 11. With respect to the TSC, the NRC report states that 
you ``question the size'' of the TSC.
    What do you believe would be the optimal size of the TSC?
    Answer. The committee noted that additional detailed study is 
needed to determine the appropriate size and configuration of the TSC. 
The committee suggested criteria that could be used but noted that such 
a study should be undertaken by Reclamation and be subjected to 
external peer review.
    Question 12. Do you have any suggestions on how to make the TSC 
more cost efficient?
    Answer. The process for making TSC more cost efficient should begin 
with creating a properly sized and configured organizational structure 
that is consistent with the needs of the bureau and its customers. It 
will need a cadre of individuals with multi-functional capabilities and 
a nimble organization that is adaptable to change.
    Question 13. The NRC report found that Reclamation and its customer 
are facing numerous challenges with respect to aging infrastructure, 
primarily with finding ways to meet the financial burden that this 
poses.
    From your perspective, do believe Reclamation recognizes the need 
for more appropriations to be made available to perform more O&M on 
existing facilities?
    Answer. I believe Reclamation recognizes that additional resources 
are required to overcome a maintenance backlog. A large part of the O&M 
expenditures are reimbursable by the beneficiaries in the year 
expended. Such repayment schedule causes hardship occasionally for 
large, non-routine expenditures.
    Question 14. Did you identify any other financing mechanisms that 
can be made available to Reclamation customers to address the costs 
associated with aging infrastructure?
    Answer. The committee did not identify any extant mechanisms that 
would be available to Reclamation customers. In the private sector, the 
term recapitalization is used in reference to repair and replacement of 
major components as a facility ages. In the Federal government sector, 
a mechanism may possibly be to provide a low cost loan to the 
beneficiary, to be repaid with interest over time.
    Question 15. To what extent can operations and maintenance be 
transferred from Reclamation to beneficiary districts in order to free 
up money within Reclamation for other purposes? Which types of projects 
should be transferred?
    Answer. Responsibility for operation and maintenance expense of 
Reclamation facilities is defined by statute and authorization. Having 
beneficiaries perform some of the Reclamation O&M does not reduce 
Reclamation's total obligation as the beneficiaries will be reimbursed 
for their effort. On the other hand, the beneficiaries may want to 
accept responsibility for reimbursable O&M under the belief that they 
can accomplish it at less cost and in shorter time. Outside of the 
major hydroelectric facilities and high risk dams, the operation and 
maintenance functions could be transferred.
    Question 16. The NRC report found that Reclamation needs to 
promulgate Reclamation-wide policies and directives in order to promote 
consistency and accountability within Reclamation.
    To what extent can Reclamation reinstate the Reclamation 
Instructions that were retired at the end of Fiscal Year 2005?
    Answer. The committee was led to believe the Instructions were 
retired in 1993. Although much of the material may still be pertinent, 
they will have to be rewritten to reflect an empowered decentralized 
organization and a higher degree of outsourcing.
    Question 17. The NRC report found that there are significant 
problems facing Reclamation's work force.
    What suggestions do you have for Reclamation to maintain 
institutional knowledge in the face of the number of projected 
retirements?
    Answer. One approach is to arrange transitional assignments that 
pair upcoming retirees with potential replacements. Another approach is 
to require that retiring employees prepare a historical record of past 
events and decisions they believe can impact the future; such as, known 
risk decisions that should be periodically reevaluated.
    Question 18. How do you suggest that Reclamation foster 
collaborative skills among its existing workforce and new employees?
    Answer. Successful collaboration is largely driven by developing 
the proper cultural attitude. Although there are training courses that 
can aid in behavioral recognition and help instill intrinsic skills, it 
is important that top management demonstrate their continual commitment 
to the principle.
    Responses of Lloyd A. Duscha to Questions From Senator Bingaman
    Question 1. In your view, does Reclamation have sufficient 
resources to carry-out the many responsibilities it is being asked to 
address in the 21st Century? What is your opinion on the most serious 
issue facing Reclamation in the future?
    Answer. On an overall basis and on the premise that its 
infrastructure inventory will not expand markedly, I believe 
Reclamation has sufficient resources to discharge its many 
responsibilities. However, continued pressures on limiting resources 
could have an effect in the long run.
    Question 2. The NRC focuses a lot of attention on the Denver 
Technical Service Center (TSC). Reclamation has asserted, though, that 
the TSC is competitive with private engineering firms and that water 
users only pay for TSC costs if its services are required for work on 
the water users' particular project.
    Do you agree with Reclamation's response regarding the TSC? Is the 
cost of the TSC services the primary concern or is it that it competes 
with the private sector?
    Answer. I am unaware of any direct response from Reclamation on 
this issue. Comparing engineering costs is difficult as each project 
has its own peculiar scope and complexity and there are no established 
benchmarks. The committee did hear from Reclamation customers that TSC 
costs more than private sector services. The TSC hourly rates presented 
the committee did not appear to be out-of-line with the private sector; 
however, this does not account for any differences in relative 
productivity. Competition with the private sector was not a validation 
factor.
    Question 3. Your testimony states that Reclamation needs ``to 
evaluate their inventory of assets and manage them more aggressively 
over the life cycle.''
    Did the NRC find serious problems with the condition of 
Reclamation's infrastructure? Is there a concern among stakeholders 
that a significant number of structures are not being properly 
maintained?
    Answer. The committee did not undertake an examination of all 
facilities. The committed did observe inconsistent evaluations of 
Reclamation's asset management by its customers, but did not see any 
facilities that were not being adequately maintained. Aggressive 
management will require consistent, detailed condition assessments 
followed by planning that addresses the needs and available resources 
and establishes priorities.
    Question 4. You note that Reclamation needs clear, detailed policy 
directives that will help guide its decentralized management style.
    Can you provide some examples of situations where different 
Reclamation offices have implemented inconsistent policies?
    Answer. The committee's observation was based on reports from 
customers, particularly the Family Farm Alliance. The committee 
believed that the problems encountered at Animas-La Plata were in part 
due to a lack of clear directives. As another example, the Carter Lake 
Dam outflow control decisions seemed to be ad hoc. Reclamation 
personnel acknowledged a need for more detailed central policy and 
standards. This shortcoming is not uncommon under decentralization.
                                 ______
                                 
    Responses of H. Diane Snyder to Questions From Senator Domenici
    Question 1a. The NRC report states that O&M, field data collection, 
drilling operations, routine engineering, and environmental studies 
should be ``more aggressively outsourced where objectively determined 
to be feasibly and economically beneficial.''
    Do you agree with this statement?
    Answer. Yes. Reclamation should probably still be in charge of O&M 
for their large federally owned facilities which are unlikely to be 
transferred to local sponsors. This can be viewed as an inherently 
governmental function. Also, planning of locally sponsored / owned 
projects, operation and maintenance of locally sponsored l owned 
projects, planning and design of projects that are not necessarily 
``routine'', and value engineering. The private sector is particularly 
flexible and adept at developing projects that are sensitive to the 
local context and innovative.
    Question 1b. Which additional activities do you believe should be 
outsourced?
    Answer. Essentially all non-governmental functions, e.g. design, 
construction, etc. They can perform oversight.
    Question 1c. Are there any activities that should not be 
outsourced?
    Answer. Yes, those activities that are inherently governmental 
(appraisal level planning) and activities related to NEPA, NHPA, etc. 
Also, ACEC suggests that Reclamation is well positioned for long-range 
planning activities, research (such as the hydraulic research lab in 
Denver and brackish water development), possibly technical support / 
oversight on locally sponsored and owned projects, and operation and 
maintenance of large scale federally owned facilities with a national 
interest.
    Question 2. Do you believe that Reclamation work is generally of 
the same quality of work performed by a competent engineering firm?
    Answer. It is difficult to make a blanket statement in this regard. 
It has been our experience that Reclamation's quality of work is 
determined by various regions and area offices. Generally, Reclamation 
work is inferior to private consultants work as noted in ACEC's written 
testimony. In general, I would say it takes longer and it is less 
efficient to get to the same place with Reclamation's work.
    Question 3a. A common complaint from my constituents is that 
Reclamation services could almost always be performed cheaper by the 
private sector.
    Is it your experience that Reclamation costs are higher than those 
found in the private sector for similar services?
    Answer. Yes.
    Question 3b. If so, to what do you attribute these higher costs?
    Answer. There is a basic lack of accountability and a lack of 
proper budget oversight by Reclamation. Several factors which 
contribute to higher costs for work performed by Reclamation included: 
(1) federal wages are generally higher than private wages in certain 
areas; (2) additional overhead in the form of multiple layers of 
management and support personnel; and (3) less emphasis on getting 
deliverables out in a timely manner. Time is money and delays are 
particularly felt on the construction side.
    Question 3c. In your experience, have you found instances in which 
Reclamation projects were ``over-engineered,'' adding to the total cost 
to Reclamation customers?
    Answer. Yes, Reclamation is more entrenched in national policies 
and procedures (even if some of those have sunset) that are not as 
sensitive to the local context or flexible with respect to the specific 
project being planned and designed. This can result in a project that 
takes longer to develop and implement. Time is often the most critical 
cost element in a project (3 to 10% annual increases in cost). To be 
fair to reclamation staff, with Reclamation Instructions sunset they 
are put in the position of having to develop policy and procedures on a 
project by project basis--particularly when they are not the project 
owner but are tasked with providing input 1 oversight because federal 
funds are involved.
    Question 4. In your experience, have you found instances in which 
Reclamation cost estimates were ``padded'' in order to ensure that the 
ultimate costs were not above original cost estimates?
    Answer. ACEC does not have any direct experience with this. 
However, we do know that other projects under Reclamation's control 
have experienced significant cost escalation over time resulting in 
intense scrutiny of Reclamation's procedures--a factor that influences 
their input and oversight of projects that are not directly under their 
control.
     Response of H. Diane Snyder to Question From Senator Bingaman
    Question 1. Your testimony provides several examples of situations 
where public and private funding has been used for project studies that 
Reclamation rejected as not meeting its standards.
    Does Reclamation have clear standards and criteria for feasibility 
studies and cost estimates that are useful to private engineering firms 
doing work on water projects?
    Answer. ACEC understands our members that have worked with 
Reclamation is that the organization does not have clear procedures and 
standards for feasibility studies and cost estimates. The NRC report 
states Commissioner Daniel P. Beard in a memo in 1993 stated:

          In order to ensure that this approach to implementing 
        instructions and technical is followed, all existing guidance 
        will be sunset at the end of fiscal year 1995 unless 
        affirmatively retained, or revised and reissued prior to then.

    The report continues to state that even though in 2005 Reclamation 
started a web-based manual the process has been slow and inadequate. 
However, the directives and standards in the web-based version of the 
Reclamation Manual are not as comprehensive as the older ``Reclamation 
Instructions.'' The current Directive/Standard for feasibility studies 
(CMP 05-02) is vague, and the documents that should address cost 
estimates (BGT series) are of little value.
    Also, a pattern has evolved where Reclamation projects are being 
developed on a case by case basis due to the lack of (1) clear 
standards and criteria (Reclamation Instructions having sunset) and (2) 
a clear role for Reclamation's involvement in projects that they are 
not the lead on. One of the biggest issues we have faced with 
Reclamation is due to this lack of a clear role for Reclamation in 
locally sponsored projects. If the project is not ``theirs'' they are 
less interested in seeing it move ahead.
    One recommendation made by the NRC and endorsed by ACEC is the need 
for a centralized acquisition policy within the Bureau of Reclamation's 
headquarters, however, still providing enough flexibility for the 
different regions and district offices to function.
                                 ______
                                 
               Responses of The Family Farm Alliance to 
                    Questions From Senator Domenici
    Question 1. You mention in your testimony that Reclamation should 
pursue more title transfers and transfers of operational and 
maintenance responsibilities to beneficiary districts.
    In general, have you found a willingness of Reclamation to pursue 
title transfers?
    Answer. The Alliance has found that, while Reclamation policy is to 
pursue title transfers, Reclamation practice discourages transfers.
    Reclamation appears to support transferring title to those that can 
demonstrate capability to continue operating the project. Transfers are 
seen as a benefit to the federal government because of the loss of 
liability and future financial responsibility for non-reimbursable 
purposes as non-reimbursable OM&R. Further, such transfers will produce 
an immediate positive revenue flow to the Treasury, avoid long term 
federal operation and maintenance costs, and transfer the ongoing 
liability and responsibility for the project from the federal 
government to local interests.
    Although policy makers within the Administration, at the highest 
level, have supported transfers, lingering bureaucracy has proven to be 
a significant impediment. Several of our members who have participated 
in title transfers have identified the cumbersome NEPA (National 
Environmental Policy Act) and National Historic Preservation Act (NHPA) 
processes as primary reasons for difficulties. In some areas, our 
members have observed that much of the resistance associated with title 
transfer NEPA and NHPA issues comes from internal staff at the Bureau 
of Reclamation.
    Question 2. Are your members generally in favor of assuming 
operational and maintenance responsibilities from Reclamation?
    Answer. Family Farm Alliance members are generally in favor of 
assuming operational and maintenance responsibilities from Reclamation. 
Local entities throughout the west have begun to operate and maintain 
federal projects under contract with the Bureau of Reclamation, with 
almost uniformly better results at lower cost. Many local entities 
believe that taking over federal facilities through title transfers 
will serve the twin goals of strengthening local control and downsizing 
the federal government to sustain a balanced federal budget. Efforts to 
transfer the ownership of federal water facilities to those water user 
entities that desire to obtain title should also be encouraged.
    Question 3. How would you suggest streamlining the title transfer 
process?
    Answer. Last year marked the second time in the past decade that 
the Family Farm Alliance canvassed its membership to assess 
Reclamation's transfer process and identify ways to improve it. Here 
are some of the priority ideas offered up by some of our members in 
2005:

   Pass simple, brief and specific legislation that would 
        exclude title transfers from NEPA, unless there is clear 
        evidence suggesting that project operations will change. 
        Something must be done to address the unwieldy NEPA process 
        that currently applies to title transfer processes. Many in the 
        water user community have argued that NEPA should not apply to 
        some transfers. They strongly believe, that, because a transfer 
        project does not change how a project is operated, a NEPA 
        categorical exclusion should apply.
   Reclamation and Congress should investigate NHPA impediments 
        to title transfer and suggest or support, as may be 
        appropriate, language that would modify the requirements of 
        Section 106 in such instances. Part of the justification for 
        this enormous expenditure of time and money is based on Section 
        106 regulation, 36 CFR Part 800.5(a) (2) (viii), that defines 
        transfers of property out of Federal ownership or control as 
        adverse effects if the agency transferring the property 
        determines that there are inadequate legally enforceable 
        restrictions or conditions to ensure long term preservation of 
        the property's historic significance.
   Develop generic legislation authorizing title transfer based 
        on a district's capability to assume ownership and continue 
        with a viable project. The condition of the projects is a major 
        issue in making the determination to move forward with title 
        transfer.
   Legislate timelines which force Reclamation to make progress 
        at certain milestones for specific projects. New Mexico water 
        users ultimately had success using this approach.

    Question 4. A common complaint of Reclamation customers is that the 
costs of Reclamation services are often ``significantly higher than 
reasonably anticipated costs.''
    To what do you attribute this statement?
    Answer. This statement derives primarily from the documented first-
hand experiences of our members from throughout the West. The Family 
Farm Alliance in 2005 specifically asked irrigation districts and 
organizations of farmers to provide examples of: 1) poor or exemplary 
project management by Reclamation; 2) management of Reclamation 
projects by non-federal authorities; and 3) instances where Reclamation 
is operating beyond its traditional mission. This effort led to the 
development of nine individual case studies for irrigation districts 
served by six Reclamation projects in five Western states. The final 
report that summarizes our findings is entitled ``The Bureau of 
Reclamation's Capability to Fulfill Its Core Mission: The Customer's 
Perspective'', and was presented to the National Research Council Board 
on Infrastructure and the Constructed Environment, Committee on 
Organizing to Manage Construction and Infrastructure in the 21st 
Century in June of 2005.
    We support our statement based in part on case studies included in 
this report. Consider the following examples:

   The Northern Colorado Water Conservancy District (District) 
        since 1999 has been working to complete a project that would 
        add an outlet to Carter Lake Reservoir. The objective of the 
        District has been to complete this project by April 2007 in the 
        most cost-effective manner possible with a total cost not to 
        exceed $10 million. Significant cost overruns (in some cases as 
        much as 77 percent) have occurred on the pre-design phases of 
        this project. According to the District, these cost overruns 
        are related to the management of the project, as is 
        demonstrated by the fact that as many as 17 Reclamation 
        employees attended a meeting to discuss a project that is 
        relatively small in scope and not extraordinary from an 
        engineering and policy perspective.
   The Pershing County Water District (Nevada) was critical of 
        Reclamation's cost estimates for transfer-related work that 
        were significantly higher than estimates prepared by qualified 
        consultants.
   The Santa Ynez Water Conservation District (District) serves 
        rural agricultural, domestic and commercial customers on 10,850 
        acres in Santa Barbara County, California. Over the past nine 
        years, the District has been faced with the challenge of 
        absorbing unanticipated expenditures caused by Reclamation cost 
        overruns on the Cachuma Project. These cost overruns have been 
        significant and, in the District's opinion, avoidable. For 
        example, Congress allocated $41.5 million for the Bradbury Dam 
        Seismic Strengthening Project, based on a report submitted by 
        Reclamation. The construction cost for the project was 
        completed 15% below the budget amount. Yet, amazingly, total 
        costs were 18% over budget, caused entirely by an 82% overrun 
        in the Contract Administration and Design & Specification 
        functions. The latter cost more than doubled, from $2.5 million 
        to $6.24 million.
   In the mid 1990's, Hermiston Irrigation District 
        participated in a safety of dams update to its facilities in 
        northeastern Oregon. Included in that update process was a 
        requirement by Reclamation to install a new backflow structure. 
        Despite objection from the District to Reclamation's proposed 
        design--which the District felt was not acceptable from an 
        operations standpoint--Reclamation proceeded with final design 
        and construction of the facility. As predicted by the District, 
        numerous operational problems over the next three years led to 
        a revised design of the structure, which the District was 
        required to pay for as part of the safety of dams expense. 
        Importantly, 55 percent of the price tag was attributed to 
        engineering costs generated by Reclamation staff.

    Although not covered specifically in our case study report, we have 
all heard concerns expressed about the costs of the Animas-La Plata 
Project, which were approximately 50% over prior estimates. I believe 
two other witnesses who submitted testimony at your May 23, 2006 
hearing--Mr. Bennett Raley and Ms. Diane Snyder--have addressed this 
issue in further detail.
    Question 5. How do you suggest we reduce the costs associated with 
Reclamation services?
    Answer. We have recommended several means of reducing costs 
associated with Reclamation services, and these are included in our 
written testimony. They include the following:

   Reclamation should develop and implement a transition plan 
        to achieve an agency with ``right-sized'' design, estimating 
        and construction management staff;
   Reclamation adopts a policy that contractors who pay for 50% 
        or more of specific work can elect to use irrigation district 
        personnel or private consultants for design, procurement, 
        construction, and contract and construction management;
   Reclamation proposes reductions at Technical Service Center 
        that are real and not achieved by reassignments to the Regions 
        or reclassifications of existing job categories;
   Standards for construction and O&M are based on an 
        assessment of the relative risk, consequences of failure, 
        marginal return, and subject to appeal to policy level 
        officials;
   Reclamation moves to use ``performance-based'' instead of 
        ``design-based'' standards for any work which is paid for in 
        part by contractors, and emphasize use of ``off-the-shelf' 
        components, as opposed to redesigning projects.
   Reclamation does not perform design, construction, and 
        procurement work unless the Commissioner certifies that there 
        is a substantial likelihood that Reclamation can perform the 
        work at issue at a cost equal to or less than if outsourced 
        (based on a defined Reclamation project cost).
   Reclamation requires reporting/tracking for projects that 
        monitor actual Reclamation costs, as well as providing for 
        advance notification to contractors and Congress that there is 
        a material risk that Reclamation will exceed defined 
        Reclamation project costs.

    In summary, fundamental fairness requires that when a water user is 
paying for work in advance or through repayment mechanisms, that water 
user should have the option to have the work executed in the manner 
that provides the most return for the investment. Qualified districts 
or water user organizations should be provided with the option to 
perform or contract with qualified private contractors any work on 
federal facilities that does not fall within the category of 
``essential governmental functions'' so long as appropriate standards 
are met.
    Question 6. How do you suggest that Reclamation maintain 
appropriate oversight of outsourced work to ensure that it is performed 
in a competent manner?
    Answer. I believe Bennett Raley's observations on this issue, as 
identified in his July 19, 2005 letter to NRC Committee Chairman 
Mitchell, best apply here. Reclamation must be able to 1) account for 
all funds associated with these projects and ensure that they are spent 
for authorized purposes, and 2) ensure that the work is performed in a 
manner that meets applicable engineering or other standards.
    Reclamation will need a strong construction management program that 
includes both fiscal and engineering components. However, these 
components should be deployed to set standards in advance, monitor 
compliance, and report on results. Performance of these functions does 
not mean that Reclamation employees must design projects, serve as the 
``general contractor,'' perform research, or serve as the day-to-day 
construction manager. Qualified water districts and the private sector 
can perform each of these functions under Reclamation supervision.
    Reclamation itself already hires outside consultants to assist it 
in dam safety peer reviews, and some of the outside consultants were 
trained by Reclamation. There are many highly qualified engineers that 
work elsewhere in the profession.
    Question 7. You propose a reduction in the staff of the TSC. How do 
you reach this conclusion? What, from your perspective, would be the 
optimal size of the TSC?
    Answer. The optimal size of the Technical Services Center (TSC) can 
be ascertained by developing and implementing a transition plan to 
achieve an agency with ``right-sized'' design, estimating and 
construction management staff. We believe that a review of the list of 
programs and activities that are carried out from the TSC would reveal 
a number of functions that may fall outside of the definition of 
``management'' or an ``inherently governmental activity'' associated 
with Reclamation. Much of this work is important, legally mandated, and 
involves many people who are respected professionals. However, we 
believe other federal agencies, the private sector, and universities 
can also perform much of this work.
    The Family Farm Alliance believes that Reclamation can propose 
reductions at the TSC that are real and not achieved by reassignments 
to the Regions or reclassifications of existing job categories. This 
conclusion is based on findings from the aforementioned 2005 case study 
report, and is bolstered by comments that we heard at a Reclamation 
stakeholder meeting held in Denver this past April. At that meeting, 
stakeholders expressed concerns regarding the TSC being overstaffed and 
assigning too many people to projects. The Family Farm Alliance and 
other customer representatives in Denver stated their wishes to see the 
TSC staffed to maintain core capabilities at the leanest levels.
    Question 8. In your testimony, you mention the need for Reclamation 
to do a better job of soliciting comment from customers and 
stakeholders. How do you propose improving stakeholder and customer 
involvement in decision making?
    Answer. Reclamation should revise the customer interaction process 
to include written procedures for customer input on current financial 
circumstances of all Reclamation infrastructure, including cost 
invested, repayment status, O&M cost allocation, design life, facility 
condition, etc, and a documented means through which Reclamation used 
(or didn't use) this input.
    At Reclamation's April 27, 2006 National Stakeholder's Meeting on 
Managing for Excellence, held in Denver (noted in our response to 
question #7, above), it was clear that customers were interested in 
gaining a better understanding of Reclamation's business model, 
particularly how costs are charged, accounted for, allocated, reported, 
billed, etc. Most importantly, customers want to understand what they 
are being billed for. This information could be provided through 
workshops held with regional constituents on charging and allocation 
processes.
    Stakeholders are frustrated that their input to budget formulation 
seems to go unused and that they are not provided feedback on status of 
budget requests. For example, Reclamation has not always been 
responsive to their questions regarding costs/charges and needs to 
communicate more readily with customers.
    We would like to provide more input on O&M planning and budgeting. 
Since the budgeting process prohibits Reclamation from sharing 
information, water customers would like to provide more input early in 
the budget development process to assist in making decisions regarding 
requested funds.
    We would like this outreach to be more consistent across the West. 
Several area offices have been more successful at integrating customer 
outreach in O&M Planning and the Budget Process. The processes used at 
these offices should be applied elsewhere as a model or best practice.
    The funds requested from Congress for long-term planning should 
extend beyond O&M Planning to also include rehabilitation and eventual 
replacement costs. Multipurpose costs should be explained upfront in 
more detail, and districts would like some control over how 
multipurpose costs are spent.
               Responses of The Family Farm Alliance to 
                    Questions From Senator Bingaman
    Question 1. Reclamation asserts that its customers do not pay for 
the services of the TSC unless it is used for planning, design, and 
construction activities related to the customer's project. Do you 
agree? If customers are given the option to use other engineering 
services for projects in which the customers pay 50% or more of the 
cost, would the FFA still be concerned about the staffing levels at the 
TSC?
    Answer. Based on discussion at Reclamation's April 27, 2006 
National Stakeholder's Meeting on Managing for Excellence (held in 
Denver), it is clear that Reclamation believes stakeholders have little 
understanding of the TSC, including how it is funded and its size, 
function, workload, and operating practices. At the Denver meeting, we 
were told by a TSC employee at that meeting that roughly 80% of TSC 
staff time can be linked directly to specific project work. It appears 
that the actual billing rate utilized is developed to reflect the 20% 
``non-direct charge'' nature of this work.
    We believe that continued cooperation and educational exchange 
opportunities between Reclamation and its customers, similar to the 
approach-laid out in Managing for Excellence, will lead to a mutual 
understanding of this matter. Whether Reclamation's customers are 
paying only for project-specific TSC services or not, customers are 
definitely concerned about perceived excessive TSC charges being racked 
up on those specific projects. As the Managing for Excellence action 
plan is implemented, the optimal size of the TSC can be ascertained by 
developing and implementing a transition plan to achieve an agency with 
``right-sized'' design, estimating and construction management staff.
    Question 2. Please provide a more detailed explanation of the use 
of ``performance-based'' standards instead of ``design-based'' 
standards.
    Answer. When we use the term ``design-based'' standards, we are 
referring to the actual design and construction of facilities. A 
``performance-based'' approach refers to the appropriate role of 
establishing performance or other standards to meet minimum engineering 
requirements. It is well accepted that Reclamation should be 
responsible for establishing appropriate design standards for work on 
federally owned structures. However, we also believe that it would 
helpful to make recommendations regarding the manner in which these 
design standards are established, and a process for resolving 
disagreements between Reclamation engineers and qualified non-
Reclamation engineers regarding the appropriateness of particular 
standards.
    There is a perception with some western water users that 
Reclamation ``over-designs'' project elements based on an institutional 
philosophy that assumes that facilities should be designed using the 
most conservative design standards. While this approach may be 
appropriate for federally funded work and for work with public safety 
issues, it is not necessarily appropriate for work funded by water 
users that does not present serious public safety risks. In some cases, 
certain districts (unlike Reclamation) may be willing to take on 
liability associated with less robust designs on non-critical projects.
    These issues can quickly move beyond engineering criteria to 
fundamental policy decisions that undermine balancing of risks in an 
environment where financial resources are limited. Greater 
opportunities may exist for innovation and efficiency and should be 
considered when analyzing engineering standards. One suggestion would 
be to provide for a quick ``mini-peer review'' involving outside 
consultants that project sponsors could utilize for disputes\1\
---------------------------------------------------------------------------
    \1\ Bennett Raley letter to Dr. James K Mitchell dated July 19, 
2005, pp. 9-10.
---------------------------------------------------------------------------
                                 ______
                                 
      Responses of Scott Yates to Questions From Senator Domenici
    Question 1. Do you believe that environmental restoration 
activities should be a focus of Reclamation or do you feel that these 
activities are better carried out by other federal agencies?
    Answer. Yes, environmental restoration activities should be a core 
component of the agency's management of its own projects. We do not 
mean to imply that Reclamation should usurp other federal agency's 
roles and responsibilities. Rather, with regard to operation of 
Reclamation projects, no other agency has the authority to determine 
appropriate mitigation for Reclamation projects absent Endangered 
Species consultation authority with either NOAA or the Fish and 
Wildlife Service.
    According to the agency's website, Reclamation's mission is to 
``develop, manage, and protect water and related resources in an 
environmentally and economically sound manner in the interest of the 
American public.'' As such, it seems clear that Reclamation would be 
unable to achieve its mission without engaging in environmental 
restoration activities, especially as they relate to ongoing impacts 
from Reclamation projects. The NRC report states that Reclamation needs 
to focus on ``sustaining its facilities, infrastructure, and resources, 
as well as responsibly managing the environment'' (page 23). In other 
words, Reclamation needs to take an active role in addressing 
environmental challenges created, in part, by the agency's projects.
    As a practical matter, Reclamation personnel are best suited to 
guide and conduct environmental restoration activities related to 
Reclamation projects because of their first-hand knowledge of each 
project and its impacts. The Bureau has programs in place, such as the 
Water Conservation Field Services Program, that include engineering and 
environmental staff members that are able to identify partnership and 
restoration opportunities in river drainages with Reclamation projects. 
Such programs should be fully funded and directly identified and vested 
as a core program for the agency so that important restoration goals 
and objectives are met.
    Question 2. From your perspective, has Reclamation done an adequate 
job of soliciting comment from the environmental community? If not, how 
would you improve their relationships with the environmental community?
    Answer. Unfortunately, Reclamation has not always engaged a diverse 
array of stakeholders in a meaningful way. This is a programmatic issue 
for Reclamation in terms of developing and institutionalizing broader 
consultation strategies, but it also implicates the agency for lack of 
consistency agency-wide. It is important to note that informal 
consultation and soliciting input from stakeholders such as TU goes 
beyond formal decisions that involve compliance with broad federal 
environmental statutes such as the CWA, ESA, or NEPA. This is 
particularly important in light of the fact that the agency has managed 
to largely insulate itself from NEPA compliance. For instance, 
Reclamation water delivery contracts are subject to renewal only once 
every 40 years. Even then some contracts are not subject to NEPA if 
Reclamation determines that no ``significant changed circumstances'' 
exist.
    The bottom line is that Reclamation regional and area offices often 
make operational proposals or take various actions that do not always 
invoke substantive or procedural laws or regulation, but still have 
prospective impacts. Some Reclamation offices are better than others at 
identifying such situations, but the agency is far from consistent in 
working with TU and other members of the environmental community on a 
broad spectrum of issues, not just when required by the law to do so.
    One way to improve communication and collaboration with 
stakeholders, including conservation organizations, would be for 
Reclamation leadership in DC to clearly provide direction to the 
regional and area offices to engage non-traditional partners on 
operational and other Reclamation issues that could impact river 
management or health. This would include existing direction that Bureau 
staff participate in watershed restoration efforts underway in project 
basins, such as creating and implementing TMDLs to manage water quality 
impacts below Reclamation dams. Not only would Reclamation's pro-active 
engagement better comply with federal Clean Water Act requirements, but 
it would provide an opportunity for the Bureau to improve its relations 
with diverse stakeholders. Reclamation leadership should make it clear 
that staff time spent on such watershed restoration activities (and 
compliance with federal law) is expected, encouraged, and will be 
rewarded.
    In addition to focusing Reclamation staff in general terms on 
watershed activities and existing multi-stakeholder efforts to assess 
and identify water management issues and solutions, the agency could 
also better utilize existing authority, such as the Fish and Wildlife 
Coordination Act consultation provisions, to engage the environmental 
community and other local participants. The statute provides an 
underutilized framework, and therefore a built-in starting point, for 
setting up and establishing guidelines for Reclamation to engage the 
public regarding agency activities and water management issues.
    Question 3. Do you believe that Reclamation has adequate staff to 
engage the environmental community and the appropriate state and 
federal agencies in making decisions regarding project operations?
    Answer. The answer to this question varies widely from region to 
region and state office to state office. For example, as discussed in 
more detail in my written testimony regarding the Sun River, 
Reclamation officials in Montana cite lack of staff as the reason they 
have not completed a reservoir operations model re-run for two full 
years that has been requested by the multi-stakeholder Sun River 
Watershed Group as a way to begin implementation of the EPA-approved 
TMDL on the Sun River. At the same time, the Pacific Northwest Regional 
staff has been able to cover a tremendous amount of ground in Oregon, 
Washington, and Idaho in response to both issues related to dam 
operations and field-based partnerships to restore important tributary 
habitat. The difference between regions may not necessarily involve 
understaffing or limited resources, but merely the lack of support and 
clear direction from Washington, DC that collaboration and 
communication with diverse stakeholders would improve the situation.
        Responses of Scott Yates to Questions From Senator Craig
    Question 1. I see in your written testimony you have recommended 
that the Bureau should also look into 3rd party costs and benefits. The 
water that is spread over these projects covers critical wildlife 
habitat that have advocacy groups and critical farm ground that 
supports communities. Therefore, how would you propose those 3rd party 
cost/benefits be calculated and who is the ``3rd party''? Also, for 
your group to receive greater ``benefits,'' would you be willing to pay 
for those project upgrades?
    Answer. A mitigation duty exists for Reclamation because of the 
adverse impacts to water quality and fish and wildlife habitat caused 
by its projects. Federal law already largely defines the extent of this 
duty, such as compliance with the Endangered Species Act, Clean Water 
Act TMDLs and state water quality standards. Current project 
beneficiaries need to pay for actions necessary to meet these mandatory 
mitigation duties just as rate-payers pay for mitigation requirements 
at FERC-licensed hydro dams.
    On the other hand, the costs of conservation benefits that are over 
and above mandatory mitigation requirements may need to be paid for 
from some type of payment pool created by all benefiting parties. 
Discussions over the past few years amongst stakeholders in the Henry's 
Fork drainage have focused on identifying creative operational 
strategies to reduce drought year impacts on the phenomenal wild trout 
fishery below Island Park Dam. Much like on the South Fork Snake, these 
groups have been successful in identifying scenarios during dry years 
where water can be moved downstream in the winter and earmarked in 
American Falls Reservoir--this has resulted in increased fishery flows 
during the critical winter time period for fish and additional power 
generation with little increase in risk for Reclamation or the 
irrigators regarding meeting storage rule curves or contractual 
delivery obligations.
    At the same time, TU and others have thrown out additional 
scenarios that would involve more water during the winter time period 
and a corresponding increased risk that the reservoir will not refill. 
The idea in this case would be to create a fund whereby the risk for 
such a strategy does not fall on irrigators, but rather a fund is 
created to reimburse irrigators if such operations result in water not 
being stored and delivered pursuant to contractual obligations. 
Obviously, this is a difficult topic and there is not yet consensus in 
the Henry's Fork watershed regarding such an alternative. But creating 
a drought pool where, under certain circumstances, Reclamation and the 
irrigation community would be indemnified for taking additional water 
management risks is one example of where conservation groups would be 
willing to seek private, state, tribal, and federal funding sources to 
provide increased resource benefits.
    Question 2. At this point, has there been a change in Bureau of 
Reclamation priorities because of this study? If so, what has moved up 
on the priorities and what has suffered?
    Answer. It is too early to tell. Reclamation's action items set 
forth in it plan responding to the NRC report will not be complete 
until December 2007. However, our initial conversations with the agency 
reflect an urgency to work with stakeholders regarding the issues and 
recommendations identified in the NRC Report. Most importantly from 
TU's perspective, the agency appears willing to intensify efforts to 
engage conservation groups, along with traditional project 
beneficiaries, as the agency reflects on its approach and assesses 
possible organizational and institutional change regarding how it 
manages Reclamation projects and water in the West.
       Response of Scott Yates to Question From Senator Bingaman
    Question 1. In your review of Reclamation's Action Plan do you 
believe that it is giving appropriate consideration to the conservation 
and protection of water and related resources as a core part of its 
mission in the future? If not, how do you think that mission can be 
enhanced within Reclamation?
    Answer. Some parts of the action plan give appropriate 
consideration to conservation and protection, some parts do not, and 
some parts are too broad to be able to asses whether or not the agency 
contemplated conservation and protection.
    Some parts of the action plan are too broad at this point to 
determine whether or not the agency is giving appropriate consideration 
to conservation and protection. For example, one action item identified 
in the plan related to major repair challenges reads ``[d]evelop 
processes or measuring tools to determine whether a major repair 
project is warranted.'' One way to enhance Reclamation's conservation 
and protection mission would be to include consideration of water and 
natural resources impacts as part of such processes developed by agency 
officials.
    Other parts do not sufficiently address conservation and 
protection. The action plan states that determining and achieving the 
appropriate level of future construction is a key assessment that must 
be considered in looking to the agency's future. The plan defines 
future construction to include major repairs of existing infrastructure 
and salinity control projects. Unfortunately, neither the functional 
areas to be evaluated nor the benchmarks set forth in the plan for 
future construction mention consideration of impacts to water and 
related resources. A clear identification of consideration of such 
resources would. strengthen the action plan.
    On the other hand, some components of the plan appropriately 
consider conservation and protection. For example, the plan sets forth 
key issues that must be addressed prior to contemplating any future 
transfers of O&M including how to ensure that Federal responsibilities 
such as environmental, recreation and cultural resources are met.
    With respect to better enhancing the conservation and protection 
mission overall within the agency, Trout Unlimited strongly recommends 
that the Committee either provide additional statutory authority to the 
agency to do so or require the agency to vigorously use existing legal 
mechanisms, such as the Fish and Wildlife Coordination Act. Reclamation 
has proved a valuable partner in numerous tributary habitat restoration 
projects in the Pacific Northwest, but the agency should identify how 
to expand their reach throughout the West to fund actual construction 
costs throughout mainstem and tributary reaches in watersheds where 
Reclamation dams exist.
                                 ______
                                 
   Responses of Thomas F. Donnelly to Questions From Senator Domenici
    Question 1. Mr. Donnelly, you state in your testimony that 
Reclamation customers frequently complain about the administrative 
costs associated with Reclamation services.
    Why do you believe costs for Reclamation services exceed those 
found in the private sector?
    Answer. I can't say with any degree of certainty that Reclamation's 
costs of services are significantly greater than the private sector. 
All of the complaints that our member have voiced are antidotal. 
However, on some recent projects (i.e. Animas-La Plata) excessive 
administrative costs have been applied to the projects. For more 
detail, I would refer the Committee to former Assistant Secretary of 
the Interior Bennett Raley. Regardless, this issue should be addressed 
by the Bureau of Reclamation as part of the ``Managing for Excellence'' 
process.
    Question 2. Do you believe that this is a result of overstaffing at 
Reclamation?
    Answer. Again, we are hopeful that the ``Managing for Excellence'' 
process will include a critical assessment of the Bureau's future 
staffing needs. We are concerned that the Bureau has maintained 
capabilities which were required for their construction mission of the 
past, but are no longer necessary for their maintenance mission of the 
future.
    Question 3. In your testimony, you mention the hardship that 
current annual repayment schedules impose on Reclamation customers and 
the need to ease that burden.
    Have you encountered situations in which your members are not able 
to meet their O&M obligations?
    Answer. Yes, but for a number of reasons. On single purpose 
irrigation project, particularly in the northern tier States where 
there is only one growing season, project beneficiaries have struggled 
for years to meet their annual O&M obligations. When rehabilitation of 
project facilities becomes necessary it is often deferred because the 
beneficiaries can not repay the cost within the year they are 
incurred.. When this happens deferred maintenance often becomes 
critical maintenance. This is a huge issue in the context of the 
Bureau's aging infrastructure.
    Question 4. How do you suggest that we meet this need? What 
alternative financing mechanisms do you propose to help Reclamation 
customers meet the O&M costs allocable to them?
    Answer. It is important to distinguish between routine operation 
and maintenance costs and modernization and rehabilitation needs. Often 
the Bureau is forced to blur that line because they have no available 
option. Over the past two years, we have engaged in discussions with 
Bureau representatives concerning this problem. Unfortunately, the 
Bureau of Reclamation is tremendously restrained with what it can offer 
as a solution by the Administration's Office of Management and Budget 
and consequently, unable to think ``outside the box.'' Recently, the 
Bureau has discussed with us the possibility of a program of loan 
guarantees as a solution. In some instances, loan guarantees can work, 
but loan guarantees do not offer a comprehensive solution. We believe 
there are a number of potential solutions, some using existing 
authority and others requiring new program authorization. Modernization 
and or rehabilitation of these projects could be accomplished through 
various means: project specific authorization (amendment of original 
authorization or new authorization) and appropriations, a 
congressionally authorized U.S. Bureau of Reclamation modernization and 
rehabilitation program, an infrastructure revolving fund or use of the 
existing Reclamation Fund. A restructuring of the Reclamation Fund, 
established under Section 1 of the Reclamation Act of 1902 (32 Stat. 
388; 43 U.S.C.  391), is an example of a potential solution using 
existing authority. The ``Fund'' currently has approximately $4.5-5.0 
billion in it. In reality, it was envisioned to address both new 
project construction and the modernization and rehabilitation of the 
existing infrastructure.
    Question 5. Have you conducted a preliminary assessment of 
Reclamation infrastructure repair needs? If so, what is your estimate?
    Answer. We are in the process of conducting a survey of project 
facilities Westwide to determine the scope of the aging infrastructure 
problem as it relates to Bureau of Reclamation facilities. To date we 
have only received between 20 and 30 responses. Most of the responses 
are from projects in the Pacific Northwest. We are hopeful that the 
information we gather through this survey combined with information the 
Bureau possesses on its projects can be combined to provide Congress 
with a ``blueprint'' of aging infrastructure funding needs over the 
next several decades.
    At this time, we can not provide the Committee with an accurate 
estimate.
    Question 6. You mention in your testimony that your organization 
has been asked to participate in the promulgation of Reclamation's 
Action Plan.
    Generally, do you believe that Reclamation has solicited 
stakeholder and customer perspectives in responding to the NRC report?
    Answer. I believe that the leadership of the Bureau of Reclamation 
and the Department are making every effort to include the Bureau's 
customers in addressing the recommendations in the NRC report.
    Customer input is being actively sought and I am confident will be 
seriously evaluated.
    Response of Thomas F. Donnelly to Question From Senator Bingaman
    1. Do you think that Reclamation's mission in future should include 
an active role in helping municipalities, Indian tribes, and other 
rural communities address their future water needs, or should 
Reclamation be limited to focusing its attention on existing water and 
power infrastructure?
    Answer. [None given.]
                                 ______
                                 
    [Responses to the following questions were not received at 
the time hearing went to press.]

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                      Washington, DC, May 30, 2006.
Hon. Lynn Scarlett,
Acting Secretary, Department of the Interior, Washington, DC.
    Dear Madam Secretary: I would like to take this opportunity to 
thank you for sending Mr. William Rinne to testify before the Senate 
Committee on Energy and Natural Resources on Tuesday, May 23, 2006, to 
give testimony regarding the National Research Council report, Managing 
Construction and Infrastructure in the 21st Century Bureau of 
Reclamation and the U.S. Bureau of Reclamation Report, Managing for 
Excellence: An Action Plan for the 21st Century.
    Enclosed herewith please find a list of questions which have been 
submitted for the record. If possible, I would like to have your 
response to these questions by Monday, June 12, 2006.
    Thank you in advance for your prompt consideration.
            Sincerely,
                                          Pete V. Domenici,
                                                          Chairman.
[Enclosure.]

                    Questions From Senator Domenici
    Reclamation's Action Plan, identifies 41 ``action items'' that, 
according to Reclamation, require thorough analysis and decision 
making.
    Question 1. When will you complete analysis required to implement 
the Action Plan?
    Question 2. When will you complete implementation of the Action 
Plan?
    Question 3. Do you believe that any legislation is. needed in order 
to implement this plan?
    Mr. Rinne, I am particularly concerned with Reclamation's ability 
to maintain its existing infrastructure. Reclamation facilities 
represent a public investment of approximately $250 billion. 
Additionally, many rely on water and power that the facilities provide. 
The average Reclamation facility is over 50 years old. Some Reclamation 
facilities are over 90 years old. In many instances, these facilities 
have exceeded their original operational lives. Meeting increasing 
operations, maintenance and rehabilitation obligations in light of 
budget cuts will prove especially challenging for Reclamation and its 
customers. For this reason, we need to ensure that costs passed on to 
customers provide Reclamation customers with the greatest value.
    Question 4. Do you believe that OMB appreciates the increasing 
budgetary burden that O&M obligations on these facilities will impose 
on Reclamation? If so, how does the Administration justify a proposed 
cut of 13 percent to Reclamation's budget for FY2007?
    Question 5. In general, how do you plan to meet increasing O&M 
obligations and protect the federal investment in Reclamation projects?
    As you are aware, Reclamation customers are responsible for 
repaying O&M costs annually. The NRC report found ``some water 
customers already find full payment of O&M activities difficult and 
major repairs and modernization needs . . . cannot be met under the 
current repayment requirements.''
    Question 6. Have you encountered situations where customers are not 
able to meet their O&M costs obligations? If so, have you explored any 
options for helping them meet his burden? If so, what?
    Question 7. Are you concerned that if adequate sums are not made 
available for O&M obligations, that it would put the structural 
integrity of some Reclamation facilities at risk?
    As you are aware, some overhead costs within Reclamation are passed 
on to its customers. Many customers claim that ``overstaffing'' within 
Reclamation is the reason costs are much higher than they would be in 
the private sector. However, the NRC report also recognizes the need to 
maintain ``core competencies'' in order for Reclamation to be a smart 
purchaser of private sector services.
    Question 8. How do you plan to address the claims of customers that 
overstaffing exists within Reclamation and that the overstaffing 
results in excessive costs to Reclamation customers?
    Question 9. Do you plan to undertake any outreach efforts to 
justify the need for Reclamation's workforce and the cost associated 
with the current workforce?
    Question 10. Based on the fact that few, if any, large construction 
projects undertaken by Reclamation, should capabilities necessary for 
construction of large facilities be retained in Reclamation?
    Of great concern to me is the problem of attrition which is 
currently facing Reclamation. The NRC report recognizes that, because 
of the aging workforce, a large number of staff will be retiring soon.
    Question 11. How do you plan to recruit employees to address 
problems with attrition within Reclamation, including the retention of 
institutional memory?
    Question 12. How do you plan to remain competitive with the private 
sector in order to attract new employees?
    Question 13. Do you believe that Reclamation has adequate training 
programs underway in order to ensure that new and existing employees 
have the collaborative skills they need?
    It is my understanding that services undertaken by the TSC have 
been benchmarked against similar services undertaken by the private 
sector.
    Question 14. What have you found in these benchmarking activities? 
Have you found that TSC services are generally more expensive than 
comparable services in the private sector?
    The NRC report states that while it does not question the need for 
the TSC, it does question the size.
    Question 15. Do you agree that the TSC employs too may people? If 
so, do you believe that fact significantly contributes to the cost of 
TSC services?
    Mr. Rinne, the FY2003 Omnibus Appropriations Act contained a 
provision requiring Reclamation to use the private sector for 10 
percent of its planning, engineering and design work in fiscal year 
2003, and 10 percent in each subsequent year until the level of work is 
at least 40 percent.
    Question 16. Has Reclamation complied with this statutory mandate?
    Question 17. What is the current amount of outsourced work in these 
areas?
    According to OMB Circular A-76, ``commercial activities should be 
subject to the forces of competition.'' The Circular also states that 
``the government shall perform inherently governmental activities.''
    Question 18. What activities would you define as ``inherently 
governmental'' and which activities do you believe should be subject to 
the forces of competition?
    Question 19. Do you agree with the NRC report's finding that 
Reclamation could outsource more?
    The NRC report states that O&M, field data collection, drilling 
operations, routine engineering, and environmental studies should be 
``more aggressively outsourced where objectively determined to be 
feasibly and economically beneficial.''
    Question 20. Do you agree with this statement? How do you plan to 
determine which services can be outsourced more ``aggressively 
outsourced''?
    Former Assistant Secretary for Water and Science, Bennett Raley, 
who requested the NRC report, found ``construction functions can almost 
always be performed cheaper and more efficiently by districts or 
private companies.'' I have heard similar complaints from Reclamation 
customers as well.
    Question 21. Is it your experience that Reclamation costs are 
higher than those found in the private sector for similar services? If 
so, to what do you attribute these higher costs?
    Question 22. Generally, do you believe that increased outsourcing 
would result in cost savings to Reclamation customers?
    The NRC report recognizes that some technical capabilities need to 
be retained within Reclamation so that it can remain a smart purchaser 
of private sector services.
    Question 23. How do you plan to determine what level of technical 
capabilities need to retained? Should these technical capabilities be 
retained at the TSC, regional, area or project offices?
    Mr. Rinne, a frequent complaint I hear from Reclamation customers 
is that they often do not feel included in decision-making processes 
and it is not clear how Reclamation makes decisions. Based on the NRC 
report, it appears that many of the complaints that customers and 
stakeholders have with Reclamation would disappear if Reclamation 
included them in the decision-making process and were more transparent 
in their operations.
    Question 24. Do you agree with the NRC report that providing for 
stakeholder involvement will make it easier for Reclamation ``to obtain 
buy-in from sponsors and stakeholders''?
    Question 25. What successful models within Reclamation can you 
point to regarding stakeholder involvement?
    The Reclamation Action Plan states ``it is critical that we 
maintain and strengthen our capability to work with our many 
stakeholders.''
    Question 26. What additional skills do you believe need to be 
fostered among Reclamation employees in order to improve relationships 
with customers and stakeholders?
    Question 27. How do you plan to foster these skills?
    At the end of Fiscal Year 2005, then-Commissioner Beard retired a 
comprehensive set of policy statements and procedural directives call 
``Reclamation Instructions.'' This resulted in a lack of policy 
guidance. Although a new Reclamation Manual has been developed, the NRC 
states that ``it is incomplete.''
    According to the National Water Resources Association the 
retirement of the Reclamation Instructions had a ``profoundly negative 
effect on the organization.''
    Question 28. Do you agree with the NWRA's statement?
    Question 29. Do you believe that the revocation of the Reclamation 
Instructions resulted in a lack of consistency within Reclamation and a 
lack of accountability among Reclamation employees?
    The NRC report recommends that Reclamation ``should promulgate 
policy guidance, directives and how-to documents.''
    Question 30. Do you agree with this statement?
    Question 31. To what extent can the Reclamation Instructions be 
reinstated?
    Question 32. Do you agree with the finding of the NRC report that 
Reclamation should ``establish a structured project management 
process'' with respect to cost estimating? When will Reclamation's 
directives on cost estimating be implemented?
                      Question From Senator Craig
    Question 1. As recognized in the NRC report, rehabilitation costs 
are becoming increasingly burdensome to our water users. Can you tell 
me how the Bureau intends to fix this problem and what the time frame 
may be?
                      Questions From Senator Burns
    In your report, ``Managing for Excellence'' you highlight several 
questions surrounding major repair challenges. This includes how do you 
help customers finance their share of major repair projects?
    Question 1. What progress have you made on finding workable 
solutions to the ``major repair challenges'' you face?
    In recent years, the Sun River Watershed Group in Montana, a group 
that includes the irrigation districts and other interested 
stakeholders, has come together to explore ways to restore flows to the 
Sun River and thereby protect and enhance the Sun's wild trout fishery. 
The river is the site of a Reclamation water project, which includes 
Gibson dam and reservoir, a secondary diversion dam, two smaller 
storage reservoirs, and numerous irrigation canals. The Reclamation 
project provides water to the Greenfields Irrigation District (GID) and 
the Fort Shaw Irrigation District (FSID). Several other major ranches 
have additional water right claims from the Sun River downstream of the 
Gibson reservoir. During drought years, the river barely contains 
enough water to satisfy the irrigators' water rights, and the riverbed 
is nearly run dry.
    Recently, the Watershed Group came up with an approach for 
exploring flow restoration that was acceptable to all stakeholders, 
tied these flow restoration goals to thermal TMDL targets, and the Sun 
River TMDL was approved by the EPA last year. A first-step in the flow 
restoration goals is improving river winter flows below Reclamation's 
Gibson Dam, by taking a close look at reservoir operations and the 
current reservoir fill regime to determine whether some flexibility 
could be found in the operational regime to increase winter flows 
without jeopardizing the ability of Gibson Reservoir to fill with the 
spring peak flows due to snow-melt.
    It is my understanding that some time ago Bureau representatives 
agreed to re-run the reservoir operations model to determine if there 
is some flexibility to increase winter flows. The Sun River Watershed 
Group invested significant resources in a detailed review of flow 
regime and snow pack data that should aid Reclamation's model re-run.
    Question 2. Does the Bureau plan to re-run the reservoir operations 
model and share the results with the Sun River Watershed Group? If yes, 
please tell me when this will occur. If no, please elaborate as to why.
                    Questions From Senator Bingaman
    The NRC testimony references the budget constraints that 
Reclamation has to deal with.
    Question 1. In your view, has Reclamation's mission expanded beyond 
what it can effectively manage given its budget constraints? Is there 
room for making the organization more efficient, thereby increasing its 
capacity for on-the-ground activity that will benefit communities west-
wide?
    As I noted in my opening statement, there has been much frustration 
in New Mexico due to Reclamation's lack of clear standards for project 
planning and cost estimates. Moreover, we continually hear Reclamation 
testimony before this Committee objecting to various projects and 
activities on the grounds that the engineering studies and cost 
estimates provided by the proponents do not meet Reclamation's 
feasibility study standards. The ACEC testimony on Panel 2 provides 
some examples.
    Question 2. Does Reclamation have clear standards for feasibility 
studies? Does it have clear standards for developing cost estimates? 
How is this whole issue being addressed in the Action Plan?
    Concerns have been raised that title transfers or O&M transfers, in 
which the federal nexus is diminished, could result in the loss of 
attention on the restoration of river health in a number of areas.
    Question 3. Is the Action Plan looking at this issue? Is there a 
way to engage in title and O&M transfers while still ensuring that 
environmental issues will continue to be addressed?
    Question 4. Is the Action Plan looking at the role of the National 
Historic Preservation Act in title transfers?
    NRC's testimony recommends that Reclamation formulate comprehensive 
O&M plans to help develop fair and affordable repayment schedules.
    Question 5. Is such a plan in the works? If so, when do you expect 
to finish it? How does Reclamation currently handle payment for large 
rehabilitation projects such as dam safety repairs? Does Reclamation 
anticipate needing new authority in the future to help it address the 
issue of paying for the upkeep of aging infrastructure?
    Please provide a detailed explanation of the process by which 
Reclamation assesses annual O&M charges to its customers.
    Question 6. Is all O&M, including large-scale rehabilitation/repair 
projects, required to be paid back on an annual basis?
    Question 7. How are repairs paid for pursuant to Reclamation's Dam 
Safety Program?
    Trout Unlimited's testimony expresses concern about Reclamation's 
failure to participate in the Sun River Watershed Group's request for 
model runs to assess new reservoir operations that might improve 
watershed health.
    Question 8. Why hasn't Reclamation been willing to model 
alternative reservoir operations?
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                     Statement of Bennett W. Raley
    Mr. Chairman, Members of the Committee, thank you for your gracious 
invitation to testify today. I am particularly grateful that you have 
taken the time to consider the important issue of how the Bureau of 
Reclamation should prepare itself to serve the American people in the 
21st Century. I have attached to my remarks a copy of a July 19, 2005 
letter to the Chairman of the National Academy of Sciences Committee on 
Managing Construction and Infrastructure in the 21st Century Bureau of 
Reclamation, which I would request be submitted for the record along 
with these remarks. This letter recounts some of the history that led 
to the request to the National Academy for a review of the structure 
and focus of Reclamation.
    We have now seen Reclamation's initial response to the Report of 
the National Academy. I believe that Reclamation's ``Managing for 
Excellence'' represents a good faith and serious first step by the 
agency to respond to the challenges identified by the National Academy. 
I think that it is worth noting that this response was directed by 
Deputy Secretary Scarlett and Assistant Secretary Limbaugh. As this 
Committee knows, the fact that a response was directed by senior 
officials in Interior signals that the outcome of this process is 
likely to be reviewed and approved at the most senior levels in the 
Department and will not simply be left to the agency. That is a good 
thing, as change is never easy, and particularly so when the needed 
change threatens long-held institutional biases.
    I also participated in the first meeting between Reclamation and 
some of its stakeholders, which was held on April 27th in Denver. 
Assistant Secretary Limbaugh opened the meeting, and Reclamation was 
represented by a solid team of senior management and staff. Based on 
the comments from the Reclamation participants at this meeting, I 
believe that many in Reclamation understand the seriousness of this 
effort and the need to make meaningful changes in Reclamation's 
institutional structure. Reclamation participants in the meeting were 
open and willing to participate in an iterative discussion of the 
issues. This willingness to engage in a frank discussion allayed to a 
great degree the fear that Reclamation's ``outreach'' would consist of 
staged presentations that avoided the difficult issues. The prospects 
for success will be greatly enhanced if Reclamation continues to engage 
in a meaningful discussion of the issues with stakeholders.
    However, the test of success will be whether Reclamation emerges 
from this process as a more realistic, more efficient, and more 
transparent entity. Reclamation must be more realistic, which means 
that it must recognize that it is time for it to evolve from an 
institution that believes that it must have the capability to do 
everything associated with the planning, design, operation, and 
maintenance of Reclamation Projects. Times have changed, and other 
entities have emerged that are fully capable of taking an enhanced role 
in all aspects of Reclamation Project operations subject to Reclamation 
oversight that is narrowly tailored to protect inherently governmental 
functions and responsibilities. Reclamation must also recognize that 
continued shift towards user-funded construction will require a 
corresponding shift away from Reclamation-dominated decision-making for 
those projects. These changes will require institutional courage, as 
they inherently involve downsizing or eliminating existing offices and 
programs.
    We should soon be able to assess whether Reclamation has the 
institutional courage that will be required if it is to step aside 
where others can do work that it has traditionally done. On April 10, 
2006, Assistant Secretary Limbaugh requested that Reclamation identify 
five examples in each Region of opportunities for Reclamation to create 
new or enhance existing partnerships that could be pursued as a part of 
its Managing for Excellence. A copy of this request is attached to my 
testimony. Reclamation's response to this request will be very telling. 
If the response is timely and includes proposals for partnerships that 
represent a meaningful change from the status quo, it will be a 
meaningful sign that Reclamation is indeed serious about affecting 
change. If, on the other hand, the response is delayed for months, or 
is characterized by either meaningless ``fluff and stuff'' or 
suggestions that are clearly impossible to implement, we will have 
cause to conclude that meaningful and realistic changes must be driven 
from sources external to the agency.
    I can report one positive response to Assistant Secretary 
Limbaugh's request. On April 21, 2006, Acting Commissioner of 
Reclamation William Rinne requested that the Northern Colorado Water 
Conservancy District consider taking over responsibility for several 
power facilities that are a part of the Colorado-Big Thompson Project. 
A copy of this request is attached to my testimony. Reclamation and the 
Northern Colorado Water Conservancy District have had a number of 
meetings to discuss this proposal, and intend to provide a plan for 
consideration of this proposal to the Commissioner and Assistant 
Secretary by July 16, 2006. These discussions have included 
representatives of the Western Area Power Administration and the 
preference power beneficiaries of the Colorado-Big Thompson Project. 
Reclamation is to be commended for its initiative in proposing that the 
Northern District take additional responsibility for C-BT Project 
operations. While it is premature to conclude that these discussions 
will result in the actual transfer, the initial discussions have been 
positive and have not identified any insurmountable barriers. The 
complexity of these discussions is increased by the fact that the 
related issue of customer funding for costs associated with power 
facilities is also being discussed. Assistant Secretary Limbaugh has 
assured the participants that while a change in current appropriations-
based funding is of interest to the Department, a change from the 
current method of funding these costs is not a required element of a 
transfer of additional responsibility for project operations and 
maintenance to project beneficiaries. I have also attached a copy of a 
concept paper that describes the Northern District's perspective on 
this matter.
    If Reclamation's response to Assistant Secretary Limbaugh's April 
10, 2006 request contains concepts like that proposed by Acting 
Commissioner Rinne regarding the Colorado-Big Thompson Project, and if 
Reclamation moves forward to actually implement a number of these 
proposals, it will have demonstrated that it indeed is serious about 
the response to the challenges outlined by the National Academy.
    I also suggested that Reclamation must become more efficient. This 
suggestion is based on the fact that, as the Family Farm Alliance has 
pointed out on a number of occasions, stakeholders view Reclamation's 
design and construction work to be too expensive and too slow. These 
conflicts are likely the result of Reclamation's attempt to preserve 
capabilities that are in excess of what is required for it to fulfill 
its inherently governmental functions. There are too many examples of 
excess staffing of meetings and delays and overruns for the design of 
facilities to discount the problems as isolated incidents. Simply put, 
the single most important reform element that Reclamation could and 
should adopt is to provide that except in cases where the proposed 
facility involves a substantial and risk to public health and safety, 
an entity that provides 50% or greater of the costs has the option to 
have planning, design, procurement, and construction performed by 
qualified non-federal parties subject to Reclamation oversight. A 
policy that allows dissatisfied stakeholders to elect to not use 
Reclamation services for construction services will provide internal 
incentives for Reclamation to be more efficient, as it will, as an 
institution, quickly understand that poor quality service will result 
in a continued decline in its role in construction activities. 
Conversely, cost effective and timely services will likely result in 
more work for Reclamation employees. This simple mechanism will 
probably do more to cure Reclamation's problems at its Denver Center 
than anything else. However, Congress will have to watch carefully or 
it will find that projects funded by scarce federal funds may not 
receive the same level of effort to ensure efficiency.
    As for the third area where Reclamation must change, ``more 
transparency'' means developing a greater capacity to track and report 
costs, whether paid by federal taxpayers or water and power project 
beneficiaries. Reclamation has continued to improve in this area, but 
much remains to be done before it can report in a timely fashion where 
it spends federal and non-federal funds.
    I have previously articulated ``10 Tests for Success'' to be used 
to assess whether Reclamation's ``Managing for Excellence'' will result 
in meaningful change or simply join the long list of studies and 
reports that gather dust in Interior offices and elsewhere:

          1. Reclamation adopts a policy that project beneficiaries who 
        pay for 50% or more of specific work can elect to use District 
        personnel or private consultants for design, procurement, 
        construction, and contract and construction management.
          2. Reclamation uses ``performance based'' instead of ``design 
        based'' standards for construction work.
          3. Standards for construction and O&M used by Reclamation are 
        based on an assessment of the relative risk, consequences of 
        failure, marginal return, and subject to appeal to policy level
          4. Reclamation adopts GPRA Goals that require transfer of O&M 
        for an increasing percentage of Reclamation facilities to 
        project beneficiaries.
          5. Reclamation adopts GPRA Goals that establish minimum 
        percentage of planning, design, procurement, construction and 
        contract management to be performed by project beneficiaries or 
        outsourced.
          6. GPRA Goals incorporated into SES Performance Reviews.
          7. ABC Accounting at Project level available to Project 
        beneficiaries by job classification and specific task--
        ``Transparency''.
          8. Reclamation adopts Scenario 2 or Scenario 3 from NRC 
        Report.
          9. Total Reclamation Workforce is reduced by other than the 
        rate of attrition--``Rightsizing''.
          10. Reductions at the Denver TSC are real and not achieved by 
        reassignments to the Regions or reclassifications of existing 
        job categories.

    I would invite this Committee to modify and improve on this list (I 
do not claim it to be something I thought of, as much of it reflects 
thoughts of others)--it is essentially intended to provoke discussion 
and to create an expectation of real change. I also believe that it is 
important that we recognize what these measures would do and not do. 
These measures are intended to preserve Reclamation's role in 
supervising federally owned water projects--they can be implemented 
without the need for a transfer of title and would not affect, in any 
way, the requirements or application of federal laws such as the 
National Environmental Policy Act and the Endangered Species Act. These 
measures would allow Reclamation to focus scarce human capital 
resources on ``inherently governmental'' activities that cannot and 
should not be delegated to local project beneficiaries. Finally, they 
would not conflict with the need for Reclamation to preserve technical 
capabilities required for circumstances when Reclamation will be the 
lead for construction activities, nor would they conflict with the 
enhancement of Reclamation's construction management activities. 
However, it is only fair that I note that the discussion with 
Reclamation representatives at the outreach session in Denver persuaded 
me that No. 9--downsizing by more than the rate of attrition, is not 
necessarily an appropriate goal. As for the rest, I am waiting for 
Reclamation or others to agree, disagree, or come up with a better 
list.
    In today's fiscal reality, it is in the best interests of everyone 
for Reclamation to devote scarce federal dollars to tasks that others 
cannot perform, and for Reclamation to be able to supervise and provide 
accountability for public funds that are invested in federal projects 
while maximizing the role of other competent entities in the operation, 
maintenance and rehabilitation of the irreplaceable investment in water 
supply infrastructure in the West.
    Reclamation has a long and proud history of excellence. I am very 
proud to have been associated with Reclamation in my career. None of my 
remarks should be construed to be a criticism of Reclamation employees, 
or for that matter of Reclamation itself. The need for change does not 
mean that what came before was wrong or misguided. Sometimes, as is the 
case with Reclamation today, institutions must change to meet the 
evolving needs of the people they serve.
    Thank you for your patience with me today.
                                 ______
                                 
                                             Bennett Raley,
                                     Centennial, CO, July 19, 2005.
Dr. James K. Mitchell, Sc.D., P.E.,
Geotechnical Engineer, Virginia Tech University, Blacksburg, VA.

Re: Organizing to Manage Construction and Infrastructure in the 21st 
Century Bureau of Reclamation, Project Identification Number: BICE-J-
04-01-A

    Dear Dr. Mitchell: I was the Assistant Secretary for Water and 
Science, Department of the Interior from July 17, 2001 to December 3, 
2004. I thought it might be of some interest if I relayed to the 
Committee the history of and reasons for the request for a Review of 
Reclamation by the National Research Council, as well as some 
observations on the issue before the Committee. Of course, I no longer 
speak for the Department and the thoughts expressed in this letter are 
mine alone.
    By way of introduction, I have been around Reclamation and western 
water issues for 38 years, almost 25 of which have been spent working 
as a lawyer for water users and water districts with an ongoing 
relationship with Reclamation. I have also worked on United States 
Senate staff on two occasions, and have served as a Special Assistant 
Attorney General for a western state in connection with matters that 
are closely related to federal Reclamation law and projects.
    In summary, I agree with a letter recently sent by the Family Farm 
Alliance to United States Senator Pete Domenici that stated that ``the 
Bureau of Reclamation must focus on fulfilling its core mission of 
delivering water and power in accordance with applicable contracts, 
water rights, interstate compacts, and other requirements of state and 
federal law. Essential components of the core mission are: 1) providing 
for the operation and maintenance of existing facilities that are 
likely to remain in federal ownership; and 2) providing for the 
rehabilitation and replacement of infrastructure that is likely to 
remain in federal ownership. Inherent in this definition of core 
mission is the need to prioritize the expenditure of federal funds and 
other resources of the Department of the Interior.'' It is critically 
important that Reclamation position itself to achieve this goal in the 
most cost-effective manner possible.
    The world has changed since 1902, and many water users are no 
longer dependant on the federal government to finance and construct 
complex water supply projects or facilities. Were it not for the 
unfortunate fact that the federal government has retained title to far 
more Projects and facilities than was originally envisioned by the 
Reclamation Act, water users would proceed independently with the 
planning, design, construction, and operation of many facilities that 
replace, modernize, and enhance existing Projects. If Reclamation is to 
achieve the goals outlined by the Family Farm Alliance, it must accept 
the reality that the Reclamation role in construction projects that are 
primarily funded by water users should be limited to the development of 
design standards, supervision of work to ensure that the design 
standards are met, and accountability for public funds expended for 
these projects. Reclamation must also recognize that water districts 
and the private sector have engineering and other capabilities that are 
equal to or exceed those remaining within the agency and which can 
perform project design, contracting, construction, and related 
functions in a more cost efficient manner.
                               background
    Let me start with by observing that the request did not derive from 
a desire to have the Committee engage in a wide-ranging discussion of 
what the mission of the Bureau of Reclamation should be in coming 
decades. The Department had defined the ``core mission'' of Reclamation 
as ``delivering water and power'' in accordance with legal requirements 
of state and federal law. That definition, when combined with the 
strategic planning and budget processes of the Department, provided 
Reclamation with direction from the Administration regarding its 
mission. This definition of ``core mission'' was intentionally 
pragmatic and limited in scope in order to avoid ``mission creep'' and 
to provide a basis for a disciplined focus and prioritization of 
Reclamation resources and efforts. This definition of core mission was 
further explained internally and externally by observing that the 
existing and foreseeable budgets of Reclamation would not likely be 
adequate to provide for the operation, maintenance and replacement of 
existing facilities, meeting the mandatory requirements of Biological 
Opinions issued under the federal Endangered Species Act, and funding 
measures security measures required by the post-11 September 
environment. The challenge to those who wanted to spend money on other 
aspects of the Reclamation Program not included within core mission was 
to justify taking funds away from these priorities for another 
objective.
    In addition, Secretary Norton's Water 2025 Initiative defined the 
role of Reclamation from a substantive or philosophical perspective. 
See http://www.doi.gov/water2025/. Certain aspects of Water 2025 may be 
relevant to your Review. Water 2025 intentionally avoided the classic 
approach of a ``sweeping study'' combined with a ``grand 
pronouncement'' of a government program to solve western water 
conflicts. Water 2025 instead focused on the demographic, hydrographic, 
and fiscal realities that will shape western water policy for coming 
decades, and identified pragmatic ``tools'' that can be implemented to 
minimize or avoid water supply related crises that will otherwise occur 
in the next 25 years. These tools--water conservation and increased 
efficiency, markets, collaboration (specifically long-term biological 
opinions under the ESA), technology (specifically ocean and brackish 
groundwater desalinization), and system optimization were selected 
because of their capacity to be implemented and make progress in an 
environment characterized by very limited federal funds and an absence 
of public and political support for the construction of new 
infrastructure that would increase the available water supply on a 
programmatic or large scale basis.
    It may be of interest to note that the success of Water 2025 does 
not depend on the maintenance or expansion of the Reclamation Program 
at or beyond current levels. This assumption was a reflection of the 
reality that the Reclamation budget is unlikely see a substantial and 
sustained increase regardless of which party controls the legislative 
or executive branches of the federal government.
    I have no doubt that the Committee would be capable of producing a 
thoughtful and provoking analysis of what the Reclamation mission 
should be in the future. However, unless that vision is accompanied by 
the implementation of a parallel political strategy, it is likely that 
such an effort will join other similar attempts over the years as they 
gather dust on agency shelves. In my view, the Committee will provide a 
great service if it instead focuses its talents on the more mundane but 
critically important issue of assisting Reclamation in reorienting its 
program to deal with the fact that fiscal and political realities 
indicate that its role in the 21st century will not be a reprise of its 
role in the 20 century.
    The request for the Review evolved from the consideration of a 
number of factors. First, President Bush has defined Presidential 
Management Initiatives that are to be implemented by all federal 
agencies. See http//www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf. Two 
PMI's, Human Capital Management and Competitive Sourcing were 
particularly relevant. The focus on Human Capital Management was not 
particularly threatening to Reclamation, as it recognized the 
challenges associated with its aging work force that was developed to 
meet the demands of a prior era and the difficulty of recruiting for an 
agency with a static mission. However, as was likely the case for all 
federal agencies, the PMI on Competitive Sourcing was viewed as a 
threat to existing personnel and programs. Second, senior Department 
officials had requested that all bureaus identify existing programs 
that could be cut or eliminated. Not surprisingly, this request was 
viewed with great suspicion, and the response was at best slow and 
begrudging. This attitude was captured by the response to a question 
regarding what existing programs and capability were necessary to 
fulfill Reclamation's ``core mission''--the reply was that ``it is all 
core mission.'' Likewise, the instinctive response to budget pressures 
was to preserve all programs and capabilities by allocating whatever 
shortfall was at issue across all programs in order to avoid ``zeroing 
out'' lesser priorities. Third, a review of the reasons for 
Reclamation's discovery that the costs of the Animas-La Plata Project 
were approximately 50% over prior estimates concluded that one of the 
contributing factors was that Reclamation did not have an effective 
``construction management'' program in place. This failure was not 
solely the fault of Reclamation, as senior management in Interior 
(myself included) did not focus on the fact that 1994-5 ``sunsetting'' 
of the Reclamation Instructions was not replaced by a comparable system 
that provided for a chain of command, responsibility, and authority 
over construction management activities. Members of Congress who were 
very unhappy with the Animas-la Plata experience were made aware of 
this Review and there is likely some expectation that it will address 
some of the issues presented by that experience. I assume that you have 
been fully briefed on this issue, its potential relevance to your work, 
and expectations that may exist in Congress in this regard.
    A reflection on these factors resulted in several intermediate-
level conclusions--it was unreasonable to expect Reclamation (or any 
other agency, for that matter) to provide a coldly analytical 
assessment of what aspects of its existing program were not essential 
to fulfilling a limited core mission (in part because of the 
unavoidable strategic and tactical ``gaming'' aspects of the 
development of the budget inside Interior, inside the Administration, 
and in Congress); it was unreasonable to expect Reclamation to provide 
a dispassionate assessment of what aspects of its core mission must be 
performed by Reclamation personnel and what aspects of its core mission 
could be performed by others; and the private sector was likewise not 
particularly well suited to an objective review of these issues. The 
National Research Council Board on Infrastructure and the Constructed 
Environment was then identified as an organization that could provide 
this type of review and analysis because of its perceived ability to 
act independent of any self-interest and provide a disciplined response 
to the requested Project Scope.
                             project scope
    The Office of the Assistant Secretary for Water and Science drafted 
the Project Scope\1\ to enable the Committee to focus its efforts on 
the question of what capability Reclamation needs in order to fulfill 
its core mission. The inclusion in the Project Scope of an explanation 
of the ``essential components'' of Reclamation's core mission was an 
attempt to provide a tiered hierarchy of needs that the Reclamation 
Program must meet under any foreseeable combination of political and 
fiscal scenarios. I use the term ``Reclamation Program'' here as an 
intentionally broad term that can encompass activities performed by 
Reclamation employees as well as activities performed by others in 
connection with Reclamation Projects or activities.
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    \1\ See http://www4.nas.edu/webcr.nsf/
5c50571a75df494485256a95007a091e/
09caed00ca8dce0b85256f8d00601302?OpenDocument&Highlight=O,reclamation.
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    The three tiers of this hierarchy reflect the base case for the 
Reclamation Program, starting with the definable and unavoidable 
reality of operating and maintaining existing projects, moving to the 
foreseeable, but less predictable need to rebuild existing 
infrastructure, and concluding with the likely, but even less 
predicable need to provide for new project construction. The philosophy 
reflected in this hierarchy is that the first priority of the 
Reclamation Program should be to maintain the capability required by 
the essential components or base case for the future of the Reclamation 
Program, and that the development and maintenance of additional 
capabilities should clearly be subordinated to the need to protect 
priority capabilities. Implicit in this formulation of Project Scope is 
a concern that an attempt by Reclamation to develop and maintain 
capabilities beyond those required for the base case will, in a limited 
budget environment, put at risk Reclamation's ability to fulfill its 
core mission in an effective manner.
               issues for consideration by the committee
Reclamation is unique in that it has a greater degree of ``user 
        funding'' for its programs than do other federal agencies.
    One might assume that everything that Reclamation currently does is 
in fact essential for it to perform its core mission. However, I am of 
the opinion that there is great risk to Reclamation if this position 
prevails.
    As the Committee has already heard, Reclamation is somewhat unique 
among federal agencies because much of its work is funded directly or 
indirectly by its water and power customers. Some of this work is 
funded directly by the users, and Congress funds some of it subject to 
the requirement that water and power users repay the federal treasury 
over time. Consequently, there is a far greater degree of sensitivity 
to and scrutiny of Reclamation staffing decisions than exists for other 
federal agencies. This level of sensitivity and scrutiny is likely to 
intensify in coming years as the relative proportion of federal dollars 
invested in water supply infrastructure decreases and results in a 
correspondingly greater burden on already scarce non-federal funding 
sources. This trend will mean that there will be a greater proportion 
of direct funding by users and a relative decrease in Congressional 
funding subject to repayment obligations. This trend is of great 
importance to the matter before the Committee, as it is one thing for 
an agency to justify the maintenance of human capital or other program 
resources when it is the dominant fiscal force or when the costs of 
doing so are born by taxpayers, and quite another thing to attempt to 
preserve or build a program or when the costs are paid by specific 
project proponents who do not want to pay for the maintenance of 
additional capacity.
    Any attempt by Reclamation to maintain internal capability beyond 
that required by the base case and for which the water and power users 
are willing to pay is likely to at a minimum create political and other 
tensions between Reclamation and its constituency, and may result in 
direct intervention by Congress on behalf of those who are being asked 
to pay for the additional capacity. Moreover, attempts to shield this 
capacity from these pressures by funding the additional capacity 
through non-reimbursable sources are not likely to succeed in the long 
term because of the operation of administration and congressional 
funding caps and the inability of Reclamation to prevent excess 
capacity from being billed to reimbursable accounts. Concerns regarding 
Reclamation's ability to provide engineering and related services in an 
effective manner are surfacing with increasing frequency with both 
water users and Congress. There are several recent cases of attempts by 
water users to seek legislation that would mandate a role for qualified 
districts and private consultants, and a senior Senator recently 
circulated of legislation that would fund projects through the 
Reclamation budget but require that Reclamation contract with the Corps 
of Engineers to do the work.
    On numerous occasions over the past 6 months I have had the 
opportunity to talk to water district representatives about their 
perceptions of the broad issue of Reclamation costs and overhead. 
Several unmistakable patterns characterize these conversations:

   With a few exceptions, water managers that work with 
        Reclamation like and respect their Area and Regional Offices. I 
        also have a high personal regard for all of the Regional 
        Directors, and while I have not met or worked with all of the 
        Area Offices, most of them are very capable. In addition, I 
        grew to appreciate the talents and hard work of a large number 
        of Reclamation employees throughout the agency, and appreciate 
        my having the opportunity to serve with them.
   Water users complain bitterly about virtually all aspects of 
        the work performed by the Denver Technical Services Center. To 
        quote a recent conversation ``as soon as Denver got involved 
        costs skyrocketed and the work ground to a halt.'' I want to 
        make it clear that in my personal opinion this problem is not 
        Mike Roluti's fault, nor am I directing criticism at individual 
        employees within the Denver Technical Services Center. The 
        Denver Center is an institutional problem that is beyond the 
        capacity of the direct supervisor or individual employees to 
        fix.
   Water users believe that Reclamation has lost substantial 
        components of the engineering and other construction-related 
        expertise that it once had as an inevitable result of 
        retirements, reductions in funding and the dearth of new 
        federal Reclamation Projects, and the emergence of a cadre of 
        highly qualified engineering personnel within water user 
        districts and the private consulting sector. However, water 
        users are unwilling to pay for or otherwise support the 
        reacquisition of this capacity within Reclamation because they 
        believe that the strictures and limitations inherent in the use 
        of federal agencies will mean that design, procurement, and 
        construction functions can almost always be performed cheaper 
        and more efficiently by districts or private consultants under 
        appropriate Reclamation supervision.

    Although water users complain bitterly about the cost of and 
services provided by the Technical Services Center, most are unwilling 
to complain publicly because of a fear of retaliation by Reclamation, 
and a concern that their Area Offices and Regional Office will feel 
compelled to defend the Denver Center. However, both the number and 
substance of these discussions lead me to conclude that the 
dissatisfaction with the Denver Technical Services Center is widespread 
and substantive in nature. It is also worth noting that neither I nor 
others who have been exploring this issue have found water users that 
thought that the Denver Center was great and who did not want the 
option to do the work themselves or via qualified consultants. That 
does not mean that there is not, somewhere, a District that is very 
happy with the Technical Services Center or which does not want to have 
the option to use non-federal capacity--I just have not found them.
    While I do not have hard data to support this conclusion, I believe 
that there is a particularly pernicious dynamic at work that almost 
guarantees that the Technical Services Center will lurch from one 
conflict to another. Simply put, the official line is that the TSC is 
``self funded.'' In order to preserve the appearance of a need for the 
capacity at the TSC, Reclamation as an institution has a strong 
incentive to force work to TSC in order to maintain high utilization 
rates. Several recent examples of Reclamation's attempt to force water 
users to use TSC provide a basis for this conclusion. However, because 
it also appears that there is not enough work to really keep all of 
this capacity working in an efficient manner, I fear that unused 
capacity tends to be assigned or drift to whatever project can bear the 
costs.\2\ When water users become aware of excess staffing or 
unacceptably high project cost estimates, Reclamation responds by 
``bargaining down'' the cost of the work under scrutiny, at times by 
significant margins. Reclamation's routine willingness to reduce the 
cost of most projects that come under scrutiny provides strong evidence 
of a practice of overstaffing or over-estimating for projects in 
general. Stated another way, since Reclamation is not a profit-making 
entity, it cannot be achieving these reductions by taking a lesser 
profit, and must be reducing its costs by either eliminating excess 
staffing or having other projects subsidize the cost of the project 
under scrutiny.
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    \2\ It may well be that the problem of overstaffing is the 
collective result of well-intentioned TSC employees who want to 
contribute, want to be productive, and as a consequence show up to work 
on whatever projects are at hand. This dynamic can explain numerous 
examples of TSC staffing or involvement in a project that would not be 
accepted in the private sector because of the need to be price 
competitive, make a profit, and satisfy cost conscious clients.
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    I do believe that the TSC has been able to manage the costs of 
specific projects when under scrutiny and significant pressure. 
However, I am fearful that the result is that the unutilized capacity 
shifts to a project not under scrutiny and the problem is replicated 
elsewhere. Thus, a de facto policy of ``overstaff until caught because 
we have to show full utilization'' means that one projects' gain in 
cost control results in the shift of costs to less vigilant projects 
until they too come under scrutiny. The consequence of this destructive 
cycle is a loss of confidence in Reclamation.
    One aspect of the institutional problems associated with the TSC is 
that it appears to operate outside of the normal Reclamation chain of 
command. Area Managers and Regional Directors are responsible to water 
users for costs associated with their respective offices. However, the 
TSC reports to the Commissioner outside of the Area Office/Regional 
Director structure. It appears that Area Offices and Regional Directors 
do not directly control staffing and other decisions that affect costs 
associated with work performed by the TSC on Projects that are 
otherwise within their jurisdiction. This mismatch between 
responsibilities and control over work may well put an Area Manager, 
who must deal with water users on a daily basis, in the impossible 
position of attempting to control costs in a parallel component of 
Reclamation that is perceived to be directly responsible to the 
Commissioner.
    I do not believe that it is in Reclamation's long-term interests to 
continue a political battle with its constituents in order to preserve 
or enhance capacity because the battle will damage Reclamations' 
credibility with water users and with Congress.
The critical issue before this Committee is to identify which 
        capabilities must Reclamation maintain within the agency and 
        which capabilities can be provided by qualified non-Reclamation 
        entities.
    The importance of defining the capabilities that should be 
maintained within the Reclamation Program turns on the answer to the 
question-of what capabilities must be performed by Reclamation and 
which can be performed by qualified non-Reclamation entities. If 
Reclamation maximizes the use of non-Reclamation capabilities, it can 
add or eliminate capabilities using other federal agencies such as the 
Corps of Engineers or qualified non-federal contractors as needed. In 
this scenario the capacities of the Reclamation Program can fluctuate 
with actual demands for which appropriate funding is provided. Capacity 
that is maintained or added because and only for so long as someone 
wants it and will pay for it, whether that person be Congress or a 
water user, is unlikely to be controversial. If, however, Reclamation 
attempts to maintain internal capacity beyond the minimum required to 
meet anticipated needs, the question becomes far more important, as any 
over-estimate of the capacity required will be difficult to correct and 
become either a source of conflict with water users or a drain on 
available non-reimbursable fiscal resources.
    I strongly believe that Reclamation should adopt the approach of 
tailoring its personnel needs and internal program components to 
maximize the use of non-Reclamation capacity. This conclusion is not 
based on a belief that Reclamation personnel are somehow less qualified 
than the alternatives. This conclusion is directly based on the unique 
nature of Reclamation as a user-funded agency. This reality makes it 
imperative that Reclamation be able to tailor its capacity to user 
demands and available funds far more quickly than is required for other 
federal agencies.
    At a programmatic level, I would suggest that there are two broad 
areas and one specific program that define the appropriate role for 
Reclamation employees, and that activities outside of these areas 
should be presumed to be appropriate to be performed by non-Reclamation 
entities. The two broad areas that should be performed by Reclamation 
employees are management of Reclamation Projects and construction 
management, and the specific Program is the Safety of Dams Program. 
This conclusion is consistent with conclusions reached in Outsourcing 
Management Functions for the Acquisition of Federal Facilities (2000), 
Commission on Engineering and Technical Systems:

          The committee reviewed federal legislation and policies 
        related to inherently governmental functions--a critical 
        determinant of which activities federal agencies can and cannot 
        outsource. An inherently governmental function is defined as 
        one that is so intimately related to the public interest that 
        it must be performed by government employees. An activity not 
        inherently governmental is defined as commercial. The committee 
        concluded that, although design and construction activities are 
        commercial and may be outsourced, management functions cannot 
        be clearly categorized.

    http://www.nap.edu/books/0309072670/htmi/3.html. (Emphasis added). 
While the scope and focus of the inquiry of the Commission was not 
identical to that of this Committee, the context was similar enough to 
make its conclusion relevant here.
    Management of Reclamation Projects. As is recognized by the above 
quote, within the broad category of management of Reclamation Projects 
there is a range of circumstances that should govern the level of 
management that is required to be performed by Reclamation personnel. 
For example, some water Districts have financial, managerial, 
engineering, and other capabilities that rival that of Reclamation (in 
some cases because the District personnel were previously Reclamation 
personnel). Other Reclamation Projects may require a far more extensive 
Reclamation presence because of conflicts relating to Project 
operations, sheer Project complexity, or a lack of capacity within the 
local District.
    Consequently, the capacity required for Project ``management'' will 
vary widely between Reclamation Projects. This variance is likely 
already captured to some degree and reflected by staffing levels within 
the existing Regional and Area Offices. The Denver TSC does not and 
should not perform ``management'' functions, as this would be both 
inefficient and inconsistent with Reclamation's ``line authority'' 
approach. Similar conclusions can be reached about other aspects of 
Reclamation's Denver Service Center. While well intended and the home 
to many fine Reclamation employees, the Denver Service Center does not 
fit well within the strong ``line authority'' structure of Reclamation. 
Simply put, the chain of command for Reclamation runs from the 
Commissioner to the Regional Directors to the Area Offices. 
Notwithstanding this clear line of authority that is followed in theory 
and practice, the Denver Service Center is staffed by an inordinate 
number of Senior Executive Service employees who have, over time, had a 
very difficult time finding a comfortable ``fit'' or role within the 
Reclamation management structure.
    A review of the list of ``Programs, Initiatives, and Activities'' 
that are largely carried out from the Denver Service Center includes a 
number of functions that may well fall outside of a careful definition 
of ``management'' or an ``inherently governmental activity associated 
with Reclamation, including; the Building Seismic Safety Program, 
aspects of the Cultural Resources Program, DataWeb, the Fisheries 
Applications Research Group, substantial aspects of the Geotechnical 
Engineering Groups, the History Program, aspects of the Hydroelectric 
Research and Technical Services Program, aspects of Infrastructure 
Services, substantial aspects of the International Affairs Office, the 
entire JobCorps Program (regardless of whether Reclamation is fully 
reimbursed for its costs), the Materials Engineering and Research Lab, 
all aspects of the Museum Property Program not mandated by federal law, 
the Remote Sensing and GIS Program, the Science and Technology Program, 
aspects of the River Systems and Meteorology Group, aspects of the 
Research and Natural Resources Program, the Science and Technology 
Program, aspects of the Sedimentation and River Hydraulics Group, the 
entire Technical Services Program except for the Dam Safety Group, 
aspects of the Water Resources Research Laboratory, and aspects of the 
Water Resource Services Program. See, http://www.usbr.gov/main/
programs.
    I realize that there are overlaps and other inconsistencies within 
this list, but it is what Reclamation uses to describe its Programs. 
Much of this work is important, some of it is required by statute, many 
of the people involved are very, very good, and some of them are (or at 
least were) personal friends. However, the value of this work and the 
people that perform the work does not make these programs essential 
management functions or an ``inherently governmental activity'', nor 
does existence of a statutory requirement require that the work be 
performed by, as opposed to supervised by, Reclamation employees. Other 
federal agencies, the private sector, and universities can also perform 
much of this work. I would be very surprised if a careful and objective 
review of the existing capacity of the Denver Service Center did not 
conclude that a minimum of 30% was either not required to fulfill 
Reclamation's core mission or could be performed on an as-needed basis 
by non-Reclamation entities.
    Construction Management. The Animas-la Plata experience highlighted 
the consequences of the decision 10 years ago to sunset the Reclamation 
Handbook without creating a replacement structure for the management of 
construction projects. Reclamation will be responsible to the public, 
to Congress, and to water users for a wide array of construction 
activities in the future. These activities will include both the 
replacement of the infrastructure completed over the past century as 
well as the construction of new components and facilities. While there 
is no inherent reason why Reclamation must perform research, design, 
contracting, and construction work, it must be able to 1) account for 
all funds associated with these projects and ensure that they are spent 
for authorized purposes, and 2) ensure that the work is performed in a 
manner that meets applicable engineering or other standards. Simply 
put, I believe that under any foreseeable future scenario Reclamation 
will need a strong construction management program that includes both 
fiscal and engineering components. However, these components should be 
deployed to set standards in advance, monitor compliance, and report on 
results. Performance of these functions does not, absent a statutory 
requirement, mean that Reclamation employees must design projects, 
serve as the ``general contractor,'' perform research, or serve as the 
day-to-day construction manager. Qualified water districts and the 
private sector can perform each of these functions under Reclamation 
supervision. I also recognize that in some unique cases, like the 
Animas-la Plata Project, the number of participating entities and 
tribal trust aspects of the Project make it appropriate for Reclamation 
to serve in a more expansive role than would otherwise be the case. 
However, these unique cases will not characterize the role of 
Reclamation in the future.
    I have heard on occasion that the existence of dam safety or other 
aspects of particular projects require that Reclamation personnel 
perform all of the design work. This assertion is not persuasive, as 
there is no rational reason why the fact that a professional engineer 
is employed or not employed by Reclamation is relevant to the exercise 
of his or her professional engineering judgment. Reclamation itself 
hires outside consultants to assist it in dam safety peer reviews, and 
some of the outside consultants were trained by Reclamation. The 
quality of the engineer is determined by education, intelligence, and 
experience, not employment status. This position inappropriately 
confuses the appropriate role of establishing appropriate performance 
or other standards to meet minimum engineering requirements with the 
actual design and construction of the facility. To be blunt, the 
assertion that Reclamation is uniquely qualified to design structures 
that have public safety implications is not credible and does a great 
disservice to the many highly qualified engineers that work elsewhere 
in the profession.
    I believe that it is well accepted that Reclamation should be 
responsible for establishing appropriate design standards for work on 
federally owned structures. However, I would suggest that it would 
helpful for Committee to make recommendations regarding the manner in 
which these design standards are established, and a process for 
resolving disagreements between Reclamation engineers and qualified 
non-Reclamation engineers regarding the appropriateness of particular 
standards. In particular, I and others have at times perceived that 
Reclamation reflexively ``over-designs'' project elements based on an 
institutional philosophy that assumes that facilities should be 
designed using the most conservative design standards. While this 
approach may be appropriate for federally funded work and for work with 
material public safety issues, it is not necessarily appropriate for 
work funded by water users that does not present serious public safety 
risks. These issues can quickly move beyond engineering criteria to 
fundamental policy decisions that implicate the balancing of risks in 
an environment where financial resources are limited. One suggestion 
would be to provide for a quick ``mini-peer review'' involving outside 
consultants that project sponsors could utilize for disputes. However, 
the success of this approach would require Reclamation to welcome such 
a review instead of viewing it as a personal or professional attack.
    The Safety of Dams Program. While an intellectual case can be made 
for considering the Safety of Dams Program to be just another 
engineering exercise, I believe that the unique nature of this program 
justifies the maintenance of the required expertise within Reclamation. 
Public safety is directly affected by this Program, and unlike other 
aspects of the Reclamation Program, there is a need for Program-wide 
uniformity. This Program also has significant national security 
implications. However, the Horsetooth Reservoir case study previously 
submitted to the Committee by Mike Applegate reveals that while the 
Safety of Dams Program may be technically strong, it may also have 
serious management flaws. Simply put, the fact that even after a 
roughly 50% reduction in costs as a result of Reclamation's Value 
Engineering Program, the non-construction costs were equal to 
approximately 70% of the construction costs. This is far above any 
standard ratio in the industry. Moreover, the unexplained reduction of 
project costs from $77 million to $56 million creates credibility 
issues for the SOD Program. Finally, the inability of Reclamation to 
provide a final accounting for project costs 18 months after completion 
of the project borders is deeply troubling. While my trust in 
Reclamation is substantial, any government program that cannot or will 
not provide a public accounting for how it spent $56 million of public 
funds is one bad actor away from a disaster. Reclamation can and should 
provide greater transparency and accountability for its expenditures of 
public funds.
    Thank you for considering these comments.
            Sincerely yours,
                                          Bennett W. Raley.



      
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