[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


                  U.S. GOVERNMENT PRINTING OFFICE
53-851 PDF                WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
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.]



                            A P P E N D I X

                              ----------                              

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 
