    [Senate Hearing 111-467]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 111-467

                     ACHIEVING THE PRESIDENT'S OBJECTIVES:
                       NEW OMB GUIDANCE TO COMBAT WASTE,
                      INEFFICIENCY, AND MISUSE IN FEDERAL
                             GOVERNMENT CONTRACTING

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

                                    HEARING

                                   before the

                  AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                                     of the

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 28, 2009

                                   __________

           Available via http://www.gpoaccess.gov/congress/index.html

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

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    53-851 PDF                WASHINGTON : 2010
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    20402-0001

            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   JOSEPH I. LIEBERMAN, Connecticut, Chairman
    CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
    DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
    THOMAS R. CARPER, Delaware           JOHN McCAIN, Arizona
    MARK PRYOR, Arkansas                 GEORGE V. VOINOVICH, Ohio
    MARY L. LANDRIEU, Louisiana          JOHN ENSIGN, Nevada
    CLAIRE McCASKILL, Missouri           LINDSEY GRAHAM, South Carolina
    JON TESTER, Montana                  ROBERT F. BENNETT, Utah
    ROLAND W. BURRIS, Illinois
    PAUL G. KIRK, JR., Massachusetts

                      Michael L. Alexander, Staff Director
         Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                      Trina Driessnack Tyrer, Chief Clerk

                  AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                           CLAIRE McCASKILL, Chairman
    CARL LEVIN, Michigan                 ROBERT F. BENNETT, Utah
    THOMAS R. CARPER, Delaware           SUSAN M. COLLINS, Maine
    MARK L. PRYOR, Arkansas              TOM COBURN, Oklahoma
    JON TESTER, Montana                  JOHN McCAIN, Arizona
    PAUL G. KIRK, JR., Massachusetts     LINDSEY GRAHAM, South Carolina
                         Margaret Daum, Staff Director
                    Molly Wilkinson, Minority Staff Director
                           Kelsey Stroud, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator McCaskill............................................     1
        Senator Bennett..............................................     3
        Senator Coburn...............................................    13
        Senator Collins..............................................    16
    Prepared statements:
        Senator McCaskill............................................    23
        Senator Collins..............................................    25
        Senator Bennett..............................................    28
        Senator Kirk.................................................    30

                                    WITNESS
                          Wednesday, October 28, 2009

    Jeffrey D. Zients, Deputy Director for Management and Chief
      Performance Officer, U.S. Office of Management and Budget:
        Testimony....................................................     5
        Prepared statement...........................................    31
    Post-hearing Questions for the Record from:
        Mr. Zients...................................................    42

    ACHIEVING THE PRESIDENT'S OBJECTIVES: NEW OMB GUIDANCE TO COMBAT WASTE,
           INEFFICIENCY, AND MISUSE IN FEDERAL GOVERNMENT CONTRACTING

                                  ----------

                          WEDNESDAY, OCTOBER 28, 2009

                                       U.S. Senate,
              Ad Hoc Subcommittee on Contracting Oversight,
                        of the Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:37 p.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Claire
    McCaskill, Chairman of the Subcommittee, presiding.
        Present: Senators McCaskill, Bennett, Collins, and Coburn.

                 OPENING STATEMENT OF SENATOR MCCASKILL

        Senator McCaskill. Thank you for being here today, and I
    appreciate the other Committee Members who are here,
    particularly Ranking Member Senator Bennett, and it is always
    good to see Senator Coburn.
        The purpose of today's hearing is to examine the future of
    government contracting in this Administration. On March 4 of
    this year, President Obama announced that he was going to try
    to reform the way government does business. The President said,
    ``We will stop outsourcing services that should be performed by
    the government, open up the contracting process to small
    businesses. We will end unnecessary no-bid and cost-plus
    contracts that run up a bill that is paid for by the American
    people. And we will strengthen oversight to maximize
    transparency and accountability. Altogether, these reforms can
    save the American people up to $40 billion each year.''
        The President directed the Office of Management and Budget
    and Federal agencies to work together to develop new guidelines
    to achieve these goals. Yesterday, OMB released guidance
    instructing agencies to bolster competition and improve the use
    of high-risk contract types like cost-plus and time and
    materials contracts. OMB also released guidance relating to the
    critical need to strengthen the acquisition workforce.
        Let me say, I commend the President for his concern about
    contracting. I think it is well founded. And I want to
    congratulate your staff for all of the hard work they have done
    in preparing for this hearing today.
        The guidance that was issued yesterday follows three
    previous memoranda issued by OMB in July of this year. First,
    OMB directed agencies to make a 7 percent reduction in overall
    contract spending by 2011 and a 10 percent reduction in dollars
    spent on non-competitive or cost-plus contracts by 2010.
        Second, OMB told agencies to improve the management of
    multi-sector workforce, the blend of government employees and
    contractors who work for government agencies.
        And finally, OMB told agencies how to improve how agencies
    collect, report, and use information about how contractors have
    performed on Federal contracts. Taken together, these actions
    are expected to amount to approximately $40 billion in savings
    per year.
        At today's hearing, we are going to assess OMB's new
    guidelines to find out whether they will meet the President's
    bold vision for reform.
        I was proud to be standing with President Obama during his
    announcement in March and was encouraged by his commitment to
    eliminate the waste, fraud, and abuse in government contracts.
    Today, however, I have serious concerns. There are parts of
    OMB's guidance that make a lot of sense. OMB has called for
    agencies to develop long-term plans for the acquisition
    workforce. They have also directed agencies to develop
    procedures to collect and report past performance information
    and to create pilot programs to improve their management of
    contractor employees.
        But also, there are some significant concerns. As we will
    hear today, OMB has tasked government agencies with developing
    their own plans for improving contracting, yet OMB has provided
    very little concrete guidance as to how to achieve these
    necessary reforms.
        For example, OMB's guidance on increasing competition gives
    agencies guidelines with questions for agencies to address and
    a set of considerations for agencies to use in answering those
    questions. I accept that agencies have different needs and
    obligations, but it is important that OMB's guidance provide a
    clear way forward for these agencies.
        Another serious problem may be the lack of accountability.
    OMB is committed to setting a few targets and reviewing
    agencies' progress towards these targets. But the guidance sets
    out only a handful of specific dates and deliverables. I think
    dates and deliverables are very important for accountability.
    And even the dates and deliverables that are in the guidance
    are vague. OMB has not said how it will review progress for
    agencies or what metrics and benchmarks the agency will use.
        A third problem is OMB's failure to address other key
    problems with government contracting. For example, OMB's
    guidance does not address the need for improved planning for
    government contracts and OMB has announced that its guidance on
    service contracts and inherently governmental functions has
    been delayed indefinitely.
        I am also concerned that the lack of an Administrator for
    the Office of Federal Procurement Policy (OFPP) was not
    announced until this month, several days after OMB's
    contracting guidance was already supposed to be completed. I
    once again commend the President on his nominee and look
    forward to his confirmation hearing next month. However, in the
    absence of a confirmed OFPP Administrator, that may be an
    additional obstacle in the path of the President's plan for
    aggressive contracting reform.
        Finally, OMB's lengthy delay in meeting the President's
    schedule for issuing this guidance is not a good omen for the
    future of contracting oversight. Government contracting is an
    enormous challenge. To achieve lasting reforms, we need
    definite goals and detailed plans on how to meet those goals.
    We need to be able to measure progress and hold agencies
    accountable every step of the way. And we need very strong
    leadership from OMB. Otherwise, government contracting is just
    going to be business as usual.
        I look forward to the testimony of Jeffrey Zients, OMB's
    Deputy Director for Management and Chief Performance Officer
    and thank him for being here today.
        Senator Bennett, do you have any statement you would like
    to make?

                  OPENING STATEMENT OF SENATOR BENNETT

        Senator Bennett. Thank you very much, Madam Chairman. I
    have a formal statement that I would like submitted for the
    record, but I would like to make a few more informal kinds of
    observations.
        I am delighted, Mr. Zients, that you come out of the
    private sector. You worked with Bain and Company, which means
    you are a Mitt Romney guy at some point, even though you are
    not working for him as President of the United States, as some
    of us hoped might be the case somewhere along the way.
        Senator McCaskill. We will have to agree to disagree.
    [Laughter.]
        Senator Bennett. I understand that, Madam Chairman.
        To put it on the lowest possible personal level, when I
    served in the Army, I served on KP like every private E-1 did
    at one point or another, peeling potatoes and helping prepare
    meals and so on. When I go back to the Army now, I discover
    that all of that is being done by contractors and it strikes me
    as a really good idea. We urge people to join the military. We
    train them in military skills. And we should not dilute that
    training and their time in the military by having them peel
    potatoes when we can hire somebody else to do it, probably more
    cheaply and more efficiently than the military.
        So the sergeant, the specialist, and the airman is focusing
    on the warfighting or the training connected with the
    warfighting mission and somebody else is peeling the potatoes.
    It is a good deal for the military. It is a good deal for the
    country. And it is a good deal for the contractor.
        The world from which you and I both came prior to entering
    government, we would call that outsourcing instead of
    contracting, where people say, I am no longer going to have my
    employees sweep out the factory at the end of the day. I am
    going to hire a cleaning service to do it. And it maximizes the
    productivity you get out of the people performing the mission,
    and if you make the right buy, it is cheaper.
        Now, I put it in that folksy kind of way because, in my
    view, that is basically your mission, to maximize the
    productivity of the Federal worker by releasing him and her
    from duties that can be outsourced more cheaply. But the
    challenge is to see that you make the right deal, when you do
    the outsourcing, you hire the right people, and you monitor how
    well they are doing.
        And to repeat a theme I have been on before, but I have
    discovered since I have come to the Senate there is no such
    thing as repetition--every statement by a Senator is treated as
    if it is brand new--the thing I worry about more than waste,
    fraud, and abuse is inertia. The law of motion is not just
    Newton's law that applies to physics. It applies to agencies,
    and an agency set in motion tends to stay in motion in the same
    direction. And what was a good contracting decision 5 years ago
    then gets the benefit of inertia and becomes the same
    contracting decision now because that is the way we always did
    it.
        We need to review the inertia as much as we do the waste,
    fraud, and abuse, because many times, inertia can lead us in
    the wrong direction more powerfully than somebody who is trying
    to rip us off and we end up wasting more money out of inertia
    than we do in other areas.
        My colleague, Dr. Coburn, is an expert on this, because he
    keeps hammering on us on the Appropriations Committee, well,
    you are just doing this because you did it last year and that
    is not an acceptable reason to keep doing it. He has made a
    dent sometimes and he has not other times, but I am convinced
    that his inertia will keep him doing it and that is a healthy
    thing.
        That is the challenge that you face and that is the focus
    that I would like to get out of this hearing. Again, how do we
    maximize the productivity of the employees of the Federal
    Government by outsourcing duties that could be done more
    cheaply and more efficiently with somebody else, and at the
    same time stay on top of that outsourcing function--I am
    deliberately using the language of private industry because
    that is where you come from and those are the people who have
    discovered how to do this, maybe better than we have--how do
    you make sure that the outsourcing that is done produces the
    best value and is the right place to go, or is there a new
    contractor or a new service that the old contractor hasn't
    offered you that you can turn to?
        The biggest barrier to get there from here that I have
    observed is, again, the inertia of the process of screening
    contractors. We are so sure that anybody who comes to the
    Federal Government with something to offer is really going to
    try to rip the government off that we spend so much time
    putting up so many barriers, so many hoops that the contractor
    has to go through in order to get the job, that we see far too
    many contractors say, just forget it. I am not going to bid for
    government work even though I could do it better and I could do
    it cheaper than the contractor that they have got because the
    process of bidding is so impenetrable. I will just stay where I
    am. It is not worth it.
        So that is my summary of the challenges we face and the
    kinds of things I am looking forward to out of this hearing.
    Thank you, Madam Chairman.
        Senator McCaskill. Thank you.
        Since this is a one-witness hearing and we only have one of
    our other Members here, I would certainly use the Chairman's
    prerogative to offer you the opportunity to make any kind of
    opening remarks you would like to, Senator Coburn.
        Senator Coburn. Thank you, Madam Chairman. I will defer.
    Thank you.
        Senator McCaskill. OK. Let me introduce our witness today.
    He is the Deputy Director of Management at the Office of
    Management and Budget. He is also the Chief Performance Officer
    for the Administration. He has 20 years of business experience
    as a CEO, management consultant, and entrepreneur. He most
    recently served as Managing Partner of Portfolio Logic, an
    investment firm focusing primarily on business and health care
    services companies.
        Prior to founding Portfolio Logic, Mr. Zients served as CEO
    and Chairman of the Advisory Board Company and Chairman of the
    Corporate Executive Board. Mr. Zients began his career in
    management consulting at Bain and Company and Mercer Management
    Consulting, where he focused on developing strategies and
    improving operations of Fortune 1000 companies. He also
    cofounded the Urban Alliance Foundation, a nonprofit
    organization that partners with corporations to provide
    economically disadvantaged youth with year-round paid
    internships, adult mentors, and job training.
        It is the custom of the Subcommittee to swear in all
    witnesses that appear before us, so if you don't mind, I would
    ask you to stand.
        Do you swear that the testimony you will give before this
    Subcommittee will be the truth, the whole truth, and nothing
    but the truth, so help you, God?
        Mr. Zients. I do.
        Senator McCaskill. Mr. Zients, we welcome your testimony.
    Your written testimony will be printed in the record in its
    entirety. We would ask you to try to hold it to 10 minutes,
    although I don't think we are going to be too strict today. Mr.
    Zients.

        TESTIMONY OF JEFFREY D. ZIENTS,\1\ DEPUTY DIRECTOR FOR
       MANAGEMENT AND CHIEF PERFORMANCE OFFICER, U.S. OFFICE OF
                         MANAGEMENT AND BUDGET

        Mr. Zients. Thank you, and I will beat the 10-minute mark.
    Chairman McCaskill, Ranking Member Bennett, and Senator Coburn,
    I appreciate the opportunity to appear before you today to
    discuss OMB's implementation of the President's Memorandum on
    Government Contracting and our shared interest in improving
    Federal acquisition practices.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Zients appears in the Appendix on
    page 31.
    ---------------------------------------------------------------------------
        The President has charged the government with cutting waste
    and saving taxpayers' dollars. He has committed to putting the
    Nation on sound fiscal footing, investing in programs that work
    and fixing or ending those that don't. Addressing the chronic
    problems in government contracting is a key part of this
    effort.
        OMB has developed a three-prong approach to improve the
    results of our acquisition process. First, we will meet the
    President's goal of saving $40 billion annually through better
    acquisition practices.
        Second, we will clarify the rules and practices to
    determine the proper roles of both the public and private
    sectors to best serve the American people.
        Third, as recommended by this Subcommittee on a bipartisan
    basis, we will provide for a strong, well-equipped acquisition
    workforce to achieve the best long-term results from government
    contracting activities.
        With respect to the first goal, saving $40 billion, OMB has
    directed agencies to take two actions to achieve immediate
    results: Develop plans to save 7 percent of contracting
    spending by the end of fiscal year 2011 and to reduce high-risk
    contracts by 10 percent in fiscal year 2010.
        There are many ways in which agencies will address the 7
    percent cost savings goal. For example, an agency may end
    contracts that do not meet goals or support for projects that
    are no longer needed. An agency may transition from a cost
    reimbursement contract to a fixed-price contract, where the
    incentive to perform in a cost effective manner is greatest. An
    agency may switch from a stand-alone contract to a
    strategically sourced contract that uses the government's
    collective purchasing power to get lower prices. These agency
    savings plans are due November 2, and they must lay out the
    specific steps that each agency is taking to achieve the 7
    percent minimum.
        In addition to the 7 percent cost savings, we have targeted
    a minimum of 10 percent reduction in non-competitive cost
    reimbursement and time and materials contracts because each of
    these high-risk authorities carries the potential risk of
    overspending taxpayer resources.
        Earlier this week, OMB issued guidelines for the ongoing
    review of high-risk contracting. The guidelines pose three key
    questions. First, how is the agency maximizing the effective
    use of competition in choosing the best contract type for the
    acquisition? Second, how is the agency mitigating risk when
    non-competitive cost reimbursement or time and material
    contracts are used? Third, how are agencies creating the
    opportunities to transition away from these high-risk
    contracting vehicles to better contracting vehicles?
        The guidelines lay out a number of considerations agencies
    should use for addressing these questions. We will work with
    agencies to do a mid-year and end-of-year review of their
    progress in reducing the reliance on these authorities by a
    minimum of 10 percent, and those agencies which are
    experiencing challenges or not meeting the goals will take
    appropriate corrective actions to improve these results.
        Regulatory actions are also addressing the use of high-risk
    contracting. Earlier this month, the Federal Acquisition
    Regulation (FAR) was amended to prohibit the use of rollover
    and award fee contracting. This practice, which actually
    allowed contractors to earn fees in subsequent performance
    periods after having failed to earn them initially, has
    repeatedly been cited as contributing to the waste of taxpayer
    dollars. This waste has been stopped.
        This summer, FAR changes were made to require the use of
    past contractor performance in source evaluations. This
    motivates contractors to perform well and reduces the
    likelihood that taxpayer resources will go to waste. The FAR
    now requires agencies to submit electronic records of
    contractor performance into a single government-wide
    repository, and OMB will conduct compliance assessments and
    quality reviews beginning in February to make sure that this
    database works.
        With respect to management of the multi-sector workforce,
    we are taking a number of steps to improve rules and practices
    and to provide agencies with useful tools. As one step, each
    major agency identified one of its organizations where it has
    concerns about a potential over-reliance on contractors. This
    will be the subject of a pilot. Using cross-functional teams
    with human capital, acquisition, and program officials, each
    agency is developing a plan that determines the best mix of
    skills and workforce size for the organization. These plans,
    combined with assessments of how the organizations are
    performing, could lead to in-sourcing, adding resources to
    contract management, or hiring new employees. Agencies will
    apply the insights from these initial pilots to other
    organizations with similar needs.
        We have also developed guidance to help agencies implement
    new statutory requirements concerning in-sourcing. These
    provisions require agencies to give special consideration to
    in-sourcing work where there is either a particular risk that
    prior practices have resulted in an over-reliance on
    contractors or performance of the work by Federal employees
    could be more cost effective. This guidance will help agencies
    to strengthen their sourcing decisions and fix situations where
    they are too reliant on contractors and establish sufficient
    internal capacity to maintain control of their operations.
        Additional OMB guidance is under development to address the
    ongoing confusion in how the boundaries are drawn between the
    Federal and private sectors. We must reconcile differences in
    the definition of ``inherently governmental'' and clarify the
    meaning of different terms used in connection with non-
    inherently governmental functions, such as ``critical
    functions.'' These issues will be addressed over the next
    several months and we will seek public comment before the rules
    are promulgated.
        This brings us to our third and final goal, to strengthen
    the acquisition workforce, the backbone of our system. We are
    committed to a sustained management focus on growing both their
    capacity and their capability to improve acquisition outcomes
    and agency performance.
        This week, OFPP released an Acquisition Workforce
    Development Strategic Plan to help civilian agencies align
    their workforce needs with their acquisition profiles to
    determine capacity and capability needs over the next 5 years.
    OFPP concluded that an increase in the acquisition workforce of
    5 percent is needed at most, if not all, civilian agencies. The
    plan calls for agencies to take immediate steps to increase
    their contracting workforce and establishes an annual process
    led by OFPP to focus on long-term planning that addresses the
    growth and development needs of the broader acquisition
    workforce, including program managers and contracting officer
    technical representatives.
        Across all of our efforts, we are focused on achieving
    tangible results. Agencies are identifying savings of 7 percent
    and have already begun saving money through better sourcing
    decisions. Agencies have initiated pilots to determine their
    multi-sector workforce needs so they can make reasoned choices
    to rebuild a critical capacity and potentially save money.
    Agencies are building workforce capacity and capabilities to
    support and sustain better acquisition outcomes. Regulations
    have been enacted to prohibit rollovers and to require
    collection of data on contractor past performance.
        Overall, while we have made progress across the last
    several months, much work remains to be done. We have a lot of
    work to do. Agencies must implement changes and achieve
    results. OFPP needs to issue further guidance and provide
    implementation assistance and strengthen its oversight of
    agency progress and performance. We look forward to hearing
    your feedback and working with the Committee to build a
    stronger acquisition system to better deliver results to our
    taxpayers at a lower cost.
        I am happy to answer any questions you have. Thank you.
        Senator McCaskill. Thank you.
        Let me just start with this observation. I have a quote
    here from a GAO report in 2000 commenting on the acquisition
    workforce. ``The Government's hiring, training, and retention
    practices have not been oriented towards maintaining a
    balanced, stable workforce and ensuring adequate emphasis on
    career development, training, and orderly succession
    planning.'' That is one quote we picked out, and frankly, we
    had volumes of them that we could have picked out from so many
    different IG, GAO reports over the years, particularly a great
    number of them in the aftermath of the contingency in Iraq and
    even in Bosnia dealing with the contracting issues and problems
    as it related to contingency contracting.
        I have got to tell you, I smell the sincerity, I sense it,
    but what is it about the way you are going to do this--what are
    you bringing to the table that is going to actually bring about
    the pressure for results? I mean, if you had to identify how
    you are going--I mean, this is a mammoth organization to reform
    on every topic you have talked about, whether it is the
    blending of contracting employees with government employees in
    ways that sometimes is appropriate, that sometimes is not;
    whether it is figuring out how we make contracts more
    competitive and how we make contractors perform well and reward
    good behavior and punish bad behavior. Any one of those is
    huge.
        What are your strategies that you can tell us today that
    when we come back and talk about this a year from now and 2
    years from now and 3 years from now, that you will look back on
    your testimony and say, see, I told you so. We have an idea. We
    have tools that we are going to put in place that are going to
    require that we move this giant battleship in this ocean of
    contracting problems.
        Mr. Zients. Yes. I agree it is mammoth, so it is a big
    challenge, and it is not something that is going to be resolved
    in 6 months. It is a multi-year effort. I believe we have done
    a good job of getting going, of jump-starting the effort, and I
    think putting the stake in the ground that we are going to save
    $40 billion is very clarifying. So we are starting with the
    major result first.
        And by asking every agency to find their share of the $40
    billion by November 2, and then reviewing those plans and
    tracking those plans to ensure that they are real, that they
    have the appropriate detail, and that agencies are making
    progress against those plans, and will achieve it by the end of
    fiscal year 2011, is, I think, the major step to initiate these
    efforts. It is not the only step, but it is the major one.
        The second one is to recognize that there is a category of
    contracts--cost reimbursement contracts, non-competitive
    contracts--that are disproportionately risky for the
    government. They are disproportionately likely to lead to bad
    outcomes in terms of fraud and abuse and waste. So we have
    said, in a similar fashion, you need to reduce it by 10
    percent. You need to do it in fiscal year 2010, and we are
    going to track your progress against it. We are going to look
    at it mid-year, and we are going to look at it at the end of
    the year.
        Based on those results, based on what we learn, we will set
    future targets for further reductions to ensure that we are
    reducing our reliance on cost reimbursement contracts, and that
    we are increasing competition and optimizing competition across
    the government.
        Third is the workforce itself. There has actually been
    decent progress on building the size of the workforce, which I
    think is only one part of the equation. People tend to focus on
    the size. I think it is important. It probably does need to
    increase. But it has actually increased at about 6.5 percent
    the last couple of years. We believe there is some growth in
    fiscal year 2010. We don't know that yet because we just
    entered fiscal year 2010. And you couple that with our very
    strong guidance that there be a minimum increase of 5 percent
    in fiscal year 2011 and you have an acquisition workforce that
    has grown by 20-plus percent in fiscal year 2011 versus the
    prior 3 years benchmark, if you will.
        That is only half of the equation. We have to build their
    capabilities. We have to figure out what competencies they
    don't have, and we need to figure out how to train them and
    certify in those competencies. And we need to consider that we
    have the challenge of some of our most experienced, best people
    being likely to retire relatively soon, so we have to do
    appropriate succession planning there, too.
        So I think we have jump-started efforts. I think we are
    headed in the right direction. I think we are going to have
    tangible management results. I think we have a lot more to do.
    We have made some policy changes through the FAR. There is more
    policy work to be done. We have not yet done guidance
    explicitly on ``inherently governmental.'' That is an
    unbelievably complex terrain, and we will have guidance out by
    the end of the year. But that is a terrain that I would imagine
    we will have to take several shots at. We are not going to do
    it all at once, but we are going to start making progress on
    it.
        So there is a lot of work to be done. A lot of what you
    talked about in your opening statement, I agree with. We are
    not where we want to be ultimately. I think we are in a pretty
    good spot 6 months in, post-March 4, but we have a lot of work
    ahead; and I look forward to getting your feedback on what that
    work should entail.
        Senator McCaskill. Well, you have got some low-hanging
    fruit, that you can do quickly. I think the hard work is
    something that you are going to have to really stay on.
        Let me ask you about the $40 billion number. Is there going
    to be another number for the following year? I mean, is there a
    plan, that there will continue to be an actual number goal of
    savings for these agencies throughout the 4 years of the
    Administration?
        Mr. Zients. As you have seen in each one of these
    activities, I am a big believer in putting a stake in the
    ground and driving results to that number, or hopefully beating
    that number. So I think we will learn a lot from the $40
    billion exercise, and I think we will then be in a very good
    position to determine what the next stake in the ground is.
        Senator McCaskill. Yes, and I can't--I think it is really
    important that we have measurables. You know this well, because
    in the private sector, there is the ultimate measure: Is the
    company making money? For government, that is much harder,
    because there is no bottom line. It is about performance, and
    it is about effectiveness and efficiencies.
        I think from this Subcommittee's standpoint, I am confident
    that the more stakes in the ground that you can plant, the more
    measurables and deliverables that we can measure you against in
    terms of progress you are making, I think the more responsive
    these massive agencies are going to be to your direction.
        Mr. Zients. I agree 100 percent. The President, with you at
    his side, put a $40 billion stake in the ground. That is very
    clarifying. And I believe we need to make sure each agency
    contributes its share. On high-risk contracting, the first
    stake in the ground, a 10 percent reduction. There will be
    additional stakes in the ground. Acquisition workforce, we need
    to grow it. We are. There is a stake in the ground as to a
    minimum there.
        So I think that the basic philosophy here is a management
    philosophy of setting a goal and driving organizations through
    monitoring against those goals, sharing best practices, coming
    up with corrective action plans, where appropriate, to get us
    there. But we are going to learn a lot through this process----
        Senator McCaskill. Yes.
        Mr. Zients [continuing]. As to regulatory changes and other
    things that we need to contemplate.
        Senator McCaskill. There are not probably very many people
    in Washington that are looking forward to November 2. I am. I
    want to see these plans. I want to see what these agencies say.
    I want to see--now, are they going to be available to the
    public, what they submit in terms of their November 2 plans for
    the $40 billion?
        Mr. Zients. I believe that on November 2, we will be seeing
    them for the first time, too, in that form. We have been
    working along the way. I think we need to have a period of time
    where we have a deliberative process and work with the agencies
    as to the agency's areas that they are going to address, their
    progress and how they do. That, we will make transparent and
    public.
        Senator McCaskill. OK. Well, just as quickly as it can be
    transparent and public, the happier I know that the Members of
    this Subcommittee will be, and I think it is important that we
    remain mindful of the President's commitment to transparency,
    that there is a new era of everybody seeing how the government
    is doing and we want to be able to look over your shoulder. As
    painful as that is sometimes, I think it is important----
        Mr. Zients. I think you have the combination of the $40
    billion, which is a commitment from our President, and
    transparency, so the combination will lead to the result that
    you are hoping for.
        Senator McCaskill. Senator Bennett.
        Senator Bennett. Thank you, Madam Chairman.
        Where did the $40 billion number come from?
        Mr. Zients. It is seen as based on some of the research
    that was done prior to my arrival as a realistic goal for a
    couple-year period of time. I think that--as the Senator
    asked--we will learn from this. I hope we can beat $40 billion
    in this round, and based on what we learn, if it really is
    truly low-hanging fruit, then we will have a $40 billion or
    greater goal in the next round. If we are more efficient and
    there aren't as many low-hanging fruit, then the goal will be
    determined based on what we learn through this. So it was seen
    as a goal that was a worthy goal, i.e., it will require a lot
    of hard work, a lot of focus, and at the same time, if we do
    have good execution, or arguably great execution, it is a goal
    that we believe we can achieve or exceed.
        Senator Bennett. So you make reference to research that was
    available to you that was done previous to your coming in. Help
    me understand it a little more. What went into the decision
    that, OK, $40 billion is really the number? Was there an
    analysis of excess fat that you think you found in various
    agencies?
        Mr. Zients. Yes, I think there was--again----
        Senator Bennett. You can see where I am going. I want to
    avoid a completely arbitrary number.
        Mr. Zients. Understood. And I think that given that it was
    set out relatively early in the Administration, it is not as
    rigorous in terms of its analytics as it will be going forward,
    when we are deeper in. That said, it was based on talking to
    industry experts, talking to contracting officers across
    government, across the whole acquisition terrain, looking at
    GAO reports on waste and other contracting insights. So it was
    triangulated, but it was not based off of benchmarks. The way
    we would have done it in the private sector, clearly, would
    have been to benchmark it----
        Senator Bennett. Right.
        Mr. Zients [continuing]. And we would have looked at other
    competitors and understood how they are doing. Unfortunately,
    there aren't those types of competitive metrics. There was some
    internal benchmarking.
        I feel good about the number. It is a number that, as I
    have gotten deeper in, feels like it is not a pipe dream,
    because I think if you set a number that is unrealistic, people
    do not rally behind it. At the same time, if you set a number
    too low, you don't push yourself. You don't find the
    incremental creative idea.
        So I think it is set at that level that is going to require
    a lot of hard work, some sleepless nights, and at the same
    time, it is a number that we can achieve.
        Senator Bennett. OK. Now, the 7 percent of baseline
    spending, is that tied to the $40 billion? Is there a
    connection there?
        Mr. Zients. That is what it is. That is the math of the
    $500 billion plus----
        Senator Bennett. I see. You did the baseline spending and
    the $40 billion popped up?
        Mr. Zients. The baseline spending was--the analysis we did
    was based on what were we spending, going back to your previous
    question. The $40 billion is 7 percent of the roughly $530
    billion that we were spending in fiscal year 2008.
        Senator Bennett. Yes. OK.
        Mr. Zients. The baseline part of it is to adjust for
    certain one-time events and to create more of a baseline, so to
    take off one-time events.
        Senator Bennett. All right. I am the Secretary of Interior.
    I get this directive from you. What do I do?
        Mr. Zients. You pull together a cross-functional team, as I
    think we have addressed contracting too many times in a
    stovepipe. And the contracting officer is responsible for the
    procurement, but is not responsible, or solely responsible for
    developing the requirements or ensuring the implementation of
    the contract. So you pull together your senior team. You say,
    we have a goal. We have a goal that is probably multi-billion
    dollars, given the size of Interior. We need to pull together
    how we are going to do this.
        Where are we contracting out services that we are not
    getting a good return for? To your point earlier, where have we
    been sitting on a contract for 5 years and just renewing it the
    sixth year? Where do we need to compete because the marketplace
    has changed? Where can we pool our purchasing power with the
    purchasing power over at Agriculture and really, truly leverage
    the government's purchasing power and get a better price?
        Senator Bennett. That sounds wonderful, but I don't see the
    Secretary of Interior and the Secretary of Agriculture talking
    about that unless they get a little nudge from you.
        Mr. Zients. Well, the nudge has come. I think it is
    actually the deputies that are the point people here.
        Senator Bennett. OK.
        Mr. Zients. They are my colleagues through government. I
    chair the President's Management Council, which meets monthly.
    The Secretaries, as all of you know, have forward or external--
    --
        Senator Bennett. So you chair a council that consists of
    all of the deputies?
        Mr. Zients. All the deputies across.
        Senator Bennett. Good.
        Mr. Zients. But I think you are right. I would hope the
    Secretaries are cognizant and aware and are supporting their
    deputies in this. But the deputies own this, and it is being
    driven down in the organization through cross-functional teams.
        Senator Bennett. All right. Now, I discover something that,
    in order to meet your goals, I would cut out or make a change
    and everything will be wonderful, except that I become
    convinced from a management point of view that we shouldn't be
    cutting that, that we are, in fact, getting the value that I
    spoke of where it is. Do I have an avenue for an appeal on this
    one. And say, look, in my department--and now I am no longer
    Secretary of Interior--but whatever mythical department I am
    Secretary of, I say, we have a different circumstance, and we
    think that 7 percent, in fact, will end up creating problems
    that will end up costing money. Do I have the right to appeal
    from the 7 percent?
        Mr. Zients. Well, I guess my going in is given how much
    money we spend, how fast it is growing----
        Senator Bennett. You are just saying that won't exist?
        Mr. Zients. No. I mean, I am skeptical----
        Senator Bennett. I think you may well be right----
        Mr. Zients. Well, I am skeptical, given that we have
    doubled our contracting across the 8 years, given, as you
    pointed out, we don't leverage the government's purchasing
    power very effectively, given that we have an acquisition
    workforce that is over-stretched and under-trained, that people
    can't do 7 percent better. So I am extremely skeptical, and I
    think I would push back and say, go do it again.
        Bring forward the best possible way to get there. If it is
    a genuine exercise and going from 6 to 7 percent really
    requires cutting to the bone, I guess we have to reevaluate. I
    come into it with a lot of skepticism that we can't be 7
    percent----
        Senator Bennett. Yes, and I would, too, and I think that is
    a healthy attitude on your part. But there are differences
    between departments. There are departments where outsourcing or
    contracting makes more sense than others, and I guess by taking
    7 percent, you say, well, you start wherever you are. But there
    may well be a circumstance where, as I get into this, I
    discover and say, wait a minute, here is an area where we
    probably should be contracting more that we have just
    discovered that we didn't realize.
        Mr. Zients. Well, presumably that would have an offset to
    your private sector example. You would be saving money relative
    to the sweeping of the factory floors.
        Senator Bennett. Yes. I see.
        Mr. Zients. That has an offset.
        Senator Bennett. OK. Yes.
        Mr. Zients. But just to clarify, there is, the business
    expression, a real 80/20 here.
        Senator Bennett. Yes.
        Mr. Zients. I mean, there is a handful of agencies--DOD is
    two-thirds----
        Senator Bennett. Right.
        Mr. Zients [continuing]. Or maybe closer to 70 percent. You
    add about six more agencies on----
        Senator Bennett. A target----
        Mr. Zients [continuing]. We are at 90 percent. So this is
    not a 150-agency-equal exercise. This is a handful of
    agencies--everyone is doing it. There are 23 CFO Act agencies
    that matter most here.
        Senator Bennett. I see. I think you are right on that.
    Thank you, Madam Chairman.
        Senator McCaskill. Senator Coburn.

                  OPENING STATEMENT OF SENATOR COBURN

        Senator Coburn. Thank you, Mr. Zients, for your service. I
    am really very happy where you are. I have sat up here for 5
    years working on these issues and been, quite frankly, very
    frustrated during the Bush Administration that much was not
    accomplished.
        I would like for you to talk a little bit more. The problem
    I see in contracting--there is no question, you have a shortage
    of contract officers and----
        Mr. Zients. Yes.
        Senator Coburn [continuing]. Procurement officers. But the
    biggest problem is you have a shortage of experienced contract
    officers and procurement officers. What are the plans to train
    them up to the level where they can actually run the projects,
    be responsible for the contract, look at not just cost and
    performance, but also accomplishment? In other words, there has
    to be a plan with this.
        Mr. Zients. Yes.
        Senator Coburn. We have spun the wheels for the last 7
    years and not accomplished that.
        Mr. Zients. I agree, and I think in the last 7 years, it
    has gotten a lot worse because I think if you were experienced
    in the contracting sector, you probably weren't that happy
    coming to work each day, and you had plenty of opportunities to
    jump to the private sector. So I think it is a bad situation.
    It is why I believe that it is not just the number of contract
    officers.
        Senator Coburn. Right.
        Mr. Zients. It is really the capabilities and the
    experience. So there has been a successful program, an
    internship-type program, to bring people in at the entry level.
    We are now repeating that mid-career. So there is an
    opportunity, I believe, given how interested people are in
    serving and the state of this economy, to bring in people who
    are more experienced. That will help. It is not the majority of
    the strategy, but I think it is a significant contributor.
        The majority has got to be better training, and we have
    done competency surveys to figure out what the most important
    competencies are. We have to get much more targeted in our
    training and our certification, and I think we just need to
    invest more money in it to ensure that we have the seniority
    and the set of capabilities that we need. Further, we have to
    make sure we retain those that we have, and do the right
    succession planning.
        But you are right. There is a huge return on our
    investment. How do we get to 7 percent? How do we get to
    numbers beyond 7 percent? We get great people doing this, and
    it is not just the contract officers. It is the project
    managers. It is the technical representatives. They have to
    work as a team, and we have training needs across the whole
    spectrum.
        Senator Coburn. I was very impressed to see past contractor
    performance used in evaluating future contracts. As you know,
    the Defense Department, just out of stimulus money, $30 or $40
    million to contractors who were under investigation for fraud,
    and yet we gave them contracts. So you have put into place
    something that should cure that illness, and I am glad to see
    that is there.
        One other question that I had deals with competitive
    biding. According to the Government Executive Order on October
    20, $7.8 billion of the more than $16 billion in Federal
    contracts awarded under the stimulus had not been competitively
    bid or fixed price. What is the guidance to the agencies on
    when to make that decision?
        Mr. Zients. Well, I think on the $7.8 billion you
    reference, the majority of that is not your first category of
    competition. It is your second category of cost reimbursement
    and disproportionally. That is DOE, unfortunately, not because
    of what they do, what they do is very important, but given the
    nature of their work, it leads to more cost reimbursement-like
    contracts.
        Senator Coburn. Right.
        Mr. Zients. So the competition overall on recovery
    benchmarks favorably versus our normal baseline spend.
        Senator Coburn. OK.
        Mr. Zients. That said, do I believe we need more
    competition in all of what we do? Absolutely.
        Senator Coburn. Yes.
        Mr. Zients. So recovery is actually doing a little better,
    not a little worse. You have to dig a little deeper to see what
    is going on. But competition across the government needs to be
    enhanced.
        Senator Coburn. Are you working specifically any with extra
    guidance to GSA? I would just note that your staff might want
    to go back to past hearings that we have had over the last 4
    years on GSA. We are the biggest purchaser in the world of
    everything. The testimony that this full Committee has had
    before us, specifically the Federal Financial Management
    Subcommittee, is that GSA doesn't get the best prices, and that
    even the best price for the same quality, agencies aren't
    forced to use, so they will buy something higher. There is a
    tremendous amount of money that is bought through GSA that
    could be received and could be a source for saving you money. I
    would recommend to you looking at that.
        Mr. Zients. Having been in the private sector at medium-
    sized firms, trying to flex our muscles on purchasing power, it
    is lovely to be here as the world's largest purchaser----
        Senator Coburn. Nobody should be able to buy cheaper than
    this government.
        Mr. Zients. For example--and it is good we did this--but
    overnight delivery, which is the ultimate commodity, we
    consolidated in the private sector a decade or two, because it
    is the same thing to have FedEx or its competitors. You go to
    one and get the economies of scale. We just turned to that in
    the U.S. Government in 2005. Better late than never, but just
    in 2005. And we still, to your point, haven't fully
    consolidated.
        How many of those opportunities exist across government, to
    leverage our position as the world's largest purchaser and get
    better prices and better service? I think that is tremendously
    exciting. Is that baked into some of the 7 percent? Of course.
    But across the next several years, we have got to position
    ourselves consistent with that purchasing power.
        Senator Coburn. Use that leverage, yes.
        I want to go to one other point and then I will finish up.
    Senator Bennett talked about an agency where there was a, maybe
    we don't need to, but let us say it is just a blank, and that
    we are getting a good value now. We assess we are getting a
    good value. There is great value in competitively bidding that
    again anyway, because it makes the person who has the contract
    want to keep the contract, which it gives you a great way to
    lower the cost. Even if you don't think you are going to get a
    lower price, you are going to get a lower price.
        Mr. Zients. When I think about what we did in the private
    sector 5 years ago and how technology and other advances have
    driven productivity, we can do it for a lot less money----
        Senator Coburn. Right.
        Mr. Zients [continuing]. Whatever it might be, and we can
    do it better for a lot less money. So the idea of sitting on a
    contract for 5 or 6 years, and being content with it, given all
    the advances in those contractor communities, doesn't make any
    sense.
        Senator Coburn. Right. I agree. Thank you, Madam Chairman.
        Senator McCaskill. Senator Collins.

                  OPENING STATEMENT OF SENATOR COLLINS

        Senator Collins. Thank you, Madam Chairman.
        First of all, let me ask unanimous consent that my opening
    statement be inserted in the record.\1\
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Collins appears in the
    Appendix on page 25.
    ---------------------------------------------------------------------------
        Senator McCaskill. Without objection.
        Senator Collins. Thank you, and thank you for calling this
    hearing. I think this kind of oversight is so important.
        I worked with many Members of this Subcommittee to author
    legislation that required OFPP to produce an Acquisition
    Workforce Development Strategic Plan. The law specifically
    requires the plan to have an actionable, specific 5-year
    implementation plan to increase the size of the acquisition
    workforce and to operate a government-wide acquisition
    internship program.
        Similarly, the President's March memorandum identifies the
    development of the acquisition workforce as a pillar for
    strengthening procurement practices. After all, we can pass all
    the laws and reforms in the world. You can issue through OFPP
    and through OMB directly all of the guidance. But if we don't
    have a well-trained and sufficiently-sized workforce, our
    efforts are not going to succeed.
        And with that background, I have to tell you that I am very
    disappointed in the report that OFPP and OMB put out yesterday
    on the acquisition workforce. This is pursuant to the law that
    we wrote and pursuant to the President's memorandum, and it
    lacks adequate analysis and substance, in my view. It really is
    boilerplate. It is standard materials. It reiterates a list of
    general human capital planning guidelines. It creates various
    interagency working groups. I am tired of studies. I am tired
    of working groups. I want to see action, and in my view, this
    plan simply delegates to each agency what the law required OFPP
    to do itself.
        So I know that is not a happy note to start on. I know you
    are working hard and there is a lot that is good that is coming
    out of your effort. But if we don't solve the workforce issues,
    it is not going to matter that we have good guidance. There is
    not going to be anyone to do the oversight, to better define
    the requirements--go ahead.
        Mr. Zients. I agree 100 percent, and we talked about it, I
    think, before you came in, that central to all of this is the
    acquisition workforce. Without it, none of this is going to
    happen.
        Let me take what I think are the two pieces. One is the
    size of the workforce, and the second is the capability. On the
    size, the 25 percent number that was recommended----
        Senator Collins. By us.
        Mr. Zients. I am a little wary, and this is going to be
    part of--this might be a philosophical difference or a
    different approach--too many efforts being across the whole
    government, sort of a sense of one-size-fits-all because each
    agency is so different in terms of what it does day to day on
    the contracting front, what is the current status of its
    acquisition workforce, what the gaps are between what it is
    today and what it should be. So that is part of the philosophy
    of making sure that this planning is primarily done at the
    agency level rather than at the macro government level.
        That said, on the 25 percent, that 25 percent was
    articulated before we understood the growth in 2008. The growth
    in fiscal year 2008 was 6.5 percent. The growth in fiscal year
    2009 looks like it is going to be about the same: 6.5 percent.
    So we are up to 13 percent increase. We think there will be
    growth in fiscal year 2010. We are asking for a minimum growth
    of 5 percent in fiscal year 2011 as part of that guidance. We
    are somewhere north of 20 percent growth since that 25 percent
    stake in the ground.
        So, again, I am wary of whether each agency needs 20
    percent, but overall, the government will have grown its
    acquisition workforce, if this math is correct, by about 20
    percent by fiscal year 2011. That is a good increase.
        I believe that on the capability side--I am coming back to
    Senator Coburn's question--we have a lot to do. We need to
    bring people in not just at the entry level, we need to bring
    people in mid-career. We need to retain individuals who are
    experienced for longer and have them not retire or go to the
    private sector. And then we have to train. And we have been
    doing competency studies to figure out where our gaps are. We
    have created functional advisory boards to figure out what the
    most targeted, most important training is.
        So I think we are doing a lot. We are not there. We have a
    lot more to do. I would be interested in getting more of your
    feedback on where you feel like we really haven't done enough.
    But I think it is fair to say the train has left the station. I
    think it is moving pretty fast. But trust me, I am going to
    have the pedal to the metal and try to move it even faster to
    get more done.
        Senator Collins. Your point that a one-size-fits-all
    approach should not be taken is a good one. However, I would
    note that in your report, you say the analysis led us to
    conclude that an increase in the acquisition workforce of at
    least 5 percent, except in unusual circumstances where analysis
    shows that it is not to be required, is needed at all civilian
    agencies----
        Mr. Zients. Agreed. But then the main planning exercise of
    what level of people we need, and how many we need, we believe
    is done at the agency level; that it is not an academic
    exercise. It is a modeling exercise if you try to do it across
    the board. It becomes real, it needs to be tied to budgets; and
    it needs to be implemented, and that I believe needs to be done
    at the agency level.
        Senator Collins. I agree with you that there are some
    agencies, DOD is an example, where there has been such a
    diminution of the acquisition workforce that probably more than
    5 percent----
        Mr. Zients. Yes.
        Senator Collins [continuing]. Is needed, given the huge
    increase in contract dollars and contract actions. So I am not
    arguing for one-size-fits-all, but I believe that you need to
    understand that there will be resistance to this in some
    agencies despite their evident need because they are going to
    want to spend the money on other things.
        Mr. Zients. Just to clarify, this guidance that you are
    referring to only applies to the civilian agencies.
        Senator Collins. Right.
        Mr. Zients. So DOD has its own workforce plan, as you
    know----
        Senator Collins. I do know that.
        Mr. Zients [continuing]. And they are massively ramping up
    in terms of number of people and training, and they have a very
    good training facility right now. So we are talking about the
    30 percent.
        I am sorry, I missed the second part of----
        Senator Collins. Well, I have been at this a long time and
    I have been on this issue for a long time, and I know for a
    fact that it is not a priority in many agencies to build up the
    acquisition workforce.
        Mr. Zients. Agreed.
        Senator Collins. It is far more fun and interesting and
    press-worthy to put the dollars into program people, or to
    launch some new initiative.
        Mr. Zients. It is similar to training across the board. It
    is the favorite thing to cut, because you don't see the instant
    return. We are receiving the first piece of the acquisition
    workforce plan November 2 with the 7 percent savings plan. We
    will incorporate that into the budget process for fiscal year
    2011, which is ongoing at OMB right now. In the future,
    acquisition workforce plans, the annual plan of how many people
    do you need, will be completed in March or early April, and
    that will then dovetail with the following year fiscal year
    budget planning process. And so we at OMB will make sure that
    it is front and center and part of agencies' budgets the
    President recommends to Congress.
        Senator Collins. I appreciate that commitment and I can
    assure you we are going to hold you to it because it is
    important.
        Senator McCaskill. I am going to do one more round, so if
    you----
        Senator Collins. OK.
        Senator McCaskill [continuing]. If you want to hold and we
    will do another round.
        Senator Collins. Sure.
        Senator McCaskill. OK. Great. A couple of things I wanted
    to bring to your attention. First, will we at least know on
    November 2 who has submitted on time and who still hasn't
    submitted? Is there any kind of public accountability of who is
    going to make the mark of November 2? Have you made that
    decision?
        Mr. Zients. I don't think we have made a formal decision on
    that, but my bias would be that we tell you, or give people a
    little bit of a grace period, not long, and we report who has
    reported. I would anticipate everybody will be in. I would be
    disappointed if we don't have everybody in.
        Senator McCaskill. As an old auditor, the more people know
    when someone is not doing it----
        Mr. Zients. Yes.
        Senator McCaskill [continuing]. The more likely you are
    they are going to do it the next time. So even if you want
    internal time to look at what they have submitted before we
    have a chance to look at it, I certainly would hope that we
    would know quickly if we have any agencies that are lagging
    behind in terms of making this a priority in terms of planning.
        Mr. Zients. Will do.
        Senator McCaskill. There are a couple of things that are
    really irritating to me about the way agencies behave. One is
    the rush to spend money by the end of the fiscal year. That
    means that sometimes contracting officers are really pushed by
    management at these agencies to put through contracts very
    quickly at the end of the year to buy stuff because there is an
    existing contract that they can pull off of.
        Do you have anything in the works to plan for identifying
    this when it happens? It seems to me with today's technology,
    you ought to be able to pull up a report near the end of the
    fiscal year and see the rush that all Federal agencies have to
    spend their money, because they don't want any of us to think
    they don't need every dime they have gotten because that means
    we might not give them as much next year. And so there is this
    whole thing, spend what you get, because if you don't, you
    won't get as much the next time, and it really brings about so
    many bad decisions in purchasing and contracting in the last 90
    days of the fiscal year.
        Mr. Zients. Yes. I think the things that we have talked
    about here to increase competition and reduce high-risk
    contracting is important. We have not done a special focus, and
    I think it is a good idea, on how do you ensure that, given
    that mad rush, you don't have lack of competition or higher-
    risk contracts as a result. So I think paying special attention
    there makes a lot of sense. It is not something we have yet
    addressed, but we will.
        Senator McCaskill. I have worked in a lot of government
    buildings in my career and I always know when it is the end of
    the fiscal year, not by the change in weather and not by the
    month on the calendar, but rather by glancing around the
    building to see all of the boxes that start arriving. It is as
    certain as the sun coming up that this happens, and it is in
    the category of low-hanging fruit.
        Mr. Zients. I think it is a very good point, because if you
    take a stretched workforce and then try to have them work even
    harder in a compressed period of time, inevitably, you are not
    going to be as rigorous. So I think that is an area that we
    should pay special attention to.
        Senator McCaskill. And in some ways, I know the contracting
    workforce doesn't have to be separated out from these agencies.
    But in some ways, they should begin to get some kind of IG-like
    protection around them. And by that I mean I would hope you
    would look at ways to catch them being good.
        Contracting personnel that are doing the right thing,
    despite a pressure from their agencies to do other things, to
    me, you should seek out those contracting people that are
    trying to hold the line and say, no, we are not going to do
    that because we don't have enough time to really bid the
    contract appropriately. Or, no, we are not going to renew that
    contract just because we can and just because it is easier and
    just because it has always been done that way. I don't know
    what you have got out there to reward that kind of
    professionalism and that willingness to kind of show some
    independence as it relates to contracting processes.
        Mr. Zients. I think there are some recognition vehicles or
    awards today. There are not enough. This is a group that, I
    think, has not been--has not enjoyed a glory period of time in
    the last 8 years and I think we need to help lift them up and
    celebrate their victories, and I think some of those victories
    will be around driving acquisition savings, to your point. Some
    of it will be on holding the line. So I think recognition is
    very important here and it is something that we have jump-
    started some efforts on already.
        Senator McCaskill. One of the guidances is a requirement
    that government agencies select the candidate organization for
    pilot programs to analyze whether the agency has relied on
    contractors too much. Have these agencies made these candidate
    selections and can you give us any information about how these
    selections are--have they reported what the selections are?
        Mr. Zients. They have. To your earlier question about
    November 2, with an, I believe, October deadline; everybody has
    selected. I think it is very important here that we maintain
    some confidentiality during the deliberative process because
    you don't want to open up to the world what is being examined
    for potential in-sourcing or change----
        Senator McCaskill. Right. That would not be good although
    we might get a lot of lower contract prices.
        Mr. Zients. It is interesting, though, in that IT tends to
    be an area where a lot of people are focused right now. About a
    third were in the IT terrain. And a significant number were
    actually in the acquisition workforce itself, so people having
    contracted out help for acquisition and thinking, that is----
        Senator McCaskill. Contractors watching contractors.
        Mr. Zients. Absolutely. Well, actually, contractors helping
    to make----
        Senator McCaskill. Contract decisions. Right. Both.
        Mr. Zients. So you can see how that would fall in the
    category of potential over-reliance and something that should
    be looked at carefully.
        Senator McCaskill. And finally, another discovery I made
    when I got here that I still shake my head about, and I would
    hope that you would work this into the reforms that you are
    doing in contracting and with these acquisition workforces, is
    this phenomena we have in the Federal Government that you can
    buy stuff from other agencies and the other agencies make money
    on it. I mean, I was shocked when I found out in a very early
    oversight hearing I attended that they were actually
    advertising. One agency was advertising, buy your stuff here,
    to another Federal agency because they were getting a cut
    because of the contract they had. Well, there is something very
    wrong about that----
        Mr. Zients. Right.
        Senator McCaskill [continuing]. Just fundamentally wrong,
    that somebody had the time to try to advertise to another part
    of the government that you should be buying your stuff from
    another part of the government because then they got money from
    that that they added to their budget.
        Wherever there is a good price, everybody in government
    ought to access it. This is--it was bizarre. And to my
    knowledge, nothing has been done about it, that it is still
    happening.
        Mr. Zients. Well, it is bizarre and it should not be
    happening. Strategic sourcing, leveraging the government's
    purchasing power, should be happening. So agencies should be
    purchasing together where there are opportunities to do it----
        Senator McCaskill. Yes, but one agency shouldn't be making
    a cut off of----
        Mr. Zients. I completely agree.
        Senator McCaskill. Yes.
        Mr. Zients. And I think that is an area that GAO and others
    have reported on. I think it is an area, and I don't have the
    details here today, where OFPP has spent some time, and with
    the new Administrator it will spend more time. I agree with
    you. It is bizarre--at best, bizarre.
        Senator McCaskill. I want to warn you that it won't be
    soon, but I am sure that we will have another hearing that we
    will actually look at not the buying of contractors for doing
    government work or the securing of contractors to build things
    for the government, but rather just buying stuff----
        Mr. Zients. Yes.
        Senator McCaskill [continuing]. How that is occurring and
    what the positives and negatives are about that. And I would
    hope by the time we have that hearing, probably sometime next
    year, that you would have somebody begin to look at this issue
    of are we leveraging the volume that we have in the Federal
    Government to drive price.
        Mr. Zients. Oh, I think it is our biggest opportunity, so
    we will have a big effort behind it and I look forward to the
    hearing.
        Senator McCaskill. Great. Senator Bennett.
        Senator Bennett. Thank you. Senator Collins had to leave
    and left behind a question that is in the same area as the ones
    you are asking about, the blanket purchase agreements (BPAs).
    She is quoting a September 2009 GAO report that says the
    Federal agencies obligated as much as $7.9 billion under
    schedule blanket purchasing agreements, and in about half of
    the sample BPAs reviewed, they found no evidence that an agency
    sought discounts when establishing these blanket purchasing
    agreements and suggests that such opportunities were missed
    when the estimated amount was in the hundreds of millions of
    dollars.
        Then the heart of her question, I understand the
    competition guidance issued yesterday did not specifically
    address BPAs. Would you consider taking actions to ensure this
    contracting tool is not misused? Or, I would add my own
    comment, not ignored, because apparently that is the bigger
    problem.
        Mr. Zients. That is a significant problem. I think we
    believe the GAO report is correct and it is something that we
    will address.
        Senator Bennett. All right. Fine. Thank you, Madam
    Chairman.
        Senator McCaskill. Thank you.
        Senator Bennett. I have nothing further.
        Senator McCaskill. I think the President has made a wise
    selection when he selected you to do this job. I think you have
    got the right combination of experience in the private sector
    and a really weird passion for this stuff. [Laughter.]
        Mr. Zients. Very strange.
        Senator McCaskill. It is strange. I completely relate to
    it.
        Mr. Zients. Maybe bizarre.
        Senator McCaskill. Yes, maybe bizarre. I think you are
    excited about making this government more efficient and
    effective and more cost conscious, and I think you know how
    badly we need that kind of passion. Let me just tell you, I
    will not predict success unless you hold on to that passion
    because this is a really big monster to move. It is going to
    take you being cheerfully enthusiastic every single day and
    giving all the people that work with you almost a zeal, a
    missionary zeal for the kind of reforms that are necessary.
        There is a lot of low-hanging fruit and it is not going to
    take a huge effort to do a little bit better than we have been
    doing. But it will take a lot of effort to make the kind of
    reforms that I know that you see as possibilities because of
    the massive problems that you face.
        So I am glad you are there. We are going to continue to
    look over your shoulder.
        Mr. Zients. Please.
        Senator McCaskill. It is important that we ask tough
    questions. This may be the easiest hearing you have in front of
    this Subcommittee over the next 4 years, because we will be
    looking to see if these benchmarks have been met and if enough
    deliverables and hard, fast goals are being set for these
    agencies and that you are staying on them, and we will continue
    to press to make sure that all the information that is out
    there is available to the public as quickly and as efficiently
    as possible.
        I thank you very much, and I want to once again thank your
    staff. I know that there was around-the-clock work. There is
    good news and bad news about that. The good news is, the staff
    was willing to work around the clock to get ready for this
    hearing. The bad news is they had to. And hopefully, as time
    goes on and you have been there longer and the staff can
    prepare a little bit more ahead of time so we have a little
    more time----
        Mr. Zients. Yes.
        Senator McCaskill [continuing]. Prior to the hearing to be
    able to digest the materials that we want to go over. But I
    appreciate how hard everyone worked and I certainly appreciate
    your time here today.
        Mr. Zients. I appreciate your support, and your staff has
    been great.
        Senator McCaskill. Great. OK. Thank you very much.
        This hearing is adjourned.
        [Whereupon, at 3:45 p.m., the Subcommittee was adjourned.]

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