[Senate Hearing 111-1058]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1058
TRANSFORMING GOVERNMENT THROUGH INNOVATIVE TOOLS AND TECHNOLOGIES
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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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63-827 PDF WASHINGTON : 2011
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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
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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
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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
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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.
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\1\ The prepared statement of Mr. Werfel appears in the Appendix on
page 45.
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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.
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\1\ The prepared statement of Mr. Devaney appears in the Appendix
on page 53.
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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.
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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.
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\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.
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\1\ The prepared statement of Dr. Crane appears in the Appendix on
page 69.
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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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