[Senate Hearing 111-1058]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1058

   TRANSFORMING GOVERNMENT THROUGH INNOVATIVE TOOLS AND TECHNOLOGIES

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


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                                 of the

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             AUGUST 3, 2010

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/

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









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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

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

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk
            Joyce Ward, Publications Clerk and GPO Detailee
                                 ------                                

 SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 
              FEDERAL SERVICES, AND INTERNATIONAL SECURITY

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
ROLAND W. BURRIS, Illinois

                    John Kilvington, Staff Director
    Bryan Parker, Staff Director and General Counsel to the Minority
                   Deirdre G. Armstrong, Chief Clerk












                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
Prepared statements:
    Senator Carper...............................................    41
    Senator McCain...............................................    43

                               WITNESSES
                        Tuesday, August 3, 2010

Daniel I. Werfel, Controller, Office of Federal Financial 
  Management, Office of Management and Budget....................     3
The Honorable Earl E. Devaney, Chairman, Recovery Accountability 
  and Transparency Board.........................................     5
Alexander Karp, Ph.D., Co-Founder and Chief Executive Officer, 
  Palantir Technologies..........................................    27
Robert R. McEwen, Chairman and Chief Executive Officer, U.S. 
  Goldcorp, Inc..................................................    29
Riley Crane, Ph.D., Human Dynamics Group, Media Lab, 
  Massachusetts Institute of Technology..........................    31

                     Alphabetical List of Witnesses

Crane, Riley, Ph.D.:
    Testimony....................................................    31
    Prepared statement...........................................    69
Devaney Hon. Earl E.:
    Testimony....................................................     5
    Prepared statement...........................................    53
Karp, Alexander, Ph.D.:
    Testimony....................................................    27
    Prepared statement...........................................    58
McEwen, Robert R.:
    Testimony....................................................    29
    Prepared statement...........................................    61
Werfel, Daniel I.:
    Testimony....................................................     3
    Prepared statement...........................................    45

                                APPENDIX

Questions and responses for the Record from:
    Mr. Devaney..................................................    73

 
    TRANSFORMING GOVERNMENT THROUGH INNOVATIVE TOOLS AND TECHNOLOGY

                              ----------                              


                        TUESDAY, AUGUST 3, 2010

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:32 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, Pryor, and McCain.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. The hearing will come to order. Welcome to 
our first panel, and I look forward to introducing each of you 
in just a couple of minutes. We are delighted that you are 
here. And thank you for not just your presence and thanks for 
your testimony, but thanks very much for your good work over a 
period of a number of years.
    Mr. Devaney, you might have Mr. Werfel by a year or two, 
but he has done a lot in a relatively few years, and you have 
done a whole lot more than probably the rest of us combined, so 
welcome.
    Over the last couple of years, everybody knows we have 
faced a set of economic challenges that are almost unparalleled 
since going back to the Great Depression. These challenges have 
disrupted the lives of millions of American workers and their 
families. They have slowed our Nation's economic growth, and 
they have brought greater attention to the fiscal stability of 
our government.
    In the face of this uncertainty and fear, the American 
people demanded a new sense of urgency and an attention to 
these problems and called on us to act. That is why over a year 
ago, President Obama proposed and this Congress passed the 
American Recovery and Reinvestment Act (ARRA) to help put 
Americans back to work and to install a renewed sense of 
confidence in our economy. The plan totaled some $787 billion 
over a couple of years, much of it in the form of tax cuts for 
working Americans, which citizens saw in clear dollars and 
cents right on their weekly paychecks.
    The other piece of the Recovery Act (RA) was direct Federal 
spending for projects to help rebuild our physical and economic 
infrastructure while at the same time preserving jobs and 
beginning the process of getting unemployed Americans back to 
work. And when the President and this Congress put together 
this plan, we wanted to make sure that not one dime was wasted.
    The Recovery Accountability and Transparency Board (RATB) 
was created to give Americans a window into how their 
government was spending their money. The steps the Board and 
the Administration have taken in this area are, I think, 
unprecedented. Through Recovery.gov, citizens of this country 
for the first time could see or can see where projects were 
happening, how much was being spent on them, and how many jobs 
were created or saved because of those outlays.
    With any pot of money this big, however, there will be scam 
artists and criminals who want to take advantage and defraud 
the American people. The Recovery Board (RB) was tasked to go 
after these individuals proactively and make sure that every 
penny or at least every dollar was being spent to put Americans 
back to work and not to line the pockets of crooks. Working 
with Inspector Generals (IGs) from 29 Federal agencies, the 
Recovery Board has successfully provided both transparency and 
accountability for these funds. In fact, they have done such a 
good job, the President has asked them, maybe even told them, 
to take their show on the road.
    Last month, the Office of Management and Budget (OMB) 
Director Peter Orszag and Vice President Joe Biden announced 
that the tools and techniques successfully used at the Recovery 
Board will be expanded to the Centers for Medicare & Medicaid 
Services (CMS). I have said before, we need to do a better job 
of bringing the highest levels of health care to Americans for 
less money, and it is clear that there is a lot more that we 
can do to cut fraud and waste from our public health care 
system.
    Medicare and Medicaid have made about $65 billion in 
improper payments, I am told, in 2009, and it's safe to assume 
that at least some of those monies can be attributed to fraud. 
Now, if we can use the Recovery Board's work as a model for 
Medicare and Medicaid and quickly, more quickly detect and stop 
those payments, then we can start to put that money back to 
work for the American people.
    I look forward to hearing from our first two witnesses, 
Chairman Devaney from the Recovery Board and Mr. Werfel from 
the Office of Management and Budget, about the Recovery Board's 
successes and its challenges, as well as the President's plan 
to expand these efforts to make all of our government work 
better and more efficiently.
    As we look at the averted economic collapse in the rearview 
mirror, we face our Nation's mind-boggling budget deficits 
barreling straight toward us. I hope to have a broader 
discussion with members of our second panel about how they 
think government can perform better and more efficiently at a 
time when those of us in government are thinking about how we 
can do more with less.
    These are well-respected visionaries in their fields, and I 
look forward to hearing their thoughts on how government might 
be able to solve problems and do more with less by leveraging 
novel approaches and innovative technologies. If we do not 
start doing a better job of managing our Federal expenses and 
begin to close our deficits, we are going to pass on a legacy 
of crippling debt to our children and to their children. We 
need to use every tool in our toolbox that is available to 
bring our fiscal house back to order and give the American 
people the government that they deserve.
    And with that, I have the opportunity, pleasure really, of 
introducing our first two witnesses. Our first witness today is 
Mr. Daniel Werfel, the Controller of the Office of Federal 
Financial Management (OFFM) within the Office of Management and 
Budget.
    I would just say to Chairman Devaney, if we paid Mr. Werfel 
for every time he has testified before this Subcommittee in the 
years that I have been in the Senate, we could probably come 
close to paying off the budget deficit. He has been here a lot, 
and it is always good to see him. He brings a lot to the table, 
as I know you do, too.
    But as Controller, Mr. Werfel is responsible for 
coordinating the Office of Management and Budget's efforts to 
initiate governmentwide improvements and all areas of financial 
management, including financial reporting, improper payments, 
and real property management. Those are all issues and areas of 
concern to this Committee and this Subcommittee. Previously, 
Mr. Werfel served in multiple capacities within OMB, including 
Deputy Controller and Chief of the Financial Integrity and 
Analysis Branch. I think he had quite a successful career in 
football, college football, that we all remember fondly. For 
those of you in the audience who know football, I am just 
pulling your leg. But he is probably a much better witness than 
the other guy.
    Our second witness is Mr. Earl Devaney, Chairman of the 
Recovery Accountability and Transparency Board. I am sure there 
is an acronym for that, too, but hopefully we will not learn 
too much about that. Mr. Devaney is charged with overseeing 
spending under the $787 billion recovery program. Previously, 
Mr. Devaney served as Inspector General of the Department of 
the Interior and a whole lot of other things. Weren't you in 
the Secret Service for a number of years?
    Mr. Devaney. I was, sir.
    Senator Carper. You have done a lot of things in your life, 
and we are grateful literally for your decades of service.
    We would invite you to proceed. My clock here in front of 
me says 5 minutes. If you stay fairly close to that, that would 
be good. If you go a little bit over, that is all right. But, 
Mr. Werfel, why don't you proceed? Your entire statement will 
be made part of the record. Thank you.

TESTIMONY OF DANIEL I. WERFEL,\1\ CONTROLLER, OFFICE OF FEDERAL 
     FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Werfel. Thank you. Good afternoon, Chairman Carper, 
Ranking Member McCain, and other distinguished Members of the 
Subcommittee. Thank you for inviting me to discuss how the 
government is using technology to prevent and reduce payment 
errors. It is an honor to be here and, of course, to sit 
alongside my esteemed colleague Earl Devaney.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Werfel appears in the Appendix on 
page 45.
---------------------------------------------------------------------------
    As part of its Accountable Government Initiative, the 
Administration has moved to cut programs that do not work, 
streamline what does work, modernize how government operates to 
save money and improve performance, and make government more 
open and responsive to the needs of the American people.
    One of the ways we will accomplish these goals is through 
improving the government's use of technology to enhance citizen 
services, improve the productivity of government operations, 
and identify and prevent fraud, waste, and error in government 
programs.
    One of the biggest sources of waste and inefficiency is the 
nearly $110 billion in improper payments that were made in 
fiscal year (FY) 2009 to individuals, organizations, and 
contractors. These errors are unacceptable, and the 
Administration is committed to reducing payment errors and 
eliminating fraud, waste, and abuse through aggressive and 
comprehensive efforts.
    Accordingly, I am pleased that the President has charged 
his Administration with the aggressive goal to reduce the 
current government-wide amount of improper payments by $50 
billion and to recapture through payment recapture audits at 
least $2 billion in improper payments to vendors--all of this 
to occur by fiscal year 2012.
    Our partnership with Congress is vital to achieving these 
goals. The recently enacted Improper Payments Elimination and 
Recovery Act (IPERA) and the Affordable Care Act provide 
agencies such as the Department of Health and Human Services 
(HHS) numerous new authorities and tools to prevent, identify, 
and recover improper payments. Effective execution of these new 
laws is a top priority for the Administration. Our actions on 
this front build on an already aggressive set of administrative 
priorities in place to attack and eliminate payment errors.
    I would like to briefly highlight a few such activities, 
each of which leverage technology as a primary driver of 
success.
    First, on November 20, 2009, the President issued Executive 
Order (EO) 13520. Under this EO we have identified the highest 
priority programs that account for the majority of error, 
established supplemental measures to provide more frequent data 
to guide our efforts, and selected accountable officials that 
are responsible for getting results. In addition, we launched 
PaymentAccuracy.gov, a new dashboard that significantly 
increases the transparency of our payment errors and our 
progress in remediating them.
    Second, the President recently issued a memorandum creating 
a Do Not Pay List. This list will serve as a single source to 
link agencies to relevant eligibility databases such as Social 
Security's Death Master File and General Services 
Administration's (GSA's) Excluded Parties List.
    Third, in March of this year, the President directed 
agencies to expand their efforts to recapture improper payments 
from government contractors using payment recapture audits 
where specialized auditors use sophisticated technologies to 
identify errors and are paid a portion of what they recover. 
The President directed agencies to recover at least $2 billion 
in improper payments over the next 3 years, a significant 
acceleration from the previous several years.
    Fourth, we are spreading best practices on the use of data 
mining tools that are proving effective in preventing error. 
For example, the Department of Defense (DOD) has prevented more 
than $700 million in improper payments to vendors over the past 
2 years through the deployment of their business activity 
monitoring tool. Also, as you just referenced, we announced in 
June that we were rolling out the Recovery Board's innovative 
fraud detection tool for use across government beginning with 
Medicare and Medicaid.
    Last, I would like to highlight the Partnership Fund for 
Program Integrity Innovation. This is a new program enacted in 
the fiscal year 2010 Consolidated Appropriations Act. Under 
this program we are working with State governments and other 
stakeholders to identify innovative practices and program 
integrity. We are testing them for broader application and 
providing a forum to share these innovations across programs 
and levels of government.
    Looking ahead, there is still important work to be done on 
both the legislative and administrative front. Of particular 
note, I am hopeful that Congress will act on the important 
provisions contained in the President's 2011 budget that would 
enable critical program integrity improvements in such areas as 
Medicare, Unemployment Insurance (UI), and Social Security. In 
total, the President's budget proposals, if enacted, would save 
more than $150 billion over 10 years.
    Moreover, significant work remains to carry out our new 
legislative authorities and to meet the aggressive goals for 
error reduction and recovery the President has set for us. I 
look forward to keeping you up to date on our progress.
    Thank you again for inviting me to testify. I look forward 
to answering your questions.
    Senator Carper. Thanks, Mr. Werfel.
    Chairman Devaney, please proceed.

 TESTIMONY OF THE HON. EARL E. DEVANEY,\1\ CHAIRMAN, RECOVERY 
             ACCOUNTABILITY AND TRANSPARENCY BOARD

    Mr. Devaney. Thank you, Mr. Chairman and Members of this 
Subcommittee. I want to thank you for the opportunity to appear 
before you today to discuss the accomplishments of the Recovery 
Board, with particular emphasis on the use of technology in 
both the accountability and transparency arenas. And after my 
opening remarks, I will be glad to answer any questions you 
have for me.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Devaney appears in the Appendix 
on page 53.
---------------------------------------------------------------------------
    In the year and a half since the enactment of the Recovery 
Act, the Recovery Board has faced many challenges. From its 
inception in February 2009, the Board began striving to meet 
extreme deadlines in establishing two complex and innovative 
Internet sites: An inbound reporting site for recipients of 
contracts, grants, and a loans; and an outbound, public-facing 
site to make the recipient data transparent.
    Now, under normal circumstances, such a project would 
proceed in sequence. Specific requirements would be determined 
according to the needs of the client and prospective users. A 
prototype would be developed and then tested, then readjusted, 
tested again and so forth until a final product meeting the 
client approval would be delivered.
    In government, this would normally take about 2 years. 
However, the time constraints upon the Board permitted no such 
luxury. Things had to happen simultaneously. We did it in about 
6 months. And as one contractor would later say, ``Basically we 
were building the ship as we were leaving the port.''
    Initially, the Board considered joining together existing 
legacy computer systems within Federal agencies to collect and 
house the data from recipients. But that course was ultimately 
rejected because of data, timing, and linkages issues that 
probably would have led to failure. So instead of having each 
Federal agency collect data from its own recipients, the Board 
and OMB opted to create a single, centralized reporting system 
called FederalReporting.gov.
    As it turned out, the new inbound reporting side would 
resemble no other existing government system. 
FederalReporting.gov would also be the first to handle 
government contracts, grants, and loans all in one system--
convenient for data trackers but a potential nightmare for IT 
system builders.
    For instance, Federal contracts and grants each involve 
different user communities as well as rules and policies. This 
entailed different coding, prototypes, testing, and approvals 
regarding data for each type of award.
    The first big test for the Board came nearly a year ago on 
August 17, 2009, when FederalReporting.gov was launched, 
enabling recipients of Recovery Act contracts, grants, and 
loans to begin registering for data reporting. Overall, 
registration went quite smoothly, largely because OMB and the 
Board had educated recipients about the system and its 
functions. The biggest test, however, was yet to come.
    On October 1, 2009, recipients began filing what turned out 
to be more than 130,000 separate data reports. As reporting 
periods have come and gone, recipients have become more 
comfortable with FederalReporting.gov, leading to fewer 
recipient filing and data errors in each successive reporting 
period.
    The Board has done its part as well in working to prevent 
errors. FederalReporting.gov now contains a number of internal 
logic checks to keep recipients from entering inconsistent 
data. For example, one logic check notifies recipients who have 
entered a congressional district that does not match up with 
the ZIP code they entered.
    The Board's outbound reporting website, Recovery.gov, has 
likewise gone through a number of modifications over the past 
year and a half. When the Board was first established, we were 
presented with what I have termed Version 1.0 of Recovery.gov. 
This website had been created hurriedly out of necessity by GSA 
and OMB. After employing many technical advancements and 
obtaining public input through a round of focus groups and 
usability studies, the Board launched Recovery.gov Version 2.0 
on September 28, 2009. And on October 30, 2009, 30 days after 
the end of the first reporting period began, Recovery.gov 
displayed an enormous amount of data that had been transferred 
smoothly from FederalReporting.gov. Both new Web-based 
reporting systems have continued to run smoothly for all four 
reporting periods so far.
    In looking back on these extraordinary achievements, the 
Board's IT team members universally say that they learned two 
valuable lessons from the strategy of developing components of 
both websites simultaneously instead of serially.
    First, developing a typical monolithic, one-size-fits-all 
technology to solve a problem is not necessary. Quickly and 
imaginatively integrating existing technologies can work as 
well, or even better.
    Second, deploying individual tools and components as soon 
as they are ready and integrating others as they become 
available can work just as well as waiting until all the pieces 
have been completed.
    Now that Americans have become more familiar with 
Recovery.gov and the transparency that it offers, the Board is 
beginning to get more questions relating to our accountability 
mission. Reporters have begun asking, ``When can the public 
expect to see criminal indictments in the recovery program? '' 
My answer is that prosecutions will emerge eventually, but 
there is much more to safeguarding taxpayers' dollars than 
bringing high-profile indictments. Indeed, the Board's most 
critical challenge is preventing fraud and waste before they 
occur. While transparency is harder to practice than it is to 
talk about, I have come to believe that transparency is the 
friend of the enforcer and the enemy of the fraudster.
    Early on, the Board decided that we need to build a state-
of-the-art command center that would allow us to keep a close 
eye on the flow of recovery money and ensure that all 
contracts, grants, and loans could be subjected to a 
comprehensive scrutiny. To accomplish our goal, we built a 
Recovery Operations Center. The operations center combines 
traditional law enforcement analysis with sophisticated 
software tools, government databases, and open-source 
information to track the money.
    It is helpful to visualize fraud occurring on a continuum 
as opposed to a finite point in time. In doing so, we realize 
that there are an indeterminate number of points between one 
end of the continuum--when the would-be lawbreaker first 
decides to commit the fraud--and the other--when the fraud has 
been fully completed and the money is out the door. The 
analytical tools used in our operations center have been 
designed to intercept fraud closer to the front end of that 
continuum rather than to detect it only after the monies have 
been lost. Simply put, the Board's skilled analysts look for 
early-warning signs of trouble. They use the software to search 
colossal amounts of data, looking for potential problems such 
as criminal convictions, lawsuits, tax liens, bankruptcies, 
risky financial deals, and suspension and debarment 
proceedings. Once a concern has been identified, the analysts 
then perform an in-depth analysis of the award and forward 
their report to the appropriate agency Inspector General for 
further inquiry.
    This past May, we announced Recovery.gov had moved to a 
cloud computing infrastructure, a technology that allows for 
more efficient computer operations, improved security, and 
reduced costs. Recovery.gov became the first government-wide 
system to move to the cloud.
    The Board is now engaging in our second round of focus 
group and usability testing, visiting cities across America 
with the ultimate goal of increasing the usability of 
Recovery.gov and further enabling detailed tracking of Recovery 
Act monies.
    Mr. Chairman, I would be remiss if I did not mention what 
we have determined is the single biggest impediment to the kind 
of transparency that the Recovery Act envisions. It is the lack 
of a single consistent governmentwide award numbering system. 
All 29 recovery agencies--in fact, all government agencies--
have unique alphanumerical coding systems for their awards. 
While this may not sound like a big deal, it is. Disparate, 
inconsistent coding systems make the task of reviewing and 
checking award data unnecessarily arduous and ineffective for 
those with oversight responsibility. This problem needs to be 
fixed before we can achieve true spending transparency.
    Finally, Mr. Chairman, I believe that even after the Board 
sunsets in 2013, the legacy of the Board will continue. I know 
I am not alone in touting the future good that this 
transparency and accountability model can continue to bring. 
William LeoGrande, dean of the School of Public Affairs at 
American University, was recently quoted in the Federal Times 
as saying of Recovery.gov, ``I think this will be a model for 
the future on how the Federal Government can, if it is willing, 
provide incredible public access to the inner workings of 
legislation as it is implemented.''
    And Vice President Biden, speaking about Recovery.gov, 
said, ``I expect it to be a template from this point on for how 
Federal Government deals with taxpayers' money.''
    I believe the Vice President and Dean LeoGrande are correct 
that this historic experiment in transparency will continue. I 
expect it has to, and I cannot imagine the American public 
would meekly accept a retreat back to the old non-transparent 
ways.
    Mr. Chairman, Members of this Subcommittee, that concludes 
my prepared testimony. Thank you for the opportunity, and I 
will be glad to answer any questions.
    Senator Carper. Good. Thanks so much, Mr. Devaney.
    We have been joined by Senator Mark Pryor. Senator Pryor 
and I have been involved for almost 6 years now in trying to 
nurture and bring along a centrist think tank called Third Way, 
and a big part of what we are trying to do here today is to put 
a spotlight on some of the parts of our government, some of the 
players in our government that have sought out a third way--a 
third way to make sure that we are spending our money in a more 
cost-effective ways, or taxpayers' money in a more effective 
way.
    Usually when Senator Pryor comes to these hearings, he 
takes about half an hour for an opening statement, and then I 
go right to him for the questions. I do not know if you would 
like to make an opening statement at this time or not, but 
anything you would like to add or take away, please do.
    Senator Pryor. I would prefer just to let you ask your 
questions, and I will ask mine.
    Senator Carper. All right. Fair enough. Thank you. Glad you 
could be here.
    I want to just ask you, Mr. Devaney, some folks might be 
watching us on C-SPAN. I do not know if they are or not. But 
let us just say we have a poultry farmer in Delaware or maybe 
one in Arkansas--we have a lot of those in our two States. But 
they happen to be channel surfing, and they come across this 
hearing, maybe sometime later tonight, and they hear you 
talking about the Recovery Accountability and Transparency 
Board. Can you make that concept real or meaningful in their 
lives, just in the lives of ordinary people?
    Mr. Devaney. Well, Mr. Chairman, I think that----
    Senator Carper. Can you hear him? No? Just check your mic.
    Mr. Devaney. I think the ability for the American public to 
finally see how their government is spending money is an 
incredible new thing that I think there is a big appetite for. 
They can literally go on this website, Recovery.gov, and drill 
down into their communities and see how the money is being 
spent in their own neighborhoods. They can look at it across 
the country or by State--as a matter of fact, in a variety of 
ways.
    What we do is we make the data available. We hope to become 
the authoritative source so others can take that data and do 
what they call mash-ups and use that data in ways that we 
cannot even contemplate in the Federal Government. So this is 
really new, and it is a big piece of the transparency effort 
going on in government right now.
    Senator Carper. Thank you.
    Mr. Werfel, do you want to answer the same question?
    Mr. Werfel. I think to explain it to Mom and Dad back home, 
I would say the Board was created by Congress and by the 
President to have a very strong set of leaders and individuals 
come from around government and monitor the funds that are 
moving out into the public sphere in a way that has not been 
done before. I would say that there was a recognition when this 
law was passed that there were certain risks associated with 
this amount of money going out through the normal standard 
channels that we have for payment processes and the way we 
administer government. And with these types of risks, we wanted 
to make sure as a government that we had put the necessary 
people in place to watch those funds closely and to report and 
help report on exactly where they were going.
    And so the vision, I think, really is a great example of a 
vision of Congress and the President coming to fruition 
effectively, because the Board is a gathering of very talented 
and dedicated professionals that are singularly focused on 
making sure the money goes out correctly and wisely and 
judiciously and it is reported effectively.
    And so we have a very good track record in terms of the 
lack of identification of major instances of fraud and error in 
the Recovery Act, in large measure because of the scrutiny that 
the Board places on the overall process. And we have 
Recovery.gov, which provides an unprecedented view and enormous 
quantities of data, just as Congress and the President 
envisioned.
    So I think the process has really worked effectively, and I 
think the Board has had a big deal to do with it.
    Senator Carper. Mr. Devaney, Mr. Werfel just said this kind 
of activity had not been done before, and let me just ask of 
you a two-part question. Why not? And why are we able to do it 
now?
    Mr. Devaney. I do not know why not. I really cannot answer 
that question. But I can tell you that I have come to believe--
with my background in law enforcement, I will be candid and 
tell you that transparency has not always been my favorite 
thing, but----
    Senator Carper. I can remember a day not that long ago when 
someone would accuse you of being transparent, it was not a 
compliment.
    Mr. Devaney. Right. But I have come to believe that 
transparency actually drives accountability. I think as Mr. 
Werfel mentioned, we have had, relatively speaking with this 
amount of money, very few large fraud events so far. There are 
active cases ongoing but, quite frankly, less than I would have 
presumed a year and a half ago. And I think a large part of 
that answer is the transparency piece, the fact that citizens 
get up every morning and look at this website, reporters get up 
every morning and look at this website. Those citizens call us 
and tell us about things they see that they do not think are 
right, and we follow that up.
    Senator Carper. How many people comprise the Board or the 
staff of the Board?
    Mr. Devaney. The Board is 12 Inspector Generals and myself, 
and the 12 Inspector Generals were named in the legislation, 
and I was selected by the President. The Board meets typically 
once a month. We have Subcommittees that meet more regularly. 
And we also have a presidential panel that provides advice to 
the Board that was named recently.
    Senator Carper. All right. In your testimony, Mr. Devaney--
I think it is the last page of your testimony--there is a 
paragraph that ends, ``I have, therefore, decided to dedicate a 
considerable portion of my remaining time in government to 
fixing this problem.''
    Explain this problem. I have read your paragraph a couple 
of times and listened to your testimony. Explain this problem 
and why is it something--you have had a distinguished career 
working for the people of this country. But why is it a promise 
of such importance that you would decide to dedicate a 
considerable portion of your remaining 30 years in government?
    Mr. Devaney. Well, Mr. Chairman, first of all----
    Senator Carper. OK, maybe it is not 30 years.
    Mr. Devaney. It is actually 40, and my remaining time is 
very small, so maybe I am not really committing to much there. 
I did not know this problem existed, quite frankly, before----
    Senator Carper. I did not either. Why don't you tell us 
about it?
    Mr. Devaney. And as I mentioned in my testimony, each 
agency--and they have for years--has its own unique numbering 
system for awards, grants, contracts that they give out. None 
of them are harmonized or look like each other unlike, for 
instance, credit cards which are, a certain length and without 
dashes, without letters in them. And each agency does it their 
own way and have been doing it that way for years.
    So along comes Recovery and we try and collect all the data 
and make sense of it. We have tried to make sure that the 
agency tells us what they have given out as money, and when we 
look at what comes in, we try to match that. And when we try to 
do that, the lack of a common single awarding report system 
really is problematic. And we have what we call mismatches 
where we have to literally almost hand search these awards to 
make sure that they match up.
    So I think if that problem was fixed--and I do not know 
that it would be very practical to fix it on awards in the 
past. I think we would have to do something going forward. And 
the Board wants to provide a solution. We want to try to work 
with OMB to not only identify the problem but find a way 
forward. And Mr. Werfel and I are going to work together on 
that.
    Senator Carper. Well, good. It sounds like this is a 
problem that could take years to finish out, so it looks like 
we will have you around for a little while. At least we hope 
so.
    I have some more questions, and I look forward to asking 
them. Right now I am going to yield to Senator Pryor for 
however much time he wishes to take.
    Senator Pryor. Thank you, Mr. Chairman, and thank you for 
your tenacious focus on this and your leadership on this issue.
    Mr. Werfel, let me start with you, if I may. As I 
understand it, OMB has decided to take some of the tools that 
the Recovery Board has been successful with and are going to 
start to apply them to other government agencies and maybe even 
across government generally. My understanding is that CMS is 
going to be maybe the first or one of the first to see a pilot 
program.
    Could you tell us a little more about that in terms of when 
that starts and what you hope to accomplish there?
    Mr. Werfel. Certainly, Senator. Very early in the life of 
the Recovery Act, we started to recognize that the Recovery 
Board was developing some cutting-edge best practices: The way 
in which FederalReporting.gov was deployed, the way in which 
Recovery.gov was constructed. And then we became aware of this 
fraud detection tool that the Recovery Board was working on, 
and we quickly saw that there was potential benefit to this 
type of technology and innovation outside of the Recovery Act.
    In particular, the tool takes publicly available 
information and combines it with information that the 
government may have about a particular set of individuals or 
corporations and how the money is spent. And it essentially 
shines a light on new risk factors for where there might be 
fraud or prohibited activity taking place.
    And so it created more of a multi-dimensional view into the 
picture that we had in front of us for finding problems. So 
when we look at our current suite of information that we have 
in today's world, before this tool came along, it lacks certain 
dimensions and lacks certain information that allows us to see 
risks and red flags, and the Recovery Board's tool kind of 
turns the information and combines it with other things on its 
axis a little bit, and suddenly things come to light that 
otherwise would not have.
    And this is general. There is nothing specific or unique 
about the Recovery Act. We have risks of improper payments, 
fraud, and error in all programs. And because we started to see 
the power of this tool--in particular, one of the major 
benefits of the tool is that it is resource smart. You do not 
have to send a field of investigators out locally to look at 
things. You can see things from a central location, almost in 
real time in terms of the information flow. And in a world of 
scarce resources, we need every tool we can get that would 
allow the agencies to do more oversight and more scrutiny with 
limited budgets and limited field trips and the like.
    We started the process and we approached Mr. Devaney and 
said we are very excited about this. We are in the business at 
OMB of identifying best practices and sharing them. And we 
think there are too many--Senator Carper mentioned $65 billion 
in improper payments just in Medicare and Medicaid. That is too 
big of a number to say, ``Hey, we will pilot this at some other 
small agencies and see how it is going.'' We wanted to move a 
tool like this right into the sweet spot of where we are having 
problems with fraud and error in government programs.
    Senator Pryor. So you will try to apply the tool in the 
payment system of CMS, not just the contracting and some of the 
other things they do, but actually where you think most of the 
fraud is?
    Mr. Werfel. I think the key with CMS has to do with the 
medical providers that enroll in those programs, some of which 
have been previously excluded and are coming back under new 
names, some of which are involved in fraud and are billing for 
treatments that never took place or have medical practices but 
have a history of overbilling, double billing for systems 
advertently. And so CMS may have been blind to some of this 
activity before a tool like this comes along.
    You asked earlier about the timing. CMS has already started 
to review their data through the Recovery Board's tool and is 
already seeing some potential important impacts of having 
information earlier in the process about fraud and error than 
they would have otherwise had.
    Senator Pryor. So, in other words, they are starting pretty 
much now? Is that what you mean?
    Mr. Werfel. They are in the process right now.
    Senator Pryor. And how close to real time can they look at 
the numbers? In other words, one of the problems with Medicare 
fraud and Medicaid fraud is usually either the U.S. Attorney or 
the State Attorney General, they do these fancy searches and 
algorithms but it may take months or even a year or more before 
they really detect what has happened in the past, and sometimes 
by that time, it is just way too late.
    So how close to real time do you think CMS can look at 
their numbers?
    Mr. Werfel. I think it can be essentially as real time as 
we need it to be to stop a payment before it goes out, which is 
real enough for us----
    Senator Pryor. I think that is critical to really go after 
this, because you are always going to have the people who--have 
been ripping the system off for a long time, but as soon as, 
they get the sense that they are about to be caught, they seem 
to go away and you cannot find them. They change names. They 
come back under another name.
    Do you think that you are going to be able to track those 
kind of repeat offenders down, the folks that do change names 
or change a few things so they make it look like they are 
different folks in the system but it is really the same people? 
Do you think this system can----
    Mr. Werfel. I used the term before. I think that is the 
sweet spot of whether this tool comes into play, and it has 
been an area of problem for us in government in the past, 
tracking these types of corporations, companies, partnerships, 
or providers that get convicted or targeted and then come back 
in a different incarnation.
    Senator Pryor. I think that is huge.
    Do you have a sense of how much this will save the 
taxpayer? I know you mentioned there is $65 billion worth of 
fraud there. Realistically, how effective do you think this 
will be?
    Mr. Werfel. I do not know. I wish I could tell you the 
exact impact of the tool. I do know that in early June the 
President drew a line in the sand for HHS and, quite frankly, 
for the rest of the Administration to cut errors in Medicare 
fee-for-service in half. And that is a pretty substantial drop 
in improper payments because the Medicare fee-for-service 
errors are very high.
    This will be an important part of that, as well as other 
tools. I do not know what proportion of it, but some of it is 
we are going to stop payments before they go out, and some of 
it I think will have a deterrent effect, because as we start 
bringing to bear more important tools--and, in particular, I 
mentioned the Affordable Care Act provides us and DOJ in 
particular stronger enforcement tools and penalties to attack 
fraud and error.
    So, taken as a whole, we think this tool combined with 
other new authorities in both the bill that Senator Carper 
helped pass recently, the Improper Payments Elimination and 
Recovery Act, and the health care bill, we think we can meet 
the President's charge for cutting Medicare errors in half 
within 3 years.
    Senator Pryor. I think the deterrent effect is very 
important because I think most people who commit Medicare 
fraud, know that there is a pretty small chance that they will 
get caught. And if you can increase that percentage, and 
dramatically increase it like you are talking about, I think 
you will see fewer people trying to rip off the system. I think 
that is great news.
    Let me ask you one more question, Mr. Werfel, and that is 
about the PaymentAccuracy.gov that you have. Can you tell us, 
first, about the website and, second, how it is working?
    Mr. Werfel. I would be happy to. When the President issued 
an Executive Order in November, this was in large part in 
response to the fiscal year 2009 numbers that had just come out 
and shown a significant spike in improper payments over the 
past several years, that we were trending in the wrong 
direction dating back, 2005, 2006, 2007, 2008, and 2009. We 
decided to take as strong a step as we could, and one of the 
things that the Executive Order did was require that we publish 
a dashboard that would have some key ingredients both for 
transparency and accountability.
    In particular on the accountability side, we named a senior 
accountable official for the major programs with the highest 
errors, such as at Medicare and Medicaid, and put their name on 
this website. We published all the information in a way that 
the public can go see which agencies have the highest improper 
payments. We list on this website, as an example, the highest 
dollar improper payments that were found, whether there was a 
$2 million error, an $8 million error, or a $40,000 error. 
Whatever the top 10 are listed in a very transparent way on the 
website and which agency is responsible for it.
    So there is a sense, that we are owning the problem, 
showing where the issues are, which agencies and which 
officials are responsible for them, and we also on that website 
have our targets going forward. Where do we think we can be 
going forward? So the first thing you see when you go on 
PaymentAccuracy.gov is a bar chart that shows where we are 
today in terms of our error rate and where we want to be 3 
years from now, which would correlate to our goal of a $50 
billion reduction in terms of dropping that error rate down.
    I will mention we are somewhat proud of the fact that 
PaymentAccuracy.gov had about 50,000 hits in the first 2 days 
and close to 300,000 hits in the first 2 weeks, which for us, 
in my world, that is pretty good foot traffic on a website of 
this kind. So we are excited about the type of attention we are 
getting to it.
    Senator Pryor. Good.
    Mr. Chairman, can I have just one more minute to ask Mr. 
Devaney another question?
    Senator Carper. The gentleman's time has expired. 
[Laughter.]
    No, go ahead.
    Senator Pryor. Thank you.
    Mr. Devaney, I am excited about what you are doing. I think 
you are getting good results. I think that as Mr. Werfel said, 
there is really some good news here. I know you have a lot more 
work to do, but I am curious about the feedback you have 
received from other departments, and the IG community and if 
those folks are coming to you and asking, ``Tell us what we can 
do to be better? Are you helping to make other agencies and 
departments better? ''
    Mr. Devaney. That is an excellent question, Senator. I 
think the fact is the IG community has never had these tools 
before as a community, and now that we do, what we see is 
certainly the 29 IGs that have recovery responsibilities are, 
in fact, not only receiving information about this, Senator, 
but they are bringing it to us. And as a result, we have 
interaction we have never had before. They tell me that the 
material we are giving them is value-added to their 
investigations; it is saving them an awful lot of leg work. It 
is very cost-effective for them to use the information the 
center gives them.
    So I would say that from that perspective I think this tool 
is going to be something the IG community uses in the future.
    Senator Pryor. Let me ask one last question, and that is, I 
know you are using some great tools there, and obviously the 
private sector in most circumstances has a lot of incentive to 
get rid of fraud and waste and, different types of things that 
bleed them financially where they are just not getting a good 
return on what they are spending.
    Do you feel like your tools today are as good as the 
private sector users for their various endeavors, whatever they 
may be? Or is this an example where, the government has found 
one or two good things, but there is a set of other things that 
we could be doing that we are not yet doing?
    Mr. Devaney. I think it is--I would not want to say that we 
are better than the private sector. I will say we are using 
tools that I think the private sector has used before, the 
banking industry, the credit card industry. Quite frankly, some 
of the tools we are using, some of the software we are using 
has been used before in the law enforcement setting, in the 
terrorism setting. And we are using these tools for the very 
first time, I think it is fair to say, in the government 
spending arena, and that is the newness of it. We are taking 
tools that others have used successfully in the last few years, 
and other tools are coming along. And as we see those tools, we 
plug them in.
    So what we are doing is taking a new approach and using 
tools that, quite frankly, have never been used in government 
spending before.
    Senator Pryor. Thank you, Mr. Chairman.
    Senator Carper. Thanks very much for joining us. Thanks for 
those questions as well.
    We have been joined by our Ranking Republican, Senator 
McCain. Senator McCain, you are recognized for as long as you 
wish.
    Senator McCain. Thank you, Mr. Chairman, and I apologize 
for being a little late.
    Senator Carper. I am just glad you are here.
    Senator McCain. There was a nomination hearing in the Armed 
Services Committee, and so I thank you for your patience. I 
thank the witnesses.
    Mr. Devaney, is it an accurate statement that a 7-percent 
loss of funds to fraud is considered the normal course of doing 
business?
    Mr. Devaney. Senator, I think that figure was last year's 
figure. I am told it has gone down to 5 percent. But even at 
that, that is a totally unacceptable figure, percent rather, 
when you apply it to $787 billion. The 7 percent would be $55 
billion and the 5 percent I think is around $40 billion. That 
is totally unacceptable. I have never imagined that it could 
get that bad, and I do not think it will, quite frankly, ever 
come near that figure.
    So as I mentioned in my testimony, I think the value in 
what we are doing is trying to prevent fraud and waste before 
it occurs as opposed to waiting, as Senator Pryor indicated in 
his comments, long after the money is out the door. So I think 
that we have been able--I think the transparency is a big help 
here to keeping fraud at a minimum.
    Senator McCain. So you want to head off the fraud and abuse 
before it takes place. Now, exactly how do you go about that?
    Mr. Devaney. Well, the IG community as a whole took a very 
proactive approach to preventing fraud. There was an enormous 
amount of training that went on, both in the government and the 
private sector, to train folks that were not only recipients of 
the money but those that were giving it out in the government.
    Senator McCain. So far, what have you done? Could you give 
us an example?
    Mr. Devaney. Of training?
    Senator McCain. No. Of fraud and abuse that you have 
prevented.
    Mr. Devaney. Well, that is a difficult metric to talk 
about, but I think it is fair to say we simply have not seen 
the kind of fraud that we would have imagined as professional 
law enforcement we would have seen by now. So I think some of 
the things we are doing are working. I think that the whole 
concept that we have with our Recovery Operations Center (ROC) 
is to identify fraud before it occurs or at least intercept it 
as it is occurring. And there have been times when we have 
notified agencies that you seem to be----
    Senator McCain. Well, can you give me an example of fraud 
you have detected while it is occurring?
    Mr. Devaney. Yes. I think there are several cases where 
we----
    Senator McCain. Could you name one?
    Mr. Devaney. Well, most of these cases are active criminal 
investigations, Senator, but in general, we have identified 
money that has gone to----
    Senator McCain. The program has been going on for a year 
and a half, and all these are still ongoing, you have not 
completed one?
    Mr. Devaney. The Inspector Generals are--normally, it is 
about a 2-year cycle for a criminal investigation, so no, there 
have not been any significant criminal investigations 
completed. There are over 350 ongoing right now.
    Senator McCain. But not one completed?
    Mr. Devaney. None of any significance.
    Senator McCain. That does not inspire confidence in me.
    Mr. Werfel, do you have any comment on that?
    Mr. Werfel. Only that I think it is--a couple of things. 
First of all, I think that the fact that there are ongoing 
investigations establishes a sense among the Recovery Act 
recipients that there are watchdogs and close scrutiny looking 
at the funds as they are going out the door. The tools that the 
Recovery Board has put in place, we have promoted them and had 
the agencies talking to their recipients about the nature of 
their activities and that they are being looked at in 
unprecedented and closer ways than have been done before by 
both the public and government watchdogs. And I think the 
overall metrics that we are seeing in terms of, as Mr. Devaney 
referenced, a much lower rate of error and problem than one 
would have anticipated for a program of this size is an 
indicator to us that the measures that we are taking, whether 
the investigation is ongoing or otherwise, are working 
effectively.
    Senator McCain. So of the potential cases of fraud, those 
you were talking about, are those that have been referred to 
the corresponding Inspector Generals' office, the Department of 
Justice (DOJ) or the appropriate State and local stimulus 
oversight authorities?
    Mr. Devaney. Yes, sir.
    Senator McCain. And how many is that?
    Mr. Devaney. It is a little over 350.
    Senator McCain. Have been referred to all of the above or 
some of the above or one of the above?
    Mr. Devaney. I would say all of the above.
    Senator McCain. So you find a case of fraud and abuse, and 
you refer it to the IG's office, the Department of Justice, and 
the appropriate State or local stimulus oversight authorities?
    Mr. Devaney. Exactly.
    Senator McCain. And there are three hundred and----
    Mr. Devaney. Fifty or so.
    Senator McCain. How many of these have been dropped?
    Mr. Devaney. By dropped, do you mean declined for 
prosecution?
    Senator McCain. Yes.
    Mr. Devaney. I think there are over 100--not of those 350, 
but an additional 100 have been looked at and prosecution has 
been declined.
    Senator McCain. And so far there has not been any case that 
has been brought to court?
    Mr. Devaney. There have been some in the Social Security 
arena, people getting small checks that have pled guilty to 
those kinds of crimes. It is only $250 per check, so I would 
not consider that a significant fraud. So the answer, I think, 
to your question is no, there have not been any significant 
plea agreements or convictions in what I would consider major 
fraud?
    Senator McCain. And when would you expect some of these 
things to happen?
    Mr. Devaney. I would think we could expect to see some 
indictments in the near future, and I think that starts the 
process, and we go to court and we go to trial.
    Senator McCain. ``Near future'' meaning?
    Mr. Devaney. Well, we are about 18 months into it, and the 
normal cyclical cycle for a criminal case is about 2 years, so 
within the next 6 months.
    Senator McCain. Thank you very much. I thank the witnesses.
    Thank you, Mr. Chairman.
    Senator Carper. Thank you, Senator McCain.
    On page 3 of your testimony, Mr. Devaney, you actually cite 
a number of examples that I think could be responsive to 
Senator McCain's question. You cite four examples. Do you want 
to just mention those?
    Mr. Devaney. Sure, I would be glad to. In one case, a 
Federal agency has canceled a research grant after our staff 
discovered that the recipient had previously been debarred from 
receiving Federal funds.
    A $1 million award was revoked by a Federal agency after we 
discovered that the recipient was not eligible for the award 
under Federal guidelines.
    A Federal agency canceled a company's contracts worth more 
than $7 million after our analysis showed that the recipient 
had been debarred.
    And another company with multiple awards of over $10 
million was debarred from doing government business after we 
uncovered information showing the company was not eligible to 
receive contract awards.
    These are not exactly--these did not turn into a full-
fledged criminal investigation, but are examples of what I 
talked about earlier in trying to intercept fraud at the front 
end to prevent it from happening in the first instance.
    Senator Carper. Part of what we tried to do in the improper 
payments legislation that Senator McCain and I, Senator Collins 
and others, Senator Coburn, Senator McCaskill, had worked on is 
we said basically there are three things we wanted to be done 
with respect to improper payments:
    First, make sure all Federal agencies, including Medicare, 
all parts of Medicare, Medicaid, are reporting improper 
payments. Number one. Not just some. All across the government.
    The second piece is we want you to stop making them. We 
want to stop making them.
    The third part of it is we want you to go out and use 
private recovery contractors to go out and recover as much of 
the money that has been improperly paid, overpaid, as you can.
    We got the idea from the work that was begun, I want to say 
about 4 years ago, in Medicare. I think just initially in three 
States--California, Florida, and New York--we said let us use 
some recovery audit contractors and go out and recover money as 
best we can that has been really stolen, almost stolen from the 
Medicare trust funds. And then we added a couple of other 
States, I think a total of five, and then worked on it for 
about 3 years and recovered about $1 billion. We recovered 
about $1 billion. We spent the last year kind of standing down 
and doing a lessons learned from that experience, and we are 
starting to extend that recovery work to all 50 States.
    I have heard estimates for improper payments for Medicare 
and Medicaid combined on an annual basis, estimates that go up 
as high as $60 billion a year, maybe even more. But let us just 
say it is $50 billion a year. I think in our testimony today, 
maybe it was you, Mr. Werfel, who said we hope to capture at 
least $2 billion by 2012. As I understood it, you were saying 
from all Federal agencies, from all Federal programs. And I am 
encouraged that we are going to use this approach that Mr. 
Devaney has been leading along with the Vice President for the 
last year and a half. And $2 billion is a lot of money, but if 
we are talking about just in Medicare and Medicaid as much as 
maybe $100 billion in 2 years in improper payments, a lot of it 
fraud, $2 billion captured governmentwide, Medicare and 
Medicaid and everything else, does not seem like a lot or 
certainly does not seem like enough.
    Mr. Werfel. It is a good question, Senator. Let me start by 
saying when we established the $2 billion goal, there were 
essentially two places where we had the ability to recover 
improper payments using this concept of payment recapture audit 
where you are hiring a specialized auditor to go out and get 
the money and they are paid based on the amount of error they 
recover. The two places were Medicare and Federal contracting.
    So that left off the table Medicaid and all the other 
programs that make up the brunt of these $110 billion figures 
that we have been discussing, including food stamps and Social 
Security and all these other programs and, in particular, 
Medicaid.
    Since that time, with the passage of the Improper Payments 
Elimination and Recovery Act and the Affordable Care Act, our 
authorities to use these tools have expanded, and so we are 
relooking at our $2 billion goal in light of these new expanded 
authorities to see if we should be raising it and how 
significantly we should be raising it to set a new bar.
    When you look just at Federal contracting in Medicare, we 
looked at our experience over the last several years in terms 
of what we could achieve, and the $2 billion ends up being more 
than double the recoveries in that universe of Federal 
contracts and Medicare than we were able to recover, and for 
that reason we thought it was the right aggressive goal to set.
    But I agree with you that given new authorities and the 
fact that we now have this ability for a broader set of 
programs, that is a goal worth revisiting.
    Senator Carper. Good. As I understand it, during this last 
year we stood down the recovery audit contracting activities in 
these five States and did a lessons learned. One of the lessons 
we tried to learn is to hear from the private contractors that 
have been retained to ask them, ``What have you learned that 
can inform the Federal Government, particularly Medicare, to 
enable us to stop making improper payments? '' And we have 
tried to spread that word. So the idea there is to benefit from 
the lessons learned from these private contractors.
    In the testimony we had, oh, gosh, a week or two ago here, 
the folks from CMS indicated that I think they said about 40 
percent of the recommendations have actually been done, maybe 
close to half, but there is a bunch of them that have not been, 
and we asked for a timetable of when we are going to do the 
rest. And it is not clear when we are going to do the rest.
    Do you have any thoughts on that?
    Mr. Werfel. By the rest, you mean Medicaid and other parts 
of Medicare?
    Senator Carper. Yes.
    Mr. Werfel. Well, the----
    Senator Carper. Let me say this: About roughly half--of the 
ideas of what we need to do to stop making these improper 
payments, about half of them, maybe half of them, have been 
acted on, but the rest have not. And I think the savings for 
those are potentially $300 million a year, and it could be year 
after year after year, so it turns into a lot of money. And the 
question I asked is--and this may not be something you are even 
aware of, but in terms of turning out attention to the other 
ideas from the contractors, making sure we use those ideas to 
stop making improper payments, what are we going to be doing 
about that? My hope is that OMB is going to be at least from 
afar riding herd on this.
    Mr. Werfel. Absolutely, and, I think it is--when you look 
at the improper payments terrain and HHS is half the balance 
sheet, so it is very critical that OMB is applying the 
appropriate oversight and partnership with HHS going forward. I 
will reflect on a couple of observations just to respond to 
your question.
    Some of the lessons learned coming from HHS is that when 
they have run their pilots before, sometimes--and, God bless 
the contractors. They are trying to go out and get those 
recovered dollars. Sometimes you can almost go too aggressive 
and identify errors that are not really errors and end up with 
a lot of appeals and litigation and a lot of administrative 
activities that are not having value added to the process. And 
so, really, the challenge that HHS has--and I think what you 
are seeing is some tentativeness on some of the recommendations 
and then full steam ahead on some.
    The recommendations, where I think they are being more 
tentative is where they are concerned that going out and 
collecting errors before certain things are checked and due 
process elements are put in place and certain due diligence is 
done is going to create a lot of false positives. And so what 
they are trying to do is find the right equilibrium. And we 
learned a lot during that five-State pilot that you mentioned, 
and the numbers are probably somewhat inflated, only because a 
lot of those recoveries ended up being litigated, appealed, and 
created a lot of administrative activity that we want to try to 
avoid and some equity issues that we want to try to avoid.
    But from my standpoint, my guiding principle is to make 
sure that HHS is as aggressive on the spectrum as they can be 
without crossing into lines of inequity or administrative 
problem. I do not think they are there yet. I think we need to 
work with HHS to push them down that continuum into a more 
aggressive posture on their error reduction efforts in general, 
but in particular on payment recapture. And so I will be 
working with them on the remaining recommendations.
    I am excited by the fact that they have embraced the ones 
that they believe they can embrace because I think that will 
have an impact. To the extent they are not embracing, I think 
it is incumbent upon us to make sure that they are doing those 
reviews quickly and landing on a good place so they can move 
forward.
    Senator Carper. All right. Thank you.
    Mr. Devaney, I understand that the Recovery Board and OMB 
worked closely on the ramp-up of Recovery.gov and the Board's 
various activities. I often say right here in this hearing 
room, if it is not perfect, make it better; everything I do I 
know I can do better. I think that is true for all of us. But I 
know there are a number of challenges that the Board faced 
early in its mission.
    Let me just ask, in your view, what was maybe the most 
significant or perplexing problem that you faced as it relates 
to the Recovery Act? And how did you go about solving it?
    Mr. Devaney. I think as I mentioned in my testimony, Mr. 
Chairman, the biggest problem was time. We had time constraints 
that were, quite frankly, almost insurmountable. We had to 
build two separate websites in less than 6 months. I think it 
is fair to say that the government would normally take a couple 
years to do that.
    So we had to pull together a team of folks. The staff I 
pulled together were outstanding, from all parts of the 
government. We got the backing, the full backing of OMB in that 
endeavor, and we were able to do it. We probably did not do it 
the way the government usually does it, but that is probably 
what made it work. And we did a lot of things simultaneously, 
and we got it up and running and it worked. So it was the time 
constraints that we faced when we took over.
    Senator Carper. OK. Let me just follow up with a related 
question. As I said earlier, the task that was set out for you 
was not an easy one, and in your testimony you talk a little 
bit about--I think you talk about extreme deadlines that you 
had to meet. As you just said, our government is not exactly 
known for the speed in which we operate. In fact, a lot of big 
entities are not. But how were you able to establish the 
Recovery Operations Center in such a short period of time and 
find specific cases of fraud and waste as quickly as you did?
    Mr. Devaney. Well, we are doing that simultaneously. We are 
building the two websites. We also have half of the staff is 
dedicated to accountability, so that portion of my staff was 
working to pull together all of those special tools, and the 
recipient data had not come in yet until October, so we had a 
little time to plan that out a little, quite frankly, more than 
we had time to play in the two websites.
    So it took a lot of thought, and once again, we pulled 
folks together from different parts of the government, from 
different IGs. We brought in some folks with unique software, 
one of whom, at least, is going to testify later this 
afternoon, and pulled all that together probably just about the 
time the data started to roll in and we had our first look at 
it.
    Senator Carper. OK. Mr. Werfel, in your testimony you say 
that the fraud and abuse of the Recovery Act funds has been 
much lower than a lot of people had anticipated. From your 
vantage point, what have been some of the Board's secrets, if 
you will, to success in protecting those funds? And what sort 
of lessons has your office taken away from what you have seen 
at the Recovery Board and which might be extended to other 
parts of our government?
    Mr. Werfel. Well, I would like to answer that, if I could, 
a little bit broader than the Board. I think the Board was a 
key part of it, but I have been asked this question a lot and 
given it a lot of thought, because I do often say I want to 
bottle some of the success that we have had.
    It might sound somewhat trite, but it really is not--the 
leadership involvement and emphasis is so critical. And from 
day one there has been such a strong message from the President 
and the Vice President regarding the scrutiny that they 
expected Federal agencies to place on watching these dollars, 
making sure they were being spent judiciously yet quickly and 
wisely, and that there was no poor judgment used in the type of 
projects or activities that would be funded.
    And this message did not come across just once. It came 
across repeatedly. And the Vice President has played an 
extremely active role, bringing the Cabinet together and senior 
recovery officials, often calling Governors on a rolling basis 
and, pounding the table if he needs to regarding the importance 
of making sure that every dollar is watched and that there is a 
tremendous amount of what I call healthy stress or healthy 
pressure placed on the system to watch every single dollar that 
is going out the door and making sure that it is spent wisely.
    And this type of scrutiny and attention and engagement has 
really established an accountability structure where if dollars 
go out in error or for poorly defined or thought of projects, 
there is a strong sense that this is unacceptable throughout 
government.
    I think the Board's presence has been critical to these 
efforts because, in any activity that you undertake where you 
are looking at these payments and these activities through a 
close eye, the Inspector General is always standing there on 
the side making sure that eye is keen and that it is diligent 
and that it is taken seriously and that it is thorough. And 
here what you have is a very interesting development, and that 
is, the IGs coming together across government in a common 
purpose for a common program and talking amongst each other and 
sharing practices and approaches and evaluating agencies 
together around these activities. And I think the entire 
government has advanced because of it, because of the lack of 
silos and the cross-cutting nature by which the Vice President 
drives and his cross-cutting meetings about doing things 
better, where it is not, the low-level employee talking about 
what they are doing; it is the Secretary or the Deputy 
Secretary talking about how seriously they are taking these 
activities. And the Inspector General community is there in 
unison as well looking across programs.
    This is certainly, I think, a best practice and an exciting 
development that we need to leverage going forward.
    Senator Carper. Good. Thank you.
    Mr. Werfel, is it true that Mr. Devaney is the supervisor 
of the Vice President? Is that the way it works? [Laughter.]
    Mr. Werfel. I will say if Mr. Devaney is coming by for a 
meeting, we take that very seriously, and we want to make sure 
that we are ready, because Mr. Devaney asks tough questions, as 
he should, but they are always fair. And I think one of the 
best practices coming out of this is the partnership that OMB 
in particular, the Vice President's office, and the Recovery 
Board have forged here. Mr. Devaney mentioned tight deadlines 
and an overwhelming challenge that we had on our hands that was 
delivered to us, and the challenge was the right challenge, and 
we took it on together. But we would not have been successful, 
I do not think, if we did not immediately find a way to bring 
both of our comparative advantages to the table. And Mr. 
Devaney and I would sit down and talk to each other. At the 
beginning I remember there were all these questions: What is 
your role, what is my role in terms of OMB and the Recovery 
Board? And ultimately I think we made the decision that our 
roles should be who can do the best work in the quickest time 
and where your expertise comes to bear.
    And so we tried at OMB to throw our expertise on the table 
in certain areas. The Recovery Board did the same, and the 
results were we met our deadlines, and I think we met them 
pretty effectively.
    Senator Carper. Good. Thanks.
    I do not know which one of you mentioned this, but one of 
you mentioned earlier in this back-and-forth a Do Not Pay List. 
I am not sure who did. But I want to go back to that for a 
moment. I think it was maybe last month that the President 
issued a memorandum issuing the establishment of a single Do 
Not Pay List. I suspect that a lot of Americans might be 
surprised that there was not already a single list of people or 
companies that the government should not be sending money to.
    We have all heard the stories of deceased people receiving 
checks or debarred contractors continuing to receive new 
business from the Federal Government. I am just wondering if 
one or both of you could just shine a little more light on what 
the system looked like say before this announcement of a month 
ago and what the new Do Not Pay List means for our taxpayers.
    Mr. Werfel. Well, this is kind of an OMB-generated 
initiative, so I will take the lead on it.
    Senator Carper. OK.
    Mr. Werfel. It was inspired by some of the Recovery Act 
activities. In particular, I will start by saying, when we look 
at improper payments and the $110 billion, there is certainly a 
spectrum of how challenging or less challenging it is to get 
out in front of these payments and deal with them. On the more 
challenging end of the spectrum, you might find a Medicare 
reimbursement which, after evaluation and audit, looks like it 
was not a necessary medical procedure, and knowing that up 
front can be extremely difficult. And so that is the type of 
error that I would put at the more difficult end of the 
spectrum.
    But more at the less difficult, certainly less difficult 
end of the spectrum is when the government makes payments to 
individuals or entities where we have clear information sitting 
in either a public or a government database that we know would 
nullify that payment, whether the individual is deceased or on 
the Excluded Parties List or owes an outstanding tax or other 
form of debt to the government.
    And, unfortunately, we continue to make both kinds of 
errors, and Mr. Devaney testified earlier that there were 
instances in the Recovery Act where individuals or entities on 
the Excluded Parties List, which is right there on GSA's 
website for the whole world to see, were continuing to get 
payments. I think the Do Not Pay List is recognizing that we 
have to at a minimum, if we are going to be successful in 
improper payments, get rid of all the improper payments that 
exist at this less challenging end of the spectrum.
    So what we have today, and before the Do Not Pay List was 
issued, is a set of disparate databases held by different 
agencies. GSA maintains the Excluded Parties List. Social 
Security maintains the Death File. Treasury maintains our debt 
files on who owes outstanding or delinquent debts. And when we 
started talking to agencies about this problem of not being 
able to get at the basic errors that we should be able to get 
at, one of the things we learned was that there were 
challenges, administrative challenges that they were facing in 
terms of accessing these databases and building that into their 
prepayment processes in a more seamless way, in a way that, 
when this Excluded Parties List is refreshed, I am 
automatically in tune with that refreshed list, or that I have 
the right technology set-up between myself and the Social 
Security administration to do that bump-up with the data. And 
we also learned that the agencies were not being as thorough as 
they needed to be in their prepayment processes to make sure 
that these data sets were being checked.
    So as a result of the Do Not Pay List, what we are charged 
with doing and what we have already started is bringing these 
data sets together for the single entry point. So if I am an 
agency, no longer do I have to establish multiple agreements 
and data-sharing arrangements and technology interfaces with 
agencies. I just have to do it once. And through that one 
interface, I can start to see what the spectrum of potential 
ineligibility factors are raising.
    We have started the process already at GSA. They have 
started to bring this data together on contractors where we now 
have in one place, for example, information on whether a 
contract has been excluded, a contractor has been excluded, or 
whether they owe a debt. So just picture the kind of coming 
together in various pieces as we go over time to bring these 
data sets in to--we could not do it overnight, but I am happy 
to report that we have already started the process. And in the 
coming months, our goal is to continuously add to this unified 
data structure and have agencies more and more tap into it. So 
that is how the world will be changing.
    Senator Carper. Good. Before I excuse you from the 
testimony, do either of you have something you would like to 
add in conclusion, just a concluding thought, something--and 
taking in mind one of the questions I often ask is--we are 
forever asking more of you, and one of the questions I ask is 
what can we do to be of further support and help.
    Mr. Werfel and I have had this conversation before, but one 
of the responsibilities of this Subcommittee and this 
Subcommittee is to kind of look throughout Federal Government 
and try to figure out how we can save money and how we can 
spend money more effectively, more cost-effectively. And from 
time to time we get actually very good feedback, helpful 
feedback, but our job is in part to do oversight, the good 
oversight, constructive oversight; on the one hand, when 
agencies are misbehaving, to put a spotlight on that; on the 
other hand, when an agency is doing a particularly good job, as 
we have an example here today, to put a spotlight on that as 
well, try to reinforce and reward the good behavior.
    We learned earlier in my tenure here in the Senate that if 
it is just this Committee or just this Subcommittee that is 
trying to do this, we are not going to get very far. If we can 
somehow partner with OMB, if we can somehow partner with the 
Government Accountability Office, if we can somehow partner 
with all the Inspector Generals, and, frankly, outside of 
government there are a number of entities that are interested 
in eliminating waste and abuse--if we could somehow partner 
with all of those, we might actually get something done here. 
And my sense is that we are starting to partner pretty well 
together, and I think we are on the verge of getting a whole 
lot done in terms of stopping, for example, improper payments 
and beginning to recover significant amounts of money.
    But just a concluding thought about what maybe we can be 
doing more of or less of that would be supportive to you in 
your efforts. Mr. Devaney, I will go to you first, and then I 
will ask Mr. Werfel, if you will, to conclude. Thank you.
    Mr. Devaney. Well, Mr. Chairman, I think as has been said 
earlier today, I think the specter of all of those folks 
getting together and finally working together is a first in my 
career.
    Senator Carper. Is that right?
    Mr. Devaney. I think so. I think there have been examples 
in the past perhaps of----
    Senator Carper. How long is your career?
    Mr. Devaney. About 40 years.
    Senator Carper. That is a long time.
    Mr. Devaney. It is a long time. So as Mr. Werfel testified, 
we could not have done this if we had decided to fight those 
old parochial battles that we inevitably get into sometimes in 
government. So that all went away because I think we were all 
faced with the same problem set in trying to do this under the 
constraint of the time. And I think we now all see the value of 
getting together and working harmoniously. It is very apparent 
in this effort.
    And so I think that--I hope it will live on long after I am 
gone or, for that matter, the Recovery Board sunsets in 2013. 
My hope is that what we have started here will serve as a 
platform or a template for the future, and that others will 
come along later and make it better, with your help.
    Senator Carper. All right. Thank you.
    Mr. Werfel, a closing thought?
    Mr. Werfel. Yes, a couple.
    First of all, I want to thank you for your leadership and 
this Subcommittee's leadership in this area. It is very 
important for us to be able to--when we are talking with 
members of the community and stakeholders about this effort and 
try to drive momentum and accountability and energy and 
passion, that we can point to activities and hearings and 
Senate statements, in particular your message on the Senate 
floor where you thanked OMB for our efforts was extremely 
energizing.
    Senator Carper. We do not hear that every day, do we?
    Mr. Werfel. No, we do not. And it is extremely energizing 
not just for me and my small staff sitting behind me, but the 
whole of OMB was made aware of your statement, and it was a 
good moment for us that our efforts were recognized.
    But your continuing championing this issue is helpful for 
me, I think for my boss, Jeff Zients, and our incoming 
Director-to-be, Jack Lew, to be able to champion it as well and 
have this kind of combined legislative and Executive Branch 
voice around this challenge. So on that, I think more of the 
same is appreciated.
    I do want to re-highlight something I said earlier because, 
I say it and it sounds impressive--and it is, and I do not know 
that it gets much attention. But the President's budget in 2011 
contains a series of program integrity provisions, both 
discretionary and mandatory, that all totaled would save $150 
billion over 10 years if enacted. That is the way our budget 
experts score these important provisions. And I think that is 
an important reminder that, our legislative work in this area 
is probably never done, and this is a challenge that is going 
to elude us unless we stay ahead of it.
    One of the things I am excited about, in addition to my 
hope that the President's budget proposals are looked at and 
acted upon, is the new IPERA legislation sets up an important 
structure, I think, where if programs are noncompliant or are 
falling behind, that we are required to come up with 
legislative proposals to make sure that they are not falling 
behind any more. If that is a vibrant and active terrain for 
us, working with you, I think we are going to stay ahead of 
this problem over time. And so that is another area I look 
forward to working with you on.
    Senator Carper. Good enough.
    Going back to the President's proposals in the 2011 budget 
that would actually, in the view of the Administration and 
maybe the Congressional Budget Office (CBO), save as much as 
$150 billion over 10 years, we are looking for--in the 
Legislative Branch, we are always looking for pay-fors, the way 
to pay for program expansion in some cases, the way to provide 
offsets to either tax cuts or spending increases. We are always 
looking for that stuff, even today.
    You may be well advised to have your folks just come back 
to our Committee staff, our Subcommittee staff and say, ``By 
the way, as you look for those pay-fors, remember in our budget 
we had all these different ideas that add up to $150 billion, 
because especially right now we could use some of them.''
    The last question I ask is tongue in cheek, but you 
mentioned your small staff, and I know they are not all here, 
but I think they would fit easily into this room, if I am not 
mistaken. But I noticed as you spoke and testified, Mr. Werfel, 
that there is a young man sitting directly behind you in the 
front row. And as I watch carefully, I see his lips move when 
you speak, and he looks very familiar. What is his name? Do you 
recall what his name is?
    Mr. Werfel. He has a nickname. We call him the Pika guy at 
OMB.
    Senator Carper. The Pika guy.
    Mr. Werfel. But his name is Joe Pika.
    Senator Carper. I wonder where he is from.
    Mr. Werfel. I do not know. Joe, where are you from?
    Mr. Pika. Delaware.
    Senator Carper. Delaware.
    Mr. Werfel. And he knows that he is under oath when he says 
anything in the Senate chamber. He is truly from Delaware.
    Senator Carper. He was once a member of--as a young man, he 
was a member of our staff, and I think maybe even an intern at 
one point in time, and later became a member of our staff. His 
father was someone I had the privilege as Governor to nominate 
to serve on the Delaware State Board of Education. He is a 
legendary professor at the University of Delaware, and the 
apple in this case did not fall far from the tree. I heard 
recently from another senior member of my staff that Joe Pika's 
Dad, also known as Dr. Joseph Pika, has had some kind of health 
impediment impairing his speech, as I recall. And I would just 
ask if that is indeed the case, convey our best to your Dad, 
Joe, and say we hope he is well on his way to a complete 
recovery, and when I come across him again in Delaware that he 
will be at full voice once again.
    Our thanks to both of you for joining us today. Thank you 
for your good work, and we look forward to continuing to 
partner with you. Mr. Devaney, I will convey to the Vice 
President when I see him that he is earning high marks for his 
good work, too. All right. Thanks very much.
    I would ask our second panel to go ahead and come to the 
front of the room. Welcome. It is nice to see some of you again 
and to be able to welcome others before this panel for the 
first time. I am going to go ahead and introduce our witnesses 
starting with Dr. Karp. I will just telegraph this one ahead. 
The question is: What happened to the last two letters of your 
name?
    Dr. Karp. I think it was Ellis Island.
    Senator Carper. OK, fair enough. I always wondered that 
when I saw that name. We are glad that you are here, 
abbreviated name or not. Just a real quick introduction, if I 
could.
    Dr. Alex Karp, Co-founder and Chief Executive Officer 
(CEO), Palantir Technologies. Palantir Technologies develops 
tools to assist groups in analyzing and integrating and 
visualizing various types of data. I understand that Dr. Karp 
earned his law degree from Stanford University, his Ph.D. from 
the University of Frankfurt in Germany, and he is fluent in 
English, in German, and maybe even in French. Which language 
will you be testifying in today?
    Dr. Karp. In a pidgin version of English that will be hard 
to understand.
    Senator Carper. We will do our best. We will do our best. 
Thank you for joining us today. I used to live in Palo Alto and 
Menlo Park when I was a naval flight officer, Moffett Field, 
and spent a little bit of time at Stanford. It is a great part 
of the world. Great part of the world. A lot of good, smart 
people come out of there.
    Our next witness is Dr. Robert McEwen. Mr. McEwen, welcome. 
Mr. McEwen is the CEO and chairman of U.S. Gold Corporation, 
among other companies. In March 2000, Mr. McEwen, I understand 
that you launched the Goldcorp Challenge, a Web-based context 
which successfully used what is called incentivized crowd 
sourcing to renew an underperforming gold mine. We have read 
about that with a fair amount of interest and want to see what 
we have to learn here in the Federal Government from some of 
what you all were doing back then and in the years since.
    Our final witness is Dr. Riley Crane, the senior post 
doctoral fellow in the Human Dynamics Group at the 
Massachusetts Institute of Technology (MIT). Dr. Crane's 
research focuses on understanding the hidden patterns behind 
collective behavior on social media networks such as YouTube. 
In addition to his scientific work, Dr. Crane consults for 
business and government and has built virtual media campaigns 
for the United Nations, among others. We thank you for joining 
us today. One of our two sons spent some time--4 years--on your 
campus and just wrapped up his undergraduate work there. We 
have a huge amount of respect for the work that you all do at 
MIT on a whole wide range of fronts. So thank you.
    Dr. Karp, please proceed. Again, thank you for joining us 
today.

  TESTIMONY OF ALEXANDER KARP,\1\ PH.D., CO-FOUNDER AND CHIEF 
            EXECUTIVE OFFICER, PALANTIR TECHNOLOGIES

    Dr. Karp. I would like to thank you, the Chairman, for 
hosting this hearing and commend you on the outstanding work 
you have done in this field, and also the Ranking Member McCain 
and the Subcommittee in general for inviting us. Likewise, 
obviously, thank Chairman Devaney whose leadership made the 
Recovery Board possible and many of the successes that have 
been already discussed.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Karp appears in the Appendix on 
page 58.
---------------------------------------------------------------------------
    By way of introduction, we are a Silicon Valley company, 
essentially specialized in perhaps the least glamorous aspect 
of finding fraud, which is getting the data to the analysts so 
that they can find fraud in real time.
    A couple words about our company. We self-finance our 
company based on a methodology, developed by PayPal that 
reduced fraud by 90, in some cases 98 percent, wanted to turn 
that methodology into an off-the-shelf, fully deployable, and 
extensible software platform. We did this and brought it to the 
government market and to large institutions with a hope of 
making data integration something that can take thousands of 
hours and often unsuccessful into something that can be done in 
real time. And currently we employ 300 people, 80 percent of 
whom are engineers--we do not deploy a sales force. We 
essentially work in one environment to the next.
    We are honored to be invited to take part in extending 
Chairman Devaney's mission of reducing fraud, waste, and abuse, 
which was an extension of the work that you have done, Mr. 
Chairman. And our piece basically involves detection and 
prevention. We allow analysts to perceive latent patterns 
hidden in large data stores across different siloed 
environments so that fraud becomes apparent to the non-
technical analyst, something which is very difficult to do and 
which costs a lot of money usually in the commercial and in 
private sector. And by doing that and uncovering these latent 
patterns, which is very similar to what we have done across 
government and at PayPal, we are able to empower analysts to 
find a highly adaptive adversary. As was mentioned in the 
previous testimony and by you, one of the challenges is not 
just finding a static adversary but finding someone who 
obviously is a professional in many cases in attempting to 
adapt their behavior based on what they think the latest 
methodology is.
    When successful, this not only cuts fraud and detects 
fraud, as in the case of the Recovery Board, but it also 
provides a preventative methodology so that fraudsters prevent 
or are not eager to engage in the kind of fraud that they have 
been engaged in.
    The second part that we have been involved in, also under 
the leadership of the Recovery Board, is extending this so that 
once the fraud is detected, that it can be prevented going 
forward, as essentially a second piece. So, obviously, finding 
fraud and preventing fraud at the early part of the spectrum, 
as both of your guests mentioned, is crucial. But then 
preventing those fraudsters from reappearing under other names, 
which is a common practice, or using latent networks which 
obfuscate their identity or the kind of behavior they are doing 
is crucial to reducing fraud, waste, and abuse across 
government.
    We are delighted that this approach is being extended into 
other parts of government and humbled to be a part of this. We 
see our part of it as basically being one technology among 
many, providing an open architecture so that other technology 
and other expertises can be integrated, which is pretty 
important, in our view; but really doing the kind of heavy 
engineering lifting under the leadership of technical experts. 
We are not the investigators. We are the people that provide an 
extensible platform so the investigators can do their work 
across large data stores and without being engineers. We are 
delighted that this came about.
    One thing that should be noted before I close, the idea of 
using technology which has been broadly deployed in commercial 
space and in other parts of government in the context of fraud, 
waste, and abuse took essentially an entrepreneurial mind in 
the form of Chairman Devaney. It was not--usually people do not 
take the leap of using one form of technology that has been 
successful for finding latent networks and providing civil 
liberties protections. At the same time in another context, it 
was the leadership of the Recovery Board which really led to 
deploying our technology, which is quite well known in law 
enforcement, the civil liberties area, security-level 
collaboration, and in counterterror and cyber work, again 
pernicious fraud and finding latent networks there, while, of 
course, maintain civil liberties norms.
    So thank you again for having us, and thank you to Chairman 
Devaney and the Chairman especially. Delighted to be here.
    Senator Carper. Thanks so much, Dr. Karp. Mr. McEwen.

TESTIMONY OF ROBERT R. MCEWEN,\1\ CHAIRMAN AND CHIEF EXECUTIVE 
                  OFFICER, U.S. GOLDCORP INC.

    Mr. McEwen. Chairman Carper, Ranking Member McCain, 
distinguished Members of the Subcommittee, thank you for the 
opportunity of testifying today concerning innovative 
technologies and approaches to solving problems and making the 
government run more effectively.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. McEwen appears in the Appendix on 
page 61.
---------------------------------------------------------------------------
    I have been asked to share with you a story of innovation 
that I believe has vast application and benefit to the 
government.
    In 2000, my company, Goldcorp, made a $1 million investment 
in website development, database assembly, and cash prizes. The 
result was stunning. We reaped the benefit in excess of $3 
billion in new found gold. My business is gold mining, 
definitely not an area that you would look to for inspiration 
for innovation However, what we did astounded both the mining 
and the high-tech community. It was one of the first examples 
of incentivized crowd sourcing used to solve problems. The 
successful utilization of the Web was well documented in such 
best-selling business books as ``Wikinomics,'' ``The World Is 
Flat,'' ``Mavericks at Work.''
    When we put the Goldcorp Challenge up on the Web, we 
``broke the mold''. We defied industry standards by sharing 
proprietary data about our orebody that everyone knew was never 
shared without confidentiality agreements. We provided free, 
comprehensive, and unrestricted access to an extremely valuable 
database about the most exciting gold discovery of the decade. 
In effect, we started a worldwide brainstorming session via the 
Internet where we offered half a million dollars in prize money 
to exploration experts to help us find the next 6 million 
ounces of gold at our mine. And this was a mine that had 
already been going for 50 years.
    Our strategy was to make available to anyone anywhere in 
the world an extremely valuable, proprietary geological 
database via the Internet as well as software that allowed one 
to analyze and depict this data graphically in two and three 
dimensions, plus an economic incentive to have the participants 
share their geological insights.
    The response was immediate and remarkable. Within a week we 
had 120,000 hits on our website. The mining industry on every 
continent knew about the company. And within 4 months there 
were a quarter million hits, and more than 1,300 individuals, 
corporations, domestic and foreign, governmental, geological 
agencies, and universities representing 50 countries had 
registered for the Challenge.
    In addition, the rest of the Web was looking at Goldcorp 
and concluding it was not your typical mining company, and they 
were right. The Challenge served as a powerful catalyst to 
improve the careers and financial independence of our employees 
and propelled Goldcorp's future growth. The Challenge provided 
much more than an immense exploration success. It changed the 
attitude of our employees. They became proud of their work and 
their company. They became more confident and comfortable with 
accepting change and new technologies. They became eager to 
share and test their ideas about how to innovate and improve 
the way we worked.
    Given the time constraints to my oral testimony, I have 
attached an appendix to my written version, and it outlines how 
we came to develop the Challenge, and I would recommend it for 
your review.
    So how might the concept of crowd sourcing have a positive 
impact on government efforts to become a more effective, more 
efficient provider of services to all Americans? I would like 
you to consider these thoughts.
    First, there is a vast pool of experience, knowledge, and 
insights within the ranks of the government. This pool could 
and should be engaged in brainstorming to define questions to 
be asked to provide alternatives for improvements to current 
practices.
    Two, initiate brainstorming on a departmental or 
interdepartmental level. Too often all of us get very close to 
an issue to see it objectively and are thus unable to see the 
alternatives. By introducing another perspective, a new problem 
statement may be formulated that can generate surprising and 
effective alternatives.
    Three, look to bring in individuals from the outside into a 
department, into the government and importantly give them the 
authority to introduce unconventional change.
    Four, look for the unquestioned underlying assumptions in 
your department, in the government. These are the ones that 
most people never question, because they are so fundamental. 
Once identified, question and challenge these assumptions.
    Remember, nobody is as smart as everybody, and that you 
need to share knowledge freely to gain their insights and 
answers.
    The incentives for crowd-sourcing projects can be much more 
than cash. The range of prizes available to you are limitless 
because people engaged in problem solving have a wide range of 
needs and motivations. In our Challenge, individuals 
participated for a variety of reasons: Intellectual curiosity, 
access to otherwise unobtainable data, peer recognition, an 
opportunity to profile and market their services, and more.
    I believe to achieve major change in an organization, one 
must be, first, unconventional, change the rules, and I 
emphasize keep selling the opposition on the benefits to them 
on a personal basis.
    An area of opportunity for innovation by the government. 
The government is good at making laws, rules, regulations. The 
Securities and Exchange Commission (SEC) was created to protect 
investors. It has more rules today than when it was established 
in 1933, but the losses suffered by investors recently have 
been enormous. Consider this thought: Does the creation of 
additional laws create more or less opportunity for criminals?
    One last observation. The biggest gold mine in the world 
exists between everyone's ears. So tap into the minds of your 
fellow Americans and the citizens of the world to achieve your 
Committee's objectives. I applaud your quest to innovate. I 
thank you for your invitation to testify today, and I would be 
pleased and honored to answer any questions from the Members of 
the Subcommittee.
    Senator Carper. Good. Thank you. When I read your 
testimony, a couple things jumped off the page at me. One of 
them was your comment, ``Nobody is as smart as everybody.'' I 
thought that was terrific. And I thought, Is that original? Is 
that something that----
    Mr. McEwen. Someone else scribed those words.
    Senator Carper. All right. And the other one was the one 
you just used. You said the biggest gold mine in the world is 
between our ears.
    Mr. McEwen. That is mine.
    Senator Carper. Good stuff. All right. You might have a 
future around here writing our material. You never know. Thank 
you.
    Mr. McEwen. You are welcome.
    Senator Carper. We will borrow from it, but always try to 
give you credit, or somebody.
    Riley Crane, how long have you been at MIT?
    Dr. Crane. Almost a year.
    Senator Carper. What did you do before that?
    Dr. Crane. I was a post doc in Switzerland at ETH, and then 
before that I did my Ph.D. at the University of California, Los 
Angeles (UCLA).
    Senator Carper. OK. Boy, you have been getting around. 
Welcome. Please proceed.

TESTIMONY OF RILEY CRANE,\1\ PH.D., HUMAN DYNAMICS GROUP, MEDIA 
           LAB, MASSACHUSETTS INSTITUTE OF TECHNOLOGY

    Dr. Crane. Mr. Chairman and Members of the Subcommittee, 
thank you for this opportunity to testify before you today. My 
name is Riley Crane, and I am post doc at MIT in the Human 
Dynamics Group at the Media Lab. In December 2009, I led the 
team from MIT that won the DARPA Network Challenge using crowd 
sourcing, social networking, and social media to mobilize 
thousands of individuals around the world in under 9 hours. I 
would like to share with you this story in the hope that we can 
take away some of the insights that might be applied to 
government.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Crane appears in the Appendix on 
page 69.
---------------------------------------------------------------------------
    On December 5, 2009, the Defense Advanced Research Projects 
Agency (DARPA), unveiled 10 moored, red weather balloons at 
undisclosed locations around the continental U.S. and offered 
$40,000 to the first person to correctly locate all of the 
coordinates of these balloons. DARPA is the agency credited 
with the creation of the Internet, and this Challenge, 
considered to be impossible to solve by those within the 
intelligence community, was designed to celebrate the 40th 
anniversary of the creation of the Internet.
    Over these 40 years, we have seen incredible advances both 
in the Internet linking together all the world's computers, 
followed by the Web, which now links together all of the 
world's publicly available documents. But recently there has 
been a transformation driven by the convergence of new 
networked and mobile and social technologies that is for the 
first time allowing us to bridge the gap between online and 
real worlds and create virtual connections between people, 
places, and things.
    Many wonder whether this new social and global 
infrastructure can be used to solve important challenges, and 
so it was DARPA that wanted to challenge and to test this 
question to explore the role that crowd sourcing, social 
networking, and social media play in timely communication, 
wide-area team building, and urgent mobilization required to 
solve a broad range of problems.
    To tackle this challenge, our team built a platform that 
used incentives, referrals, and social media to effectively 
construct a network of human sensors throughout the world. Our 
platform was designed to track the chain of referrals as 
individuals signed up and spread the information through their 
social network in order to account for who was responsible for 
recruiting whom.
    In addition, we created an incentive system that divided 
the $40,000 equally over the 10 balloons. In this way, for 
example, Mr. Chairman, if you signed up and found a balloon, we 
would give you $2,000 and give the remaining $2,000 to charity. 
If instead you had signed up and referred Mr. McCain, and if he 
found the balloon, we would have given him the $2,000, we would 
have given you $1,000 for referring him, and given the 
remaining $1,000 to charity.
    Senator Carper. So I would still get more money than 
Senator McCain.
    Dr. Crane. No, It always starts with who found the actual 
balloon, and then it goes backwards, halving at each level. So 
you can have these chains as long as you would like.
    In total, over 4,000 teams competed, many of which were 
very well organized. Using our strategy, the MIT Red Balloon 
Challenge Team found all 10 balloons in 8 hours and 52 minutes. 
One of the most----
    Senator Carper. Did you say this was an assignment or an 
undertaking that was deemed to be impossible by the 
intelligence community? Did you say that?
    Dr. Crane. Yes. And it took us 8 hours and 52 minutes. And 
there were estimates all over the place. Some people thought it 
would be finished in minutes, and some people thought it was 
never be finished.
    Senator Carper. So the intelligence community said we 
cannot do this or this cannot be done. You did it in less than 
9 hours?
    Dr. Crane. The intelligence community said it could not be 
done using traditional techniques.
    Senator Carper. OK.
    Dr. Crane. One of the more interesting facts of the story 
is that I had only heard about the Challenge 4 days before the 
competition began. In 2 days, we built a platform and in just 
36 hours recruited nearly 5,000 participants. According to the 
official results released by DARPA our approach found four 
balloons before any other team, and of the 10 individuals that 
were the first to report to us the locations, we recruited half 
of them before the competition began. So this I think 
illustrates the power of social media to rapidly spread 
information.
    One of the questions we often receive is ``What did we do 
differently from these other teams that were more well 
organized? '' While some teams spent months preparing, 
organizing, and designing systems to solve the problem, our 
approach, which was conceived of, built, and executed in 4 
days, relied on continuous feedback from the spontaneous 
network and evolved throughout the Challenge. And rather than 
coming up with the best solution, we built a platform that 
leveraged the problem-solving capabilities of the participants. 
This platform encouraged individuals to innovate and to spread 
the message to their own audience in the most contextually 
relevant way, whether this was ``help science'', ``help 
charity'', ``win money'', or something else.
    Our system provided a solution that aligned the goals of 
each participant acting in their own self-interest with the 
broader goals of our organization. And really at the end of the 
day, we built the infrastructure that allowed others, even some 
of our competitors, to solve the problem for us.
    In the interest of time, I am going to skip over some of 
the examples I had prepared. While I think that our example 
nicely encapsulates some of the disruptive innovation that is 
being driven by the democratization of technology and its 
convergence with many other factors that are changing the way 
that we communicate, collaborate, and coordinate, there are 
many other examples of crowd sourcing that I would like to 
focus on one in particular that I believe addresses the 
Subcommittee's concerns here today.
    Last year, the Guardian, a British newspaper, created a 
crowd-sourcing platform that digitized the expense reports for 
Members of Parliament and encouraged citizens to investigate 
and to bring attention to the charges that they believed 
required further investigation. Looking at the site last week, 
the program had resulted in the review of over 200,000 pages of 
documents by more than 27,000 people and had brought to light 
many examples of extravagant spending.
    There have been many other great examples of new platforms 
that have enabled government to more effectively mobilize 
citizens. Another great one happened in the aftermath of the 
Haitian earthquake in which the U.S. State Department teamed up 
with great organizations like Ushahidi and Open Street Maps. 
One of the sort of success stories of this was highlight by 
Secretary Clinton when she emphasized the plight of a little 
girl who was ``pulled from the rubble in Port-au-Prince. She 
was alive. She was reunited with her family, and she will have 
the chance to grow up because these networks took a voice that 
was buried and spread it to the world.''
    I think the lessons that can be applied from these examples 
to government is that in each of the cases that I have 
mentioned, the organizations created a platform that enabled 
citizens acting in their own interests to solve problems. And 
my recommendation to the Subcommittee is that government should 
embrace the ideas espoused by Tim O'Reilly and others around 
government 2.0, which is a sort of catch-all term that means 
everything and nothing, but whose emphasis is that government 
should become a platform that provides the foundation for 
citizens to solve the problems that they care about most.
    Thank you very much for your time, and I look forward to 
answering your questions.
    Senator Carper. You bet. Thanks so much, Dr. Crane, for 
your testimony.
    This Subcommittee has fairly broad jurisdiction across a 
lot of different parts of our Federal Government. In fact, our 
full Committee is called Homeland Security and Governmental 
Affairs. It used to be just Governmental Affairs, but it has 
very wide jurisdiction to drill down to examine what is going 
on in different agencies of our Federal Government.
    One of the entities over which the Subcommittee has 
jurisdiction is the Census Bureau, and another one is the 
Postal Service. And I want to ask you to focus with me, if you 
will for a little bit, on the Census Bureau, the Bureau of the 
Census. We are just completing our decennial census. We do it 
every 10 years. We do a number of intermediate censuses almost 
on an annual basis, but we try to count everybody every 10 
years. We are just about wrapping that up.
    Part of the census involves figuring out what are all the 
residences where people could live in this country from coast 
to coast, from north to south; and then once we have done that, 
to figure out who lives in those places. And as time goes by, 
it gets actually harder to count them all, count all the places 
where people can live, all the places here folks are living, 
and then actually get people to respond to the census. We had 
really troubling reports this year of the enumerators, the 
people actually going out and doing the counting, being 
harassed just trying to do their job, in some cases chased off, 
chased, and berated and worse.
    The cost of the census is measured in billions and billions 
of dollars, and it is going up. In fact, the census this year 
cost way more than the census just 10 years ago. I think we 
counted about 75 percent of the people. We got about 75 percent 
of the people to respond to the mailings that we sent out.
    Here is my question: I think it is for every extra 
percentage of people who responds to the mailings that go out 
in the census, asking people to respond from where they live, I 
think it saves the--reduces expenditures by--I do not know, 
$80, $90, $100 million. So if we go from 70 percent response to 
an 80 percent response, we save roughly 10 times, we will say, 
`` $80 million, which would be like $800 million. A lot of 
money.''
    Here is my question. I do not know if you can see where I 
am going with this. But is there anything that you all have 
been doing, in particular, Dr. Crane and Mr. McEwen, and 
certainly Dr. Karp, anything that you all have been doing that 
you think might be applicable for our work on the census? One 
of the things that I was troubled by, Dr. Coburn, who sat here 
where Senator McCain sat for many years, and also right here as 
either the Chair or the Ranking Member of this Subcommittee, he 
and I were very unhappy that, again this year, the Census 
Bureau did not make very extensive use of technology, at least 
not the kind we had hoped for, using the Internet like some 
other countries do to actually reach out to people and help 
count them.
    But I would be interested if you think some of what you 
have done might be applicable to help us to do a better job 
counting people and do a more effective job counting people. I 
do not care who goes first.
    Dr. Crane. I have a sort of very quick answer, which is 
that while there are many implications or privacy implications 
that would have to be thought out very carefully, I think most 
Americans carry a phone. And there have been recent mobility 
studies showing that people are quite predictable, that if you 
think about where you go throughout your day, you spend most of 
your time going between home and work with maybe a few 
deviations to go to the market or other outings.
    I think there is the possibility to use phones as sensors 
to detect, at least to get a broad-scale scope, sort of count 
of the number of people in the country, although this data is 
typically owned by the cellular phone carriers, and they are 
quite rightfully protective of that data.
    Senator Carper. All right. Thank you.
    Mr. McEwen, think outside the box for us for a little bit. 
Do a little bit of blue skying for me?
    Mr. McEwen. You may want to offer an incentive for the 
people to give that information. Right now it is viewed as an 
intrusion. Given the fact that his information is very 
important to the country, and that the higher the response 
rate, the bigger the savings, for the government. To encourage 
participation consider sharing some of the potential savings in 
some way, with the respondents. Possible areas to discount are 
on State tax, income tax, municipal tax, tuition or Medicare, 
etc.
    I found in our Challenge there was all sorts of opposition 
amongst our management team. To overcome it, I had to first 
understand the basis of their opposition and then show them the 
potential for personal benefit. Once they saw the benefit, then 
they embraced the concept.
    Senator Carper. Good. Right here in this hearing room we 
had the folks from the Bureau of the Census before us a year or 
two ago, and we were trying to get them to think outside the 
box to see how they could use technology, whether it was too 
late to use the Internet or cell phones or whatever. And I 
suggested to the fellow who--I think it was either the Acting 
Director of the Bureau of the Census or about to become the 
Director. And I said to him maybe we should consider like 
offering a reward to people who participate in the census, but 
for those who did maybe their name would be entered into 
something to make them eligible for the lottery, a lottery, and 
then so many people from every State would have the chance of 
participating in some prize money. I did not know at the time 
if it was a good idea or a bad idea. I just wanted to think 
outside the box. And they were crazy about the idea, but did 
not do a whole lot of thinking outside the box.
    I want to make sure--if I will be around here in this chair 
10 years from now when we do the census again, but I want to 
make sure that the way we do the census then will be a good 
deal different than the way we have done it this year and 10 
years ago and 20 years ago and so forth.
    Dr. Karp, anything you want to add to this before I move on 
to another question?
    Dr. Karp. I think you get the smartest people and you have 
them brainstorm. I do think you would have to use incentives. I 
would be a little careful about using data for civil liberties 
reasons. It would clearly have to be something that people buy 
into. So there is essentially the challenge of how can you do 
it, which might be very different than the challenge of how can 
you do it in a way that society believes in. And I think that 
would be the dichotomy that is being outlined here, and I would 
be very focused on getting a consensus around how it is done as 
opposed to just doing it.
    Senator Carper. All right. We have a somewhat different 
situation with the Postal Service. The Postal Service is sort 
of a quasi-Federal private operation with hundreds of thousands 
of employees. Six days a week, they deliver to every door, 
every mailbox in America. And before we had the Internet, 
before we had electronic bill paying and the ability to send 
email messages or text messages like that, folks used mail a 
lot. I recall when I was a naval flight officer out at Moffett 
Field, and we would go overseas during the Southeast Asia and 
Vietnam War, we always looked forward to the mail call, and we 
did not have the ability to send email messages, text messages, 
or any of that stuff. We were just lucky to be able to get a 
MARS call with ham radio operators and be able to talk to our 
loved ones every several months.
    But the Postal Service is operating in a very different 
world today, and part of what they need to do is be able to not 
just find ways to save money--and they are, I think, doing an 
admirable job there, but also to help them use their business 
model to deliver more revenues. And somewhere along the line, 
we might want to reach out to you and to the folks that you 
work with to see if you could help us think outside the box 
there as well.
    Dr. Karp, for you please. Palantir instituted the fraud 
mapping tool at the Recovery Board and is now bringing that 
same technology, as we talked earlier, to a pilot over at the 
Centers for Medicare & Medicaid Services. And your company's 
maybe best known work for government has been, I think, in the 
intelligence community, which is just a far cry from recovery 
contracts and from Medicare claims.
    What are the similarities, if you will, that your company 
has encountered when it comes to analyzing secret intelligence 
or finding fraudulent or wasteful activity of government funds?
    Dr. Karp. Well, obviously at a very general level, we are 
particularly interested in uncovering latent networks so that--
there is a big difference between----
    Senator Carper. When you say uncovering latent networks, I 
think I know what that means, but maybe not everybody does.
    Dr. Karp. Uncovering networks that are not visible and 
essentially conspiracies. So you can think of the difference 
between ordinary criminality and a conspiracy of the kind that 
creates a terrorist attack as being something that requires 
multiple people working together or some kind of very 
sophisticated methodology. What makes that kind of behavior 
particularly difficult to find is it may be in very different 
data stores, each of which has different data that you need to 
be able to see the conspiracy.
    So, in fact, the fact that I am sitting here and you are 
sitting here is very hard to find sometimes in a data store if 
one data store has you and one data store has me. And what we 
are specialized in is allowing analysts to perceive the data in 
every data store so that they can uncover hard-to-find or 
latent networks.
    So if you take that to the fraud, waste, and abuse case, 
what you have are different kinds of criminals. Some criminals 
are very simple. They are just doing something that--they are a 
Mom-and-Pop shop essentially. They are just trying to 
perpetrate very simple fraud. But the most productive criminals 
tend to have methodologies that include switching their name, 
switching their LSE, switching their location. These are 
actually very, very hard to find in large data sets. And it is 
also hard to find while simultaneously maintaining privacy and 
civil liberties protections, which, of course, one has to do in 
the intelligence community. That is something we have been very 
passionate about.
    And so what we did--or under the leadership of Chairman 
Devaney, what was done was taking the ability to find latent 
networks or difficult-to-find networks and using that in the 
fraud, waste, and abuse context so that we not only find the 
simple criminal but the criminal that is essentially a 
professional, someone that is changing their identity, changing 
their LSE, but has been caught perhaps in the past, knows they 
have been caught in the past, but has a network of people that 
allow them to shift their identity, shift the kind of 
methodology they are doing. This kind of person has heretofore 
actually been very, very hard to catch, but using some of these 
techniques and especially the knowledge that Chairman Devaney 
and others had, combined with our ability to integrate data, it 
has been very effective.
    Senator Carper. OK, thanks. And one last question, if I 
could, for the entire panel. And, Dr. Crane, I will ask you to 
kind of lead it off, and we will move from your right to your 
right, and then we will wrap this up. But one theme which has 
been repeated often in your testimonies for today is the 
necessary link between innovative technology and human 
intelligence. And computers do a lot of things very well, as we 
know, but they can only get us, if you will, part of the way 
there.
    I think the Recovery Board's work has shown us or provided 
for us a great example of how we can leverage both of these 
assets to produce real results. And I would like for each of 
you really from your own unique experience to take a moment and 
explore with us that idea. And what does each of those assets 
bring to the table? How can government foster the right ratio 
to make it most effective? Dr. Crane.
    Dr. Crane. If I understand the question, it is about how do 
we combine innovative technologies with human intelligence?
    Senator Carper. Yes.
    Dr. Crane. I think that in all of our cases here, we have 
all been involved in some way with augmenting human 
intelligence with communication networks and other exchange 
networks. I think that in some way there is the sort of catch-
all term of crowd sourcing that means a lot of things to a lot 
of people.
    I think in my experience the most effective way of doing 
crowd sourcing and bringing these technologies of communication 
and human intelligence together is about finding the right 
incentives, finding the way that you involve the largest number 
of people that are acting in their own interest, but that you 
have designed or shaped their behavior through the right 
incentive mechanisms that are not always financial, that can 
sometimes be reputational in the case of the United Nations 
project that I had the pleasure to work on.
    And I think that while many people have thought about just 
applying crowd sourcing or going in the crowd-sourcing 
direction, it is not always effective. And one has to think 
very carefully about what the objectives are and what the goals 
are of the actual program so that you can--for example, in some 
cases, crowd sourcing means simply asking everyone in this room 
what your weight is, and you probably will get it on average. 
And this is a type of averaging of the crowd or the wisdom of 
the crowd; whereas, other types of crowd sourcing are thought 
of in terms of Wikipedia, where it is a sort of social 
production crowd, where there the incentives are very different 
for participation.
    So, again, it is hard to address these things so generally, 
but what I would suggest is that whatever problems are being 
thought of, to think very carefully about what types of crowd 
one would like and how to properly incentivize their 
participation.
    Senator Carper. OK. Thank you. Mr. McEwen.
    Mr. McEwen. Chairman Carper, I believe it is about 
communication----
    Senator Carper. Say that again? You believe what?
    Mr. McEwen. It is about communication, and when people are 
talking between different industries, different organizations, 
they each have their own vocabulary, and often there is not an 
interpreter to do that.
    There is a great benefit to be realized by getting 
different organizations talking, different departments talking. 
My wife and I set up a Center for Regenerative Medicine. Once a 
month our researchers come together to share what they are 
doing. It is always surprising to me by how much surprise is in 
the room as each of these researchers hear what the others are 
doing, and how it relates to what they are doing. So the more 
you encourage communication between the departments, the 
greater the benefits.
    I have found in my own business, the mining industry, if 
you can translate mining language into the words understood by 
investors, then they can understand why you are getting excited 
and why your company's share be bought. It is this linkage that 
is very important.
    And the other aspect is only 5 or 10 percent of the 
audience you are talking to are going to be lateral thinkers. 
It is this group that are able to look across a broad spectrum 
of information and make connections between what appear to be 
disparate facts or observations. So you are not going to get 
everybody doing it. You will get a small percentage that do the 
innovation. The others will follow once they see the benefit.
    Senator Carper. OK. Thank you. Dr. Karp.
    Dr. Karp. First of all, thank you for hosting us.
    Senator Carper. It was my pleasure. Thank you.
    Dr. Karp. Some of the comments about crowd sourcing come 
down to how does one augment intelligence. We are very 
passionate about augmenting human intelligence and in this case 
allowing non-technical investigators to do the work of 
essentially technical engineers. So for us the question is: How 
can you take someone who is not technical but has deep insight 
into a problem, like Chairman Devaney, and allow them to extend 
their knowledge into a technical area? This is something that 
all of society will face, all of government will face, and 
doing that simultaneously and protecting civil liberties I 
think will be one of the core challenges of our time. We are 
very passionate about it. We are delighted to be a part of the 
Recovery Board and its efforts and would like to do more of 
this.
    Senator Carper. Good. Well, my guess is you will have that 
opportunity, and we look forward to partnering with you.
    Let me just close, if I can, by saying if we keep on doing 
things the way we have always done them, we will keep on 
getting the same result. And what is insanity? Insanity is 
described as doing the same thing over and over and over again 
expecting a different result and not getting it.
    Obviously, with the kind of budget deficits that we face--
and we have literally doubled our Nation's deficit between 2001 
and 2008. We are on track to maybe double it again over the 
next 10 years if we are not careful. I am pleased with the 
initiatives of this Administration to try to turn the--get the 
boat on a better course. But we need to really be thinking 
outside the box. The three of you and the folks that you work 
with really do a pretty good job--a very good job of thinking 
outside the box, and we appreciate your working with us and 
particularly with the Board, Dr. Karp, in other ways here to 
help us provide, one, better service, do so more effectively, 
to spend less money, and the money that we do spend to better 
ensure that we are getting our money's worth, the taxpayers' 
money's worth for that.
    I really do want to have a chance to maybe follow up with 
maybe a couple of you with respect to the Census Bureau and do 
some thinking outside the box. One of the things the Census 
Bureau does is they partner with all kinds of organizations 
across the country who are invested and interested in making 
sure that their constituents turn out and are counted. These 
organizations are not paid anything. They are just part of a 
very broad partnership. They are incentivized because they want 
to--for reasons I will not get into now, they want to make sure 
that their constituents are counted and represented in the 
surveys.
    So I am one who thinks a lot about how to incentivize good 
public policy and how do we use market forces and other forces 
to do that, and we would like to have an opportunity to drill 
down with you on that.
    There may be some way that you all can help us think more 
smartly about the Postal Service and find ways that they can--I 
want them to be around for another 200, 300 years or more. We 
want them to be able to function and compete in a world that 
continues to change.
    Thanks again for joining us. It is great to see you, each 
of you, and we will look forward to crossing paths with you 
again. You may get some follow-up questions from some of our 
Members that were here or maybe not here. If you do get those 
questions, would you please respond to them as promptly as you 
can.
    And with that, this hearing is concluded. Thanks very much.
    Dr. Karp. Thank you.
    Mr. McEwen. Thank you.
    Dr. Crane. Thank you.
    [Whereupon, at 4:37 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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