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



 
   PERFORMANCE ``STAT'': MEASURING PRIORITIES, PROGRESS, AND RESULTS

                              ----------                              


                         MONDAY, JULY 12, 2010

                                       U.S. Senate,
  Committee on the Budget and the Task Force on Government 
                                 Performance, Annapolis, MD

    The Committee met, pursuant to notice, at 2:07 p.m., in the 
Governor's Reception Room, Maryland State House, 100 State 
Circle, Annapolis, Maryland, Hon. Mark Warner, Chairman of the 
Task Force, presiding.
    Present: Senators Warner and Cardin.
    Also present: Representative Sarbanes.
    Staff present: John Righter, Ben Licht, Ronald Storhaug, 
Amy Edwards, and Gregory McNeil.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. The hearing will come to order. I want to 
first welcome everyone and thank you for being here. In 
particular, thanks to Governor O'Malley for hosting us here in 
the Maryland State House in Annapolis. Our task force greatly 
appreciates the cooperation and assistance provided by you and 
your staff.
    I want to thank my colleagues Senator Cardin and 
Congressman Sarbanes for accompanying me to this hearing. Of 
course, it was perhaps a little shorter trip for both of them 
than for me--although maybe not. Coming from Alexandria, it is 
not that far.
    I want to particularly thank Senator Cardin. He is an 
important member of both the Senate Budget Committee and the 
Government Performance Task Force, and I have benefited greatly 
from his guidance and support.
    This is an official hearing of the Government Performance 
Task Force of the U.S. Senate Budget Committee. The hearing is 
being webcast, and an official record of it will be provided to 
our colleagues in the Senate. The record will include the full 
written statements provided by each of the witnesses, and we 
are going to have two panels today.
    Let me make my statement, then I will call on Senator 
Cardin and Congressman Sarbanes for comments, and then we will 
get to the Governor.
    I would like to begin by welcoming everyone to the 
Government Performance Task Force Hearing, ``Performance 
`Stat': Measuring Priorities, Progress, and Results.''

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    Today we will explore how the Stat performance management 
model uses data to directly improve outcomes and how it has 
been used at all levels of Government in the State of Maryland. 
Today also marks the tenth anniversary of the Stat model in 
Maryland, and I know Governor O'Malley started it in Baltimore 
as CitiStat.
    As I mentioned, I am honored to be joined by both Senator 
Cardin and Congressman Sarbanes. When I first came to the U.S. 
Senate, I was asked to chair this task force. The task force 
works to examine the Federal Government performance policies. 
Now, this is normally a fairly wonky category, but as we are in 
periods of enormous budget challenges, trying to get this part 
right in terms of Government performance measurements and 
procedures is going to become, I think, a wave of the future. 
And, again, we are with one of the leaders here with Governor 
O'Malley.

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    This task force works to improve the information base for 
Federal decisionmaking, helps us refocus goals. We focus a lot 
on data and reporting information that matters to Congress, and 
we are looking at how we can perhaps use some of these tools to 
develop cross-cutting policy goals across various agencies and 
departments. Our goal is to create a more efficient Government 
and identify savings for the American taxpayers.
    Now, this is a particular area of interest for me. As some 
of you in the audience know, I am a former Governor of 
Virginia. This was an area that I focused on during my tenure 
there. We developed some of the similar cross-cutting policy 
goals and measures to support them, similar to what Governor 
O'Malley has done. As a matter of fact, we even changed our 
budget processes so we could see those results, and I was proud 
that during my tenure Virginia was named the best managed State 
in the country. Of course, I will acknowledge that was before 
Governor O'Malley was in office.
    Today the Stat model is sweeping across the country. If we 
could go ahead to the next chart, this initiative started in 
Maryland. If you look all across the country at how many other 
locations, you can see the model is used in D.C., San 
Francisco, St. Louis, Atlanta, Washington State, among others. 
A total of 11 cities have adopted CitiStat.

[GRAPHIC] [TIFF OMITTED] T8155.087


    The Federal Government is also implementing the Stat model; 
however, we have a lot of work to do in D.C., and we need to do 
what Governor O'Malley has already done in Maryland: create 
governmentwide goals and incent our Federal agencies to work 
more closely together to achieve those goals.
    The Governor's administration has worked to define 15 
strategic and visionary goals to improve the quality of life in 
Maryland. The Governor's delivery unit was created to work with 
agencies to align State and Federal resources around those 15 
goals. Now, as somebody who wrestled with this issue at the 
State level, how you align Federal funding flows to actually 
meet your State goals, I am anxious to hear if you cracked that 
code. I am anxious to hear, again, from the Governor on his 
successes and challenges.

[GRAPHIC] [TIFF OMITTED] T8155.088


    The Stat model, as we have up here on this chart, is 
relatively simple. Government must set clear goals. You have to 
hold agencies accountable. You have to make sure that once you 
set those goals and you tell the agencies you are going to hold 
them accountable, you actually have regular progress meetings. 
Time and again I found that even as Governor, if you set a 
directive, unless you are consciously relentless on following 
up the progress of reaching those goals, there are some in the 
work force that might just say, well, this guy is going to be 
gone at some point, and even more so in Virginia where it was a 
4-year term. But I think that regular progress meetings are 
very important. Strong analytical support and then aggressive 
followup.
    I would add that the Obama administration has taken the 
Stat model as well and is implementing it at the Federal level 
with TechStat, launched by the Federal CIO, Vivek Kundra. 
TechStat provides a forum for examining at-risk and failing IT 
projects. An IT dashboard website was established to help 
provide data to inform TechStat meetings. Plans are underway to 
convene quarterly meetings between the OMB and agencies to 
discuss progress in achieving high-priority performance goals 
and to establish a Federal Government web portal that focuses 
on performance. This area around IT projects and failure 
sometimes of those projects, I think most of us have read 
about. I have personally been involved as the local Senator on 
the failure of Arlington Cemetery to keep appropriate records 
of our fallen heroes, and if there was ever a case of an 
example of an ill-performed and ill-monitored IT project, it is 
what has been going on at Arlington Cemetery. We are in the 
process of trying to get that fixed.
    While overall we are starting to see signs that our economy 
is growing again, millions of Americans are still facing 
hardships and turning to State and local governments at a time 
when governments are cutting back on services. Again, it is 
critical for governments at every level to identify savings to 
improve the services they offer.
    While most Stat initiatives have been well received as 
efforts to institutionalize good management practices, some 
concerns have been raised about agency capacity and workload 
and the limitations of the data that is collected. However, 
critics cannot deny that the Stat model has enhanced 
transparency between high-level officials and the 
organizations' operating units. One of the things I hope the 
Governor will at least comment on is, in moving toward this 
Stat model, whether part of encouraging the work force is also 
to look at ways you would eliminate some of the past data 
collection efforts that might not be useful data.
    I believe the model is working, and I believe that we can 
at the Federal level learn a lot about what is going on, not 
only at the State level here, but in our second panel when we 
get to what is going on at the county and city level as well.
    So, with that, I will turn to my colleague Senator Cardin 
and then Congressman Sarbanes for comments, and then we will 
get to the panel.

              OPENING STATEMENT OF SENATOR CARDIN

    Senator Cardin. Well, first, Governor O'Malley, thank you 
for your hospitality in allowing us to use this historic State 
House for our Committee hearing. I cannot think of a more 
appropriate place, so thank you very much for your hospitality.
    Senator Warner, I want to thank you and congratulate you 
for your leadership.
    This task force was the recommendation of Senator Warner. 
Senator Warner brings a wealth of experience in Government 
management to his position as the Senator from Virginia, and he 
is looked upon by his colleagues in the U.S. Senate as a person 
who can lead us in the right direction in trying to get a 
handle on our most important responsibility, and that is 
Government oversight, accountability, performance standards, 
spending the taxpayers' money in a correct way, not only in the 
allocation of priorities but in the manner in which those 
dollars are spent. So I thank Senator Warner for his 
leadership.
    It is nice to have Congressman Sarbanes with us. 
Congressman Sarbanes is my Congressman, and I think he is doing 
a great job in the U.S. Congress. It is always nice to be with 
him.
    To Ike Leggett, our county executive from Montgomery 
County, who has one of the toughest jobs in America, the size 
of his county, the complexity, and demands of his constituency 
are second to none, and he does an incredible job in managing 
resources with very, very high expectations from the people who 
live in Montgomery County. County Executive Leggett is meeting 
those expectations. So it is nice to have all of our colleagues 
here.
    Our State is home to more than 50 Federal agencies, 
including the Census Bureau in Prince George's County; the Food 
and Drug Administration, the National Institutes of Health in 
Montgomery County; the National Security Agency in Anne Arundel 
County; and the Centers for Medicare and Medicaid Services and 
the Social Security Administration in Baltimore County. In all, 
more than 132,000 Federal employees, many of whom, work in 
Washington, D.C., reside in the State of Maryland.
    The Task Force on Government Performance represents an 
opportunity for us to evaluate how effectively Government is 
functioning and to examine the mission assigned to our Federal 
employees and whether they are given the necessary tools and 
resources to fulfill it. Whether by increasing agencies' 
coordination, improving management, or streamlining hiring or 
other personnel practices, our efforts in Congress in 
conjunction with those of the Obama administration can improve 
the outlook on both of these fronts.
    I am honored to serve on the Budget Committee. One of the 
most important responsibilities of the Congress is to pass a 
budget to establish the priorities of our Government. But it is 
more than just establishing our priorities. The Budget 
Committee is also responsible for the budget process, to make 
sure that we have efficiency and accountability in the manner 
in which we determine the budget for the Nation. And that is 
why this task force is so important. These are most challenging 
times with unprecedented deficits and, to be a little gentle 
about this, skepticism among our constituents as to how well 
Government is doing its work. It is even more important than 
ever for the work of this task force to restore the type of 
confidence necessary for us to be able to govern. So I think 
all the work that we are doing is very, very important.
    I just want to point out that our witnesses today can be 
extremely helpful. As mayor of Baltimore and then Governor, 
Martin O'Malley has been nationally recognized for developing 
tools to quantitatively measure performance. Two of his 
initiatives, CitiStat and StateStat, use data to increase 
accountability, transparency, and cooperation between agencies. 
These initiatives have been studied by international 
organizations and local governments across the country, and 
they have been recognized by the Harvard Kennedy School of 
Government. In addition, Lieutenant Governor Brown has 
developed BRACStat to evaluate the BRAC-related progress in our 
State.
    Now, Senator Warner, let me tell you, I have seen Governor 
O'Malley use the Stat process, and I must tell you, I haveten 
there a little bit early and I've seen the administrative heads 
come into the meeting a little worried and concerned, because 
they know that either Mayor O'Malley or Governor O'Malley has 
really studied the material and expects to see performance 
improvement. He does not just have one meeting and then 2 years 
later have another meeting. He has regular meetings with his 
department heads, using the information with expectations as to 
how he can improve performance, and having the administrators 
sign off on what Stats should be improved at the next meeting. 
And then when they show up at the next meeting, the Governor 
will quiz them as to whether they have accomplished that 
increase. And I must tell you, it has been extremely effective. 
I think Governor O'Malley is one of the most effective 
Governors not only in the history of our State but I think in 
our Nation in using hese performance evaluations to make sure 
taxpayer money is being properly spent.
    We can learn a lot at the Federal level from what has been 
done in Maryland and what has been done in Montgomery County, 
Maryland. I understand that the State budget is $32 billion and 
the Federal budget is $3.5 trillion. But we can learn from how 
things are done at the State level. The Montgomery County 
budget is--I have your budget here, Ike--$4.6 billion. Now, 
that is a lot of money by anybody's calculation. Again, we are 
dealing with multi-trillion-dollar Federal budgets. But if we 
do not break it down to smaller elements, we will never really 
get the type of efficiency and accountability needed.
    So I really do think we can take the best practices from 
Montgomery County, the best practices from Baltimore City, the 
best practices from the State of Maryland, and we can do much 
better at the Federal level, and that is why I was so pleased 
that this hearing was scheduled here in Annapolis.
    Let me just give a little advance warning to the three 
witnesses. There are three areas that I will be asking specific 
questions about.
    We will not have a Government that performs at its highest 
potential without a work force that is given the opportunity to 
perform at that level as well. Interestingly, employee 
performance management dates back to 1883 when the Civil 
Service Act established a merit system to handle promotions. 
This is a longstanding reform effort that continues today. I 
will be interested in hearing how our witnesses have modified 
your personnel practices, including retention strategies, 
training, and merit increases as a result of the information 
you gather from your performance evaluation programs. In other 
words, how are we putting information into practice to best 
incentivize our workers to do the work that we want them to?
    Second, as the world's largest buyer of goods and services, 
with purchases of more than $425 billion each year, the Federal 
Government has an unparalleled opportunity to promote 
efficiency and entrepreneurship through awarding contracts to 
American small businesses. We have a Federal set-aside program; 
23 percent of the Government's procurements are targeted at 
small firms, and individual agencies have goals set in 
coordination with SBA for contracts with veteran-, women-, and 
minority-owned firms.
    Unfortunately, our record of meeting these goals is spotty. 
Last year, only one agency--GSA--met its goals in all areas, 
and two agencies--OPM and USAID--met none of their goals. So as 
a member of the Small Business Committee, I believe these set-
asides are critically important for economic growth in our 
community, for creating jobs, and for encouraging the type of 
innovation that comes from small businesses.
    How can these performance evaluations can be used to help 
us meet the goals for small business contracting; what 
obstacles you have encountered in meeting those goals; and what 
strategies are you developing to improve Government performance 
in this area?
    And the third area I would like to talk to you about is the 
coordination between the legislative and executive branches. 
Senator Warner talks about this frequently. If we are going to 
be successful, we have to be on the same page. You can do a lot 
of work in identifying issues, at the Executive level, but if 
we do not enact the policies or support you with our actions, 
then the executive actions will be overruled by the efforts 
made by the legislative branch. How can we get the legislative 
and executive branches on the same script to make Government 
work more accountably? Also, I would be interested in your 
observations as to how your findings have been used by the 
General Assembly or by the County Council in implementing the 
type of policy changes that reflect the good work that you have 
done with your staff programs.
    With that, Mr. Chairman, I look forward to our witnesses 
and look forward to the exchange we will have after their 
testimony.
    Senator Warner. Thank you, Senator Cardin. Thank you for 
your leadership on this issue. And setting out, I know, 
Governor, we are going to have a few questions for you 
afterwards.
    Congressman Sarbanes?

           OPENING STATEMENT OF CONGRESSMAN SARBANES

    Mr. Sarbanes. Thank you very much, Senator Warner. I am 
going to keep my remarks brief because I want to hear from the 
Governor and from the other witnesses. But I appreciate the 
opportunity to participate in the hearing today. I think all 
the witnesses are going to give us some good information about 
how the Federal Government can model some of our practices 
after what you have done at the State level and the county 
level to improve efficiency. I have been very involved on the 
House side with procurement reform, which is designed to do 
this, and I will have some questions along those lines when we 
get to that part of the hearing.
    I do want to salute the Governor, though, because he has 
been a leader on this from day one. And I will tell you the 
impact it had in Baltimore City, because when CitiStat was 
started, I was still in the private sector, and the effect it 
had on the private sector's perspective on the public sector 
was tremendous. In other words, when the private sector saw the 
kinds of efficiencies and the management improvements that came 
from CitiStat, it made the private sector more willing to step 
up in the partnership with the city. And I think that is one of 
the things that we can gain from this. If there is a perception 
that Government is managing its affairs in an efficient way, 
that is going to promote more collaboration between the private 
sector and the Government sector.
    Then the last thing I just wanted to mention is I do not 
think anyone understands better than this Governor how you have 
to never forget what the stats are about. It is easy to become 
mesmerized by the Stat model, but at the end of the day it is 
about using it to improve the quality of lives, in this case of 
Marylanders, and help them get through their day and do the 
right thing for Maryland families. And the Governor has always 
understood that this is just a tool to that end.
    So we are really looking forward to your testimony today, 
Governor, and I yield back.
    Senator Warner. Thank you, Congressman Sarbanes.
    You have heard this line from me before, but as the former 
co-founder of Nextel, it does not offend me at all if cell 
phones go off during hearings like this.
    [Laughter.]
    Senator Warner. One quick last comment before I introduce 
the Governor, and that is just picking up on what both Senator 
Cardin and Congressman Sarbanes have said. I want to hear your 
testimony, but I want to also commend you because you have to 
be relentless on this stuff. You know, everybody talks about 
saving money. Everybody talks about bringing efficiency. But 
this is hard work, and to try to keep whether it is your 
legislators, your work force, the press interested, people's 
eyes glaze over when you start talking about some of these 
performance metrics. But since this is now 10 years that you 
have been at it, I salute you for your efforts.
    Our first panelist will be Governor Martin O'Malley. He has 
a long history of public service. He served as Assistant 
State's Attorney for Baltimore City, a member of the Baltimore 
City Council, and eventually mayor of Baltimore City. Governor 
O'Malley has been a real innovator in the area of performance 
measurement and management in Maryland, building and improving 
upon the Stat model that he started during his tenure as mayor. 
His administration has been focused on developing goals for the 
State of Maryland to achieve real results. The Governor has 
also received national recognition for his and Maryland's 
implementation of the American Recovery and Reinvestment Act 
funds.
    Governor, we are again pleased that you were willing to 
host us here. We are anxious to hear your testimony, and the 
floor is now yours.

STATEMENT OF THE HONORABLE MARTIN J. O'MALLEY, GOVERNOR, STATE 
                          OF MARYLAND

    Governor O'Malley. Mr. Chairman, thank you very much. We 
are flattered by your visit to Baltimore and for bringing the 
Committee here, and I also want to thank Senator Cardin for his 
very kind words and also Congressman Sarbanes, and also for 
their leadership. I have a great delegation. You do not mind if 
I brag about them a little bit. I do not think there is another 
Governor in America that has a delegation as strong as our 
delegation is in Maryland, and, again, we really appreciate 
your leadership on these issues. And I personally appreciate, 
Senator Warner, when you were Governor Warner, that you took 
the time to spend with me and gave me some great advice as I 
was taking over the responsibility and the trust of running our 
State government. And I welcome you to the oldest State capital 
in America in continuous legislative use, and I am also looking 
forward to hearing Ike Leggett's testimony, who has really 
picked up the Stat model, run with it at the county level in a 
very large and complex county, and he is one of the best county 
executives in the country and is taking my home county to 
another level.
    In times when governments are finding an increased 
necessity to do more with less, measuring performance is more 
important than ever, and the topic of this Task Force on 
Government Performance could not be more important than it is 
right now. I believe that our Government should actually work 
to protect our quality of life, improve our quality of live, 
and improve the conditions that allow us to create jobs, save 
jobs, and that allow small businesses to create and save jobs. 
And having a functioning, livable city or State, making timely 
investments in effective ways in the talents of our people and 
the health of our people is all a part of that.
    The things that get measured are the things that get done. 
We have heard that said time and again. But it does require 
that expectation of progress, and it does require a relentless 
system that forces human beings into the same room to actually 
coordinate, cooperate, communicate, and find ways to make 
things better even though there might be a lot less dollars to 
do them this quarter than there were the last quarter.
    It is hard to believe that it has been 10 years since we 
began that first CitiStat meeting in the city of Baltimore, and 
Congressman Sarbanes reminded me of the perspective of business 
people. That room was visited so often during my 7 years that I 
served the people as mayor there, and people coming from 
government, Chairman Warner, would come into that room, and 
they would say, ``I cannot believe you guys are doing this.'' 
Then people from business would come into that room, and they 
would say, ``Thank God you guys are finally doing this.''
    Today, if you plug the term ``CitiStat'' or ``CompStat'' 
into Google, you will see them popping up all across the 
country, in big cities and small. It is a testament to any good 
idea when people want to adopt it, which is what we did at the 
inception of CitiStat, actually adapting and bringing home the 
tenets which helped New York City's Police Department achieve 
such dramatic reductions in crime under the leadership of 
Commissioner Bratton and also Deputy Commissioner Maple.
    The Stat model which we have brought with us to State 
government merges emerging technologies that we just did not 
have in widespread use 10, 15 years ago, like GIS, geographic 
information-based systems, with certain timeless human 
principles, mainly setting goals openly and accountably 
measuring progress, and on that one, Jack Maple would say 
everyone, when you say that second one, measure progress openly 
and accountably so that everybody has the information, you will 
always get pushback. People say, well, you mean some people get 
the information. No. All people get the information, and the 
most important people that need to be able to see that 
information is the public, which we can now do because of the 
Internet, and broadly sharing information rather than hoarding 
it, finding the willingness to change course when necessary to 
move our graphs in the right direction before a headline or a 
bad story tells you that it is not going in the right 
direction.
    Governments tends to do, have traditionally done a decent 
job of measuring inputs: how much we are budgeting for a 
specific priority. But the Stat model is really governance by 
outputs--measuring how effectively and efficiently we are 
delivering results, taking action to get better results.
    I enjoy laying out these two tenets of city government and 
human nature. They are timeless, actually. These were the old 
tenets of city government, and it was true across the country, 
and it was true in our State government. If the Governor really 
wants to know, we can find out, but we will have to pull all 
our people off their other jobs and it will take weeks.
    Tenet number 2, we will get to it as soon as we can, but it 
will take a few months longer because our budget was cut last 
year.
    Tenet number 3, my favorite, that is the way we have always 
done it, or we are already doing that, or we tried that and it 
did not work. And how many of us have heard all of those 
things.
    Or the fourth one that Senator Warner alluded to, I hope 
the legislature forgets about this before next year's budget 
hearing. This cannot be episodic. It has to be a system.
    When faced with the adversity of turning around the public 
safety situation in the city of Baltimore, these were the new 
tenets, the Stat tenets that we used there, that we use here. 
Timely, accurate intelligence or information shared by all, and 
all means all, including the public, not just top managers, 
including workers, not just top managers; rapid deployment of 
resources; effective tactics and strategies; and relentless 
followup and assessment.
    When we faced the adversity of turning our city around from 
violence and addiction, schools that had been failing for a 
long time where not even one grade was majority proficient in 
reading or math, tons of vacant houses in neighborhoods with a 
lot of vacant hearts, and we began measuring and geo-mapping 
every conceivable service problem and opportunity. And the 
great thing about the map is a map does not know whether a 
neighborhood is black or white or rich or poor, Democratic or 
Republican. The map tells us where our opportunities are and, 
therefore, where we need to deploy our limited resources to 
take advantage of those opportunities for improving our quality 
of life.
    This is an example of our pothole map. We have a map for 
that. We were accused in the early days by a former mayor of 
Baltimore of not having any vision, so we came out with the 48-
hour pothole guarantee, and we were able to hit it with a 98-
percent success rate, and part of that was because we already 
knew we were hitting it in 53 hours. And so people rise to 
those higher expectations.
    Another example, sadly, we call it the kidneys of death. 
This shows the concentration of homicides and shootings in the 
city of Baltimore in 1999 and then 2000, 2001, 2002, 2003. You 
get the point. Baltimore over the last 10 years has achieved 
the biggest reduction of Part 1 crimes--that is, violent and 
property crimes--of any of the major cities in America. We are 
third in violent crime reduction, only behind Los Angeles and 
New York, thanks to courageous police officers and thanks to a 
much better system of timely, accurate information, relentless 
follow-up, tactics, strategies, and making the graphs move in 
the right direction.
    Let me run you fast-forward through some of the examples of 
this as we have been applying it to State government, where 
oftentimes, as the Senator knows, and actually both Senators 
know from both having worked at the highest ranks of State 
government, a lot of times the movement from municipal services 
or county services to State government becomes more complex, 
less immediate to the eye, and can sometimes defy measurement. 
But we still subscribe to Jack Maple's belief that everything 
can be measured.
    So through the State Stat process, senior staff and I meet 
with key agency leaders not once a year or once a quarter but 
every single month to track our progress, to share information, 
to determine where things are working, and where we need to do 
better. And our delivery unit works with agencies every day to 
help them deliver better results around big goals that we have 
openly set for our States--15 major goals, dozens of sub-goals. 
And there are some who warn against setting big goals: It is 
political precarious. What happens if you do not hit your goal? 
Everybody will say, Aha, you only got three-quarters of the way 
there. I find that people are pretty smart, and they would much 
rather have a government that is setting goals and sometimes 
falling short than a government that is not setting any goals 
and is instead slipping backward. We have exceeded some goals, 
and some we have not hit, but always we move forward in an open 
and transparent way.
    Over the past 4 years, we have been able, together with law 
enforcement, to drive down violent crime in Maryland to its 
lowest level since 1975, including the steepest 3-year 
reduction in homicides, I think, over these last 3 years, 
driven homicides to their lowest rate since 1975. Our violence 
prevention initiative, we now track the most violent offenders 
who statistics and probabilities tell us have the highest 
propensity to commit further acts of violence if they are not 
tightly monitored, and so that is what we now do.
    When we took office, we found that our predecessors had 
allowed a backlog of 24,000 unanalyzed DNA samples to collect 
dust, had neglected to collect an additional 15,000 that were 
legally mandated, samples that were to have been taken from 
people that have been convicted. We used our State Stat process 
to guide our efforts to eliminate both of these backlogs, and 
since that time, we have made 245 arrests of some pretty bad 
actors that would not have been made had we not knocked out 
that backlog of DNA samples, uploaded them so that law 
enforcement could clear those cases.
    We have also created a public safety dashboard where we are 
integrating--boy, this is a nightmare graph, isn't it? Our 
public safety dashboard has led to the integration of data that 
we had always had, had always collected, but had never been 
accessible to a law enforcement officer who is working a case 
with one click of a button. We have now put together data from 
our prison system, parole, probation, firearm registries, our 
fingerprint systems, mug shots, DNA, motor vehicle records, 
taxation records, and many other sources, and all a law 
enforcement officer needs is a user name and password to have 
real access to all of that data in realtime. We are now 
receiving 25,000 to 40,000 queries a day from 100 different 
agencies all around the State. It is almost like Google for 
crime solving where we have been able to put together this 
data. NASA actually came to see how some smart people forced to 
meet relentlessly without any additional money came out with 
clever ways within existing budgets to piece this together.
    The Department of Public Safety and Correctional Services, 
we have been able to reduce overtime by 20 percent. It did not 
happen overnight. It happened by measuring it every week, every 
day, every 2 weeks, and when you look over your shoulder, you 
save $10 million in overtime by constantly doing the little 
things that together get you the big results over time.
    You might have heard some of the ads in the 
telecommunications industry. There is a map for that. You could 
summarize our strategy as that we are geo-mapping everything. 
One person explained it to me this way: We always hear about 
the pyramids of human organizations, in this case different 
departments, and those pyramids, you could spend a lifetime 
trying to connect through IT solutions up and down that pyramid 
with the complexity of individuals doing complex jobs up and 
down that pyramid. But if the base of all of those pyramids has 
to land on a common map with GIS, with coordinates, people 
start organizing their information in such a way that those 
efforts become integrated and collated together.
    We have created for the first time in our State a number of 
GIS maps. We have created a base iMap. We have created 
GreenPrint and AgPrint through which we now have done an 
ecological ranking of every parcel of land in the State of 
Maryland so that when we preserve land or use precious dollars 
for the preservation of open space, we are able to give the 
public an objective criteria ranking this. You can pull it up 
in your own county and see in a dashboard type way how much of 
our GreenPrint have we preserved, how much remains to be 
preserved, in order for the bay to have a fighting chance at 
functioning.
    We have done the same thing with our agriculture lands to 
better see where those lands are so hopefully at the county 
levels and municipal levels we can better protect contiguous 
farm economies that still, thank goodness, exist in our State 
and that we need, that our ecosystem needs to breathe, and that 
all of us need in order to buy local and sustain ourselves in 
better ways for the environment.
    For the first time in our State, we are also mapping now 
our capital budget so citizens can click on and see where the 
dollars are being invested in their neighborhood. We are using 
BayStat to guide our efforts to restore the Chesapeake Bay. 
This is one slide from that map which shows the sources of 
nitrogen, phosphorous--no, in this case it is actually just the 
nitrogen and the sectors that contribute to that. Whether it is 
wastewater treatment plants, farms, stormwater run-off, septic 
systems, or the forests, we can click on to any of those ten 
tributaries and show you how it differs from one area to 
another. And we also have about 26 solutions that we track on a 
tributary-by-tributary basis. This one is commodity cover crops 
in order to keep the nitrogen from rolling off over the course 
of the winter.
    The Federal Government has now adopted a BayStat initiative 
for their own drive to help us clean up the Chesapeake Bay and 
get in all six of the watershed States to agree to two things: 
One of them was the 2-year milestones, critically important. 
Things that get watched are the things that get done, if you 
measure them and you have deadline. And so now instead of a 20-
year deadline, we have 2-year milestones so we will know 
whether we are hitting it, whether we are not hitting it. And 
also the Federal Government is creating ChesapeakeStat, which 
is a GIS-based system, so that all of these six States can also 
coordinate and cooperate.
    This is from our 2-year plan on--our 2-year milestone. The 
green line is where we are trying to move. The red line is the 
human activity across all of those various actions from cover 
crops to upgrading stormwater rules and regs, upgrading 
wastewater treatment plants, installing more modern septic 
systems, getting communities off of septics and on to sewer. 
And so we have set 2-year milestones, and we are committed not 
only to holding ourselves accountable but really the value of 
this is not--the value of this is that the public--that we are 
able to hold one another accountable as neighbors for what it 
is that are common platform that we call our State government, 
or in this case our county, State, and Federal Government is 
doing, what we are doing together to improve our quality of 
life.
    Beth, let us click through the Recovery and Reinvestment 
Act. President Obama and Congress very courageously and rightly 
passed the Recovery and Reinvestment Act. Had we not done that, 
we would all be sitting in the middle, in the depths of the 
second Great Depression instead of debating whether we were 
moving quickly enough into recovery. We took the President's 
challenge on the Recovery and Reinvestment Act very seriously. 
He challenged all of the Governors to make sure that we measure 
performance at a level of openness and transparency the likes 
of which we had never seen before. Fortunately, we already had 
the iMap in place, so we were able to just plug in the dollars 
that came to the State. We used StateStat and our first in the 
Nation iMap to target those Recovery and Reinvestment Act 
dollars, to rapidly deploy the resources, to ensure that we 
were hitting our goals for Minority Business Enterprise when we 
award these contracts, and to guard against the possibility of 
waste, fraud, and abuse. And we believe that the best elixir 
against waste, fraud, and abuse is openness and transparency.
    Information shared by just the legislature? No. Information 
shared by all. Just by the legislature and the managers and the 
county executives? No. Shared by all. The press that serves the 
public, the public themselves that is served by all of us.
    Beth Blauer, our StateStat director, is demonstrating our 
recovery website. It has been rated the No. 1 site in America. 
The head of President Obama's Recovery Act and Transportation 
and Accountability Board has cited our mapping initiatives as 
the basis for those that are now being implemented by the 
Federal Government.
    Beth, what do you want to tell us here? We are clicking on 
to any of those icons that can tell you in transportation, in 
Montgomery County. This is a resurfacing project. It is on I-
495, Potomac River Bridge to 270, construction costs--hold on 
just a second. My old eyes. What is that, 7.48?
    Ms. Blauer. 7.49.
    Governor O'Malley. 7.49. Estimated jobs is----
    Ms. Blauer. It is 98.
    Governor O'Malley. 98.
    Ms. Blauer. It was advertised.
    Governor O'Malley. Advertised on February 17, 2009. There 
is the bid date. There is the--what is the NTP?
    Ms. Blauer. Notice to Proceed.
    Governor O'Malley. Notice to Proceed date. And there is the 
MBE goal, 18.9 percent on this particular contract.
    We have used this on our MBE program. You know, we have 
long had, thanks to Parren Mitchell's leadership, the highest 
MBE goals of any State in the Nation, but for the first time, 
we actually believe we are going to hit that 25-percent goal 
this year. It did not happen in the first year, it did not 
happen in the second year. But every year we got closer.
    What are you showing me here, Beth?
    Ms. Blauer. This is the MBE attainment for just ARRA----
    Governor O'Malley. I am sorry. I did not see that you had a 
microphone. You might pull that over for--that is why I was 
repeating as you were whispering in my ear.
    Ms. Blauer. Each quarter we also put out the MBE 
performance for all of the ARRA contracts separately on their 
map so you could see where we are toward our goal for just ARRA 
spending.
    Governor O'Malley. The nice thing about this is you can go 
into--any person in any county can go on this at home and say 
those Recovery and Reinvestment Act dollars, where are those? 
What are those projects? Let me click on it.
    It is also a way that we are able to make sure that those 
dollars are being invested in a way that is fair to all the 
jurisdictions, that does not leave our rural Maryland or inner 
Beltway in the Washington area or the city of Baltimore.
    As I close, I just want to whip through a few more examples 
of some of my favorite sites, which are graphs that are moving 
in the right direction. Mr. Chairman, we have graphs that move 
in the wrong direction. We have chosen not to share them with 
the Committee today.
    [Laughter.]
    Governor O'Malley. Reducing the number of children placed 
in--are we OK, Beth?
    Ms. Blauer. Yes, we are good.
    Governor O'Malley. Reducing the number of children who are 
placed in group homes. Instead, we drive up adoptions, drive up 
other things so the children--because place matters.
    Cracking down on Medicaid fraud, moving in the right 
direction.
    Inmates participating in employment programs so they have 
some sort of job skill and hope when they come out instead of a 
higher likelihood of recidivism, moving in the right direction.
    Energy performance contracts, something we never did in the 
State until recently, moving in the right direction.
    Reducing fatalities on our highways, moving in the right 
direction, and if you save just one life, it is as if you have 
saved the world.
    Expanding health care coverage to more of our fellow 
citizens rather than fewer, moving in the right direction.
    Robert Kennedy once said that there is no basic 
inconsistency between ideals and realistic possibilities, no 
separation between the deepest desires of the heart and of mind 
and the rational application of human effort to human problems. 
And that is what this system is all about, is the rational 
application of human effort to human problems. And that is what 
performance-based government is about, and, again, thank you so 
very, very much for coming to Maryland and bringing your 
Committee here.
    [The prepared statement of Governor O'Malley follows:]

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    Senator Warner. Thank you, Governor O'Malley. Thank you for 
your presentation. In respect of your time, we will try to make 
sure each of us takes 5 or 6 minutes in our question period, 
and particular kudos on not only the whole presentation but the 
data you have on the Recovery and Reinvestment Act. It is so 
critical because I think--I can only speak for my State--a lot 
of folks did not understand what that act involved, did not 
understand it was the third largest tax cut in American 
history, did not understand the dollars that went to the State 
or other programs, and what you have done with ARRA funds is to 
be commended. Also on MBE, that was an area that we were 
woefully behind in Virginia in just not having data, and being 
able to do that buy project, I give you great congratulations.
    Governor, you tried this model out at the city level where 
you could get your arms around it. You grew it to the State 
level. We are thinking now about how do we take it to the 
Federal level. I guess I have a two-part question as my first 
question.
    One, advice or counsel to us as we try to think about how 
we implement this or implement portions of this at the Federal 
level. Should it be done on a holistic basis? Because you set 
15 policy goals broadly as your basic function to start the 
whole process. Or recognizing the enormity of the Federal 
Government, would you recommend taking it in chunks as opposed 
to Federal Government-wide? And could you also talk for a 
moment about, as you get these goals and as you lay out these 
details, clearly they do not all fit into an exact silo of a 
particular department, so you have to have these goals embraced 
by, I would imagine, agency leadership beyond a particular 
agency. So how did you get at that cross-cutting ability to get 
all of your various silos to work together on these common 
goals?
    Governor O'Malley. I would say the two biggest--the 
foundational decisions we made as CitiStat started ramping up 
was that we were all going to use a common GIS map, and we were 
all going to use a common template for reporting information.
    Now, we did not care what you labeled these columns, but 
those were the two standards that we really insisted upon. And 
it took a little while because some departments would come and 
say, ``Oh, but we really like our software and the way we have 
done our map.''
    ``Well, we are sure you do, but we are going to use''--I 
think it was the Department of Public Works that picked the 
best GIS system. That can only come about, I think, with strong 
executive insistence. If you leave it to people to do it on 
their own, I think you are in for trouble. It is like trying to 
run a railroad on 25 different gauges of track. You have to 
have one gauge of track. You have to have one map. You have to 
have one common template that then can be shared among all the 
departments, and something that is as user-friendly, as off-
the-shelf as possible. People would come from other cities and 
be shocked at how cost-neutral we were able to ramp up the 
CitiStat process. Well, that is because we used off-the-shelf 
software. The GIS map at the time was a new thing, but that is 
pretty ubiquitous now.
    Ms. Blauer. Our application, if another State wanted to 
come in and replicate what we have done with RecoveryStat, all 
of the application is free. You can just go onto a resource 
page and download it. So it is a very minimal cost, and most 
States already have pretty well developed GIS programs, and all 
they need to do is just basically download the application.
    Governor O'Malley. Now, having said that, we did ramp up 
one department at a time. I mean, there are only so many hours 
in a 14-day cycle, and so we did ramp up those meetings adding 
a new department every few weeks for that first year. And so we 
added the departments one at a time, but it was only after we 
let them know, You are coming, here is your turn in the queue, 
you might want to think about what the primary colors of 
measurement are.
    One of the things that we learned--I think it was--someone 
on the panel talked about how you can become mesmerized with 
the--John was saying you become mesmerized with all the things 
you can measure now that you could not measure before. You have 
really got to hone in on the main goals, especially in order to 
get cross-departmental collaboration. At the municipal level, 
our mission statement was a cleaner, healthier city, better 
place for kids, a place where people want to invest and grow 
their businesses. Those were our big goals, and every 
department knew they had to contribute to those in some ways.
    At the departmental level, in solid waste, one of the 
things we did was to--we had a competition before Christmas, 
not on A to Z performance measurement, but the primary colors, 
if you will, of solid waste becoming better: the tonnage they 
collect, fewer citizen complaints, less absenteeism and, 
therefore, less overtime. And based on those four things, I 
think the Abell Foundation gave us some cash incentives for the 
crews that could finish first, second, third. The crew that 
went from last place to first place, that actually happened. 
One crew that was in last place stayed in last place, I believe 
made more overtime by keeping their absenteeism high and their 
unexcused absences than if they had gone after the prize.
    But the thing that we have done at the State level was to 
create a unit that we borrowed from Tony Blair called the 
Delivery Unit. In our State government, we used to have--there 
was really no robust policy office. We never had one. No 
Governor ever had one. But out of legislative frustration, the 
legislature would see that we were not coordinating in ways 
that would allow us to grow in a smarter way between 
transportation, housing, planning, and other departments, so 
they created by legislative initiative, usually--although this 
one, I think, came from Governor Glendenning--Office of Smart 
Growth. We would see that we were not coordinating like we 
should across social services, education, health in order to 
protect children, youth, and families, so we created an Office 
of Children, Youth, and Families. So we consolidated those 
offices.
    Another one, Governor's Office of Crime Control and 
Prevention. Well, why do we need that office? Because we are 
not cooperating in order to control crime and prevent crime 
across rec. departments and police and the like.
    So we have consolidated all of those now into a delivery 
unit in State government that works in conjunction with the 
performance measurement around 15 big goals and links together 
what is a much more attenuated chain of delivering results at 
the State level than we had, say, in filling that pothole, 
which took about three steps. You know, a person calls, the 
crew goes.
    Senator Warner. Let me ask one more, recognizing I want to 
get my colleagues time in, too. We actually did have Michael 
Barber come in and talk to us about the Delivery Unit model 
from the U.K., which was very helpful. But one of the things, 
just as Senator Cardin and I have delved into this, we see at 
the Federal level, every new administration reinvents the wheel 
on what performance management and performance metrics ought to 
be. Go back. Clinton had one, Bush had one, President Obama has 
got one now. And one of the things we are hoping, working with 
President Obama's administration, is with a legislative partner 
we can institutionalize this.
    Talk to me a little bit about how--you have talked for a 
moment about how you get the public involved, but how do you 
keep the press involved as using this as a way to measure your 
performance? How do you get your legislators to buy into that 
these are the right measurement tools and that they could all 
argue if you agree that the charts ought to be going this way, 
you can argue about how you get there, but if you at least 
agree on what the common framework is, you are halfway through 
the battle. I mean, have you found ways to try to bring your 
legislature involved in this? Have you found ways to keep the 
press and the public actively engaged?
    Governor O'Malley. The city council, we were able to get 
them on board by giving them all portals so that they could 
access--we created a 3-1-1 system on the front end for city 
services as well. So that is how we got the city council on 
board when they were a little bit concerned that we might be 
cutting them out of the constituent service business. The 
openness and the transparency allows everybody to use it.
    The legislature here has embraced it. It has been very 
supportive of it, appreciative that they can come to the 
meetings if they like and see whether we are moving in the 
right direction or not. I hope over time it informs better 
legislative policy if we continue to keep it going and open and 
transparent.
    The media has been a tougher sell because some of this 
stuff, if you only look at it incrementally, can be like 
watching the paint dry and not the stuff that in an overworked 
press corps makes the headlines. We are trying to drive more 
and more people to the website, and it has been a bit of a 
frustration--I should not say frustration. We have yet to 
really communicate to the public just how much more open, 
transparent, and accessible their State government has been 
made. The Recovery and Reinvestment opportunity was a good shot 
at that, doing some of the town halls around it.
    Beth, did you want to chime in on something?
    Ms. Blauer. I think also we have for the first time all of 
the data and summaries of what happens in the meetings is 
available on the website as well. So we certainly--States that 
have been asked to come and meet with legislators during the 
session as they are articulating their ideas before the 
session, we were brought in. And this session was really 
probably the first time where we really spent a lot of time 
sharing the information and explaining how to access the 
information that is available on our website.
    Governor O'Malley. We had been putting it on the website in 
such a dense way that nobody could sort through it. So now we 
haveten a little better at boiling it down and giving people 
more sort of the executive dashboard summaries like I receive 
when I go into a meeting and sit there. This is how they look. 
It is in English. You have the charts and the graphs. Hopefully 
more and more people--we find our labor leaders will look at 
this site a lot more than anybody else does. And some of the 
things we are doing on stewardship with the bay is driving a 
lot of traffic to the BayStat website and a little bit to this 
website as well: Marylanders plant trees, Marylanders grow 
oysters, and children and nature, and those sorts of thing.
    Senator Warner. We appreciate it. I personally appreciate 
it. I hope you will stick to it, and with that, Senator Cardin?
    Senator Cardin. Well, thank you, Governor O'Malley. I am 
always impressed by, and enjoy watching, your the 
presentations. I have looked at it many times, and it is very 
impressive, and it really does help the public to understand 
what you are trying to get done. It gives them more confidence 
that you are trying to use resources in a most effective way.
    I want to followup on Senator Warner's point about how the 
legislature and executive can be on the same page on this. You 
have given many examples in which legislators have been part of 
the process. They have had a chance to see the statistical 
information. They have had a chance to challenge whether you 
are using the correct barometers, and you have been receptive 
to their comments.
    But let me just challenge you as a former House of 
Delegates speaker and as a former State about legislator how we 
judge the independence of the legislative branch of Government. 
Probably there is no more clear place in the Maryland budget 
process than in the capital budget. And you have indicated you 
are putting more information up on the capital budget right 
now.
    I am curious as to how your evaluation process would be 
used. If your evaluation process shows that you are getting a 
better return for the public dollar in one area of Maryland 
versus another, but yet your political challenge is from the 
legislature, particularly on the capital budget, which can 
alter the Governor's budget, how do you resolve that? What have 
you learned about how to get legislators to overcome their 
local bias or their political bias to work together to use the 
public resources as efficiently as possible to get the best 
results for the citizens of Maryland?
    Governor O'Malley. You are clicking on the live map?
    Ms. Blauer. Yes.
    Governor O'Malley. I have found whether it was tough 
decisions like closing firehouses in the city of Baltimore or 
the tough decisions like the capital allocations in the budget, 
if everyone can see where the dollars have landed and where the 
investments have gone, and if you have done it to the best of 
your ability, in a way that is fair and equitable, and also 
promotes the statewide one Maryland policy goal, that takes a 
lot of the pushback that you would otherwise--that is otherwise 
part of the legislative process. Let me say that another way.
    In our State--and I will not name any counties, but you 
know that there is always a reason why ever major county or 
rural areas believe that they are not treated as fairly by the 
Governor, whoever the Governor is, because--and then you fill 
in the blank: Because we are so loyal and Democratic, you take 
us for granted. Because we are poorer than other jurisdictions, 
you take us for granted. Because we have more wealth than other 
jurisdictions, you take us for granted.
    But when you actually put it out on the map and everybody 
can see that they are not getting shortchanged and that their 
neighbor is doing better than they are on the merits of things, 
that I have found to be the single most helpful--one of the 
single most helpful tools in getting through these tough 
budgetary times and the cuts is the fairness that the map so 
brings home. The willingness to have yourself held open and 
accountable and audited by that map, by showing where the 
dollars are landing.
    I saw a great demonstration of this. Jack Dangermond, who 
is the head of a company called ESRI--it is the company that 
does all of our GIS thing, great company. He was showing Ed 
Rendell, Governor Rendell, who is a big-time advocate for 
transportation funding and making sure the dollars get to the 
right places, and he had a map of a State that showed where the 
most structurally deficient bridges are. He did an overlay on 
that map to show where the greatest numbers of people travel 
over those structurally deficient bridges. And then he overlaid 
on top of that where the Federal dollars for structurally 
deficient bridges go. And when he clicked that third 
application, the dollars were all over the map instead of 
landing on the targets, to which Governor Rendell rightly said, 
``None of the money is landing on the targets.'' To which Jack 
Dangermond responded, ``No, but they are all landing on the 
map.''
    [Laughter.]
    Governor O'Malley. And so our challenge is the rational 
application of human effort to human problems, and in that 
openness and transparency to get it to land--you know, since 
they are landing on the map, we have just got to coordinate it. 
And I think the only hope--every legislator feels a tremendous 
burden to make sure they bring home everybody's fair share of 
their tax dollar, and I think the map and showing people that 
we are all in this together and having objective criteria--I 
mean, for all of the dollars that we have protected for open 
space, I am not sure we have ever had someone, once we grade it 
and do it openly, make a solid case that we are not deploying 
those dollars properly or fairly. And where the GreenPrint is, 
that is another one. People were afraid, Senator, that if we 
put the GreenPrint there, people would see where the GreenPrint 
is, and maybe they might get in the way or obstruct efforts to 
fulfill that policy goal. But we are taking the chance that our 
best hope of this republic having better and stronger days is 
better and more information in the hands and the minds of 
citizens.
    Senator Cardin. Well, it would be very useful to do this 
type of exercise at the national level. I chair the Water and 
Wildlife Subcommittee on the Environment and Public Works 
Committee, and we are trying to develop a water bill that 
reflects the Nation's needs. The politics of this is extremely 
difficult. It will be interesting to see this type of analysis 
used at the national level.
    One last question dealing with your comment about labor 
leaders looking at these pages rather carefully. I want to hear 
how the State workforce looks at this and what lessons you have 
learned. They have legitimate concerns that resources should be 
made available so they can get their jobs done. And they have a 
legitimate concern as to whether there is the right motivation 
as to how we operate the Government for the work they are 
doing.
    What have you learned in working this system as it relates 
to the confidence of our work force?
    Governor O'Malley. These have been really tough years for 
public employees. We have had to do furloughs for 3 years in a 
row. We had to do some consolidations that resulted in layoffs. 
We have tried our very best to place people in other places 
wherever possible. But as far as the system itself, it has been 
my experience that the public employees, like all human beings 
want to know that when they work hard it is recognized by 
somebody making the decisions that is leading their 
organization or their piece of the organization. And so I would 
like to believe from my interactions, especially around the 
environmental things and the bay and the like, that there is a 
certain esprit de corps that is developing even in these tough 
times from that shared sense of commitment and that openness 
and that ability to see that, hey, when we are doing things and 
working hard, somebody at the top recognizes that we are going 
in the right direction.
    A lot of times when the press would initially report on 
this, they would make it seem like it was a firing squad and 
that the public employees were coming in and offered a 
blindfold and a cigarette. But that was not the day-to-day 
experience. The day-to-day experience was men and women would 
come in and the high performers, when they were recognized, the 
rest of the organization would recognize that.
    The great Jack Maple described it to me this way. He said 
90 percent of us fall in the middle of the bell curve, and in a 
big organization it can either lean this way to the leaders or 
it can lean that way to the slackers. And if the top of the 
organization recognizes and celebrates the achievers and the 
leaders and lets everybody know, that organization will tilt 
toward the leaders. And in that is nation-leading progress.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    Senator Warner. Thank you.
    Congressman Sarbanes?
    Mr. Sarbanes. Well, I was going to ask you a question along 
those lines, but I will just echo what you said, and that is, I 
think when you go to change culture, particularly to introduce 
more performance-based measure, it is critical that there be a 
feeling on the part of the work force that you are supportive 
of them, that they are not under attack. And that is a 
challenge we have had at the Federal level, because sometimes 
when the initiatives come along, they cause the work force to 
circle the wagons, and then you cannot make progress in terms 
of changing that performance culture. So you have to create the 
accountability, as you have indicated, but also make it clear 
that there is really strong support for people all through the 
ranks. And then you get the success that I think you have been 
able to demonstrate in Baltimore and also at the State level.
    I have one question. One of the things we are wrestling 
with at the Federal level is the proper balance between what 
sort of the inherently governmental jobs are that are done by 
Federal employees and then what gets outsourced to third 
parties, to outside contractors. And for a while there in the 
last administration, my sense and the sense of many was that 
there was an ideological push toward outsourcing that put 
things out of whack. I would imagine that the Stat process has 
allowed you to drill down in a way that you can understand what 
this proper balance between sort of the employee of the 
Government is and those resources you need to pull in from 
outside to deliver a good product to the State. And I thought 
maybe you could address that.
    Governor O'Malley. Sure. This process helps you manage your 
contracts a lot better because, I mean, they also have to 
perform in their part of this. We have not done a lot of 
privatization because of the Stat process. What we have done, 
though, is imbued the State organization, public employees, the 
bureaucracy of our State government, with a much higher level 
of managed competition than there was before. Mayor Goldsmith 
of Indianapolis 10 years ago did a lot with bidding services 
out for contracts, seeing who could bid better and do it more 
efficiently. We have not had any success in doing a lot of 
that. We had one incident some 10 years ago that I will not 
bore you with where we actually did go totally private on--I 
think it was building security in the city of Baltimore, and 
part of that was a loggerhead, and in retrospect I think some 
of us wish we might have done things differently there.
    But we did measure the trash collection crews against each 
other. We measure soil conservation districts against each 
other now when it comes to signing up farmers for cover crops. 
We measure parole and probation in terms of the supervision 
that they provide to our more violent offenders and also the 
speed with which they get their warrants processed so that we 
get those offenders off the street more quickly.
    So if I am answering the call of your question, we have 
not--we have used this to imbue the entire bureaucracy with a 
better--with that tool of managed competition, recognizing the 
leaders, making sure the leaders are seen as leaders by their 
colleagues. We have not done a lot on the privatization. This 
has helped us to reduce some redundant contracts where we 
realized, hey, we had somebody in this department who is 
providing one technical service, and guess what? Another 
department was retaining the same company to do the same 
technical service. Why don't we put them together in one 
contract? Or, worse, a different company to do the same 
service. So it has helped us to save some money by 
consolidating contracts.
    Mr. Sarbanes. Thank you.
    Senator Warner. Well, Governor, thank you very much. You 
have been very generous with your time, and congratulations on 
this 10-year experiment. I think I go back to that second slide 
we had when we were up to see the way that this Stat effort has 
spread across the whole country. Kudos to you and your team. 
And, again, a final comment, as somebody who has been grappling 
with some of these issues, particularly more in my old job than 
this current position, I commend you as well for sticking to 
it, because getting the public, the press, other shareholders 
and legislators engaged, involved you got to have the metrics 
and the measurement tools first, and you have clearly set a 
way. So congratulations.
    Governor O'Malley. You know, I think the White House--the 
Federal Government--not to belabor this, but I think that 
relentlessness has been something that has been lacking in the 
way that we have--that the national Government has, to the 
extent they have approached us in the past, I mean, I cannot go 
to every meeting, especially now with the campaign in full 
swing. But, by golly, somebody very close to me is running this 
whole operation as the chief operating officer all the time. 
And I think we need a person like that.
    Senator Warner. Well, if you look at the last three 
administrations, usually with big fanfare in their first year 
in office, they announce a reinventing government or Bush had a 
different one, Obama has got a chief performance officer and 
others. But it has got to have that relentless----
    Governor O'Malley. Right.
    Senator Warner. Because it is not coming easy. But thank 
you again for your good work and thank you for appearing before 
us today.
    Governor O'Malley. Thank you.
    Senator Warner. We will now call up the second panel.
    Our first panel focused on lessons we at the Federal level 
could learn from State government. This second panel is going 
to focus on local government. We are very honored to have two 
distinguished panelists: Ike Leggett, who is the county 
executive from Montgomery County, and Deputy Mayor Christopher 
Thomaskutty, the Deputy Mayor for Public Safety and Operations 
in Baltimore. I will introduce both of our panelists, and then 
we will hear testimony from both.
    Ike Leggett has served as the Montgomery County executive 
since being elected in November 2006. He has also served four 
times as an at-large member and as the council president three 
times and as its vice president three times. He served as a 
professor of law at Howard University Law School from 1975 to 
2006. He ran the day-to-day operations of the law school as its 
assistant dean from 1979 to 1986. Mr. Leggett served as a 
captain in the United States Army. His tour of duty in the 
Vietnam War earned him the Bronze Star Medal, the Vietnam 
Service and the Vietnam Campaign medals.
    Christopher Thomaskutty serves as Deputy Mayor for Public 
Safety and Operations for Mayor Stephanie Rawlings-Blake, 
overseeing departments that include public safety--fire and 
police--and health, public works, general services, CitiStat, 
and other operating agencies.
    You have a much longer list than I initially thought here.
    Christopher began his career in Baltimore City government 
as a CitiStat analyst in 2003--so you were there at the 
birthplace--under former mayor Martin O'Malley. In 2007, he was 
selected to serve as the Director of CitiStat and later 
promoted to the position of deputy mayor. Christopher received 
a B.A. in Political Science from Birmingham-Southern College in 
Birmingham, Alabama. While at BSC, he was named a Truman 
Scholar by the Harry S. Truman Scholarship Foundation. He has a 
master's in Public Policy and Urban Planning from the John F. 
Kennedy School of Government at Harvard.
    We will start with Executive Leggett, if you would go 
ahead, please, sir.

   STATEMENT OF THE HONORABLE ISIAH ``IKE'' LEGGETT, COUNTY 
             EXECUTIVE, MONTGOMERY COUNTY, MARYLAND

    Mr. Leggett. Thank you, and thank you, Senator Cardin, 
Senator Warner, and Congressman Sarbanes, for undertaking an 
effort that I think sometimes is not fully understood by the 
public, but it is so, so important to the efficiency and 
effectiveness of governments today.
    Let me say that I came at this through the efforts of the 
then-Mayor O'Malley in Baltimore, and as county executive I 
fully adopted it as one of the principles of leadership in my 
county. But when I first heard of it many, many years ago, I 
was not impressed when I first heard it because I thought it 
sounded like something that managers would get together, hold 
hands, and sing ``Kumbaya,'' and come out and maybe adopt some 
principles and ultimately get something done. And it was a 
skeptical public who, in fact, heard and saw many of the things 
that we are talking about today and were not very, very 
impressed. It was not until, I think, people started to see the 
connectivity between budgets and outcomes in a way that 
impacted their lives that it started to take on a different 
meaning.
    The main objective for us in Montgomery County, CountyStat, 
is to improve the efficiency and responsiveness of government 
by using up-to-date data as an ongoing focus for day-to-day 
management and long-term policymaking. For us, I believe that 
our government can and must do a better job in its use of 
finite public resources to help achieve and sustain Montgomery 
County residents' priorities and objectives and deliver 
meaningful results.
    The objectives for us are outlined in what I put together 
with a task force immediately upon my election, which is to 
provide a responsive and accountable county government, 
affordable housing in an inclusive community, an effective and 
efficient transportation network, children prepared to live and 
learn, healthy and sustainable communities, safe streets and 
secure neighborhoods, a strong and vibrant economy, and vital 
living for all of our residents.
    I mention this because one of the things I think we fail to 
recognize is that unless CountyStat or the Stat programs are 
tied to some meaningful objective which the public fully 
embraces and understands, then we will not have the kinds of 
results that I think we want. Unless it is also part of a 
comprehensive program, we still would not meet the objective.
    Most recently, we followed the example of the Governor and 
others, and we introduced in Montgomery County something called 
MC311, a comprehensive integrated program that is online and 
call online for people to call with any requests for services 
and programs in one central comprehensive data base unit which 
we can track. In addition to that, we use other tools 
consistent with the CountyStat program. So we have consistency, 
we have a comprehensive approach, and it is not something in 
isolation, and it is tied to our objectives.
    Now, here are a couple of lessons learned that I think- -
some of which you have heard this afternoon, but I want to 
emphasize again. To be successful and lessons learned, you need 
to ensure commitment and support for performance management at 
the highest level. At the highest level. Unless the executive, 
chief administrative officer, Governor, whoever, is not 
personally involved, then you will not have the results that 
you see. You need to partner with the community, develop buy-in 
from directors and managers, because it is not easily always 
understood. You heard earlier buy-in through the legislative 
branch that was talked about, establish a collaborative 
relationship, focus on what matters, because despite the 
technology, despite all the efforts, we simply cannot do 
everything we want to do.
    You need to have a dedicated staff who performs and assists 
the departments, take a long-term, comprehensive view of this. 
You are not going to have the results overnight.
    Develop capacity within department offices to measure and 
manage performance and institutionalize this new approach.
    The process is valued. The people understand the process, 
it is open, it is transparent, and there is some consistency in 
the followup.
    And, of course, we separate it; the CountyStat process is 
not the budget process. It is a tool to help us in our budget 
process. So those are separate operations.
    Now, in terms of things that we have seen and that we have 
had some success with, I just want to go through and track just 
a couple things for us. First of all, we look at overtime. Look 
at this chart. You will see that we have had some success. The 
success for us, when you look at it cumulatively now, would 
probably be over $7 million. That is a considerable amount of 
money.
    It also helps us to explain and track the performance. For 
example, if you look at that yellow line there, that yellow 
line represents the Department of Transportation's overtime. 
And all of a sudden you will see a number, that line going sky 
high there. That line represents the most recent efforts 
related to snow, snow removal. So now we get to a question of 
the tracking devices that we have had, looking at overtime, 
savings that we have had traditionally by the use of the 
tracking system that we have in place, quarterly reports, 
constant management of this, and the county executive or any 
executive in a position will have to make a decision at some 
point. Do I utilize an excessive amount of overtime in order to 
respond to the challenges of the snow? Or do I stay and 
continue on this path?
    Well, by having this system in place, it allows us a tool 
for which a person can simply click on and see and track, and 
having this explanation allows us to in some way explain to 
citizens that we did not meet our objective at this point in 
time because we had a challenge before us; i.e., to move the 
snow, to respond to your concerns of safety in the community, 
or respond to the efficiency problems of reduction in overtime. 
Very good for explaining it.
    We have similar results that you look at in terms of the 
savings that we have had. We had additional challenges in a 
number of charts here that you may see from the overtime itself 
going through department by department, quarter by quarter, and 
staying on top of our managers and walking through this, 
getting explanations as to why the performance is one way or 
the other.
    We have also had another initiative called our Pedestrian 
Safety Initiative. Huge numbers of collisions, and we have 
tried to target the entire county. The dots that you see 
represent incidents of collisions, annually about 450 or so 
collisions. Probably 17 to 18 deaths per year. We targeted four 
high-incident areas, and interestingly enough, the efforts that 
we are making now on education, enforcement, and engineering, 
one of the things that was revealed to me, despite the fact 
that I have been looking at this for years in county 
government, one area that had been completely under the radar 
for many years has been the fact that a quarter of the 
collisions occur in parking lots, shopping centers. Our efforts 
for the most part were on the streets, intersections. So we had 
to refocus our efforts to, in effect, look at what we were 
doing as it relates to the parking lots, especially related to 
the elderly.
    Paper. Huge amounts of paper. You can see the chart as it 
indicates where we were headed. We have been able to monitor 
that. It is inconsistent with our environmental goals. It is 
cost-challenging for us, and we have been able to save, I 
think, somewhere in the neighborhood of $1.4 million just in 
following and tracking paper.
    Overall in the county in the last 2-1/2 years, we have held 
114 meetings on CountyStat, and we have looked at possibly 80 
different subject areas. I have with me our chief 
administrative officer who is the person that oversees this on 
a day-to-day basis, and his staff, but it is a considerable 
amount of time that we spend following this.
    There are quite a few other things that I would like to 
talk to, but I know that time is limited, but I want to end 
where I started, No. 1, to thank you for coming here today, to 
thank and congratulate our Governor for his leadership in this 
role, and to let you know from a local perspective that this is 
something that works. In times of tough budgets, it is 
something that is needed. The transparency, the efficiency with 
which this operates, and the savings that we have had over the 
last few years justifies, in my opinion, the need for this at 
the Federal level.
    There are a number of things that I would like to address, 
and we provided information for you that I think you need to 
look at, that I think may be helpful from a Federal 
perspective. But in order to preserve time, I am going to turn 
it over to the deputy mayor to----
    [The prepared statement of Mr. Leggett follows:]

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    Senator Warner. Thank you, Executive Leggett.
    Deputy Mayor Thomaskutty?

  STATEMENT OF CHRISTOPHER THOMASKUTTY, DEPUTY MAYOR, PUBLIC 
           SAFETY AND OPERATIONS, BALTIMORE, MARYLAND

    Mr. Thomaskutty. Thank you, Senator, and Senator Cardin and 
Congressman Sarbanes. It is definitely an honor to be here, and 
it is an important hearing, and we appreciate your interest in 
what we have been doing. I am here for my mayor, Mayor 
Rawlings-Blake. She is out of town today. You mentioned earlier 
that I would not be here but for the fact that Mayor O'Malley 
hired me in 2003 to work for him in CitiStat.
    Governor O'Malley. He was a great hire.
    [Laughter.]
    Mr. Thomaskutty. There are many others who he has helped 
groom and bring along to focus on performance. I think those of 
us who live in Maryland are very fortunate that we have an 
executive, a Governor, who understands governance and 
performance the way that he does, and it has translated 
throughout the counties and maintained in Baltimore City.
    You have heard a lot of very good examples, I think, of 
specific improvements that we have seen at the State level, and 
especially in Montgomery County. What I would like to focus my 
few minutes on are some of the hidden benefits and some of the 
aspects of our strategy that I think are beneficial, and there 
may be tangible links to the Federal Government.
    First off, as you have heard, this is the 10-year 
anniversary. There is a longevity to our strategy that has 
lasted. I think that is because there is a very good fit 
between what is needed in our city and what this strategy 
brings. CitiStat has also helped, I think, three different 
mayors through their transition. What probably started out as a 
question, would CitiStat last without that executive leadership 
from Mayor O'Malley, has now turned into an answer that it is a 
tool for an incoming executive. It flattens that learning curve 
because you have an exceptional opportunity to learn very 
quickly the strengths, the weaknesses of your operations and of 
your et.
    I think Mayor Rawlings-Blake was hit with a pretty nasty 
snowstorm within days of her taking office. Within weeks, by 
reading a lot of these executive memorandums, by looking at a 
lot of the analysis, by attending CitiStat meetings, she was 
able to learn her agencies and learn her managers quickly and 
well. She was able to turn the ship toward the direction that 
she wanted to see the city move in much quicker than I think 
other executives who have not taken advantage of this type of 
strategy.
    One of the other things I just want to talk about in terms 
of the speed with which an executive can put their stamp on an 
operation. We are 10 feet from each other now. Imagine if you 
got to be 10 feet from each of your managers on a bi-weekly 
basis. Communication improves, what your expectations is 
better, and you quickly see, as the Governor mentioned, who 
your stars are. And I think one of the things that we have been 
able to do is develop a cadre of leaders in the city over the 
last 10 years who are managing based on performance, and that 
is incredibly important for a large organization to get that 
mentality and the culture of leadership ingrained. It started 
with Mayor O'Malley, and it has continued under the last two 
mayors.
    It has also enabled us, I think--an unexpected benefit is a 
lot of our CitiStat staff--and we are joined by Spencer 
Nichols, one of my staff members today. We have been able to 
groom and place leaders throughout our government, chiefs of 
staff, department heads, division chiefs, all who have been 
brought up in this mentality of what gets measured gets done.
    A few of the other things I wanted to point out. Over 10 
years we have evolved. Every successful management strategy 
must adapt to its people, to its time, and to its resources. 
What once was a process that focused on an individual agency or 
an individual department, we have now evolved to where we are 
focusing on policy issues. As Senator Warner mentioned, very 
few public problems can be isolated to a particular department.
    For example, CleanStat, our city requires a tremendous 
amount of effort and collaboration to try to keep it clean. Our 
Bureau of Solid Waste cannot do that by themselves. It involves 
our Recreation Department, our Transportation Department, our 
housing code enforcement officials. We have been using 
CleanStat as a method of unifying six or seven different 
operating groups under a common theme and under common 
principles with common objectives.
    With the past year, we have revised our collection process. 
We have increased--as I think both Senator Cardin and 
Congressman Sarbanes have seen, our recycling collections are 
up 53 percent in a single year. That is unprecedented change 
for a city like Baltimore. We have seen an 80-percent increase 
in sanitation enforcement citations because we were able to 
move resources to where we needed them. And we are finally 
obtaining convictions in court for illegal dumping. That is 
done by the housing department. We used to only talk about it 
with the trash department. Everybody has got to be on the same 
page to have good, effective results.
    The next example may be one we want to think about the 
most, and that is GunStat. This is where we have a session and 
a meeting on a monthly basis based on a common shared goal 
across city, county, State, and Federal levels of government. 
And I have to say, without, I think, the Governor's 
participation from the State agencies and those that are 
involved in the State of Maryland, it would not be as 
successful. But we have the police department, the county 
police, State police, all the State agencies that are involved 
in supervision, our local State's authority and our U.S. 
Attorney, all focused on targeted enforcement and increasing 
sentences for those who are carrying illegal guns. You know, I 
will be frank. At the beginning part of the struggle is getting 
folks who do not report to the same person. You know, this is 
not about the same boss. It is about the same goal. And once 
everybody understood that here is what we all share in common 
in terms of what the outcome should be, you begin to develop 
the trust around data sharing. I am not a law enforcement 
official. There was some initial concern that why should I get 
access to certain data, you should, but we got to the point 
where we had certain agreements about what would be shared and 
what would not, and now we are all looking at the same amount 
of data, and it has been incredibly effective at the city 
level.
    Just to give you an example--and I am purposely showing you 
a map that we did not create. Probably one of the Governor's 
staffers created this map. This is showing in the city of 
Baltimore. You know, we mentioned this earlier. You can collect 
all the data you want, but if you do not have a system in place 
to take action on that data, you are wasting your time. This 
shows where we have mandatory releasees under the age of 25 who 
have been out of jail for less than 6 months of two or more 
federally significant convictions. We know based on a year-
plus, almost 2 years of solid data collection on felony gun 
crimes that that is the population of people we need to be 
touching. The Governor has people in place in his VPI unit who 
are in regular contact with them from the State level. And we 
at the city level have patrol officers on their post who are 
aware of these particular individuals who have served their 
time, but we want to make sure they know that we know where 
they are, that we love them and we want them to see us. So they 
see a coordination between the city and the State that has 
never been there before, and as the Governor mentioned, we are 
seeing the results in our homicide reductions.
    Another evolution of our strategy I think has to do with 
the way we are beginning to make links with our budgeting 
process and with our operations. Outcome budgeting is the 
process we brought to the city this past year, and a long story 
short, you normally build your budgets, you start from the 
baseline of where you were the previous year as opposed to the 
objectives you want to accomplish. The intent of outcome 
budgeting is to say what are your priorities, what do you 
really want to accomplish, and then you start putting your 
dollars at what you think is important. And through a pretty 
intensive process, you are able to determine what your 
priorities are. And so you have heard this many times. We have 
tried to start taking the scalpel approach instead of the 
sword. Instead of across-the-board cuts, we are able to see 
what is the incremental impact of an increase here or a 
decrease there, and that has been able to help us have in very 
difficult austere budget times a lot more confidence in what we 
are funding and what we are not funding and explaining that to 
our citizens better.
    Here is just a sample of what an outcome budgeting template 
would look like for us. I just grabbed a water example from our 
Water Bureau. We unapologetically in CitiStat have always been 
heavily focused on outputs. So this attention to purchasing 
outcomes, to funding the outcomes that you want is different, 
and it is not always simple to measure an outcome, at least at 
the city level. But we are becoming more and more comfortable 
with taking a step back on a quarterly basis, looking at these 
broad city-wide outcome measures, and bringing the same level 
of attention through our Stat meetings that we typically do 
through more of your everyday operational inputs and outputs. 
They are much easier to measure.
    Finally, just some quick thoughts on the application. I 
think both the Governor and the county executive have spoken to 
some of this. I am not a management professor, and I do not 
know the Federal Government all that well. But the four tenets 
that we use are effective. I think they are effective if you 
are running a coffee shop or if you are running a $2 or $4 
billion operation.
    The first thing I would say is learn the lesson that we 
learned from the Governor, and that is just get started, pick 
an operation, pick an agency, pick a section, pick a sector, 
and just get started. I think there are clear applications, as 
I have seen your BorderStat and others in the Federal 
Government that are doing direct service delivery, especially 
those where there are clear lines of authority and 
accountability. The application there I think is much simpler 
and much more straightforward.
    But for those Federal functions and agencies that are 
perhaps less involved in direct service delivery, that may be 
pass-throughs of Federal funds or more focused on compliance, I 
think there is something to this collaborative model that we 
have started along the lines of GunStat with multiple levels of 
government. Again, not focused on the same executive, but 
focused on the same goals. And as long as you can agree to a 
common shared outcome, you can find smart people to help you 
figure out the way of measuring it, sharing information, and 
then you have to figure out the way to keep the ball moving 
forward in terms of that executive interaction. There may be 
multiple executives at the table, but I think that is possible.
    There is a dynamic that I think the Governor is probably in 
the best position to speak to, the geographic size. In the city 
we have the benefit of crossing the street to find many of our 
managers. At the State level, and especially at the Federal 
level, just the lack of proximity to some of those who you are 
managing is something that has to be thought through. There is 
definitely an appeal and an advantage in managing people you 
can talk to and see face to face. There is a limit to what you 
can do via videoconferencing and other things. I think there is 
a way of applying the strategy to specific divisions within the 
departments, within agencies, that folks can think through. I 
think there is definitely promise. I think the four tenets are 
solid, and I very much appreciate the opportunity to tell you a 
little bit more about the city and to think through some of the 
ways this could help the Federal Government.
    [The prepared statement of Mr. Thomaskutty follows:]

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    Senator Warner. Thank you both for excellent testimony from 
both of you, and I am just going to ask two questions, and 
either one of you can respond to both or either one.
    One, it just seems to me that as I look at--from the 
Governor's presentation and the county's and the city's 
presentation, a lot of this is pre-framed by what questions are 
asked. And I would be curious from both of you who is making 
the determination of what Stat is being measured or what 
outcome is being measured. Do you solicit collaboration from 
the work force in the county executive's position in terms of 
the council? How do we make sure we are asking the right 
questions, No. 1, in terms of what we are going to measure?
    And then No. 2, it seems that most of the efforts here have 
been on relatively objective criteria which you can measure 
against. So, for example, as we--and this may actually--I am 
just going to get into your area about the budgeting piece. If 
we were to measure, on a CitiStat, CountyStat, or StateStat, a 
child's readiness for school, that readiness for school pushes 
us more into the policy area, and it might be health care, it 
might be pre-school, it might be parental supervision. You 
know, have you consciously in CountyStat and CitiStat tried to 
stay on the cleaner, more objective questions? Who gets the 
input? And at some point could this be drawn or is it being 
drawn now into actually the broader policy areas?
    Mr. Leggett. Thank you, Senator, for your question. I think 
it somewhat evolves, because I think the first task is to 
demonstrate to people in a very clear, straightforward way what 
are the meaningful results. Our demonstration, for example, of 
the overtime used grabs the attention of a lot of people.
    Senator Warner. Right.
    Mr. Leggett. They could see it, they could feel it, they 
know about it, it is there. We will--and I see that we will 
evolve to more subjective areas that you cannot measure quite 
as well. But the first thing that we have done would be to 
establish the value of the program itself. But until you have 
that buy-in, I think it would be very difficult to go to the 
``soft'' objective areas and demonstrate the efficiencies of 
the program rather than to do it the other way around.
    Senator Warner. And when you started even on the --in the 
ability to demonstrate the effectiveness of the program, did 
you sit with your leadership team and try to sort through which 
questions, did you have your staff--how do you even decide 
which is your----
    Mr. Leggett. It is all of the above, but more importantly, 
I think, from the people involved directly, the managers, the 
employees, and for us even the public itself. So our process is 
open. The results are online. You can see every report that we 
have conducted. If you want to participate, if you want at 
least to come in and watch what is going on, the public is 
invited to do so.
    So we have input of the question from individual components 
of the work force, especially the managers, and also from 
average citizens.
    Mr. Thomaskutty. And I will speak to your comment about 
trying to put the strategy around something like childhood 
readiness. That is exactly where we are going, because I think 
you start with what is your immediate operational needs, and 
then you take that step back as to what is your city or your 
county or your government need. So childhood readiness, what 
are the factors that impact that? The mayor wants us to start 
ChildStat for this very reason, and we know that a kid is not 
going to be ready for school unless a few things happen. One, 
they have to be loved by their city. Two, you have to take care 
of them immediately upon their birth outcome. So are we taking 
care of the mom during the prenatal stages? When the baby is 
born, are they getting a home visit from a trained nurse? How 
are we doing the immunizations throughout their early term? 
Then it is being healthy and safe in their home, and there are 
tests, right? Honestly, you give us a lot of money for Head 
Start, both private Head Start and public Head Start, and there 
are certain providers that we have not yet started to measure, 
but we know we get better results from some than we do from 
others.
    So that is what I already know and what we already know. 
What we do not know is how to turn the needle, how to make the 
investments that you are providing us, give us better outcomes 
than what we are currently getting. But it can be measured, and 
there can be a way of applying the strategy around that 
particular policy issue to where those at the table, 
nonprofits, foundations, private citizens, State agencies, city 
agencies, are sitting there around common objectives, and 
instead of every time saying, well, you need to do this 
differently, it may be you are developing the policy that is 
going to help someone else make that decision. But it is 
possible. It is just you have to adjust what you have seen 
applied successfully, I think, so far to your typical municipal 
operations and county operations.
    Senator Warner. It would seem to me--and I will turn this 
over to Senator Cardin--that if you can rank order child 
readiness for school and the goal is 90 percent of our kids are 
going to be ready for school by kindergarten and then you have 
to rank order that versus the other goals you have, but you can 
then argue as policymakers between how much prenatal versus 
early childhood health versus brain development activities. But 
until you can get that goal set--and then you have the inputs 
and some tools to measure, and I think this is where this--and 
you guys are at the lead of this, or hopefully this journey 
will take you all and then hopefully at some point the Federal 
Government behind it, because it is--you know, the notion of 
unlimited dollars or even dollars circa 2006, 2007, fiscal year 
2008, fiscal year--I just do not think we are going to see them 
again anytime soon.
    With that, Senator Cardin.
    Senator Cardin. Well, thank you very much, Senator Warner.
    You both have said there has got to be buy-in at the 
highest level for it to effectively work. Can you define what 
you mean by that? What is required from the county executive to 
make this work? What is required from the mayor of Baltimore? 
Are you talking about your personal time? Are you talking about 
delegating it to another person? Give me an idea of what is 
required for this to work at the county level.
    Mr. Leggett. Well, buy-in means that I fully embrace it and 
adopt it as a policy consideration, or me as county executive 
that I show and demonstrate that level of commitment by 
participation, by involvement. You can delegate some of it, and 
the person who probably does the day-to-day operation is the 
chief administrative officer. For those outside of county 
government, it is the city manager. But I would not delegate 
beyond that point that it must be at that level, because the 
chief administrative officer is the head of the county 
government in terms of its day-to-day operation. All the 
department heads report to the chief administrative officer.
    If you go much below that, I think that you lose a 
commitment. Again, you are making a transition. Many people, 
believe it or not, in government believe that they are doing an 
excellent job with what they have, and they have been doing it 
for the last 25 or 30 years and do not see a need to change. 
They see a narrow focus. And so you have to educate and 
transition them. So unless you have the people at the very top 
making that personal commitment, then it would be a very, very 
difficult challenge, as well from the legislative branch. You 
know as well as I do that unless there is that commitment from 
the top of the executive branch, the legislators are not going 
to be so tempted to go and make these changes on their own.
    Senator Cardin. In Baltimore City, what does it mean to 
have buy-in at the highest level?
    Mr. Thomaskutty. It is the way we are going to do business. 
It is understood. And so the mayor has spent a lot of her 
personal time, especially early on, but she will not have to 
moving forward. It is understood that I am speaking on her 
behalf, and it is as if she is always in the room. So this is 
just the way we are going to manage, it is the way we are going 
to keep score. I think after 10 years it has been ingrained in 
the culture in the city.
    Mr. Leggett. Let me just add something. We have only been 
in it about 2-1/2 years. I would hope that at some future point 
it is not so dependent upon the individual executive, that it 
becomes a way of doing business, and that it is a standard 
operating procedure for all county executives and for all 
agencies of government. I hope we get to that point, and we are 
moving in that direction. I am not sure we are quite there yet. 
So it requires a direct, personal involvement. But the way we 
would make certain that this is successful long term, that it 
is not dependent on an individual, but it is a way of doing 
business. And I think that is the direction we are moving.
    Senator Cardin. My second question is: In a time of 
declining budgets, is there concern that the Stat program is 
being used to justify budget cuts and, therefore, agency heads 
are more suspicious about cooperating with the program?
    Mr. Leggett. Let me take our situation. In the last 3-1/2 
years, we have closed budget gaps of about $2.5 billion. We 
have reduced the overall work force by 10 percent, 1,100 
positions. We have had furloughs. We have had eliminations of 
COLAs and a variety of other things. Certainly there were 
challenges as a result of that. We faced some difficulties. But 
the way I approached this was to personally engage myself both 
in the CountyStat process as well as the rec. department. This 
is why I stated earlier you cannot look at this in isolation. 
There are other tools that you have to employ with this in 
order to make it as successful as possible, the 311 system. But 
I engaged in the last year 33, 34 separate meetings with 
individual employees to walk through the potential challenge 
that we had, to talk about what CountyStat had found. And I 
think that we have developed a level of credibility of 
CountyStat that it is not looked upon as a political tool but 
as sort of a neutral, fact-finding, data analysis, clear, 
succinct, that goes above--it is over and above the political 
consideration. That is where the policy comes in where you then 
have to make the decision between is it early childhood 
development, something else, do you priority A versus B. But 
the data is clear. It is consistent. It is neutral. It speaks 
for itself. And the people that you have--and this is why it is 
so important to have competent people operate in the system and 
over and above the political considerations.
    Senator Cardin. In Baltimore City, does the mayor say, 
``Where can I get another $10 million of cuts?''
    Mr. Thomaskutty. The finance director might. I would say it 
is a tool. I think through CitiStat and through our budgeting 
process, we definitely were able to cut smarter than I think we 
otherwise would have been. But your good managers view that 
podium as a two-way street. They advocate just as much as they 
take questions. And so you will find through this particular 
budget we spent money on things that we probably otherwise 
would not. We never could find a way to fund a $140,000 program 
in our fire department that would put less expensive vehicles 
out to go to some of our most frequent callers of 911. Because 
we could show the value of that particular service through this 
new budgeting model, we had the confidence and the proof in the 
data to say it makes a heck of a lot of sense to send an SUV 
than a fire truck to someone who calls the city 180 times a 
year for 911 service.
    Senator Cardin. Well, thank you both very much.
    I will just make one final observation, and that is, you 
can tell there is a buy-in at the highest level when you meet 
with the Governor and he wants to take your laptop and show you 
a new website that he has on statistics. You do not want to 
challenge him on his technology.
    Senator Warner. And when the Governor stays for the second 
session, too, which is really a commitment.
    [Laughter.]
    Senator Cardin. Thank you.
    Senator Warner. Let me just add a couple of quick closing 
comments. Again, my thanks to the Governor, to the county 
executive, and the deputy mayor.
    Two things, just observations at the Federal level. I think 
at the city and the county level, as a mayor or county 
executive, this is your job to run the city or the county. I 
think it gets harder at the State level, but you still have 
that chief operating officer role as the Governor or someone in 
the Governor's office. There really is not that equivalent at 
the Federal level, and I think that has been one of the 
challenges. President Obama has appointed somebody who I think 
is extraordinarily talented, Jeff Zients, to be chief 
performance officer. But whether this position will be 
maintained, whether it will have enough juice I think the jury 
is still out. I am hopeful.
    But, conceptually--and, candidly, there is very little buy-
in, I think, to our efforts at the legislative level. There is 
governmental oversight, but there is not a governmental 
efficiency metrics performance group. And you got to have a 
legislative, I believe, at least at the Federal level, partner 
as well so you do not have this constantly reinventing the 
wheel every 4 to 8 years. Again, I commend the Governor for 
having the stick-to-it-iveness with CitiStat that now it has 
been implemented at the State level and others like Montgomery 
County are implementing it.
    The other thing I think we have one challenge at the 
Federal level--I am a new Member of Congress, although I think 
I have been guilty of this as well--that to our Federal work 
force we are always additive on reporting requirements, and we 
never subtract. So I think our Federal work force at times 
feels overwhelmed with whatever--whoever is coming in has got a 
new set of reporting requirements, we never get rid of any of 
the old ones, and the volumes of data--I think about the PART 
initiative under President Bush, huge volumes of data, but not 
user-friendly, and I think it was well intentioned. I am 
concerned that as we think about how we get better performance 
and metrics, at least at the Federal level, when we add new 
reporting we ought to be thinking as well maybe we could take 
away some of the others, because that sends a message, I think, 
as well to the work force that this is not just make-work, but 
this is going to be critical and it is going to be evaluated, 
it is going to be viewed, it is going to be useful. And I will 
close with the comment that all three of you have made, and 
that is, you have to be relentless, that none of this is easy, 
none of this comes quickly, and kudos to all of you for having 
that relentlessness.
    With that, I again want to thank the Governor, the county 
executive, and the deputy mayor. The hearing record will be 
kept open for additional questions for our witnesses until noon 
tomorrow. I ask that each witness respond promptly to any 
questions submitted to them.
    The Government Performance Task Force will hold its next 
hearing this Thursday at 10 a.m. in the hearing room of the 
Senate Budget Committee. The hearing will cover the issues of 
Federal procurement and contracting.
    If there is no other business, the hearing will come to an 
end. Thank you.
    [Whereupon, at 3:54 p.m., the Committee was adjourned.]

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    RESPONSIBLE CONTRACTING: MODERNIZING THE BUSINESS OF GOVERNMENT

                              ----------                              


                        THURSDAY, JULY 15, 2010

                                       U.S. Senate,
  Committee on the Budget and the Task Force on Government 
                                               Performance,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:58 a.m., in 
room SD-608, Dirksen Senate Office Building, Hon. Mark Warner, 
Chairman of the Task Force, presiding.
    Present: Senators Warner, Cardin, and Whitehouse.
    Also present: Senator Murray.
    Staff present: John Righter, Amy Edwards, Ron Storhaug, and 
Gregory McNeill.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. The hearing will come to order. Welcome to 
the Senate Budget Committee's Government Performance Task Force 
hearing on ``Responsible Contracting: Modernizing the Business 
of Government.'' I want to thank my colleague Senator 
Whitehouse, who actually was the instigator of this hearing, 
for his leadership and interest in this subject and for the 
willingness of our more senior members on the Committee and in 
the Senate, Senator Murray, for being here as well.
    As I have explained to a number of the witnesses, let me 
acknowledge on the front end there may be some shuffling of the 
gavel. Things here happen on strange time sequences that as a 
new guy I do not fully understand yet. Today we have a key vote 
at 11. I personally have a NASA markup going on right now that 
is very important for facilities in my State, so there will be 
a bit of shuffling. I know Senator Whitehouse has an important 
conference call he has to take midstream, so I ask the 
indulgence of the witnesses and our audience.
    So, let me go ahead and make my opening statement, and then 
I will ask Senator Murray and Senator Whitehouse if they would 
like to make a statement. Then we will introduce the witnesses.
    Today we will take a closer look at the Federal 
Government's contracting procedures and practices and learn 
about opportunities to improve contract oversight and leverage 
greater savings.

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    Specifically, I hope our witnesses will tell us more about 
contracting reforms that are already underway at Federal 
agencies; second, the potential savings from contracting 
improvements; and, third, steps to modernize procurement 
operations.
    This Task Force on Government Performance has held several 
hearings examining opportunities to improve the performance of 
the Federal Government to achieve better savings and service. 
As we attempt to scale back and deal with our growing fiscal 
challenges, we must also look at ways to modernize the business 
of Government, and contracting practices are due for some 
upgrades.
    Unfortunately, as my colleagues know, whenever I make any 
comments, I always refer back to my previous job for at least a 
moment. During my tenure as Governor of Virginia, we developed 
a centralized approach to State procurement and developed an 
online marketplace that has achieved some impressive results.

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    Thank you, Amy, for holding up the chart.
    Senator Whitehouse. How well managed was Virginia during 
the time you were Governor?
    Senator Warner. Thank you, Senator Whitehouse, for that 
very important----
    [Laughter.]
    Senator Warner. You know, as a matter of fact, it was 
ranked No. 1 in the whole country, a designation that we 
maintained until changes just in the last week or so. I think 
we fell to No. 2. But you can only keep good practices going 
for so long.
    But part of those good practices were represented here on 
our procurement activities. As of last year, Virginia's 
electronic procurement system has registered more than 38,000 
vendors, has supported more than $20 billion in purchases, and 
saved Virginians more than $280 million from streamlined 
purchasing--something that I think could be brought to the 
Federal Government as well. I know firsthand that results can 
be achieved by smarter spending, and, again, I think we can do 
that at the Federal level as well.
    But effective contracting and procurement is more than just 
saving money. Contracting is also critical to providing the 
quality services the public deserves. A recent example and one 
that has been important to me as the home-State Senator--but I 
know Senator Whitehouse and Senator Murray have expressed 
concerns as well--has been the mismanagement of millions of 
dollars to develop what should be a basic data base at 
Arlington Cemetery.

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    The Army's Inspector General found that Arlington Cemetery 
improperly paid millions of dollars to contractors that failed 
to deliver a new data base to hold the cemetery's records. As a 
result, they found 211 misplaced or misidentified graves for 
our fallen heroes, and that is actually only three sections of 
the 75 sections of the cemetery that have been audited so far. 
This was literally a system where they were still using three-
by-five cards because all of the millions of dollars that have 
been spent on upgrading the data bases had never been 
coordinated. The IT functions had never been put in place. And 
right now the Army is scrambling. We have put in place a series 
of private sector folks who would like to come in on a pro bono 
basis and help. But if we do not have good contract management, 
this is the results that we could see. And, again, that is what 
our hearing is about today.

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    Chart 4, the Federal Government spent $538 billion on 
contracts in 2009, and 70 percent, or $372 billion, was spent 
on the Defense Department alone.

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    And as our final chart shows--following in the footsteps of 
our great Chairman, Chairman Conrad, you cannot have a Budget 
Committee hearing without charts and graphs. As our next chart 
shows, defense contract spending has more than doubled over the 
last decade.
    It is worth pointing out that this growth is in line with 
the growth in the overall defense budget, which has also 
doubled over the last decade.
    Given the growth in contracting, I hope our witnesses today 
will discuss the oversight structures in place to ensure that 
this growth has been effectively managed.
    I am also pleased with the Obama administration's focus on 
contracting and procurement improvements and mandates to save, 
and I would like our first panel to discuss how they are 
currently working to ensure effective contracting oversight and 
to better leverage the spending power of the Federal 
Government.
    With that, I would like to call upon first Senator Murray 
and then Senator Whitehouse for opening statements.

              OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Well, thank you, Mr. Chairman, for holding 
this hearing, and I will not have an opening statement. I just 
want to welcome both of you and look forward to the question-
and-answer period. I have several questions I would like to 
ask, and thank you for hosting this hearing today.
    Senator Warner. Senator Whitehouse.
    Senator Whitehouse. Thank you very much, Senator Warner. I 
think this is exactly the sort of hearing that we envisioned 
when I asked Chairman Conrad to set up this Task Force on 
Government Performance for the purpose of trying to better 
evaluate Government performance, efficiency savings, ultimately 
toward the goal of, I hope, being able to put an efficiency 
number into our budgets in the future and hold administrations 
to account to try to achieve those efficiency savings.
    Clearly, Government contracting is an important area 
because, as you have pointed out, the extent of it and the 
hundreds of billions of dollars that flow through it just gets 
bigger every day. Anytime you have that much money out there, 
it is a target for waste and abuse and for greed and for 
laziness and all of those human characteristics.
    So particularly when you have for-profit corporations 
involved, there are all sorts of risks. The oversight and 
management function becomes incredibly important. It is not 
unheard of, particularly--I am on the Intelligence Committee--
in very classified programs where there is little oversight and 
highly technical issues at stake, to question whether the 
Government actually has the capability to oversee what it is 
being told by the contractors or whether the contractors are 
running the show, running the oversight, running every element 
of it, because they have simply run ahead of the capability of 
Government to keep track of what they are doing and to 
understand the technical substance of what they are doing.
    There is always the danger in the contracting oversight 
world of what I call and what economists have for a long time 
called regulatory capture, that over time slowly but steadily 
the influence of the regulated entity--the contractors, in this 
case--through revolving doors, through putting their own people 
into Government, through threats of litigation if you do the 
wrong thing and subtle rewards if you do the right thing, step 
by step it gets to the point where the regulator or the 
oversight authority becomes more beholden to the industry than 
to the public. And that is a common theme throughout 
administration, but particularly acute where you are dealing 
with very big corporations with huge resources and enormous 
public dollars at stake. And then, of course, campaign and 
political activity by these corporations can compound the 
problem and make it even more acute.
    So I think it becomes very important that we take an active 
role to defend the American taxpayer and make sure that these 
moneys are being wisely spent. Clearly, there is an important 
role for corporations and for contracting in Government. But it 
is also a role that we have a responsibility to carefully 
oversee. So I applaud you for holding this hearing and look 
forward to the testimony of the witnesses.
    Thank you.
    Senator Warner. Thank you, Senator Whitehouse. Thank you, 
Senator Murray.
    Our first panel, we have Daniel Gordon, the Administrator 
of the Office of Federal Procurement Policy at OMB. Mr. Gordon 
is responsible for developing and implementing acquisition 
policy, supporting over $500 billion in Federal spending 
annually. Prior to joining OFPP, he spent 17 years at GAO and 
served in several posts in the Procurement Law Division before 
being appointed Deputy General Counsel in 2006 and Acting 
General Counsel in April 2009.
    Our second witness is Mr. Shay Assad, the Acting Assistant 
Secretary of Defense-Acquisition in the Office of the Under 
Secretary of Defense for Acquisition, Technology, and Logistics 
at DOD. Mr. Assad is responsible for all Department of Defense 
acquisition and procurement policy matters. He serves as the 
principal adviser to the Deputy Under Secretary of Defense for 
Acquisition and Technology and the Defense Acquisition Board on 
acquisition procurement strategies for all major weapon system 
programs, major automated information system programs, and 
service acquisition. So clearly, Senator Whitehouse, I think we 
have the right two guys in terms of oversight, both overall 
Federal Government and particularly at DOD.
    Let us start with Mr. Gordon, and before you begin, let me 
make clear that each of the witnesses' full written statements 
will be included in the hearing record. So, gentlemen, thank 
you for both being here.

STATEMENT OF THE HONORABLE DANIEL I. GORDON, ADMINISTRATOR FOR 
  FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Gordon. Thank you. Senator Warner, members of the 
Committee and the Task Force on Government Performance, I 
appreciate the opportunity to appear before you today to 
discuss Federal acquisition and the part it can play in 
improving the performance of Government.
    What I would like to do is briefly highlight now some of 
the progress we have made following the President's direction 
in March of last year to achieve real, sustainable improvements 
in our acquisition system. As Senator Warner pointed out, the 
context of the President's direction was the fact that in the 
years 2001 through 2008, we had been seeing an unsustainable 
increase in spending on contracts and contractors, rising an 
average of 12 percent a year during that period, so that the 
amount we were spending on contracting each year more than 
doubled in that period.
    The Government's acquisition work force, however, barely 
grew in size, which meant they could not cope with this tsunami 
of buying that was taking place with predictable results.
    I cannot tell you today that we have solved all the 
problems. Far from it. It took years to dig the hole that we 
are in, and we cannot dig ourselves out of it in a few short 
months. But I can tell you we have made real, measurable 
progress.
    First of all, we are finally investing in our acquisition 
work force. They are the lifeblood of the Federal procurement 
system. Agencies have started hiring acquisition professionals, 
albeit in modest numbers, and we are working on improving the 
training that they get. For fiscal year 2011, the President has 
requested that Congress appropriate $158 million for the 
civilian agencies' acquisition work force, and I urge you to 
support that request. This is a relatively small investment 
that will have a high return, especially when you consider that 
our acquisition work force is handling more than half a 
trillion dollars in contract spending every year. And in terms 
of where we are with that enormous annual outlay, the big 
picture headline is that we put the brakes on spending.
    Instead of the 12 percent annual increase that we have been 
seeing, in fiscal year 2009 we had an increase of only 4 
percent. Across the executive branch, both at DOD and the 
civilian affiliate agencies, we are more carefully reviewing 
what we buy and how we buy it. My colleague Shay Assad will be 
telling you about DOD's commendable efforts in this regard, and 
we at OMB are, of course, working very closely with Shay and 
his colleagues at DOD. But the heightened sense of fiscal 
responsibility of acquisition is, of course, not limited to 
DOD. We are seeing proof of it and encouraging it every day in 
every agency.
    My written statement has statistics about our 
governmentwide progress in savings and risk reduction. What I 
would like to do very briefly, though, is give you five 
examples of how our agencies are demonstrating fiscal 
responsibility in their procurements, one of which is going to 
resonate with Senator Warner's comment about e- procurements in 
Virginia where I do think the States and local governments have 
done extremely well.
    No. 1, agencies are pooling their buying so that we are 
finally leveraging the purchasing power that the Federal 
Government should have as the world's largest customer. Perhaps 
the best example is the set of agreements GSA recently 
negotiated for office supplies. Those agreements will guarantee 
for the first time that every Federal buyer in every Federal 
agency, whether they buy in person, over the phone, or on the 
Web, will receive deep discounts for hundreds of different 
office supplies. That may sound mundane, but the result could 
be as much as a quarter of a billion in savings.
    Second, agencies are focused on increasing competition, and 
a great example I would like to mention about increased 
competition comes from DOD, the Military OneSource Program, 
which provides important support services for our military 
personnel and their families. That procurement has never been 
competed until now. DOD collaborated with the Department of 
Interior's Acquisition Assistance Center, which ran a full and 
open competition. That competed contract is expected to save 
taxpayers $300 million as well as to provide better services to 
our military families.
    Third, agencies are moving away from pricing arrangements 
that have the Government, which means the taxpayers, bearing 
too much of the risk, to more prudent fixed-price contracts. 
For example, EPA recently shifted from a cost reimbursement to 
a fixed-price contract for remediation clean-up services at a 
Superfund site and is now paying 65 percent less.
    Fourth--and this is what the Senator's comment about EVA 
made me think of--agencies are now routinely driving down 
prices by conducting electronic reverse auctions on the Web in 
which vendors are bidding online for the Government's business. 
One example, again: DHS last year ran more than 2,000 
electronic reverse auctions, saving us millions of dollars.
    Finally, agencies are giving long overdue attention to 
contract management. FEMA, for example, has put together high-
quality training for its COTRs, as they are called, the 
contracting officer's technical representatives. They play a 
key role in ensuring that taxpayers get the price, the 
schedule, and the quality that the contractor committed to 
deliver.
    I realize these are only examples. We need to make these 
success stories the norm across the Government. To do that, we 
are working with the agencies' chief acquisition officers, 
their chief procurement executives, and directly with the work 
force. I am meeting them, we are meeting with them in town hall 
meetings, by e-mail, on a wiki, to share best practices and 
push for their adoption across the Government.
    There is much work yet to be done, but our early results 
show that we are on track in our efforts to achieve savings, 
reduce risk, and achieve better results for our Government and 
our taxpayers. I look forward to working with you and other 
Members of Congress on this important endeavor, and I would be 
delighted to answer any questions you may have. Thank you.
    [The prepared statement of Mr. Gordon follows:]

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    Senator Warner. Thank you, Mr. Gordon.
    Mr. Assad.

  STATEMENT OF THE HONORABLE SHAY D. ASSAD, ACTING ASSISTANT 
   SECRETARY OF DEFENSE FOR ACQUISITION, OFFICE OF THE UNDER 
     SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND 
             LOGISTICS, U.S. DEPARTMENT OF DEFENSE

    Mr. Assad. Senator Warner, members of the Committee, thank 
you very much for the opportunity to speak with you today. The 
subject of today's hearing is ``Responsible Contracting: 
Modernizing the Business of Government,'' and it is a matter 
that is one of Secretary Gates' highest priorities. He recently 
directed all echelons of the Department to take a ``hard, 
unsparing look'' at how we operate with the goal of cutting 
overhead costs to transfer those savings to force structure and 
modernization within the programmed budget. Just over 2 weeks 
ago, Dr. Ashton Carter, the Under Secretary of Defense for 
Acquisition, Technology, and Logistics, directed that all DOD 
acquisition professionals find ways to improve the way we 
conduct business in order to deliver better value to the 
taxpayers for the goods and services we acquire for our 
warfighters. Dr. Carter's memo is really about increasing the 
buying power of the Department and getting a better deal for 
the taxpayers.
    In directing us to re-examine every aspect of how we do 
business, Secretary Gates has told us that we should ask two 
questions. First, is what we are doing respectful of the 
American taxpayer at a time of economic and fiscal duress? And, 
second, is this activity or arrangement the best use of limited 
dollars given the pressing needs to take care of our people, 
win the wars we are in, and invest in the capabilities 
necessary to deal with the most likely and lethal future 
threats?
    We need to examine not only what we are acquiring, but also 
how we are acquiring these activities and programs. Within the 
Department of Defense, we process over 3 million contracting 
actions a year. This year we will spend somewhere between $350 
and $400 billion in goods and services on behalf of the 
taxpayer.
    There are a number of actions that we can and must take to 
infuse arrangements into our contracts and motivate industry to 
achieve greater efficiency, and we must expect to reap the 
benefits of those efficiencies, and we will insist that 
industry share those savings with the Government.
    In the coming months, Dr. Carter will issue final guidance 
to implement this initiative. I will conclude by stating that 
there is a significant opportunity to save billions of dollars. 
But the savings will only be realized if we have a well-trained 
and sufficient work force to implement the change that is 
necessary.
    As the individual responsible for overseeing the growth and 
the development of the acquisition work force, I know I speak 
for the entire work force in expressing my gratitude to 
Secretary Gates, Deputy Secretary Lynn, Dr. Carter, and Members 
of Congress in supporting the much needed growth and increased 
capability of our work force. We will not accomplish this 
savings without a competent, capable, well-trained, and 
properly sized work force.
    I thank you for the opportunity, and I welcome your 
questions.
    [The prepared statement of Mr. Assad follows:]

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    Senator Warner. Thank you, Mr. Assad, and thank you, Mr. 
Gordon.
    Let me start by echoing what you both have said, that as we 
see these dramatic increases in the amount of contracting, the 
worst example of penny-wise, pound-foolish is not investing in 
the Federal contracting oversight work force so that we have 
the appropriate procurement officers, we have the oversight, 
and we have the expertise. Again, I know from limited prior 
experience as Governor that not having folks familiar with new 
techniques, new tools, and simply loading up additional 
responsibilities without increased oversight is a recipe for 
disaster. I think Secretary Gates is right, and I know Mr. 
Gordon has also been a big advocate for this.
    I have a couple of questions. Then as I mentioned earlier, 
I may have to step out for about 15 minutes.
    First, perhaps both of you could address this. One of the 
things we have seen in contracting--and perhaps this goes to 
work force issues--is the appropriate size and scoping of a 
contract. When we go low bid, which at first blush sounds best, 
but if we get the inappropriate sizing in the contract on the 
front end, time and again we see contractors come in on a low 
bid and then with change orders see the original contract size 
doubled, tripled, or quadrupled. How do we put in place better 
sizing procedures and framing procedures and have both 
appropriate penalties and restrictions both on contractors who 
have underbid and expect to have change orders and agencies 
that do not have any line responsibility in terms of doing the 
hard work up front in terms of sizing a contract?
    Mr. Assad. Senator, there really are two types of products 
that we buy. We buy products--that is, equipment, goods--and we 
buy services. And we have to look at them slightly differently. 
In the world of services, we are now spending more money in the 
Department of Defense than we do on major weapons systems and/
or goods. We spend about 53 percent of our funds on services, 
47 percent on major equipment and goods. And in the world of 
services, the key is to expand competition as much as we 
possibly can when we buy services, and to ensure that the 
scope--that is, the work statements that we are asking 
contractors to bid to--is understood and that we are using the 
proper types of contracts to buy the goods and services that we 
are about to do.
    In the world of services, one of our problems has been 
that, again, probably for convenience and expediency, we hold a 
competition, we select a particular contractor, and that 
contractor becomes an incumbent over an extended period of 
time. What we are trying to do at the Department is to extend 
the number of contractors that will compete on a competitive 
basis continuously, to reduce the length of time of our 
services contracts so that the scope of work can be more 
properly understood and we can get more effective control over 
what is being performed, and then be able to conduct the 
oversight to ensure that we actually got the services that we 
contracted for.
    In the world of major weapons systems, it is a little bit 
of a different situation. In that world it is all about 
properly defining your requirements. And Secretary Gates has 
talked a lot about the 75-, 80-, 85-percent solution versus the 
solution which shoots for the moon. and the idea and concept 
being we are much better off getting equipment into the hands 
of our warfighters 3 or 4 or 5 years down the road that 
increases their capability rather than taking 15 or 20 years in 
an effort to try to produce something that remarkably increases 
their capability but inevitably takes longer than we thought 
and costs the taxpayers significantly more money.
    So in that particular case, what we are doing is we are 
spending a lot of time up front talking about what are the 
technologies that are risky and have we made the proper 
investments up front before we begin making significant amounts 
of spending in engineering, manufacturing, and development, of 
ensuring that we are not asking our contractors to achieve 
things that are incredibly difficult to achieve, and that there 
is a recognition of the proper type of contract that is fair to 
both sides in terms of expectation.
    What we have failed to do in the past is create contracts 
that are reflective of the outcomes that we want to get, and 
what we were doing was measuring process rather than measuring 
the outcome. And at the end of the day, that is what the 
taxpayer wants. Did we get what we paid for? And are we paying 
a fair price?
    So I think what you are going to see from the Department is 
a lot more time spent on the front end of programs because much 
like in industry--and I spent a good deal of my career in 
industry, in major corporations--the fact of the matter is most 
of the time is spent in defining the requirement.
    Senator Warner. I guess very briefly, because my time has 
expired, Mr. Gordon, do you want to----
    Mr. Gordon. I will be very brief. Shay's office and mine 
work very closely together. I agree with everything that Shay 
said. The one point I might add is that the challenge of 
requirements definition is directly tied to the weakness of the 
acquisition work force and the need for the acquisition work 
force and the program people to work together. When we do not 
write the statement of work properly, we end up with 
contractors coming back and saying they need more money, saying 
they want an equitable adjustment. Starting the acquisition 
properly makes all the difference in the world, and for that we 
need better trained acquisition professionals, and we need them 
working with their program people.
    Senator Warner. You are consistent on your points, but I 
would only add two quick points--and we are joined by Senator 
Cardin. I appreciate Senator Cardin being here as well. One, I 
would have liked to have heard in that answer, Mr. Assad, 
something that said, And we are laying out both specific 
incentives and penalties to reward good behavior in terms of 
contracts, not expanding beyond scope and size, and clearly I 
understand the weapons system differently than, say, the 
services piece, particularly focused on some of the IT 
contracting, which is very robust in my community, but how we 
size that correctly and reward contractors or keep to that size 
and penalize both contractors and/or agencies who get it wrong 
on sizing. And since my time has expired, Mr. Assad, you will 
not get, at least at this point, the very pointed question I 
was going to ask you right now on how did we get into this 
outrageous mess at Arlington Cemetery and what are we going to 
do to make sure--and I know the Secretary of the Army and I 
have had a number of conversation about this to make sure that 
it is corrected and never happens again. It has been, a 
national embarrassment. But if I can get another round, just to 
forewarn you, that is what I am going to come back to.
    Senator Murray?
    Senator Murray. Thank you very much, Mr. Chairman.
    Mr. Assad, thank you. We are all focusing on the Federal 
deficit, and bringing down the national debt. In light of that, 
it is more important than ever that we make sure all of our 
programs are running as cost-effectively as possible. Every 
penny counts here.
    I want to talk to you--because the GAO recently testified 
that the reliance on contractors continued to increase and we 
heard that again today that this is leading to overall cost 
increase. In their testimony, the GAO noted that of the 50 
programs in their 2010 assessment, only 19 had filled all of 
their authorized positions, and 86 percent of the programs 
providing data needed to hire contractor support to do the job. 
How can Congress better assist the Department of Defense in 
recruiting qualified candidates so we can avoid using these 
contractors and save the taxpayer money?
    Mr. Assad. Senator, the point you made is absolutely valid 
and on point. The reality is one of the things that we are 
looking at right now is we grow the acquisition work force some 
20,000 people over the next 5 years. About 10,000 of those 
folks will be in program management, systems engineering, 
logistics management, business management roles. It is in those 
roles that the growth of the contractor community has really 
burst to points where it is way beyond where it should be.
    Mr. Gordon talked about inherently governmental work, and 
the fact is we need to bring back into Government more of the 
capabilities so our program managers and our program offices 
can, in fact, properly oversee these contracts with an arm's-
length relationship. We are making good progress.
    Senator Murray. And are there hiring incentives----
    Mr. Assad. Yes, and I would like to talk about that. We are 
making good progress. At this point we would have--we were 
planning to have hired about 3,400 people over--it is a 5-year 
plan. Of those 20,000, we thought we would be at about 3,400. 
We have, in fact, hired about 4,600. So we ahead of schedule. 
We are hiring quality people, and I think the flexibility that 
Congress gave us with the 852 funds and the increased funds 
provided by Congress with regard to hiring our acquisition work 
force give us the tools we need.
    So I think it is a little bit too early for us to request 
additional assistance from Congress. We need to actually go out 
and do what you have given us the authority to go do. And I 
think we are well on our way to do that.
    Senator Murray. OK. And are we working to get veterans 
into----
    Mr. Assad. Oh, absolutely. Absolutely. One of the key 
things we are finding is a number of our technical--especially 
at the Defense Contract Management Agency, we are finding that 
a lot of veterans, especially retired E-8s, E- 9s, folks with 
tremendous maintenance experience, are now coming into our work 
force to help oversee the very equipments that they were 
maintaining. So that is a good thing.
    Senator Murray. OK. And I also wanted to ask you a really 
important question. As you know, on June 30th this year, the 
WTO publicly announced that Airbus had received illegal 
subsidies that have damaged the U.S. aerospace business. 
According to U.S. Government estimates, that is about $200 
billion in today's dollars in total subsidies to Airbus. That 
has artificially lowered their prices, and tens of thousands of 
our American work force have lost their jobs because of those 
illegal subsidies, and our U.S. industrial base capacity has 
been reduced significantly, including our knowledge base that 
we need to build our defense system.
    Now, competition is key--we all know that--in making sure 
the Department of Defense gets the best value for their dollar. 
But it is also really important that the DOT factor in any 
unfair competition that another company may be receiving. And I 
wanted to ask you today, in light of that, how is the DOD 
planning to account for those illegal subsidies that have been 
received by Airbus--WTO has said that publicly now, and very 
clear--in the upcoming bid for the KC-X aerial refueling 
tanker?
    Mr. Assad. I have to be measured in what I say, Senator, 
because this is an ongoing source selection. But we think that 
we have taken adequate steps to ensure that the taxpayers are 
protected from any findings that might come out of a WTO 
ruling. As you know, there are two particular cases--one, the 
European Union versus the United States, the United States 
versus European Union. I personally--my office represents the 
Department in supporting the Trade Representative in both of 
those cases. And it is an extremely complicated situation and 
matter. It is a matter that is not likely to be resolved and is 
going to be subject to appeal, and it is going to take a 
significant amount of time for that to play out.
    What we have ensured is that in any instance the taxpayers 
will be totally protected if, in fact, there is a ruling, a 
final ruling----
    Senator Murray. I know why you are saying what you are 
saying to me, but I just want us all to remember the taxpayers 
have been harmed now, significantly, and our work force, our 
industrial base, and our capabilities. So I know why you are 
saying what you are saying, but I will tell you, there is a lot 
of us that feel very strongly about the fact that we are now 
competing against a company with a plane that has been 
illegally subsidized so they can artificially lower their cost, 
and that is not a fair competition. And I know what you have to 
say.
    Mr. Assad. Yes, ma'am, I certainly understand your 
position.
    Senator Murray. Thank you.
    Senator Whitehouse [presiding]. I have a call that I am 
supposed to take at any moment, but it has to come in first. So 
what I might do is go ahead, and if the call comes, I will 
yield immediately to Senator Cardin. But if you are answers my 
question and somebody taps me on the shoulder and I suddenly 
jump up, it really does not have anything to do with what you 
have said, so please take no offense.
    Mr. Gordon and Mr. Assad, what is the total amount that the 
U.S. Government spends annually on contractors, both generally 
and within the Defense Department?
    Mr. Assad. Well, I can tell you that the total amount of 
funds that we spend for the goods and services we buy is 
approximately--in fiscal year----
    Senator Whitehouse. Define the ``we'' in your answer.
    Mr. Assad. The Department of Defense.
    Senator Whitehouse. Department of Defense, yes.
    Mr. Assad. $372 billion last year, and about 53 percent of 
those funds were for services, and services typically are 
getting contractors to provide service to support the 
Department.
    So it is a significant amount of money that we spend in the 
contracting of services, so it is about 53 percent of the 
funds.
    Senator Whitehouse. Mr. Gordon, governmentwide, what is the 
number?
    Mr. Gordon. Government-wide, including DOD, of course, 
Senator, it was in fiscal year 2008 something like $535 
billion, maybe $537 billion. And in 2009, when we slowed that 
increase from the 12 percent we had been seeing annually on 
average, it was about $560 billion. It would have been much 
higher if we had continued on the prior track.
    Senator Whitehouse. So to go from $535 billion to $560 
billion was actually a reduction in the rate of increase that 
we were seeing?
    Mr. Gordon. Yes.
    Senator Whitehouse. That is a pretty significant tell-tale 
all on its own, isn't it?
    Mr. Gordon. It is, sir. More than half a trillion dollars a 
year.
    Senator Whitehouse. Is it the case from time to time, 
indeed relatively regularly, that under the services contract 
side of the Defense Department contracting you will find 
American soldiers and Government employees providing similar 
services, in some cases side by side in the field, to 
Government contractors with the Government contractors being 
paid more than the soldier or Government employee?
    Mr. Assad. I think that there is no doubt that we have a 
large contracted work force in the field working side by side 
with our warfighters. What we have done is basically logistics 
support of our warfighters in terms of what we call life 
support--dining facilities, laundry, things like that. We 
really do not have warfighters doing much of that anymore. It 
is provided by contractors. But there is no doubt that 
contractors make more money than our military work force. I 
mean, there is no question about that.
    Senator Whitehouse. What effect do you think that has? I 
mean, clearly there is a bit of a morale effect if two people 
are more or less side by side, suffering the same risks, doing 
the same work, pursuing the same goal, and one is being paid 
significantly more in the private sector than the other one on 
the Government payroll. But in addition to that morale effect, 
does it clearly to recruitment, revolving door, other concerns? 
Sometimes I feel that people get trained at Government expense 
and then move out into the contractor world where they take the 
training that they received at Government expense to go back 
and do the same work for the Government at a higher rate, and 
that is sort of an unfortunate result that merits a little bit 
of attention.
    Mr. Assad. It does merit oversight, Senator, but I do not 
think it is as widespread as your concern might be. For the 
most part, we have tried to divide those responsibilities so 
that what the contractors are performing is work that really 
our soldiers--either the choice has been made by our commanders 
in the field they do not want soldiers and marines performing 
those responsibilities, or they are of a technical nature such 
that our marines and soldiers are doing certain amounts of 
maintenance and the contractors are doing perhaps more 
sophisticated maintenance.
    Senator Whitehouse. The Commission on Wartime Contracting 
in Iraq and Afghanistan report identified in particular KBR, 
which collected nearly $32 billion since 2001, was connected to 
what the Commission called the vast majority of war zone fraud 
cases and a majority of the $13 billion in questioned or 
unsupported costs, and in particular, an issue that we focused 
on a lot has been the payment of at least $80 million in 
bonuses to KBR for the allegedly faulty electrical work that 
resulted in the fatal electrocutions of more than a dozen U.S. 
soldiers in the field. That sounds like a massive failure of 
oversight and really a bitter irony for the families of those 
dozen soldiers to realize that KBR was paid bonuses for that 
work.
    How are we responding to the Commission's report in terms 
of trying to protect against this sort of stuff happening 
again?
    Mr. Assad. Senator, in fact, the information is not exactly 
accurate. The fact is we paid zero award fee to KBR during that 
period of time for which we deemed them to have unsatisfactory 
quality oversight of their electrical performance. That was 
between, I think, the period January of 2008 to around May of 
2008. The fees that they got--I mean, the reality of life is if 
you go to the field and you talk to the commanders in the 
field, they will tell you that in general KBR does an adequate 
job in supporting our troops. The amount of money--and $80 
million is a lot of money. But they also performed a lot of 
work outside of that particular period for the electrical work, 
and I think what we awarded them was about 40 percent to 50 
percent of the fee that was available for the work beyond the 
electrical work. But we actually awarded them zero--
irrespective of what they performed during that period, it was 
zero award fee. My office oversaw that.
    Senator Whitehouse. Senator Cardin.
    Senator Cardin. Well, first, thank you both very much for 
your service. We very much appreciate it. The Federal 
Government is the largest purchaser of goods and services in 
the world, and Congress has made it clear through statutes that 
we want a certain amount of that procurement work reserved for 
smaller companies, 23 percent. There are five goals that are 
spelled out in law, and the most recent survey indicated that 
only one agency complied with all five of the goals and two 
agencies failed to reach any of the goals set out.
    So, Mr. Gordon, I want to ask you whether you are satisfied 
with the efforts we are currently making for small businesses 
to be able to participate in Federal procurement as Congress 
has envisioned. As you know, small companies are the living 
force behind job growth and innovation in this country. Are we 
doing enough, or do we have to do more?
    Mr. Gordon. Senator Cardin, we are not doing enough. The 
President and the administration are not satisfied with the 
situation. We need to be meeting those statutory goals not only 
for small businesses, a 23-percent goal, but also the goals for 
the subsets, such as the service-disabled-vet-owned small 
businesses.
    The President, as you know, signed a direction to us on 
April 26th to set up an interagency task force to look for ways 
to expand the opportunities for small business contracting. We 
in OMB are working with the Department of Commerce, the Small 
Business Administration, and the buying agencies right now, 
this summer, to come up with concrete recommendations for ways 
to move forward. There have to be more opportunities.
    I will tell you, Senator, too often people think, Oh, well, 
if you buy smarter, if you use strategic sourcing, that is 
going to mean you turn to the big companies. Not true. In my 
opening statement before you arrived, Senator, I talked about a 
new initiative to buy office supplies through blanket purchase 
agreements at much lower prices. At the time those were rolled 
out at the beginning of June, GSA awarded 12 of those 
agreements. Eleven of the 12 were to small businesses. Eleven 
of the 12 were to small businesses, two of which were service-
disabled-vet-owned small businesses.
    In our experience, we can make progress on small business 
contracting and get a better deal for our taxpayers. We can 
meet both of those goals if we are open to flexibility and 
looking for opportunities for our small businesses.
    Senator Cardin. Well, thank you for that reply. You know, 
one of the major problems we have is the abuse of bundling, 
which is somewhat related to whether the different agencies 
have enough personnel to be able to evaluate the number of 
interested contractors. In the Department of Defense, I must 
tell you a frequent complaint I receive from defense 
contractors is that they are often required to work with the 
larger companies in order to be able to have their work 
seriously considered, leading them to be subs or in some cases 
actually bought out by the larger companies.
    Mr. Assad, I know your background, and you have had a 
distinguished private sector career working for one of the 
Nation's largest companies. With no aspersion at all as to the 
company you work for, there has clearly been intimidation 
within the defense contracting industry to partner with a 
larger company if you intend to do business with the Federal 
Government. What is your response for more direct contracts 
between small companies and the Department of Defense so that 
they do not have to rely on being subcontractors or in some 
cases being bought out by the larger company?
    Mr. Assad. Senator, right now our goal is 23 percent. We 
are running at about 18.9. That is not good enough. That is 
nowhere near good enough. And one of the things--I do not know 
if you have had an opportunity for your staff to show you Dr. 
Carter's recent memo that he put out into the work force, but 
the biggest single area where we have an opportunity to 
significantly increase small business is in the world of 
services. And we are going to focus on this like a laser beam.
    We get a better deal when we have small business 
participation, and especially competitive small business 
involvement. And where we are going is if we establish multiple 
award contracts in the future, we are going to insist that not 
just a certain amount of the work be set aside for small 
businesses, but that small business participation exists in 
every multiple award environment, and if there are two or more 
firms that can accomplish that work, we want it competed 
amongst the small businesses.
    So what you are going to see from us is a tremendous focus 
in trying to grow in the world of services opportunities for 
small business, because what happens on our hardware side of 
the street is--you know, when we buy an aircraft carrier or we 
buy some major pieces of equipment in any particular year, it 
really hurts our ability to get that percentage up. However, I 
just mentioned to you that we spend 53 percent of our money on 
services, and so that is where we are going to focus to grow 
small business opportunity. And I could not agree with you more 
about small businesses being in that limbo state of not being 
able to compete on the hardware side of the street with a major 
equipment supplier, and we do want to foster, for example, 
through our Small Business Innovative Research Program, 
opportunities for small business in that environment, too.
    There is a lot of work to be done in this area, Senator, 
but I can assure you that--I am personally responsible for 
small businesses in my acting role, and I can assure you that 
we are focused on growing this.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    Senator Whitehouse. Thank you, Senator Cardin, and thank 
you, gentlemen. This more than half a trillion dollars a year 
in climbing is clearly a geyser of taxpayer funds that needs to 
be carefully watched, and I appreciate your efforts to increase 
and improve the oversight on it.
    As you depart, I would ask if you would take as a question 
for the record and respond in writing, Mr. Assad, to the 
question that Chairman Warner asked having to do with 
Arlington.
    Mr. Assad. Yes, sir.
    [The information referred to follows:]
    Senator Whitehouse. And if you could both respond to the 
recommendations of the Commission on Wartime Contracting in 
Iraq and Afghanistan and their September 21 report and let me 
know whether you think those recommendations are advisable and 
any comment you may have on those recommendations, I think that 
would be helpful. So I appreciate it very much and you are both 
excused. I thank you for your presence here today.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T8155.084
    

    Senator Whitehouse. We will take a 2-minute recess while we 
call up the next panel of witnesses. Thank you both so much. 
Thank you for your service.
    [Recess.]
    Senator Warner [presiding]. The Committee will reconvene. I 
want to again thank Senator Whitehouse, Senator Murray, and 
Senator Cardin for chairing, whoever did, while I slipped off 
to the Commerce Committee. And I thank our second panel as 
well.
    Our second panel will offer outside perspectives on both 
contracting practices and suggestions for improvement. I think 
it is going to be a lively panel. I know we have different 
views here, which I think is important that we as members hear.
    First we will hear from Dr. Allison Stanger, a professor of 
international politics and economics and Director of the 
Rohatyn Center for International Affairs at Middlebury College. 
Dr. Stanger's most recent book, ``One Nation Under Contract: 
The Outsourcing of American Policy and the Future of Foreign 
Policy,'' was published by Yale University Press in 2009. She 
is a member of the Council on Foreign Relations, Academic 
Leadership Council of Business for Diplomatic Action. She was 
also a contributor to the Booz Allen Hamilton project on the 
world's most enduring institutions, the Woodrow Wilson School 
Task Force on the Changing Nature of Government Service, and a 
whole lot of other stuff which will be submitted for the 
record.
    Our second witness is Dr. James Carafano, the deputy 
director of the Kathryn and Shelby Cullom Davis Institute for 
International Studies and director of the Douglas and Sarah 
Allison Center for Foreign Policy Studies at The Heritage 
Foundation. Dr. Carafano is a historian and teacher as well as 
a writer and researcher on the fundamental constitutional duty 
of the Federal Government to provide for the common defense. 
Dr. Carafano's most recent book is ``Private Sector, Public 
Wars: Contractors in Combat--Afghanistan, Iraq, and Future 
Conflicts.'' He is also a 25-year veteran of the Army, manages 
the day-to-day research program as the director of the Allison 
Center, and has a series of very distinguished background as 
well.
    We will get to the panel. Dr. Stanger, you go first.

    STATEMENT OF ALLISON STANGER, PH.D., RUSSELL LENG 1960 
 PROFESSOR OF INTERNATIONAL POLITICS AND ECONOMICS, MIDDLEBURY 
                            COLLEGE

    Ms. Stanger. Senators, it is an honor and privilege to 
share some thoughts with you here today. I have submitted a 
longer statement for the record, and I am going to use my 5 or 
6 minutes here to make a simple argument: that our cherished 
value of self-government now depends on radical transparency in 
all Government business transactions.
    As we have heard on the first panel, the business of 
government is increasingly in private hands, and there is broad 
consensus that the current Federal acquisition system is 
antiquated, ill-equipped to deal with the surging demands 
placed upon it. A few key figures from USASpending.gov make the 
general trend clear. In 2000, DOD spent $133.2 billion on 
contracts. By 2008, that figure had grown to $391.9 billion, 
which is an almost threefold increase. Again, the same period, 
2000 to 2008, the State Department spent $1.3 billion on 
contracts. Eight years later, contract spending had grown to 
$5.6 billion, an increase of 431 percent. In 2000, USAID spent 
$478.6 million on contracts. By 2008, the figure had grown to 
$3.3 billion, which is an increase of 690 percent in 8 years' 
time.
    Despite this paradigm shift in how Government conducts its 
daily business, contracting, I think, continues to be perceived 
as something peripheral to policy itself. Yet when contracting 
and grants comprise 83 percent of the State Department's 
requested budget, as they did in 2008, 82 percent of the 
Pentagon's budget, and a whopping 99 percent of USAID's net 
cost of operations, it is clearly no longer the case that 
contracting is something peripheral to policy. In the foreign 
policy realm, with America's first two contractors' wars in 
full swing, contracting has clearly become a strategic issue. 
It must be treated as such.
    Now, I am a Vermont-based professor without a security 
clearance. I can present these numbers to you here today 
because of the 2006 Federal Funding Accountability and 
Transparency Act, or FFATA, which created USASpending.gov.
    In preparing my written testimony, the figures I cited to 
you, I pulled them from that website in December 2009. But I 
discovered last week that sometime in early 2010 
USASpending.gov's platform and interface were totally 
redesigned. Once significant change caught my immediate 
attention. The old version of USASpending.gov used to have a 
page entirely dedicated to subcontracts and linked to the home 
page. The subcontracts page used to report that the site was 
under development. It really provided a clear place holder for 
important forthcoming information. Today there is no 
subcontracts or sub-grants page linked to the home page, and 
the category does not even exist in the menu of choices.
    Given recent revelations that U.S. taxpayer money has been 
flowing through subcontracts into the pockets of the Taliban in 
Afghanistan, the evaporation of the subcontracts page is 
troubling. Without transparency in subcontracts, we are 
effectively pouring taxpayer money into a black hole in 
Afghanistan with no real means of knowing how well that money 
is likely to be spent or even who is receiving it.
    FFATA required that information on subcontracts be made 
available to the public by January 1, 2009, and the old website 
really made it clear that USASpending.gov was a work in 
progress, that this information was forthcoming. Today that has 
changed. The irony here, at least at the level of appearances, 
is that a website designed to show American taxpayers where 
their money is going, whose very existence is owed to 
legislation championed by then-Senator Obama, has grown less 
rather than more transparent under President Obama's 
administration.
    Writing in Federalist No. 10, Founder James Madison saw 
what he called ``the mischief of factions'' being neutralized 
that the plethora of special interests in vast colonial America 
canceled one another out through both federalism and 
representative Government. In 21st century America, however, 
Government by contract instead encourages inside-the-Beltway 
special interests to coalesce and carry the day.
    Government by contract means that Government is entirely 
dependent on the private sector to conduct its daily business, 
so effective oversight is too often hostage to a corporate 
bottom line. Whenever the economy falters, the profit motive 
encourages businesses to cut safety and security measures 
unless Government insists they do not do so. And our disdain 
for bureaucracy makes it difficult for Government to secure the 
staffing it needs to ensure that these short cuts are not 
taken.
    Congress and the White House can, therefore, have the best 
of intentions yet be unable to escape the quagmire that 
Government itself has in part created through its incessant 
outsourcing. And I want to be sure that my basic point here is 
not misunderstood. There is no partisan villain in this tale, 
no conspiracy. We have together constructed a system that no 
longer functions as the Founders intended.
    Rescuing Government by the people from the current 
Government by checkbook is a project for a generation, but we 
need to get started now. When so much of the work of Government 
is in private hands, standard approaches to transparency will 
no longer suffice. President Obama's March 4, 2009, 
Presidential memorandum ordering a governmentwide review of our 
contracting practices was a bold step in the right direction. 
The next step is to ensure that the spirit and letter of FFATA 
are upheld.
    Thank you for your attention, and I welcome your questions.
    [The prepared statement of Ms. Stanger follows:]

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    Senator Warner. Thank you, Dr. Stanger.
    Dr. Carafano.

 STATEMENT OF JAMES JAY CARAFANO, PH.D., DIRECTOR, DOUGLAS AND 
 SARAH ALLISON CENTER FOR FOREIGN POLICY STUDIES, THE HERITAGE 
                           FOUNDATION

    Mr. Carafano. I do not know if--
    [off microphone].
    Senator Whitehouse. Oh, come on. Try.
    [Laughter.]
    Mr. Carafano. I would like to highlight five quick points 
and highlight three recommendations. My first point is 
contracting in the private sector, if it is done right, is a 
huge competitive advantage for any nation. World global product 
is $58 trillion. About a fifth of that is the United States. 
Most of that wealth was created by the private sector. Much of 
it was created by small and medium businesses, so harnessing 
that power is really the key to being the winner in the 21st 
century. And if you are a free nation, you actually start out 
with a competitive advantage. If you have rule of law, if you 
have transparency, if you have low rates of corruption, if you 
have a media and other people that bring transparency and 
sunlight, you have an enormous advantage in executing this 
thing. So getting this right--really, it is not even just about 
fiscal responsibility. This is about protecting and keeping the 
Nation free, safe, and prosperous in the 21st century, and 
leveraging one of the absolute most powerful advantages on the 
known planet is a big piece of that.
    I and a team at Heritage, we have been looking at this 
issue for a very, very long time, and after years of study I 
come back again and again and again, when I get to the root of 
the problem, 99.9 percent of the time the root of the problem 
is Government is not a very good customer. And a lot of what I 
hear today is the right discussion. The enemy is largely us, 
being the people that contract for goods and services.
    My concern is it is great to hear all this discussion and 
talk about fixing the problem and do this, and we can put aside 
the fact that we have heard this for decades and decades and 
decades from administrations both Republican and Democrat. 
Intentions are great, but intentions have to be meaningful, and 
analysis that focuses on outputs as opposed to outcomes to me 
is very troubling. So when we just throw numbers around out of 
context, numbers independently as if they mean something, 
whether they are good or bad or we are going to do this or we 
are going to do that, and it is not tied to a specific outcome 
that is clear and compelling, then I wonder whether reforms are 
actually going in the right direction.
    The fourth point I would make is by and large the solutions 
that I would argue for, my personal prejudice is always people 
overprocess, particularly where you are dealing with very, very 
huge, complex systems. Probably a great example of this is back 
in the 1990's, when information technology was really 
exploding, people had a good heart, and so we had the Clinger-
Cohen act, and the notion was Government has to get on top of 
this. So we added a process. We said, Look, consider IT a major 
enterprise acquisition for your Federal agency, period. And 
that seemed like a good thing. We were putting people in 
charge. Well, of course, we were really at the dawn of the IT 
revolution, and the people who were put in charge were 
clueless. They did not have any ideas on what good IT was. So 
it is like we gave matches to the kid, and as a result in the 
1990's Government locked itself into a lot of stupid decisions 
that the private sector did not make in terms of buying 
proprietary software and different services. And we have been 
locked into that, and in large part you could argue that our IT 
policies and acquisition have stunk for decades because we put 
stupid people in charge at the beginning, and now we are just 
playing catch-up.
    When you get the people piece right, everything else falls 
into place. And I want to just emphasize three areas of that. 
Getting an acquisition work force, I think everybody agrees 
that is absolutely right. We powered down our acquisition work 
force, particularly in DOD, at the end of the cold war. Huge 
mistake because we knew the only way we were going to grow 
capacity in time of war was to use the private sector and to 
take away the head that was supposed to run that. That was just 
dumb. And we have to build that back.
    When we build that back, we have really got to be smart, 
and there is a good analogy here. If you look in the scientific 
community what keeps scientists at a university or a research 
center? And it is not just what you are paying them. They like 
to hang out there because it is cool. They have cool research 
facilities. They got great work. They have the tools that they 
need, and they are doing exciting things. So when we build this 
IT work force, we have to give them the tools and the 
capabilities and the authority to do their job; otherwise, they 
are not going to stick around. And if we just have a lot of 
people cycling through the system every 12 or 18 months, we are 
not going to get any oversight. Particularly in the area of the 
IT systems that support the acquisition oversight and 
management process, we have to put the investments in there and 
get the right systems in place.
    The second piece I would emphasize is auditing. Everybody 
talks about auditing. Auditing is great. When we look at the 
history of the auditing of the auditor of the Defense 
Contracting Auditing Agency, it is not a pretty picture in the 
last couple years. You know, we have to get that piece right, 
and we have to, I think, make a distinction and re-create the 
difference between doing auditing of fiscal processes and what 
the Inspector General does.
    And I am very concerned that in our rush to fix things, we 
are tending to blur these things together to the point that it 
actually might get counterproductive. They are important 
activities, they are interrelated activities, but they ought to 
be cleanly separate activities, and they ought to be a resource 
and run appropriately.
    Then the last point I will make is we have really got to 
end the process of micromanagement. The concept of risk 
management was created to help leaders make decisions. It was 
not created to childproof the universe. You are never going to 
eliminate risk. And if you make laws and rules and processes 
that their sole purpose is to drive risk out of the system and 
not get anything done wrong, at the end what you are going to 
do is drive a process that is incredibly inefficient and 
incredibly risky.
    So risk management works when it is in the hands of the 
people who have responsibility, so we need to be empowering 
program managers, we need to be empowering the acquisition work 
force, we need to have the oversight and transparency. But we 
cannot continually saddle them with more and more regulations 
and requirements and have them in turn impose more and more 
regulations and requirements which are actually creating a more 
inefficient system. So we get to the point where we are buying 
absolutely nothing with zero risk and spending an awful lot of 
money on it.
    With that, I thank you for having me here today.
    [The prepared statement of Mr. Carafano follows:]

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    Senator Warner. Thank you both. I think there may be some 
spirited disagreement, but I think--not as much as you promised 
me, Sheldon. But I do think it was important that we have heard 
from all four of our panelists that the acquisition work force, 
getting those folks right, and getting them trained is key.
    Dr. Carafano, I would like you to expand on your comment in 
a moment. I am going to ask one broad-based question and let 
you both answer. This notion of fiscal auditing responsibility 
versus the Inspector General role, I agree with you. They were 
different functions, and the two tend to blur sometimes and 
trying to recognize one--in the normal course of business, one 
is looking for that outlier, bad instances. I would love you 
both to expand on that.
    What this Task Force has looked a lot at is the next level 
of Government performance geekiness, which we would all like 
but most folks' eyes roll over, which is performance metrics. 
And we have talked here a little bit about how do we have 
transparency, how do we get the contracting right. I would like 
you each to talk a little bit about, let us take DOD as an 
area. How do we get some common consensus on those performance 
metrics and what they ought to be?
    My personal bias is--and I would like you to both comment 
on this, particularly Dr. Stanger. I think Dr. Carafano has a 
point that we are--we want to do our oversight job well, but at 
times what we do is simply layer on more requirements, layer on 
more reporting, without taking anything away. And I think 
sometimes the work force was caught with this 20 years of 
accumulated reporting requirements, and nobody sorts through 
what is important and what is not important. And then when we 
get to the question of how do we present that information in a 
website that is user friendly and understandable by somebody 
other than distinguished professors with incredible 
backgrounds, we do not get it right. So I would like your 
comment on, in this move toward more transparency, would you be 
willing to say we ought to audit a little bit of what all the 
reporting requirements are already out there and see what we 
can actually remove and prioritize so that the work force can 
do a better job of recognizing what is really important for us 
to know to do our job right. Broad-based throwing in questions, 
and recognizing that at the front end will be my only question. 
Then we are going to move to Senator Whitehouse because the 
roll call vote has just started, so we are going to have to 
probably slip out in about 10 or 12 minutes.
    Ms. Stanger. Well, the point I would make is I am not an 
expert on auditing requirements, but I know that there has been 
this layering of requirement upon requirement, and when you get 
accumulated regulations over time, it tends to operate in 
irrational ways. So I definitely think that would be something 
for review.
    But my point about transparency is just a simple one. It is 
not allowing everybody to understand ordinary citizens to 
understand the requirements. It is simply letting citizens know 
where the money is going. That is the part that concerns me, is 
that if you have these enormous percentages of business, the 
business of Government, in private hands and it is flowing 
through contracts to subcontracts and we cannot see where it is 
going, that to me is at odds with the principle of self-
government and needs to be corrected. So I am a keen advocate 
of transparency for those reasons.
    I think we would all agree that the acquisition work force 
needs to be increased and better trained. I am wondering 
whether you might want to consider linking appropriate 
training--increased funds for building up the work force to 
appropriate training.
    I will stop there.
    Mr. Carafano. I think there is a real lesson to learn here 
from GPRA, the Government Performance and Review Act, which, 
again, interestingly, is another product of the legislation in 
the 1990's in a time when we were facing a similar fiscal 
situation that are today. We wanted to reduce Federal spending. 
We were trying to grow the economy, and so we wanted to make 
Government more efficient and more effective. So we introduced 
GPRA, which is by and large borrowing concepts from the private 
sector and applying them to Government, without clearly 
recognizing that Government business processes are different 
than private sector business processes because we have a 
Congress and we have rules and we have the foreign--the private 
sector does not. And if you actually look at the implementation 
of GPRA over time, what has increasingly happened is we have 
seen an increasing proliferation of metrics which are 
increasingly outputs as opposed to outcomes. So what we have 
actually been doing is, again, driving a bunch of behaviors 
which do not necessarily lead to the key things that we are 
interested in, which is getting the best value and the best 
services for the taxpayer.
    So, clearly, I think from Congress' perspective, fewer, 
more truly meaningful metrics that are truly outcome-based are 
something that is worth striving for. So I commend your notion 
and your idea of where it is really worth going and delving 
into, because I think there is some real ``there'' there.
    Senator Warner. I personally believe we have gone from GPRA 
to PART to now the Obama administration's efforts as well. It 
seems like we reinvent the wheel. Part of the challenge and 
part of what this--it seems to me the administration has come 
in and, in a flurry in the first year, talk about transparency 
and performance metrics, and that quickly gets very tedious to 
people other than folks like us who get excited about it, and 
that process recedes, and then a new administration comes in 
and we reinvent the wheel. Part of the goal--and I appreciate 
Senator Conrad and Senator Gregg giving us this task force--is 
to try to get an ongoing legislative entity that beyond a 
particular administration will keep that focus in place.
    I would ask you to--Dr. Carafano, you took on the issue 
around metrics performance. Dr. Stanger, you came back to 
transparency again. I would like you to reverse role each other 
and, Dr. Stanger, if you could talk a little bit about how do 
we get those performance metrics right. And, Dr. Carafano, I 
assume--I would like you to say Dr. Stanger's point, which is 
we at least ought to know where all the dollars are going. It 
seems to me like pretty common sense. I would take a little bit 
of an exception maybe to the notion that there are differences, 
but as somebody who has spent a career in the private sector 
and now some in the public sector the notion that they are 
totally apples and oranges, that there ought to be some ability 
to measure in a better way the outcomes, as you said, because 
it should not be outputs.
    So if you could address more the performance piece, Dr. 
Stanger, and, Dr. Carafano, if you could get more into the 
transparency issue, I would be curious.
    Ms. Stanger. I think with respect to performance metrics, 
we can all agree that enhanced competition is key to both 
lowering costs and also encouraging innovation and the energy 
on which our economy's growth depends. So I think actually 
transparency is linked to putting in place the right incentives 
for the private sector, because if we really do want to, as we 
heard on the last panel, increase the involvement of small 
business, if we want to be sure that every contract is properly 
competed, then transparency is key, because if you want small 
business involvement--and we see this in the development realm 
in particular--you know, having the information out there on 
what is possible and what has taken place in the past is 
absolutely critical. So I see a definite link between my 
transparency theme and getting better Government performance in 
that realm.
    Senator Warner. Let me just ask, before we go to Dr. 
Carafano, the point I made and the point that I think Dr. 
Carafano made, which was sometimes under the guise of 
transparency we add on more and more requirements, I do think 
he has a point in terms of at some level in oversight a 535-
member board, which in effect the Federal Government has with 
both the House and the Senate, each trying to ask specific 
items, can get into a level of micromanagement. How would you 
as an advocate for transparency sort through those? You know, 
should we be doing an audit of all the reporting requirements 
and all the management requirements that are out there to hone 
that list down so that we could focus on more important items, 
or the most important items?
    Ms. Stanger. It sound to me like that would make a lot of 
sense, but I would just add to that that--I have lost my train 
of thought.
    Senator Warner. It happens to me all the time. Because we 
are seeing--what we are focusing on here is I hear from Federal 
employees all the time. Every administration comes in with a 
new set of reporting requirements. The Congress adds in every 
piece of legislation new reports requirements. It is hard to be 
against any new reporting requirement that sounds when you are 
arguing and there is an amendment that this is in the guise of 
transparency and to get us to greater effectiveness and better 
value. But at times I have seen the GPRA reports and PART 
reports. They are so voluminous that, again, perhaps with very 
few experts around there there is not a focus to them.
    Ms. Stanger. My thought came back to me. Can I speak again? 
Sorry about that. I think it makes sense to perhaps redefine 
how we think of transparency, because in the way you are 
discussing it, transparency is very much a question of what 
Government is requiring what needs to be provided in terms of 
reporting to satisfy Government.
    I would suggest that we instead think of transparency as 
being something that is in the eyes of the beholder in the 
sense that it is not what Government thinks needs to be 
required or put out there but, rather, that we ask people who 
are providing the services what they would like to see publicly 
available or not publicly available and that transparency 
exists when the people who are depending on open sources agree 
that it is there. In other words, Government does not define 
transparency; the people do. And so I would encourage thinking 
about transparency in that sort of way with respect to 
regulations as well.
    Senator Warner. The only question I would have with that is 
I am not sure in this case more is always better and that at 
some point limitations--you could have--whether it is your 
contracting officials, whether it is your senior management, 
spending a disproportionate amount of time on simply reporting 
rather than doing their job.
    Dr. Carafano?
    Mr. Carafano. I would just like to jump back to the point 
on metrics, if I may for a second. Competition in small and 
medium businesses is actually a really good example, so 
defining--for example, small and medium businesses truly are 
the backbone in this country, enormous amount of innovation and 
a great resource for Government, absolutely. The question is: 
As a metric, is defining small business contracts as a 
percentage, is that a really useful metric, or is that just 
another output? And in driving to get to that metric, will you 
drive inefficient and poor behaviors as opposed to--I mean, and 
we really looked at why do small and medium businesses not do a 
lot of Government contracting, and it is usually because of the 
Tower of Babel of regulations and everything they have to go 
through to even find out about contracts and get them. So if we 
remove the barriers to entry level in the Government 
contracting, wouldn't that be maybe more effective than just 
establishing a percentage? So that is just a thought.
    On the transparency side this is an enormous issue for 
Government, and I think one of the problems is when we try to 
address the field of contracting we try to come up with a 
silver bullet to solve every problem for everything. And 
Government contracting is incredibly complex. It is a lot of 
different vehicles doing a lot of different things. You should 
look at them all differently.
    So if you are looking for a place to start, looking, again, 
at the IT support for the acquisition work force and the 
resources they have available and the adequacy of them I think 
is a very good place.
    You know, the notion that giving us a lot of information is 
burdensome, that was true in the 19th century, and it was true 
in the 20th century, but I am not so sure it is true in the 
21st century. We are creating new network tools, new social 
network tools so that places an enormous amounts of data 
incredibly quickly and allow you to slice and dice every way 
you do that. So I can go buy a piece of social ware, and I can 
tell you everything on the Web everybody is saying about 
Senator Warner today and who likes him and who does not like 
him, and I can give you all that data in about 5 minutes. And 
if I went to an acquisition work force and I asked you where 
are all the subcontractors working on this contract, he would 
say, ``I will get back to you in 3 or 4 months.''
    So the IT is out there to give us a lot of information to 
solve a lot of these transparency problems, and if you work 
that piece at the start, at the acquisition start, it is not 
going to solve the transparency problem for all of Government 
and all of Federal contracting. But it sure gives you a good 
start point to look at things.
    Senator Warner. Your point being that getting that--again, 
back to that initial sizing of the requirements right, at least 
on the IT piece, that--and I think you are saying then you have 
unlimited access to the data and how you slice and dice may not 
be as burdensome as in the past.
    Mr. Carafano. Right.
    Senator Warner. I am going to turn it over to Senator 
Whitehouse to close out this part of the hearing, and I 
appreciate both of your testimonies and answers to questions. 
In terms of a written response I would love both of your 
thoughts as this administration takes on this conversation 
about what is an inherently governmental function, that whole 
broad-based philosophical basis of how we are going to sort 
through this. It is something I think we are going to have to 
be engaged in as well and would love at least your thoughts 
about how we ought to at least even approach that debate, and I 
would look forward to those written responses.
    [The information referred to follows:]
    Senator Warner. I will turn the balance of the hearing over 
to my colleague Senator Whitehouse. Thank you.
    Senator Whitehouse [presiding]. Thank you, Senator Warner, 
and thank you both for your testimony. As much as we have joked 
a bit back and forth about the dispute that often comes between 
majority and minority witnesses, what struck me was that the 
areas of overlap between your testimony were far, far greater 
than your areas of disagreement. Even when you go to the more 
thorough written testimony, you guys are very much in synch 
about the need for better management of this contracting 
practice and the tools for doing that.
    A couple of things struck me. The first is that you seem 
both to agree that the practice of contracting has to a very 
significant extent run ahead of the policy about how we should 
be doing it. I noticed in Dr. Stanger's book, ``One Nation 
Under Contract: The Outsourcing of American Power and the 
Future of Foreign Policy,'' two quotes that seemed to 
illustrate this a bit. Susan Yarwood, Deputy Director of 
Enterprise Services in the Office of the Secretary of Defense, 
in June of 2007 said, ``We do not even know how many contracts 
we have now.'' And General Zinni, Anthony Zinni, the former 
commander-in-chief of the U.S. Central Command, said, ``If I 
had to revamp how we do things, I would start with what should 
be contracted and what should not.''
    So we are at a fairly basic level to start with where the 
questions are what should be contracted and what should not and 
how many contracts do we have. Do you agree that we are--that 
the practice of contracting has run ahead of the policy as to 
how and when we should do it and how it should be overseen and 
there is a gap there?
    Mr. Carafano. Maybe I will just start. Yes, I think that is 
very true. A great example of that is the A-76 process that was 
developed to determine whether some things should be inherently 
governmental or outsourced. So the A-76 process was a peacetime 
process, and it was designed for a very different military. And 
when you go back--and I discussed this example at length in my 
book. When you go back and you look at the tragedy of Walter 
Reed, the tragedy of Walter Reed was everybody was just doing 
their job, they were just clunking through on the A-76 process 
as it existed and doing what it said, and the result of that is 
we have tragically failed to take care of our soldiers because 
the A-76 process did not recognize the notion that there would 
be a war tomorrow and all of a sudden you have to surge 
capacity and then you need to stop and go in a different 
direction.
    So I think the answer to the question and where I would 
disagree with General Zinni is there is--and General Zinni 
knows this, and I am sure that is not what he said. You know, 
when they say how do you fight a war, the answer is, well, if 
you have seen one war, you have seen one war. You know, what 
should you contract? And the answer is, well, it depends. 
Technology is going to evolve. Governance is going to evolve. 
People's needs are going to evolve. So what is incredibly 
appropriate to contract today might not be a good idea to 
contract tomorrow.
    What we tend to do is to use always economies and dollar as 
the key determination about whether something should or should 
not be contracted out or not. Oftentimes, that is not good. 
And, again, to my mind, no contracting vehicle is perfect, and 
nothing is more virtuous than others. A fixed contract is not 
more virtuous than a sole-source contract because it is all 
developed in a context. But certainly in situations where, you 
know----
    Senator Whitehouse. Certainly some are a little bit more 
risky than others, though, and would need strong oversight.
    Mr. Carafano. It depends on context, absolutely. Certainly 
where national security is involved and people's lives are on 
the line, such as a contingency theory, contingency situations 
best value, I think--that is in the FAR for a reason, because 
that allows you to do the risk assessments that you need. So 
get the system and the people right, and then the decision 
about should I buy this or should I hire--you know, should I do 
this in the Pentagon, I think that will fall out more 
rationally.
    Senator Whitehouse. Yes, so you are behind the perspective 
that you presented. You accept the presumption that our policy 
as to how we should do this is not adequately settled for the 
extent of the practice we are engaged in.
    Mr. Carafano. Absolutely, and if I just may very quickly, 
one of the reasons why I was a big fan of Secretary Gansler's 
report that he did for the Army was because they focused on 
exactly the right thing, which is how to build a system that is 
flexible and agile and accommodate the Army's changing needs as 
they change over time to in a sense get the policy and the 
structure ahead of the problem, not to wait for the war to 
figure out how we contract for it, but to have the things that 
we can adapt to the war and the needs we have. And I thought 
the philosophy and the structure behind the Gansler report was 
a good step in the right direction.
    Senator Whitehouse. Dr. Stanger.
    Ms. Stanger. I think you are absolutely right that our 
policy has lagged practice, that we are only just beginning to 
think strategically about this issue, and much of it is due to 
what Secretary Gates has aptly called willy nilly contracting, 
that we wanted to pursue two wars simultaneously and to do so 
without a draft, and I think it is pretty clear that 
contractors have filled that gap, have enabled us to fight both 
wars without a draft. And with a draft, of course, we would 
have a very different political situation.
    But there have been some negative consequences of that. One 
of the big ones--and I think you pointed to it--is that 
accounting systems have really lagged reality. So the FFATA can 
ask for certain information, and the reality is that agencies 
simply were not collecting it. Even though billions of dollars 
were going out the door in contracts and grants, there were 
simply not systems in place to track that explosion in spending 
that everybody has identified and talked about.
    So part of the reason I am insisting that the spirit and 
the letter of FFATA be upheld is I think it is going to keep 
the pressure on to get those accounting systems in place and be 
sure that the information that should be in the public domain 
is indeed there.
    I think there is one thing where we might differ. I am not 
sure. I am not----
    Mr. Carafano. I do not like a draft.
    Ms. Stanger. Yes. That was not the point I was going to 
make. It might be on----
    Senator Whitehouse. Going to my next question, it is 
actually more helpful to me to single out that places where you 
do agree----
    Ms. Stanger. Sure.
    Senator Whitehouse [continuing]. Because that gives us the 
foundation for moving forward and taking action, which is the 
ultimate purpose of the hearing.
    The second place where you both seem to agree is that, in 
addition to the policy gap, there is also an accountability 
gap. Dr. Stanger, you document this in your book with a note 
that there are over 300 reported cases contracting mistakes or 
abuses in Iraq from 2003 to 2007, and the Government 
Accountability Office testified that there was not a single 
instance of anyone being fired or denied promotion in 
connection with those cases. That is sort of just one example, 
and it is really secondary. It has more to do with the 
oversight function. But do you both agree that there is a very 
substantial accountability gap both in terms of oversight of 
the contractors and oversight of the oversight function, who is 
watching the watchman?
    Ms. Stanger. Absolutely. I would totally agree with that.
    Senator Whitehouse. Dr. Carafano?
    Mr. Carafano. Yes, my concern is how in our effort to 
strive for greater accountability is we have actually 
accomplished the opposite because we have put more 
requirements, more requirements on, and what that has done is 
create a risk-averse acquisition work force that does not make 
decisions. So we see the train wreck coming, but a lot----
    Senator Whitehouse. I would actually add that what it also 
does is it creates a sufficiently complex contracting process, 
that it gives strategic advantage to larger and professional 
contractors who can leverage their ability to negotiate the 
process; whereas, the new company, the small company, the 
company with the bright idea that is not an institutionalized 
Government contractors, finds that forbidding and in many cases 
gets trapped in its snares and may not actually work its way 
through the process, even though they have a better, cheaper 
product. So it actually, I think, hurts at both ends. It hurts 
at the oversight end in terms of the way the accounting folks 
work, the oversight folks work in the Government, and it is a 
deterrent or at least--a deterrent or an advantage in a way 
that is not relevant to the quality of the product and creates 
an artificial distinction between different contractors.
    Mr. Carafano. I would argue that excessive regulatory 
requirements are the single greatest barrier to entry of small 
and medium businesses in Government contract competition.
    Senator Whitehouse. People get hired into the big 
contractors because they are expert at negotiating the snares 
and mines of the process. So we have the policy gap. We have an 
accountability gap. It also strikes me that we have a 
transparency gap. You both have mentioned that also. And in 
that context, one of the things that interests me is that if 
you are a Government employee and if you have a Government 
program, that is subject to considerable amounts of public 
scrutiny and the boundaries of what is amenable to public 
scrutiny and what is not is usually determined by national 
security concerns and the classification process, which has a 
sort of regimented nature of its own. And we can argue about 
how wise that is, but it is what it is.
    Once you step out into the world of private Government 
contractors, the question of corporate proprietary interests 
rears its head, and that brings in a whole other level of non-
transparency and non-disclosure that does not necessarily match 
with what should be classified or not. And I would submit that 
there are probably a great number of activities that if the 
Government engaged in them and then tried to claim that it was 
proprietary, the roof would fall in on whoever made the claim, 
and it would probably not withstand legal scrutiny; whereas, by 
having outsourced it, now suddenly you have raised this new 
barrier to public transparency in our democracy.
    So you have to--I think we have to recognize that there is 
an inherent transparency problem with private contracting where 
proprietary protections are honored; on the other hand, you do 
not want to force people to give up trade secrets. Any thoughts 
on how we could improve in our contracting the way--what we 
demand that a private corporation should disclose when it is 
executing a governmental initiative?
    Mr. Carafano. You know, as a general principle, I think it 
is a difficult question to answer. It is much like do you want 
security or liberty, and the answer is yes, right? And 
democracy is set up to create a natural tension so you seek to 
maximize both qualities simultaneously. So it would be hard for 
me to propose an overarching principle to address that. So I 
think there are some one eaches that we could start with in 
looking at some of these issues, and a related issue I would 
raise, for example, is the Defense Cooperation Act with 
Australia and Great Britain, which are treaties which are now 
pending before Congress, both designed to open up governments 
to having more knowledge about what contractors are doing and 
allowing contractors to have more knowledge of each other. So 
large companies in the United States which have, for example, 
subcontract--have divisions in Australia and one of the part of 
the company cannot even talk to the other part of the company 
because of proprietary restrictions and ITAR and all the rest.
    So those treaties are some good examples of the kinds of 
baby steps, but I think this is particularly an issue where it 
would have to be work on the eaches rather than trying to 
implement a general principle across the Federal enterprise.
    Senator Whitehouse. Now, one of the--Dr. Stanger, did you 
want to answer that, also?
    Ms. Stanger. I would just add to that that I think just as 
we need to rethink what transparency means in the information 
age, we may need to rethink this as proprietary and how it 
relates to work done for Government. I think there has to be a 
higher standard of openness if it is done for Government, 
precisely because such a large percentage of the work is in 
private sector hands.
    Senator Whitehouse. Yes, and not to mention that we are 
well over half a trillion dollars a year going down this pipe, 
so it is worth making sure we can track it to the end.
    In that context we are charged on the Budget Committee with 
trying to put a budget together every year. I am hoping that 
the process that we undertake through this task force will 
ultimately lead to having some confidence to add a savings 
number into the budget when we go through the process in future 
years. We obviously have to develop some ground work for that 
because you do not want to be willy nilly about throwing a 
number in the budget any more than you want to be willy nilly 
about your contracting practices.
    But in terms of our enthusiasm to pursue this question of 
contracting, it will relate to results, and so I am going to 
ask each of you for a real ballpark-range number. If we are 
doing $560 billion a year in contracting and if we were to by 
your standards get it right, what order of magnitude savings 
would you guess we might expect? Are we talking about 1 percent 
and nibbling at the edges and, therefore, probably not worth 
devoting a lot of time and energy from this task force to the 
problem? Are we talking about 5 to 10 percent, 20 percent, 
maybe 50 percent, maybe 80 percent? Where is your range of 
comfort as to where those numbers might lie? And, again, I am 
not trying to pin you down, but this is a new effort, and we 
need to deploy our resources wisely as well. And if it comes 
back with everybody saying at best you will be able to knock 
$560 billion down to $555 billion, well, frankly, we should 
probably go look somewhere else then.
    Mr. Carafano. I am going to give you a very unsatisfactory 
answer to that question, which is it is the wrong question, 
because we know for a fact that we do not really understand 
fully Government business processes. So anybody that comes to 
you and says, well, you can save X amount of money, they are 
just guessing, right? There are no analytics behind that.
    I have been very critical of Secretary Gates who said we 
are going to save $100 billion in defense practices, and then 
they turn right around and issue out a letter, a request to 
people saying, ``Give us some ideas.'' So they have defined a 
number which has no rigor behind it whatsoever. What the number 
is is the gap between what they have and what they need, right?
    So, again, driving to get $100 billion savings in the end 
may cost us how many trillions of dollars of inefficiencies, we 
do not know. So driving to get to a number that we do not know 
if it is the right--how it got there, where it makes sense, I 
am very opposed against. I am very laudable of your effort, and 
I am all for fiscal conservativism, and I think you are on 
exactly the right intellectual track. But I think you are not 
ready to ask that question.
    Ms. Stanger. I think you are ready to ask that question, 
but there is an inherent problem here that needs to be 
acknowledged, and it is what makes this so difficult, your job 
so difficult; namely, that everybody is talking about we need 
to buildup the acquisition work force because we cannot have 
oversight without some threshold level of employees to do it, 
to have them properly trained to be able to manage contracts in 
this new world. Yet obviously building up a work force is going 
to cost money in the short term, and you are doing it in the 
short term in order to get long-term savings. But on its face, 
it looks like you are adding to the budget rather than getting 
savings. But you need to do that in order to realize the long-
term cost savings and restore oversight to Government.
    So just one example to illustrate, I know that your 
Committee proposed cuts to the operating expenses budget of 
USAID. USAID is probably the hardest-hit Government agency. It 
has really become a contract clearinghouse.
    Senator Whitehouse. Contracting service, yes.
    Mr. Carafano. It is all contractors.
    Ms. Stanger. It is all contractors, and they want to 
restore that oversight function. Yet they cannot do it without 
an increase in the operating expenses budget, yet it looks like 
a good place to actually get immediate savings. So to me, that 
is the real conundrum, and it is a difficult one politically.
    Senator Whitehouse. But, I mean, encourage us a little bit. 
Assuming that we did this right, are we talking about 
potentially saving the American taxpayer a couple of million 
dollars here and there? Are we talking about potentially saving 
the American taxpayer a billion dollars here and there? Are we 
potentially talking about savings in the tens of billions of 
dollars if we got this right?
    Ms. Stanger. Senator Whitehouse, I think we would be saving 
lots of money, probably billions of dollars, but I think more 
importantly we would be saving self-government. That to me is 
the central issue here.
    Mr. Carafano. You know, I actually very much agree with 
that. I think we are shortsighted when we look at this in 
dollars and cents. We have a Government----
    Senator Whitehouse. Bearing in mind that you are in the 
Budget Committee. There are some obligations in that regard.
    [Laughter.]
    Mr. Carafano. And we have a budget for a purpose, right? 
And the purpose is to have a Government that serves the people. 
So the virtue of your effort, regardless of whether at the end 
of the day the Federal budget is bigger or smaller--and I could 
just say we could deal with entitlements growth and that would 
solve the whole problem. But you know what? Even if we solve 
the problem of Social Security, Medicaid, welfare, and all the 
other Federal programs tomorrow, I would still say that this is 
an incredibly virtuous effort, because what is at risk here, as 
you well stated, is Government is supposed to serve us. If 
Government is not contracting correctly, if they are not doing 
the people's business, then democracy is at risk. And as I said 
in my opening statement, this is a huge competitive advantage 
for America. Tapping in to the most vibrant, exciting, capable 
private sector in the history of the planet is an enormous 
source of power. It is better than oil. And we cannot do that 
if we cannot do this right.
    So if you never could credit saving a Federal nickel but 
you made a Government that served the people, I would add a 
statue for you out there.
    Senator Whitehouse. Final question. Was President 
Eisenhower right to worry about the military-industrial 
complex?
    Mr. Carafano. No.
    Senator Whitehouse. We finally have disagreement because 
Dr. Stanger was nodding her head.
    [Laughter.]
    Mr. Carafano. Read the introduction in my book.
    Senator Whitehouse. All right. So at least we ended with 
some disagreement, although through a great deal of it there 
was much agreement, and as I said, the agreement between 
witnesses who come from different perspectives and points of 
view is a very helpful place for us to move forward from. So I 
thank you both for your areas of agreement and disagreement, 
and thank you for your testimony and all the hard work that you 
have put in in this area, and I encourage you to continue, 
because we depend on people like you who are willing to look 
hard and persistently at these important questions.
    The hearing will remain open until the end of the day 
today. Sometimes the hearing record stays open a week. 
Sometimes it stays open 2 weeks. We are on a short leash, so 
the hearing record will close at the end of the day today. So 
if anybody wants to get anything in to add to the record, they 
have to do it today. But the hearing is adjourned, and I thank 
both witnesses for their testimony.
    [Whereupon, at 11:41 a.m., the Committee was adjourned.]

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    [GRAPHIC] [TIFF OMITTED] T8155.084
    

 Response from Daniel I. Gordon, Administrator for Federal Procurement 
                                 Policy

                        Questions for the Record

                        Senate Budget Committee

    QFR's from Senator Warner

    1) Can you describe some of the success agencies have 
experienced in using strategic sourcing to date, and also 
identify any future plans for strategic sourcing in other areas 
of procurement?

    As noted in my written statement, agencies are using 
strategic sourcing to help them achieve savings and efficiency 
goals. Agencies use enterprise-wide initiatives, such as VA's 
efforts to leverage the buying power of its own medical cengers 
through an integrated network of national and regional 
contracts, and also participate in government-wide Federal 
Strategic Sourcing Initiatives (FSSI). The current FSSI efforts 
for express delivery services and office supplies are available 
government-wide and further leverage the government's buying 
power. In the case of office supplies, for example, GSA 
projects government-wide savings of nearly $50 million 
annually. Additionally, the Strategic Sourching Working Group 
(SSWG) of the Chief Acquisition Officers Council is pursuing 
FSSI opportunities for wireless services, software licensing, 
and a variety of IT equipment and servcices.

    2) Do you have plans to evaluate more strategic sourcing 
opportunities with government-wide technology?

    As mentioned above, we plan to evaluate government-wide 
strategic sourcing opportunities for a variety of IT equipment 
and services. To support this evaluation, we have expanded the 
leadership of the Strategi Sourcing Working Group, the senior 
governance body for FSSI, to include as Co-Chair OMB's Deputy 
Administrator for E-Gov and IT. The SWWG is working closely 
with GSA to identify new opportunities in wireless services, 
software licensing, and other areas.