    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

           WASTE AND ABUSE: THE REFUSE OF THE FEDERAL SPENDING BINGE

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

                                    HEARING

                                   before the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 17, 2011

                                   __________

                               Serial No. 112-30

                                   __________

    Printed for the use of the Committee on Oversight and Government Reform

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

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     DARRELL E. ISSA, California, Chairman
    DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland,
    JOHN L. MICA, Florida                    Ranking Minority Member
    TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
    MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of
    JIM JORDAN, Ohio                         Columbia
    JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
    CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
    TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
    JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
    PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
    RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
    PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
    SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
    JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
    TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
    DENNIS A. ROSS, Florida              JACKIE SPEIER, California
    FRANK C. GUINTA, New Hampshire
    BLAKE FARENTHOLD, Texas
    MIKE KELLY, Pennsylvania

                       Lawrence J. Brady, Staff Director
                    John D. Cuaderes, Deputy Staff Director
                         Robert Borden, General Counsel
                           Linda A. Good, Chief Clerk
                     David Rapallo, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on February 17, 2011................................     1
    Statement of:
        Dodaro, Gene L., Comptroller General of the United States,
          U.S. Government Accountability Office; Debra Cammer, vice
          president and partner, IBM Global Business Services,
          Bethesda, MD; Vincent L. Frakes, Federal policy manager,
          Center for Health Transformation, Washington, DC; and
          Veronique de Rugy, senior research fellow, Mercatus Center
          at George Mason University, Arlington, VA..................     9
            Cammer, Debra............................................    31
            de Rugy, Veronique.......................................    47
            Dodaro, Gene L...........................................     9
            Frakes, Vincent L........................................    37
        McCaskill, Hon. Claire, a U.S. Senator from the State of
          Missouri...................................................     4
        Schatz, Thomas A., president, Citizens Against Government
          Waste, Washington, DC; Andrew Moylan, vice president of
          government affairs, National Taxpayers Union, Alexandria,
          VA; and Gary Kalman, director, Federal Legislative Office,
          U.S. PIRG, Washington, DC..................................    94
            Kalman, Gary.............................................   133
            Moylan, Andrew...........................................   109
            Schatz, Thomas A.........................................    94
    Letters, statements, etc., submitted for the record by:
        Amash, Hon. Justin, a Representative in Congress from the
          State of Michigan, prepared statement of...................   153
        Braley, Hon. Bruce L., a Representative in Congress from the
          State of Iowa, prepared statement of.......................   158
        Cammer, Debra, vice president and partner, IBM Global
          Business Services, Bethesda, MD, prepared statement of.....    33
        Connolly, Hon. Gerald E., a Representative in Congress from
          the State of Virginia, prepared statement of...............   156
        de Rugy, Veronique, senior research fellow, Mercatus Center
          at George Mason University, Arlington, VA, prepared
          statement of...............................................    49
        Dodaro, Gene L., Comptroller General of the United States,
          U.S. Government Accountability Office, prepared statement
          of.........................................................    12
        Frakes, Vincent L., Federal policy manager, Center for Health
          Transformation, Washington, DC, prepared statement of......    39
        Issa, Hon. Darrell E., a Representative in Congress from the
          State of California, information concerning real gross
          private domestic investment................................   150
        Kalman, Gary, director, Federal Legislative Office, U.S.
          PIRG, Washington, DC, prepared statement of................   135
        Kucinich, Hon. Dennis J., a Representative in Congress from
          the State of Ohio, letter dated November 19, 2010..........    69
        Moylan, Andrew, vice president of government affairs,
          National Taxpayers Union, Alexandria, VA, prepared
          statement of...............................................   111
        Schatz, Thomas A., president, Citizens Against Government
          Waste, Washington, DC:
            Cover of the Citizens Against Government Waste report
              entitled, ``Critical Waste Issues for the 112th
              Congress''.............................................    98
            Cover of the Citizens Against Government Waste report
              entitled, ``Prime Cuts 2010, A Commonsense Guide to
              Leaner Government''....................................    96
            Prepared statement of....................................   101
        Tierney, Hon. John F., a Representative in Congress from the
          State of Massachusetts, prepared statement of..............    82
        Towns, Hon. Edolphus, a Representative in Congress from the
          State of New York, prepared statement of...................   154

           WASTE AND ABUSE: THE REFUSE OF THE FEDERAL SPENDING BINGE

                                  ----------

                          THURSDAY, FEBRUARY 17, 2011

                              House of Representatives,
                  Committee on Oversight and Government Reform,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:31 a.m., in
    room HVC-210, The Capitol Visitor Center, Hon. Darrell E. Issa
    (chairman of the committee) presiding.
        Present: Representatives Issa, Platts, McHenry, Jordan,
    Walberg, Lankford, Amash, Gosar, Labrador, Meehan, DesJarlais,
    Gowdy, Ross, Guinta, Farenthold, Kelly, Cummings, Towns,
    Maloney, Norton, Kucinich, Tierney, Lynch, Connolly, Quigley,
    Welch, Yarmuth and Speier.
        Staff present: Kurt Bardella, deputy communications
    director and spokesman; Michael R. Bebeau and Gwen D'Luzansky,
    assistant clerks; Robert Borden, general counsel; Molly Boyl,
    parliamentarian; Lawrence J. Brady, staff director; Sharon
    Casey, senior assistant clerk; Steve Castor, chief counsel,
    investigations; Benjamin Stroud Cole, policy advisor and
    investigative analyst; Drew Colliatie, staff assistant; John
    Cuaderes, deputy staff director; Adam P. Fromm, director of
    Member liaison and floor operations; Linda Good, chief clerk;
    Tyler Grimm and Tabetha C. Mueller, professional staff members;
    Christopher Hixon, deputy chief counsel, oversight; Sery E.
    Kim, counsel; Justin LoFranco, press assistant; Mark D. Marin,
    senior professional staff member; Laura L. Rush, deputy chief
    clerk; Jeff Wease, deputy CIO; Ronald Allen, minority staff
    assistant; Beverly Britton Fraser, minority counsel; Craig
    Fischer and Deborah Mack, minority professional staff members;
    Carla Hultberg, minority chief clerk; Lucinda Lessley, minority
    policy director; Scott Lindsay, minority counsel; Dave Rapallo,
    minority staff director; Suzanne Sachsman Grooms, minority
    chief counsel; Mark Stephenson, minority senior policy advisor/
    legislative director; Eddie Walker, minority technology
    director; and Zeita Merchant, minority fellow.
        Chairman Issa. A little housekeeping for everyone. Senator
    McCaskill is going to be here shortly. This is an unfortunate
    but inevitable situation in which we're going to have votes
    clearly get in the middle of this morning's hearing. So what
    we're going to do is we're going to start immediately.
        When the Senator comes in, she will be on a panel by
    herself. She will speak, and, by agreement, she will not be
    able to remain. She doesn't have enough time for all the
    Members to question her.
        What I would like to do, with the ranking member's
    approval, is allow the ranking member to make his opening
    statement now even before she arrives so it's covered. I'll
    withhold mine until the main panel. What we're hoping to do is
    get as much read into the record, but we will break for the
    Senator as soon as she arrives to ensure we get her before the
    vote.
        With that, a quorum being present, this hearing has come to
    order, and I recognize the ranking member for his opening
    statement.
        Mr. Cummings. Mr. Chairman, I want to thank you very much,
    and I want to thank all the witnesses today for being a part of
    this hearing.
        In particular, I would like to extend a special welcome to
    Senator Claire McCaskill, who has taken time out of her busy
    schedule to be with us today. As many of you know, Senator
    McCaskill is the chair of the Subcommittee on Contracting
    Oversight on the Senate Committee on Homeland Security and
    Governmental Affairs. And it's safe to say that no single
    Member of Congress has been more active than Senator McCaskill
    at rooting out waste, fraud and abuse in contracting across the
    Federal Government.
        I am also thankful that Senator McCaskill could be here
    today because the committee made plans to review the 2011 High-
    Risk Report issued by the Government Accountability Office.
    This report has become a critical tool in focusing Congress'
    oversight efforts. It lists 30 government programs and spending
    areas most susceptible to waste, fraud or abuse.
        I had the opportunity yesterday to join the Comptroller
    General Gene Dodaro and Chairman Issa when GAO issued this
    year's report. As in previous years, the massive issues
    surrounding Federal procurement are featured prominently.
        Over the past decade, government contracting costs have
    escalated dramatically. In 2000, the Federal Government spent
    about $209 billion on procurement. That number has now grown to
    more than $500 billion in annual expenditures. During this same
    period, the number of sole-source and noncompetitive contracts
    have also expanded.
        In this year's High-Risk Report, 6 of the 30 programs on
    the GAO list relate directly to Federal contracting. They
    involve contracting at the Department of Defense, the
    Department of Energy, NASA, and across multiple Federal
    agencies. Several other entries on the GAO list also have
    significant contracting components, such as transforming the
    Department of Homeland Security. When you examine all of these
    together, they have a massive impact, accounting for hundreds
    of billions of taxpayer dollars every year.
        It's a real challenge to fully evaluate the extent of this
    problem. For example, during an interview last year, Defense
    Secretary Robert Gates offered what he called ``a terrible
    confession.'' He stated, ``I cannot get a number on how many
    contractors work for the Office of the Secretary of Defense.''
        In many cases congressional oversight of government
    contracting has led to meaningful reform. In 2007, when I
    became chairman of the Subcommittee on the Coast Guard and
    Maritime Transportation, I launched a series of hearings to
    examine the Coast Guard's multibillion-dollar acquisition
    program to modernize its ships and aircraft. We found that the
    Coast Guard had little in-house capability to manage a major
    procurement effort when it initiated the Deepwater program. As
    a result, it outsourced many of its oversight responsibilities
    to private contractors doing the work. Based on these results,
    I introduced legislation to make comprehensive reforms in the
    Coast Guard's acquisition program, and this legislation passed
    the House unanimously.
        In addition, Representative Tierney led an investigation in
    the last Congress into Defense Department contracts for supply
    chain trucking in Afghanistan. As a result of that
    investigation, General David Petraeus issued new contracting
    guidelines, created a task force to review contracting in
    Afghanistan, and moved to debar a major Federal contractor.
        To its credit the Obama administration has made significant
    strides to improve government contracting. In 2009, the
    President directed Federal agencies to streamline their
    acquisition processes, and last year the amount of Federal
    contracting declined for the first time since 1997. The
    administration's initiative also resulted in a reduction of no-
    bid and other noncompetitive contracts last year.
        Finally, moving forward, we have to continue this progress
    by conducting our oversight efforts in a sustained, dedicated
    and bipartisan way, and I know that the chairman is committed
    to that.
        So I see that Senator McCaskill has arrived. And I want to
    thank you, Senator, again for coming. I know that you have a
    hearing with Secretary Gates this morning, so we really
    appreciate you coming over. And if you have time for one or two
    questions after your prepared remarks, I'd appreciate it if you
    would give us any thoughts about how we can keep this oversight
    effort going on the contracting front; what steps can we take
    maybe even together to try to avoid sitting here again in 2
    years with the problems worse and not going anywhere fast.
        Again, we thank you.
        And Mr. Chairman, I really thank you for your courtesy.
        Chairman Issa. I thank the ranking member.
        Chairman Issa. And I am going to do my opening statement
    after the Senator has given her views on this.
        Two things for all the Members. It is the rule of the
    committee that all witnesses be sworn. That rule is, by policy,
    not applicable to active Members of the House and the Senate--
    although if you want to be sworn for any reason, we would be
    happy to, Senator.
        Senator McCaskill. I'll swear, but probably not that way.
        Chairman Issa. Then we will forego that.
        One other policy of the committee--and I'll brief--as I
    said, I won't do my opening statement yet, but we do read our
    mission statement at the beginning of every one. And in case
    you are considering your subcommittee having one, I'll read
    this one for you today.
        Oversight Committee Mission Statement: ``We exist to secure
    two fundamental principles: First, Americans have a right to
    know that the money Washington takes from them is well spent.
    And second, Americans deserve an efficient, effective
    government that works for them. Our duty on the Oversight and
    Government Reform Committee is to protect these rights.
        ``Our solemn responsibility is to hold government
    accountable to taxpayers because taxpayers have a right to know
    what they get from their government. We will work tirelessly,
    in partnership with citizen watchdogs, to deliver the facts to
    the American people that bring genuine reform to the Federal
    bureaucracy.'' This is the mission statement of the Oversight
    and Government Reform.
        And with that, Senator, we are delighted to have you here.
    We realize that, second only to our 25 or so amendments coming
    up in about 15 minutes, you probably have the busiest schedule
    on the Hill.
        And I now recognize the gentlelady.

      STATEMENT OF HON. CLAIRE McCASKILL, A U.S. SENATOR FROM THE
                           STATE OF MISSOURI

        Senator McCaskill. Thank you very much.
        Thank you, Mr. Chairman. I want to thank both you and the
    ranking member for this invitation. I am honored to be here. In
    fact, I would hope that we would develop a strong working
    relationship. I think there are a lot of things we don't do
    right around here; one of them is we probably don't work
    together often enough across the hall, so to speak. And I would
    enjoy the opportunity of working very closely with this
    committee as we tackle the incredibly challenging job of
    contract oversight.
        I think if there is one thing we can agree on, it's that we
    have to be smarter and better about the way we spend the
    public's money. And we can't have an honest conversation about
    restoring sanity to Federal spending if we don't take a hard
    look at Federal contracting.
        There is a dirty little secret about Federal contracting;
    that is, there have been times that there has been some
    bragging going on about how we have shrunk the size of
    government. Well, when that bragging was going on, they weren't
    really being honest with the American people that the reason
    the government was shrinking in terms of government employees
    was not because we were spending less money, it was because we
    were contracting.
        In many Federal agencies across this government, you can
    walk into a large office building and go down, and one cubicle
    is a Federal employee; the very next cubicle doing the exact
    same job is a contractor. Employee, employee, contractor,
    contractor, employee, contractor, contractor.
        One of the challenges we have is to look at whether or not
    the contracting that has occurred in many agencies, whether
    we're getting value, whether or not we actually are saving
    money by the privatization that has occurred, and, most
    importantly, whether we're gaining any efficiencies by that
    contracting. And that is just in the area of personal services.
    I am not even getting to the huge, huge, mammoth problem of
    contracting for goods, which--whether it's in the Defense
    Department or any other department, we have a long, long list
    of problems that need to be addressed.
        Of the 30 areas of government that the GAO Office
    identified being most vulnerable to waste, fraud and abuse, 5
    have to do with the management of government contracts in
    weapons system acquisition management; the Defense Department;
    contract management at the Department of Energy's National
    Nuclear Security Administration; acquisition management at
    NASA; and the management of interagency contracting.
        Contracting is also a huge part of at least 10 more areas
    on the list, on the High-Risk List, including financial
    management and supply chain management at Department of
    Defense, implementing and transforming the Department of
    Homeland Security, and the Medicare and Medicaid programs. In
    total, at least half of the most wasteful, most mismanaged and
    most inefficient areas of government today involve major levels
    of contracting.
        It will be impossible to have a real impact on wasteful
    spending without focusing on the Defense Department. The
    Defense Department alone is responsible for almost a quarter of
    the high-risk areas in GAO's list. DOD is also responsible for
    more than two-thirds of the government spending contracts.
    Holding government contractors and the Defense Department
    accountable for the way they spend money will help save the
    taxpayers real money, and actually will eliminate waste, fraud
    and abuse, and provide the men and women in uniform with the
    resources they need in a fiscally responsible way.
        I would also like to take the opportunity to acknowledge
    the extraordinary contributions that GAO makes to our efforts
    through the High-Risk List and through the thousands of reports
    they release every year. GAO, along with the many agency
    inspectors general who work so hard to identify waste, fraud
    and abuse, are the best weapons Congress has against wasteful
    spending. They save the government more through identifying
    savings and recovering money than they cost us. They save us
    more than they cost us. We need to make sure they have the
    resources and tools they need.
        In fact, we have a lot of discussions going on, which I
    think is very appropriate, about cutting the legislative
    budget. I support cutting the legislative budget, particularly
    when it comes to our offices and our committees. I think we
    need to be trimming our sails, just like most of America is
    trimming where they need to trim. But we must be careful that
    we do not trim those agencies that have the real opportunity of
    showing us the way to save even more money.
        So I hope that through your influence, Mr. Chairman, and
    the influence of the ranking member and all the members of this
    committee, that we keep a watchful eye out for the resources
    that we dedicate to our government's auditors and, most
    importantly, to the Government Accountability Office. GAO's
    work should be our road map for places we need to cut spending
    and improve the efficiency of the Federal Government.
        The time has come to be honest, to feel the pain and suffer
    the political consequences of making hard choices about when
    and where the government should spend taxpayer dollars. We
    should start with the programs on the GAO's High-Risk List.
    That is where we need to begin because that is where we know
    things are not being run well.
        GAO acknowledged in their report that the Federal
    Government has made progress in many of the areas that they
    have identified. Part of that progress can be traced to the
    congressional actions taken in the last few years, including
    the Weapon Systems Acquisition Reform Act and other major
    pieces of contracting legislation passed in the past few years,
    some of which originated from the members of this committee.
        Some of the credit should also go to the increase in
    contracting oversight from this committee and others, which has
    helped drive substantial changes at Federal agencies. In fact,
    the Obama administration recently announced that for the first
    time in 13 years, overall contract spending actually declined
    last year, but this achievement cannot be sustained without
    ongoing aggressive oversight from Congress. It is one of our
    core responsibilities, which I know the members of this
    committee take very seriously.
        And when it comes to oversight of government contracting,
    this is a bipartisan issue. Many of the agencies and programs
    on GAO's list have been there for decades under administrations
    of both parties. In the Senate, I have been fortunate to work
    with true leaders on this issue on both sides of the aisle,
    including Senator McCain, Senator Levin, Senator Lieberman,
    Senator Collins, and, more recently, the former ranking member
    on the subcommittee that I chair. Senator Scott Brown and I
    were able, through oversight hearings, to make, I think, a real
    difference in legislation that you helped us pass that are
    going to clean up the disgraceful problems in contracting that
    resulted in broken hearts at Arlington National Cemetery.
        I look forward to my new ranking member. Senator Rob
    Portman will be the new ranking member of the Contracting
    Oversight Committee. He is an expert on government. He knows
    where there's a lot of problems that we need to be focusing on,
    and I am looking forward to a strong working relationship with
    him as we move forward on aggressive contract oversight.
        In fewer than 2 years, the Subcommittee on Contracting
    Oversight in the Senate has held more than 15 hearings on
    government contracting. These hearings have addressed
    everything from improvements needed in Federal contract
    auditing, to Medicare contracts, to, as I mentioned, Arlington
    National Cemetery. We have questioned no-bid contracts and
    loopholes that cost the government literally billions of
    dollars. We plan to continue to hold regular hearings in
    subcommittee throughout this Congress and fight for legislation
    to address the abuses that we find.
        But we could hold hearings once a week, every week, for the
    next 5 years and, frankly, still have plenty of fish in the
    barrel that we could shoot. That is why I am so encouraged that
    this committee will be continuing your important work in this
    area. I look forward to working with you and coordinating with
    you so that we can be very efficient in the way that we move
    forward on contracting oversight. If your committee has a good
    idea and doesn't have time on the hearing schedule, we would
    love to hear from you. Vice versa; we will track your work, and
    if there is something we're doing that we think would fit in
    nicely to some of the hearings that you are having, I would
    look forward to that kind of cooperation also.
        We have a lot we can do here, and this really ought to be
    an area that we don't need to play political games. This
    shouldn't be about elections. This should be about how good can
    we make this government, how responsible can we make this
    government to the people who pay the bills. And most
    importantly, we can do better in terms of how we run this
    government if we actually hold government officials more
    accountable for the way they're contracting.
        I could tell you horror story after horror story--and I am
    sure, Mr. Chairman and ranking member, you could tell horror
    stories, too. I will tell you one anecdote that got me fired
    up, which is why this subcommittee was created. I went to Iraq
    on a government contracting oversight trip. My trip was only to
    look at the way they were contracting. I was a brand new
    Senator; I had come right out of a government auditing office.
    I had been the auditor in Missouri. So I was used to there
    being processes and procedures in government that made some
    kind of sense in terms of tracking the money.
        I am in an office outside the outskirts of Baghdad, and I
    am asking about the LOGCAP contract. And any of you who have
    been involved in oversight of government knows that is the huge
    contract that did all the logistical support for our military
    in Iraq.
        The estimate for the first year of the LOGCAP contract when
    it was let was $700 million. It was a no-bid contract. It was a
    cost-plus contract. The first year that they estimated it was
    going to cost $700 million, it actually cost $20 billion. They
    put a PowerPoint up on the wall, and this poor woman in the
    room--she was the only one that didn't have a uniform on. I
    knew that she was the civilian that was in charge of doing all
    this. They looked to her to explain what had happened with this
    contract. And I was asking, as you might imagine, pretty
    aggressive questions.
        So the first year was $20 billion. The second year of
    spending on the contract went down, I want to say, $16 or $17
    billion--and these figures may not be exactly right, I am
    trying to remember them from my memory. And then she went on
    with her presentation. I was feeling sorry for her, so I wanted
    to kind of throw her a bone. So I said, well, can you explain
    what you did that brought that level of contract down from $20
    billion to $16 or $17 billion? And with God as my witness, she
    looked across the table at me and she said, I don't know,
    Senator, it was a fluke. That is when I knew we had serious and
    significant problems with contracting, particularly in the
    defense space, particularly in contingency contracting.
        The Defense Department is doing a little better in
    Afghanistan than we did in Iraq. We still have major problems,
    particularly when it relates to tracking the corruption issue.
    But there is plenty of work for all of us, and I am really
    honored that you asked me to come over this morning to be here.
    And I look forward to any questions you might have and a strong
    working relationship in the future.
        Chairman Issa. Well, thank you, Senator.
        We're going to have very, very little time for questions,
    because not only do you have a hearing convening in 10 minutes,
    but we have about 6 minutes left on the clock for our own vote.
        I would only ask one question--and I think the ranking
    member has one also--would you be willing to meet on a
    bicameral basis with your ranking member, and other members of
    your committee, and members of this committee on a periodic
    basis if our schedules can be put together?
        Senator McCaskill. I think it would be terrific. If we just
    met for coffee once a month and talked over what you are doing
    and what we're doing and see if we can coordinate, I think it
    would set a great example.
        Chairman Issa. We will have coffee, juice, and, if my
    personal account will settle for it, maybe even a couple of
    doughnuts.
        With that, I'd recognize the ranking member for his
    question.
        Mr. Cummings. Just one quick question.
        Senator, do you think the President is doing enough to
    address these issues? And what kind of cooperation do you think
    we will be able to get from him and his administration?
        Senator McCaskill. I think Mr. Zients is trying very hard,
    the Performance Officer in the White House. He's really working
    at it. I think they're going to come up with some plans this
    year that will surprise people in terms of the way they're
    willing to look at organizing government and realizing more
    efficiencies.
        The contracting piece is very hard because it's so stove-
    piped. Part of the problem, as you all know, we don't have the
    right data bases. We have spent so much money on IT and haven't
    really gotten a product that allows us to peer into the world
    of contracting in an efficient and effective way. I think
    they're trying, but I think they need our oversight to do it
    better.
        Mr. Cummings. Again, I want to thank you.
        And, Mr. Chairman, again, I thank you for your courtesy to
    make sure that Senator McCaskill was able to testify within her
    schedule. But thank you very much.
        Chairman Issa. Well, thank you.
        And I apologize to all the other Members, but the Senator
    has agreed to come back on an informal basis so that we can
    really have the one-on-one that I think will be helpful between
    the two bodies.
        With fairness to our witnesses, I would swear you in, and
    then you would be all by yourself. So why don't we do this:
    We're going to break. We will come back immediately following
    the votes. For all the new Members on either side of the aisle,
    this is the most important thing we do every year is to really
    look at the new High-Risk, which, although cybersecurity is a
    big one, the $80 billion we spent in IT and get less than we
    paid for obviously is important. We look forward to hearing
    that.
        Senator, once again, thank you for your graciousness.
        We stand in recess.
        [Recess.]
        Chairman Issa. The hearing will come to order.
        Today's hearing concerns one of the most basic
    responsibilities of the Oversight Committee: eliminating
    wasteful spending and fraud in the Federal Government.
    Yesterday's release of the latest GAO High-Risk List presents
    an occasion to renew our focus on this priority.
        I look forward to hearing from the U.S. Comptroller Mr.
    Dodaro not only about the positive results and developments,
    but about the continuing struggle that affects 83 percent of
    all executive branch spending.
        There really is no celebration for good news possible where
    we have a $1.6 trillion deficit, but every dollar saved through
    elimination of waste, fraud and abuse of any sort that costs
    the American taxpayer money should be applauded, encouraged,
    and, as they say in Las Vegas, doubled-down on.
        It is my intention to work closely with the GAO and
    watchdog groups in the days and weeks to come to ensure that
    the House and the Senate do everything possible to have the
    good news we will hear about today and the challenges that
    remain ahead be, in fact, our highest priority.
        With deference to all the other Members who are returning,
    I would ask unanimous consent that all Members have 5
    legislative days in order to place their opening statements in
    the record. Without objection.
        The Chair now would like to swear in the first panel.
    Please raise your right hands.
        [Witnesses sworn.]
        Chairman Issa. Let the record reflect that all members of
    the panel answered yes.
        Please be seated.
        Now, you may feel like the first panel, but my talking
    points say I am recognizing the second panel because of the
    Senator. So it's my pleasure to introduce the Honorable Gene
    Dodaro, who is the Comptroller of the United States; Ms. Debra
    Cammer Hines, who is vice president and partner of IBM Public
    Sector; Mr. Vincent Frakes, who is the Federal policy director
    at the Center for Health Transformation; and Dr. deRugy is a
    senior research fellow at Mercatus Center at George Mason
    University. Welcome.
        And, Comptroller General, you've done this so many times,
    so it will be for anyone who hasn't, your entire written
    statements will be placed in the record. The goal of your
    opening statement is not to read it in its totality, but to use
    the 5 minutes in a way to enhance or augment. We will not stop
    you exactly at 5 minutes, but when it turns red, please find a
    way to wrap up your oral statements.
        With that, we recognize the Comptroller General for 5
    minutes.

    STATEMENTS OF GENE L. DODARO, COMPTROLLER GENERAL OF THE UNITED
     STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; DEBRA CAMMER,
       VICE PRESIDENT AND PARTNER, IBM GLOBAL BUSINESS SERVICES,
    BETHESDA, MD; VINCENT L. FRAKES, FEDERAL POLICY MANAGER, CENTER
      FOR HEALTH TRANSFORMATION, WASHINGTON, DC; AND VERONIQUE DE
     RUGY, SENIOR RESEARCH FELLOW, MERCATUS CENTER AT GEORGE MASON
                       UNIVERSITY, ARLINGTON, VA

                      STATEMENT OF GENE L. DODARO

        Mr. Dodaro. Thank you, Mr. Chairman.
        Good morning to you, Ranking Member Cummings, all the
    members of the committee.
        I would like to commend you, Mr. Chairman, for holding this
    hearing in the committee. It is a good opportunity for us to
    discuss our High-Risk List that we keep updated and unveil at
    the beginning of each new Congress to help set the oversight
    agenda not only for the Congress, but also to give the
    administration a road map as well as to what areas they should
    be working diligently on.
        The 30 areas that we have on the High-Risk List right now
    represent tremendous opportunities to save billions of dollars
    and, if actions are taken appropriately, to improve the
    performance and accountability of the Federal Government for
    the benefit of the American people. So they represent
    tremendous opportunities. I'll highlight a few areas that I
    think are apropos to this hearing and will be of interest, and
    I will be happy to talk about any of the areas.
        First there are the Medicare and Medicaid programs. These
    are complex programs that are highly susceptible to billions of
    dollars in improper payments. When we first put these programs
    on the High-Risk List, there really were no measures of
    improper payments, and thanks to legislation and administrative
    initiatives, now there are estimates of the amount of improper
    payments. But the work is just beginning. There is a long way
    to go to bring these improper payments and the billions of
    dollars under control and to really provide the type of
    accountability.
        A lot will depend on how successful agencies are in
    implementing the new Improper Payments Elimination and Recovery
    Act, which this committee sponsored and supported. And as you
    know, that act introduces a lot more rigor into the statistical
    nature of the estimates. It lowers the thresholds to make sure
    more things are reported appropriately. It requires corrective
    actions and identification of the causes of the improper
    payments, more rigorous reporting, accountability to be fixed,
    and it will also require recovery of those moneys where it's
    appropriate and possible to make the recovery. So this
    legislation has a lot of potential.
        I would respectfully recommend that the committee figure
    out a way--and I know, I think it's already in your plans, in
    your oversight plans--to make sure you followup on how agencies
    are implementing this improper payments legislation. You know,
    in some areas like the Medicare Part D, prescription drug part
    of Medicare, there is not even an estimate yet. So the
    estimates that are being made to date aren't yet complete. So
    this has tremendous potential, and we would be happy to work
    with you in doing this. And it also has potential across
    government.
        The second area has to do with unused Federal property. As
    we know, and has been reported, in 2009, the Federal agencies
    identified over 45,000 buildings, Federal buildings, that are
    either not being used or being underutilized. And the
    government is incurring an annual operating cost for these
    buildings of about $1.7 billion a year. Clearly there is a need
    to move forward and to dispose of these buildings properly and
    eliminate this unnecessary operating cost. There's also costly
    leasing opportunities that could be revisited as well. So that
    is another target.
        Also, DOD weapon systems acquisition. As Senator McCaskill
    mentioned, the Congress passed the Weapon Systems Acquisition
    Reform Act of 2009, and that included a lot of important
    reforms to come up with better cost estimates and also better
    accountability in terms of reporting on those areas. But our
    reviews of the weapon systems portfolios have shown billions of
    dollars in cost growth in those activities and longer periods
    of time to deliver the weapon systems. So it's costing a lot
    more than was originally expected, and it's delaying the
    implementation of this.
        We made a number of recommendations to better prioritize
    the weapon systems portfolio, to put in more diligent business
    practices and business cases, technology maturity levels before
    investments are made, and also to make sure that there is
    proper oversight and control over that whole process.
        As Senator McCaskill also mentioned, there are a wide range
    of other DOD business practices, whether they be in logistics
    support, contract management and other areas, that are also on
    the High-Risk List, that provide opportunities for more
    improvement, streamlining and eliminating the government's
    cost.
        The bottom line is, Mr. Speaker, there are tremendous
    opportunities out there for correcting these high-risk problems
    that we have identified. Agencies are working on it. I am
    pleased to report that we have had a series of meetings with
    OMB and the agencies on the High-Risk List and GAO to talk
    about more specific actions that need to be taken to come off
    this list.
        Congressional oversight is important. The only areas that
    we have taken off the list have been ones where Congress has
    been diligent conducting oversight. The two we took off this
    year, over a dozen congressional hearings were held on both the
    census area and the DOD personnel security clearance area since
    the time we put them on the list to them coming off the list.
        So it's a major factor, but you need also top-level agency
    commitment on the part of the administration. I can assure you
    that is going to be a top priority at the GAO to continue to
    focus on these activities and to do what we can to try to help
    be specific, maintain our independence--we're not going to take
    anything off the list until it's deserved to be taken off the
    list. But our goal is to try to provide as much specificity as
    we can to how to get these problems fixed and remedied. We
    can't afford anymore to have these problems continue.
        So thank you very much, and I look forward to answering
    questions.
        Chairman Issa. Thank you.
        [The prepared statement of Mr. Dodaro follows:]

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        Chairman Issa. Ms. Cammer. Ma'am, is it Cammer?
        Ms. Cammer. It's Cammer.
        Chairman Issa. Cammer. OK. I will try to keep it correct.
    Thank you.

                       STATEMENT OF DEBRA CAMMER

        Ms. Cammer. Thank you.
        Mr. Chairman, Ranking Member Cummings, and members of the
    committee, thank you for inviting me to appear before you today
    to discuss how the IBM Corp. believes that Federal agencies can
    improve their efficiency and reduce costs through the
    application of commercial best practices.
        My name is Debra Cammer Hines, and I am the public sector
    consulting leader for IBM in North America. In that role, I
    oversee all of IBM's consulting activities at the Federal,
    State and local level.
        Prior to becoming a management consultant, I worked as a
    Federal credit policy analyst at the Office of Management and
    Budget. In this role I performed budgetary, credit, economic
    and policy analysis in their review of credit programs across
    the Federal Government.
        We recently authored a report entitled Strategies to Cut
    Costs and Improve Performance. The purpose of this report was
    to help advance the ongoing national dialog about our Federal
    fiscal crisis by offering seven specific initiatives where
    technology-enabled productivity solutions can make a material
    difference in the performance of Federal programs.
        These seven initiatives include: One, consolidate
    information technology infrastructure; two, streamline
    government supply chains; three, reduce energy use; four, move
    to shared services for mission-support activities; five, apply
    advanced business analytics to reduce improper payments; six,
    reduce field operations footprint and move to electronic self-
    service; and seven, monetize the government's assets.
        We estimate that the aggressive implementation of these
    seven initiatives can generate $1 trillion in savings over 10
    years. These savings would be generated through improved
    performance rather than through program reductions or tax
    increases.
        Federal agencies, and State and local governments for that
    matter, spend a great deal of energy collecting and disbursing
    funds. They collect taxes and fees from citizens and
    businesses, and they disburse funds to organizations and
    individuals through a wide variety of programs. These
    activities generate large volumes of transactions, and, as a
    consequence, they are vulnerable to both honest mistakes in
    administration as well as intentional efforts to defraud.
        The good news for governments at all levels is that these
    types of programs lend themselves to what we call predictive
    analytics. So to put it simply, predictive analytics is a
    collection of statistical techniques that when applied to a
    large number of transactions being processed through a standard
    business process can reveal patterns that are indications of
    fraud, abuse, or simply poor management.
        Several Federal agencies apply predictive analytics today,
    most notably the IRS and the Department of Health and Human
    Services. However, we believe that deeper investment in these
    techniques and the broader applications of the lessons that
    have been learned in private-sector settings can improve the
    performance of these efforts and yield significant new savings.
        Let me describe one example of how the application of these
    types of tools is already generating real results. The State of
    New York hired IBM after the State's tax department estimated
    it was losing $1 billion annually in improper tax refunds. IBM
    built a predictive model that scores every refund request on
    the likelihood that it was valid. The 4 percent of returns
    deemed the most questionable were rejected outright.
    Investigators examined others considered high-risk to decide
    whether or not they were valid. And over the last 6 years, the
    State has denied $1.2 billion in improper refunds, even taking
    into account the successful appeals. Today the State continues
    to run the program on its own. And we have similar programs
    with other States and local governments that I would be glad to
    share.
        It is important to note that many Federal agencies are
    focused on these issues and are making important strides. OMB,
    for example, should be applauded for working in partnerships
    with the State and Federal agencies and others to identify
    innovative ways to reduce improper payments, improve
    administrative efficiency, enhance service delivery, and reduce
    access barriers to federally funded State-administered benefits
    programs. More can and should be done.
        Thank you.
        Chairman Issa. Thank you.
        [The prepared statement of Ms. Cammer follows:]

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        Chairman Issa. Mr. Frakes.

                     STATEMENT OF VINCENT L. FRAKES

        Mr. Frakes. Chairman Issa, Congressman Cummings, and
    members of the committee, thank you for holding this hearing
    today and inviting me to participate.
        My name is Vincent Frakes, and I am the Federal policy
    director at the Center for Health Transformation.
        Decreasing--and hopefully eliminating--waste, fraud and
    abuse in our health care system is vital to improving the
    quality of care and lowering health care costs. The Center for
    Health Transformation has worked extensively on these issues
    and with many of our members to find solutions to this dilemma.
    Fraud and abuse places a massive burden on government, and
    consequently on American taxpayers.
        On Monday, President Obama released his budget for the
    upcoming year. In his budget, the President noted that the
    gross Federal debt will exceed $15 trillion this year, which is
    equal to the size of the entire U.S. economy. This is
    unsustainable.
        A recent Thomson Reuters study found that between $600
    billion and $850 billion of health care spending annually is
    wasted, and up to $175 billion of that is pure fraud.
    Fraudulent and wasteful spending is low-hanging fruit that can
    and should be used to reduce this debt.
        There is broad bipartisan consensus that fraud and abuse
    within Medicare and Medicaid must be addressed and can make a
    significant dent in our Nation's government spending.
    Unfortunately, little has been done to curb these harmful
    practices.
        Outright criminality imposes the largest and most high-
    profile burden on the system. Crooks have figured out how to
    game the system, and they must be stopped. Take, for example,
    an Orange County, California, cancer doctor who was charged in
    April of last year with fraudulently billing Medicare and
    health insurance companies close to $1 million for
    administering injectable cancer medications that were never
    provided, or the Miami-area clinic consultant who was convicted
    last May of health care fraud in connection with a $5.8 million
    Medicare scheme in which the clinic was falsely claiming to
    administer HIV injection and infusion treatments. Countless
    examples of these types of fraud exist around the country, and
    their practice must be eliminated. Doing so could save the
    government and the American taxpayers more than $1 trillion
    over the next 10 years. Unfortunately, the vast majority of
    these crimes go undetected.
        Medicare and Medicaid are designated as high-risk programs
    by the GAO, and their improper payment rate exceeds 10 percent.
    Compare that to the less than one-tenth of 1 percent fraud rate
    that exists in the credit card industry, which conducts more
    than $2 trillion annually in transactions and has nearly 1
    billion credit cards in circulation. The primary reason for
    this success is utilizing real-time technology that prescreens
    payments before they go out the door. CMS would be wise to
    learn from these private-sector successes.
        There are three concrete solutions that can be taken
    immediately to improve Medicare and Medicaid and begin to solve
    the fiscal crisis that we find ourselves in with these
    programs. First, we must incorporate private-sector solutions
    to identify, monitor and ultimately prevent fraud and abuse.
    Companies like Humetrics and NCN are on the front lines of
    utilizing data-tracking models to head off fraud and errors on
    the front end in order to save the private and public payers
    significant amounts of money on the back end. There is no
    reason that these same systems can't be utilized at the Federal
    level as well.
        Second, we must introduce significant changes to the
    current system of electronic data tracking and data sharing
    across jurisdictions and departments. That includes utilizing a
    single, unified depository of information to reduce wasted
    resources that are expended on cross-referencing potential
    crooks. Real-time data tracking can identify irregularities at
    a moment's notice across State and provider venues.
        Third, we must institute a comprehensive and transparent
    model of supplier approval and fraudulent claims
    administration, as well as encourage the implementation of more
    intelligent systems and schemes to reduce waste and fraud in
    the system.
        There are many more steps that can be taken, as my written
    testimony explores, but these are first and foremost in terms
    of importance.
        Not only do we need to aggressively attack the roots of
    fraud and abuse in the system, but we also need to solve the
    primary reason for waste, and that is defensive medicine. One
    major reason that providers order unnecessary services is due
    to the fear of potential legal action. Predatory litigators
    cause physicians to practice defensive medicine, ordering far
    more tests and providing far more services and procedures than
    are necessary. This drives the cost through the roof.
        Jackson Health Care and Gallup recently released a poll of
    physicians where physicians said that more than a quarter of
    all health care services that they deliver, more than $600
    billion a year, are unnecessary and delivered solely to reduce
    their liability risks.
        Congressmen Gingrey, Lamar Smith and David Scott recently
    introduced H.R. 5, the HEALTH Act--which you co-sponsored, Mr.
    Chairman, as did other members of this committee--that includes
    meaningful medical liability reforms while strengthening the
    doctor-patient relationship. This reform is a critical step to
    eliminating defensive medicine, lowering costs, and expanding
    access to care.
        Waste, fraud and abuse run rampant in our Nation's health
    care system, but with fundamental changes in how government
    uses technology, properly screens providers, involves law
    enforcement and incorporates legal reform, we can save
    trillions of dollars and fundamentally transform our health
    care system to one that delivers more choices of better quality
    at a lower cost for every American.
        Thank you very much. I look forward to your questions.
        Chairman Issa. Thank you.
        [The prepared statement of Mr. Frakes follows:]

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        Chairman Issa. Dr. de Rugy.

                     STATEMENT OF VERONIQUE DE RUGY

        Ms. de Rugy. Chairman Issa, Ranking Member Cummings,
    distinguished members of this committee, thank you for the
    opportunity to come before you today to testify.
        My name is Veronique de Rugy. I am a senior research fellow
    at the Mercatus Center at George Mason University, where I
    study tax and budget issues.
        Fraud, waste and abuse are indeed problems worthy of
    congressional attention. However, the $125 billion in overt
    waste that comes from improper payment pales in comparison to
    the waste that exists in current congressional spending
    patterns and the economic damaged caused by the misallocation
    of capital and the creation of perverse incentives.
        First, this waste occurs when the Federal Government spends
    money on private-sector functions. Having the government run
    businesses such as Amtrak and overseeing infrastructures such
    as the air traffic control system is not just inefficient, it
    also hinders economic growth and costs the taxpayers money
    while providing low-quality service to customers.
        Second, this waste also occurs when the Federal Government
    spends money on functions in the purview of the States.
    President Reagan wrote that ``federalism is rooted in the
    knowledge that our political liberties are best assured by
    eliminating the size and scope of the national government.''
    Sadly, Congress has ignored this advice and is now spending
    $500 billion in grants to States for activity that it has no
    legal or practical reason to be involved in, such as healthy
    marriage promotion and museum professional training grants. It
    is inefficient and creates an unacceptable lack of
    accountability.
        The waste also occurs because when lawmakers are busy
    running State, local and private affairs, they have less time
    to oversee Federal agencies and focus on critical national
    issues such as defense and security.
        But the largest and most recent example of wasteful Federal
    spending occurred under the American Recovery and Reinvestment
    Act. Much of the money in the bill was spent, and yet
    unemployment hovers around 9 percent, higher than the 8.8
    percent unemployment rate that the administration threatened
    the country would face if Congress did not pass the gigantic
    stimulus bill.
        Evidence like this just confirmed what many scholars had
    predicted all along: Government spending can't jump-start an
    economy. As a result, many have concluded that the stimulus
    package was a waste. The practical realities witnessed by the
    American taxpayers bear out the academic truth: The stimulus
    spending did not deliver on the promises made, unemployment
    remains high, and it has saddled the country with more debt.
        What would increase employment and stimulate economic
    growth is investment, private investment, not government
    spending labeled as investment, but the American companies are
    not investing their capital, and some $1.8 trillion in capital
    is sitting on the sideline. Why? Because entrepreneurs and risk
    takers are acting very cautiously out of fear of the future.
        Economists and the business community agree, recent policy
    changes have hampered business investment, making a bad
    situation worse. The prospect of endless future debt and
    deficit raises the threat of increased taxes and government
    crowding out capital markets. Uncertainty prevails. As a
    result, U.S. companies don't build new plants, they don't
    conduct research, and they don't hire people. People stay
    unemployed for weeks, months, years.
        You are the representatives of the American taxpayers. You
    are the stewards of the Nation's finances. You want the economy
    to grow, you want people to be employed, then you must realize
    that the Federal Government cannot be and should not be the
    solution to every one of our problems.
        There are things that only the Federal Government can do,
    but when the Federal Government gets involved where it
    shouldn't be, it wastes capital, time and taxpayers' money.
    Understanding this will guide you in making hard decisions
    about where to cut spending. However, it also means that you
    must put all spending on the table. Congress needs to make sure
    that no area of the budget is untouchable, not entitlements,
    not defense spending. All parts of the budget must be on the
    table for review and potential cuts.
        Finally, you need to put in place now serious, strict and
    unavoidable budget rules that tie Congress' hand and restore
    fiscal discipline. With such reform, the American people will
    start having confidence in their future again, and the country
    will be on the road to recovery and prosperity.
        Thank you for your attention, and I am looking forward to
    your questions.
        [The prepared statement of Ms. de Rugy follows:]

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        Chairman Issa. I first want to thank all of you for being
    very, very close to that 5 minutes.That is pretty close to a
    record.
        I recognize myself for 5 minutes.
        You each gave a different perspective. In 5 minutes, it's
    going to be hard to go through all of them, but I am going to
    start with Mr. Frakes.
        When you gave those numbers, one of the things I found
    interesting is you went through defensive medicine as a major
    part, and that is beyond the scope of, perhaps, this
    committee--other committees will be dealing with it--but when
    you looked at the $178 billion in outright payments for either
    procedures that didn't occur or even in some cases to entities
    that weren't even what they claimed to be, what do you
    believe--or has your organization studied what you believe it
    would cost the Federal Government to avoid all or part of that?
    Where is the sweet spot? Would $1 billion in a system to attack
    that kind of waste or that kind of false payments yield far
    more than $1 billion?
        Mr. Frakes. Certainly. We have seen it through the private
    sector, through IBM and others, that if you put in money on the
    front end, it will yield significant results and much greater
    results in the back end.
        When I am talking about putting in money at the front to
    really curb this idea of stopping suppliers and checking things
    before they go out the door, you are going to see a massive
    increase in the number of drops in numbers of fraudulent
    payments, fraudulent suppliers that exist to the tune of--if
    anything, if you put in $1 billion, you are going to see a much
    higher yield. Those numbers are not insignificant, and they're
    going to be incredibly influential in terms of cutting things
    off.
        There is this thought out there that if you apply to be a
    Medicare or Medicaid supplier, that you are automatically
    granted that, and that is simply not the case. We need to be
    doing a much better job of putting in front-end money that will
    yield much higher savings as a result of cutting off fraudulent
    suppliers and so forth.
        Chairman Issa. Comptroller Dodaro, you are familiar with
    the recovery organization's efforts, their Web site and their
    data base management. My understanding is that was a couple of
    million dollars, and they have found like $80 million in one
    example only of what would have been the losses of Medicare
    fraud in which the organizations that were doing it had
    actually stolen doctors' identification and so on.
        Can you comment a little bit on how do we get from you and
    other watchdog organizations--how do we get the numbers so that
    we can find a way to fund programs similar to Chairman
    Devaney's?
        Mr. Dodaro. I would be happy to provide some additional
    details, but what I would say is that I agree completely that
    an up-front investment targeting certain areas that you know
    that have high rates of issues, like home health services, for
    example, and other areas, to put controls in up front would be
    a very appropriate investment to be made. We have made
    recommendations along those lines. We're looking at prepayment
    controls right now----
        Chairman Issa. But prepayment controls are a big step. That
    is sort of back to that $80 billion that we can't seem to get
    well spent in IT expenditures.
        My real question here and why I picked that 100--there are
    all kinds of numbers, in fairness. I've seen it as low as $70
    billion, you know, just a rounding here, I guess, all the way
    up to approaching $200 billion in payments made in Medicare for
    services not provided, or in many cases provided to entities
    that were not even what they said they were.
        How do we attack that in a way--and I am specifically
    looking at Earl Devaney's work, because that wasn't even in his
    main target, but because stimulus funds were used there, he was
    able to stand up--and I believe it was less than $2 million,
    and he has already headed off a scam that was just an anecdotal
    analysis.
        How do we get, with GAO's help hopefully, the ability for
    this committee to make a case to Congress at a time in which it
    seems like we're cutting to make--and perhaps that $2 million
    is enough--but to make that kind of investment and then score
    the savings so that if we spend $5 million to save $500
    million, we then see the opportunity to spend 10 times that to
    save 10 times that?
        Mr. Dodaro. No, I understand what you are saying, and I
    agree with that. I mean, we can work with Earl. I think that
    we're going to try to use his system in the health care area on
    an experimental basis and to try to come up with some proposals
    for that detection kind of capability up front with the
    relationships between different entities and the screening that
    was done. So we would be happy to try to come up with a
    proposal that we could discuss with you.
        Chairman Issa. Ms. Cammer, if I could just ask you one
    question as the private-sector representative here. If we were
    able to score it, do you believe the private sector, the way
    they have in the past with the IRS, would they--do you believe
    the private sector would be interested in working on, if you
    will, a bounty system, one in which it costs nothing to the
    government unless we save many times that?
        Ms. Cammer. Yes. So what you are talking about is an
    example of what we did with the State of North Carolina that
    we're operating right now with their Medicare and Medicaid
    payments. And so we have implemented that----
        Chairman Issa. My time has expired, so just briefly what
    have you saved?
        Ms. Cammer. Yes. So it's an outcome-based approach. So that
    has just started, and we have identified opportunities for them
    to go after that. And I don't have the number right in front of
    me, but I believe it's in my written testimony.
        Chairman Issa. But you only get a small part of whatever
    they claim.
        Ms. Cammer. We get 10 percent of what gets identified, yes.
        Chairman Issa. Thank you.
        I recognize the gentleman from Maryland.
        Mr. Cummings. Thank you very much, Mr. Chairman.
        All of your testimony is fascinating and is so very, very
    important.
        First of all, let me go back, Mr. Dodaro, to something
    Senator McCaskill was talking about. You were here when she was
    testifying?
        Mr. Dodaro. Yes.
        Mr. Cummings. You'll recall that she said basically, don't
    cut your nose off to spite your face with regard to funding for
    agencies like yours. Are you satisfied with the funding that
    you have to do your job? You are going to have to answer that
    quickly, unfortunately, because I've got a lot of questions.
        Mr. Dodaro. Basically I requested, given the fiscal
    situation in the country, that our funding level be kept flat
    at 2010 fiscal year levels, and I would be satisfied if our
    funding was kept at that level.
        Mr. Cummings. Thank you.
        Another question is during your testimony you talked about
    the agencies that you were able to take off the list, and you
    said that you saw something very interesting in that they
    seemed to have come under the most scrutiny by the Congress. Is
    that a fair statement?
        Mr. Dodaro. Yes. There was sustained congressional
    attention in both of those areas.
        Mr. Cummings. And, Mr. Chairman, what he just said I think
    is so crucial. We saw that with regard to the Coast Guard. When
    we stayed on top of them, we got it done and got it done in a
    little bit of time, saving millions of dollars in a short
    period of time because it was a sustained effort.
        Federal contracting has expanded over the last 10 years to
    over $500 billion. According to your report, GAO has included
    the Defense Department's contract management on the High-Risk
    List since 1992. DOD weapon systems acquisition and supply
    chain management have been on the list even longer, since 1990.
        Mr. Dodaro, is anyone able to quantify how much of DOD's
    contracting budget over these past 20 years has been lost to
    waste, fraud or abuse?
        Mr. Dodaro. I am not aware of any estimate of that nature.
        Mr. Cummings. And one of the things that made me realize--
    and I said this to the Coast Guard folks--I believe that we
    were caught up in a culture, that is, the Coast Guard was
    caught up in a culture, of mediocrity. And then when I saw a
    statement by Secretary Gates, it made me wonder about our
    Defense Department being caught up in a culture of mediocrity
    when it comes to these kinds of issues, particularly on
    contracting out. Secretary Gates said, ``I can't get a number
    on how many contractors work for the Office of the Secretary of
    Defense.''
        Are you surprised by that statement?
        Mr. Dodaro. No, I am not.
        Mr. Cummings. That is sad, isn't it?
        Mr. Dodaro. I think that there is plenty of room for
    improvement in the Defense Department's business areas. For
    example, they're one of the few, and the largest, departments
    that has yet been able to get a financial audit and an
    unqualified opinion. I mean, they are in need of some major
    reforms and better data in order to manage by.
        Mr. Cummings. I am going to go back to something Ms. Cammer
    said. You know, I was telling my staff you've done a great
    advertisement for IBM, and I am just wondering why, and
    following up on what the chairman was asking about, is there
    any way we can incorporate, and is there anything that Congress
    can do, Mr. Dodaro, to incorporate those kind of things?
        One of the things that Devaney has said to our committee,
    he said, I want to stop the fraud before it happens. I will
    never forget him saying that: I want to stop the mismanagement
    before it happens. And I think he has probably done that. So is
    there any way we can do those kinds of things, the kinds of
    things that some of our other witnesses talked about from the
    very beginning? Are you following me?
        Mr. Dodaro. Yes.
        Mr. Cummings. And what would it take us to do that? What
    would we need?
        Mr. Dodaro. Well, I think you need to have well-developed
    plans with the agencies. Part of this is changing the culture
    shift from a pay-and-chase type of an approach. And there was a
    lot of emphasis on getting the money out the door fast and not
    always with screening it up front. So changing that cultural
    shift, putting some additional requirements in place, and well-
    targeted investments that are developed and tailored to the
    programs.
        Mr. Cummings. Going back to DOD, we have a situation where
    we have private contractors--and we saw this in the Coast
    Guard. You've got private contractors being hired to oversee
    private contractors, which, again, that goes to that culture of
    mediocrity. Does that make any sense? And how can we get around
    that?
        Mr. Dodaro. That definitely increases the risk. And part of
    the problem is the contracting amounts of funds at DOD have
    gone like this. The acquisition workhouse has been relatively
    flat. They haven't adapted to have the right type of oversight.
    Part of the problem is you can never contract out the
    government's decisions and what the requirements ought to be
    and then provide an effective oversight over that area. The
    lack of definitive requirements is something we see time and
    time again, and changing requirements, and not applying a good
    business practice, and having a good business case in the
    beginning before the investments are made or the contracts are
    let.
        Mr. Cummings. I see my time has expired. Thank you, Mr.
    Chairman.
        Chairman Issa. The gentleman from Texas Mr. Farenthold.
        Mr. Farenthold. Thank you very much, Mr. Chairman. I had a
    couple of questions.
        My first question is we're talking about billions of
    dollars in fraud and waste. And I think I know the answer to
    this question, but I've learned in government it's better to
    ask the question.
        When you are scoring the amount of waste, let's say we're
    writing a check to somebody for $1 million and 96 cents, and it
    really should have been $1 million and 69 cents. We're counting
    that as a 27-cent error and not a million-dollar error in those
    numbers, right? I just want to make sure we really are chasing
    the really big dollars.
        Mr. Dodaro. Well, I think the amounts that we have
    mentioned in our report are the right estimate.
        Mr. Farenthold. So that is the actual cost to the
    government and not the aggregate dollar amounts.
        Mr. Dodaro. Right.
        Mr. Farenthold. There is some error in there.
        Mr. Dodaro. Yeah, there could be some error in there. And
    some of the estimates for the Medicare and Medicaid program,
    for example, some of the improper payments are based upon
    incomplete documentation or not having enough documentation,
    but a lot of it is for medically unnecessary services, or
    people receiving money are not eligible.
        Mr. Farenthold. OK. And I think Medicare and Medicaid is
    probably a right target. We talked about using software. We
    have an abysmal record with IT in the Federal Government. I
    think that comes from the fact that we don't try to use off-
    the-shelf products; we come up with our own--I am going to use
    the word ``ridiculous''--specifications rather than trying to
    squeeze something into an existing product. I realize balancing
    the Federal budget isn't like going out and buying World of
    Warcraft at Best Buy, but it seems like, for instance, in
    Medicare and Medicaid, there ought to be something already
    developed out there by the private insurance carriers who are
    doing pretty much the same thing.
        Do you see some advantage in doing that? And maybe I should
    direct this to the lady from IBM. I mean, is there a product? I
    mean, can we just go plug this stuff into your Cognos product
    and just start working at it?
        Ms. Cammer. Yes. I mean, there is a solution, so I don't
    want to say it's a product. So it's a solution that exists that
    we have been--like I said, in North Carolina. I also want to
    let you know that CMS has recently issued a Request for
    Proposal to do exactly what we're talking about, to do it
    before it gets paid, leverage analytics and IT that do
    predictive analytics around what gets paid.
        Mr. Farenthold. All right. And I'll yield back the
    remainder of my time with just the comment that I really think
    part of what we need to be doing is looking for off-the-shelf
    solutions we can plug into rather than trying to develop
    something custom for ourselves. That always tends to be much
    more expensive.
        Thank you.
        Chairman Issa. Would the gentleman yield?
        Mr. Farenthold. Sure.
        Chairman Issa. Mr. Dodaro, one quick question. We haven't
    asked you to talk about the cyber threat of both dollar waste
    and failure. Could you comment on that for a moment for all of
    us? A lot of people are just getting up to speed on that.
        Mr. Dodaro. Yes. This is a very important issue. I am glad
    you asked me that question.
        We put computer security across the Federal Government as a
    high-risk area in 1997 because of concerns we had. It was the
    very first time we designated something across the whole
    Federal Government as high-risk. And the risks continue to
    escalate. And the Federal agencies do not have good,
    comprehensive systems with access, control, segregation of
    duties, comprehensive security programs. In 2003, we expanded
    it to critical infrastructure protection, the energy grid and
    other areas. And the incidents that are occurring and are
    reported are going higher.
        The Federal Government needs to have a better public-
    private partnership with the private sector. Since most of the
    assets are in the private sector, there needs to be more early
    warning and detection capabilities. This is a very important
    area. I was glad to see that the President commissioned the
    study, but our review of the study shows that of the 24
    recommendations, only 2 have been fully implemented to date.
        So there is a road map--clear roles and responsibilities,
    partnership with the private sector. This is a terribly
    important area, and we're concerned about it.
        Chairman Issa. Thank you.
        Does the gentleman yield back?
        Mr. Farenthold. I do.
        Chairman Issa. The gentleman from New York is recognized
    Mr. Yarmuth.
        Mr. Yarmuth. You got me in the wrong State, but that is OK.
    I am not from New York.
        Chairman Issa. Oh, I am sorry. They write it down, and I
    read it. I am sorry, Kentucky.
        Mr. Yarmuth. I know everything east of California is all
    messed up, but----
        Chairman Issa. You know, Mr. Kucinich often reminds me I
    was from Cleveland before I was from California. But the
    gentleman from Kentucky.
        Mr. Yarmuth. That is quite all right. Thank you, Mr.
    Chairman.
        Thank you all for your testimony.
        Mr. Dodaro, I wanted to talk with you about one of the
    categories that you've added to the High-Risk List, and that is
    the revenues from oil and gas leases. According to your report,
    that is actually one of the largest income--nontaxed income
    sources of the government, about $9 billion in 2009. And just a
    couple days ago you wrote an op-ed in the New York Times and
    you wrote, ``In fiscal years 2006 and 2007, we found that much
    of the data reported by oil and gas companies appeared
    erroneous, resulting in millions in uncollected fees.''
        Do you have any sense of how long the oil and gas companies
    have been misreporting their production?
        Mr. Dodaro. I am not sure off hand how far back that goes.
    We did update that work in 2009 and found still continued data
    inaccuracies in the system. We also looked at Interior's
    efforts recently to verify the production numbers of oil and
    gas production and found problems with that as well.
        The other point I would add on this is that the assessment
    system generally hasn't been looked at in the last 25 years,
    and we have made recommendations there because when the Federal
    Government was compared to other countries and even some
    States, it was relatively low in terms of what it was charging.
    Interior has a study under way, and they're due to produce it
    this year.
        Mr. Yarmuth. Do you have any estimate of how much this may
    have cost the taxpayers?
        Mr. Dodaro. Not off hand.
        Mr. Yarmuth. In your examination of the data from 2006 and
    2007, what company did you find to have underreported and
    underpaid the most?
        Mr. Dodaro. I am not sure. I would have to provide that for
    the record if we have it. I'd be happy to do so.
        Mr. Yarmuth. I'd like to make a request that you would do
    that and provide a list of the companies that have
    underreported and therefore underpaid. I appreciate that.
        [The information referred to follows:]
        [Note.--The information was not provided to the committee.]
        Mr. Yarmuth. Mr. Frakes, I want to just ask you a question.
    You made a comment about the amount of medical services
    provided basically as defensive medicine, and I think you
    mentioned the number 25 percent possibly?
        Mr. Frakes. Yes, that is correct.
        Mr. Yarmuth. Where does that number come from?
        Mr. Frakes. It came from a study that was conducted between
    Jackson Health Care and the Gallup organization.
        Mr. Yarmuth. And there are studies that show that number is
    considerably lower than that, isn't it? I mean, I think we all
    agree that there's a lot of service being provided that's
    probably unjustified, but attributing it to medical
    malpractice, there are numbers that are considerably lower than
    that, aren't there?
        Mr. Frakes. I guess what we're going off is that study. And
    the interesting thing about that study was the fact that it was
    done in private, it was something that was anonymous, so that
    the physicians felt compelled to answer under anonymity, and so
    they were given that cloak. And so we would like to think that
    number is the most accurate number, given that.
        Mr. Yarmuth. I've had doctors stand up in front of a room
    full of people and admit that they practiced defensive
    medicine, which also is potentially admitting Medicare fraud as
    well, but they do it anyway.
        But to pursue that question just a little bit further,
    would ending the fee-for-service compensation system deal with
    that issue of medically unnecessary procedures and so forth;
    would that help contribute to reducing that number as well?
        Mr. Frakes. It certainly would in the sense that providers
    would feel the need to move more toward an outcome-based
    system. I mean, that is something that we at the center talk a
    lot about, that idea of as you increase incentives for outcomes
    for physicians, not only does the cost go down, but the care
    goes up, and physicians also would not feel the need as much to
    practice that level of defensive medicine, certainly.
        Mr. Yarmuth. One question--and this is just purely
    informal, Ms. Cammer--on the issue of the payments going out
    the door, stopping the payments before they go out the door,
    one of the complaints that I hear consistently--I am sure we
    all do--from medical providers, doctors, hospitals, and so
    forth is that they wait a long time for their money to begin
    with. And because of--their assessment--their characterization
    of dealing with very low profit margins anyway, the wait of 90
    days or 120 days is already stretching them, pressuring them.
    How much more delay, or would there be more delay, based on the
    kind of theory of approaching payments that you have given us?
        Ms. Cammer. We're at the point now, through leveraging
    technology to do predictive analytics, that you can get closer
    to real-time reviews of those, so you could really speed it up.
        Mr. Yarmuth. Could speed it up. OK.
        Thank you, Mr. Chairman. I yield back.
        Chairman Issa. I thank the gentleman.
        The gentleman from Pennsylvania Mr. Kelly.
        Mr. Kelly. Thank you, Mr. Chairman.
        Ms. de Rugy--am I saying it right? OK. I was really
    intrigued by what you talked about. You seemed to have a really
    direct response to what is going on.
        Now, the President the other day was talking about all this
    capital that is sitting on the sidelines, and businesses aren't
    investing it, which leads to the premise that the only way to
    get out of this situation is for the government to borrow more
    money and spend more money. Could you expand a little bit on
    that? Because there is a guy right now--I am an automobile
    dealer, and I've been encouraged to build another building. And
    the point that I have, it's very difficult to borrow money from
    banks right now for small business people.
        So while this money is sitting on the sideline, please give
    me an idea of this philosophy that the government has to just
    keep borrowing and borrowing and borrowing money to get us out
    of this dilemma. If you could, just expand a little bit on your
    comments, because I think you are hitting right where we need
    to hear this information.
        Ms. de Rugy. Thank you. It's a great question.
        I think I'd like to remind people that the Federal
    Government has already done this, borrow a lot of money and
    pretended to invest in our economy to jump-start it, and it has
    not worked.
        This money on the sideline is a real direct product of all
    the uncertainty that is inserted into an economy when the
    Federal Government spends massive amounts, because individuals
    and entrepreneurs are pretty rational, and they understand that
    spending today or borrowing today means taxes tomorrow. I mean,
    also there were a lot of new regulations going in, so it
    induced a lot of uncertainty. And that is what this money on
    the sideline is. It's like why am I going to actually invest
    money today, hire people, when I don't know what is going to
    happen? I don't know whether I am going to have customers.
        So I think, I mean, the uncertainty is the key to
    everything, and the more the government does with creating the
    uncertainty, the more uncertainty we will have, and the less we
    will recover.
        Mr. Kelly. OK. Let me ask you, this $814 billion stimulus
    bill--and we describe it as waste--are there any parts of that
    you thought were worthwhile?
        Ms. de Rugy. I think the part about unemployment benefits,
    I think, as a society, pretty wealthy, we can afford to help
    people who are deeply in need to some extent. However, the
    economic literature was very clear that this was not going to
    work because, while the government invests money, the money has
    to come from somewhere. There is no magical source for Federal
    funds. It has to be taken from the economy. And it doesn't have
    the return on investment that the administration claimed it was
    going to have.
        Mr. Kelly. The whole drive was to spend this money, because
    if we didn't spend it, we were going to see unemployment rise
    above 8 percent. So it goes to 10 percent.
        Now, let me ask you, at some point people knew this wasn't
    working. Where could we have said, hey, wait a minute, this is
    crazy? What are we doing? We're throwing a lot of money out
    there. We haven't spent it out all yet, but then there is this
    mad rush to spend a lot of money because we said it was going
    to work. And we continue to see that it's not working, and
    we're following this Judas goat and saying, yeah, just spend
    more, we're going to be OK. Borrow more, spend more, at some
    point it's going to break for us.
        Now, at some point it's going to break, but I don't think
    it's going to break the right way. It's going to break truly in
    the sense that it is going to break.
        Ms. de Rugy. I agree with you. I actually would have argued
    that it was a bad idea to do it in the first place. And there
    was a lot of evidence. It hasn't worked in the 1930's, it
    hasn't worked in the 1970's, and it hasn't worked now.
        Now, the other thing is that it's not only spending in the
    form of the stimulus bill, it's all the spending that took
    place in the last 10 years, in the last 20 years, in the last
    30 years. I mean, there has been a lot of spending. If it
    worked, we wouldn't be in this mess in the first place. And I
    think we need to change paths.
        And we are talking about waste, and we need to realize that
    waste doesn't just come in the form of overpayments and
    earmarks, it also comes in the form of the Federal Government
    putting its finger everywhere in the private sector where it
    shouldn't be to prop companies that are failing, which is a
    drag on the economy, this propping up those companies; or to
    give money to companies who are actually succeeding, which is
    totally useless. Like when the Federal Government gives money
    to the States when it shouldn't be, this creates waste.
        We need to change paths and start thinking directly about
    what wasting government spending means.
        Mr. Kelly. And I appreciate your testimony. I wish we had
    more time, but I've got to tell you that when you add the
    Federal Government and then the State and local governments,
    when we start to talk about how we're attacking our GPD and the
    amount of money that we're wasting through government, it's way
    over the top. So thank you for being here today, and I really
    appreciate your comments.
        And I yield back my time, Mr. Chairman.
        Chairman Issa. Thank you.
        We now recognize the gentleman from Cleveland, Ohio, Mr.
    Kucinich.
        Mr. Kucinich. Thank you very much, Mr. Chairman.
        Over the past few days, Members of this House have voted on
    amendments to the CR which will severely cut or entirely
    eliminate government entities or programs which provide
    critical assistance to the most vulnerable Americans. Some
    amendments which have already passed eliminate funding for
    research in some of our Nation's most consistently pressing
    social and economic issues. To my knowledge, none of these
    existing programs appeared on the GAO's list of government
    programs at high risk of waste, fraud and abuse.
        In the meantime, numerous Department of Defense
    initiatives, and specifically DOD contracting, ranked
    prominently in the GAO High-Risk Report as programs that remain
    very susceptible to fraud and abuse. The report states that
    there are ``significant ongoing problems'' and ``persistently
    poor program outcomes'' in the Department of Defense's
    inability to perform detailed audits of major defense
    acquisition programs. It notes that for fiscal year 2009, for
    example, the DOD obligated $372 billion in contracts for goods
    and services, and yet that the contracting is hampered by ``the
    lack of well-defined requirements, the use of ill-suited
    business arrangements, and the lack of an adequate number of
    trained acquisition and contract oversight personnel.''
        I have a copy of a letter sent November of last year by
    eight individuals who represent more than 300 years of
    experience with the Defense Department budget, weapons and
    military operations. And, Mr. Chairman, I ask unanimous consent
    that a copy of the letter be entered into the record.
        Chairman Issa. Without objection, so ordered.
        [The information referred to follows:]

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        Mr. Kucinich. Thank you.
        This letter was sent to Erskine Bowles, the cochairman of
    the President's National Commission on Fiscal Responsibility
    and Reform. These eight individuals implore Chairman Bowles to
    take the opportunity to make reform of the Defense Department
    budget a centerpiece of their effort to create a model for
    deficit reduction.
        ``The Pentagon cannot track the money it spends. Routinely,
    DOD does not know if it has paid contractors once, twice, or
    not at all. We recently learned it does not even know how many
    contractors it has, how many they employ, and what they're
    doing.''
        In sharp contrast to almost every other Federal agency, the
    Pentagon has failed to comply with the Chief Financial Officers
    Act of 1990, which sought to solve this problem by requiring
    the Pentagon and other Federal agencies to pass annual audits
    of the links between their expenditures and legally enacted
    appropriations authorizing these expenditures.
        So, Comptroller General Dodaro, can Congress be sure that
    budget requests from the Pentagon reflect the Department of
    Defense's actual costs?
        Mr. Dodaro. As you mentioned, there has been an inability
    to have the books of the Pentagon, aside from the Army Corps of
    Engineers and the military----
        Mr. Kucinich. Well, let's talk about everything else except
    the Corps.
        Mr. Dodaro. Right. They have not been able to pass the test
    of an audit, so it's not clear there is accurate accounting of
    what the expenditures----
        Mr. Kucinich. Isn't it true that you would have to be able
    to audit them to know if their costs roughly match up with
    their requests?
        Mr. Dodaro. It would be important to have that information
    as adequate assurance that the costs were there, yes.
        Mr. Kucinich. Right. So if we don't have accurate tracking
    of DOD payments to its contractors, much less how those
    contractors spent those moneys, is it even possible to know if
    the DOD budget request is being lost to waste, fraud or other
    abuse?
        Mr. Dodaro. Well, there would be a degree of uncertainty
    that you wouldn't necessarily want to have in making those kind
    of judgments. But basically the allocations that are made are
    tracked through budgetary systems that aren't audited either.
        And I would note that the Department is first now starting
    to audit the budget numbers that are allocated against the
    costs. I think that is a good step and a step in the right
    direction and should eventually provide the type of assurance
    that you are looking for.
        Mr. Kucinich. When I first came to Congress, I was told
    that the Department of Defense had over 1,100 individual
    accounting systems, and also that they had over $1 trillion in
    accounts that they could not track or reconcile. I just am
    hopeful that those who have the responsibility for oversight of
    the auditing part will pay attention to that, and hope that you
    take that message back as well.
        Mr. Dodaro. I will do that. In fact, of the main reasons we
    can't provide an opinion on the audited consolidated financial
    statements of the U.S. Government is because of the Department
    of Defense's pervasive financial management practices and
    procedures. And so we have been trying to work with them.
    They've got some short-term priorities now to focus on auditing
    the budget numbers and asset accountability issues, which I
    think is a good starting point, but they have a long way to go.
        Mr. Kucinich. Well, I am hopeful, Mr. Chairman, that this
    committee, as part of its oversight responsibilities, will have
    the opportunity to go deeply into some of these questions
    related to the Department of Defense's spending. Thank you.
        Chairman Issa. Would the gentleman yield?
        Mr. Kucinich. I certainly would.
        Chairman Issa. I might share with you when I was in the
    Army, during that period of time they decided they would find
    out how many rail cars they had, so they did an audit and came
    up with about 25 percent of them missing. Then they did a walk-
    down audit and found how many had been repainted over the years
    to company names because they didn't have to explain to the
    Army or the military that they were missing, but there would be
    hell to pay if they lost one belonging to a company. So this is
    not a new problem. I look forward to working with you on
    solving this long-term problem of a lack of accountability at
    DOD.
        Mr. Kucinich. I want to thank the gentleman and hope that
    his remarks do not imply favoring privatization of the Army.
        Chairman Issa. No, but I would like to know if those rail
    cars have all been found.
        With that, we recognize the gentleman from Florida Mr. Ross
    for 5 minutes.
        Mr. Ross. Thank you, Mr. Chairman.
        Mr. Dodaro, thank you for being here very much.
        I note that last year Congress, when they were raising the
    debt ceiling, empowered the GAO office for a report as to the
    duplication of any activities or efforts of the Federal
    Government that might be cost savings, and that report is
    forthcoming?
        Mr. Dodaro. Yes.
        Mr. Ross. Can you give us a preliminary, like a little
    trailer or a sneak preview of what we might anticipate?
        Mr. Dodaro. Well, we have identified about 34 different
    areas of overlap and duplication for consideration by the
    Congress, and they touch several hundred programs and virtually
    all Federal departments and agencies.
        Now, we also, as an added bonus, are including in the
    report about another 50 cost-savings opportunities for the
    Congress to consider, and also revenue enhancements, where
    there are abilities to tackle what is now an estimated tax gap
    between taxes owed and collected, about $290 billion.
        Mr. Ross. So could you quantify maybe how much we are
    looking at in terms of duplication at this point?
        Mr. Dodaro. We don't have, because of--and we will discuss
    in the report some limitations, as Congressman Kucinich just
    talked about. Some of the cost data and baseline information
    isn't really there, so it's hard to come up with an overall
    quantification effort, but it will be billions. It's
    significant.
        Mr. Ross. I know we have limited time here, so this is
    going to be an interesting question I would love for you to
    answer if you could in the brief time that I have here.
        In your report on High-Risk List, you indicate
    strengthening the foundation for efficiency and effectiveness.
    One of your recommendations is restructuring the U.S. Postal
    Service to achieve sustainable financial viability. How?
        Mr. Dodaro. Basically they have to change their business
    model, the business model they have. And we have outlined
    options in the report there for the Postal Service to consider
    and for the Congress as well.
        Mr. Ross. And in that business model, I mean, you've got
    150 million households that are being reached every day, 6 days
    a week--so far--by the U.S. Postal Service, but you've got 80
    percent of their cost is for compensation and benefits. Are you
    suggesting that we look at both sides of the equation, not only
    the revenue side of the equation, but also the expense side of
    the equation?
        Mr. Dodaro. I think everything has to be on the table there
    to really restructure it. We're looking at facilities--we just
    put out a report this week talking about how other countries
    have tackled this problem and reduced their facilities, changed
    their retail options, changed personnel structures. So I think
    all things have to be considered.
        Mr. Ross. Ms. Cammer--and I've got to ask you this question
    while I am on the Postal Service because of your background not
    only in the public sector, but also in the private sector as a
    consultant with IBM. Again, you've got an understanding of
    marketing channels, you've got an understanding of public-
    private relationships. Would you have any recommendations for
    the U.S. Postal Service as to how they can be more cost-
    efficient, cost-effective, more technologically advanced?
        Ms. Cammer. We have a team of consultants that are working
    with the Postal Service today, and I would be happy to get back
    to you with some of the recommendations that they have offered.
        Mr. Ross. That would be great. Thank you.
        [The information referred to follows:]
        [Note.--The information was not provided to the committee.]
        Mr. Ross. Dr. de Rugy, a quick question, because I am a
    firm believer that government shouldn't be in the business of
    business; the essential government functions are what
    government should provide, and that we don't need to not only
    be a competitor in the market, but also be the regulator of
    that same market. So I've got some concerns that I think run
    deep with your philosophies in your report, but I want to talk
    to you specifically about project labor agreements.
        Are you familiar with project labor agreements, PLAs, where
    any government contract that is negotiated has to be done at a
    prevailing wage or union wage? In most cases we have seen a
    situation where nonunion contractors don't get the contract
    because they're not capable of paying the union wages, and
    therefore you are seeing union jobs being let out when
    competitively it may be better to go to the lowest bidder.
        Do you have any comments on that? Do you have any
    experience in working with project labor agreements?
        Ms. de Rugy. No, I have not.
        Mr. Ross. Mr. Frakes, how about you?
        Mr. Frakes. No. But I think that it's something that
    obviously is crowding out the market and something that would
    be a good thing to investigate.
        Mr. Ross. One last thing, Mr. Dodaro. You talk about the
    excess of real property that we have. Do you have any
    recommendations for liquidation of those or leasing of those to
    at least enhance the revenue side of the U.S. budget?
        Mr. Dodaro. Not facility by facility. We think the agencies
    need to do that. We have pushed OMB to come up with a plan.
    Also, there's rules in the budget process that complicate the
    lease-versus-buy decision, which we have recommended that those
    be dealt with as well. We think this is basically a management
    responsibility to decide that, but----
        Mr. Ross. But it should be done.
        Mr. Dodaro. It should be done.
        Mr. Ross. It's wasted resources.
        Mr. Dodaro. Yeah, definitely, definitely.
        Mr. Ross. Thank you. I see my time is up.
        Chairman Issa. I thank the gentleman.
        The gentleman from Massachusetts Mr. Tierney for 5 minutes.
        Mr. Tierney. Thank you, Mr. Chairman.
        And I thank the members of the panel very much for your
    testimony here today.
        This committee has conducted a lot of oversight about the
    Department of Defense's contingency contracting both in Iraq
    and Afghanistan, including the use of private security
    contractors, but not exclusively them, of course. Last year, in
    fact, when I was chairing the Subcommittee on National Security
    and Foreign Policy, we uncovered evidence of trucking
    contractors who were paying warlords and insurgents billions of
    dollars for so-called ``protection.'' And we also talked about
    a contract where $3 billion in fuel contracts were going to
    companies that the State Department and the Department of
    Defense knew nothing about.
        So my question to you, Mr. Dodaro, is do you think that we
    have to have some improvements in the contracting laws that
    will provide those authorities that may be necessary to meet
    the challenges for operating in contingency conflicts?
        Mr. Dodaro. I definitely think there are lessons learned
    that need to be applied both in--potentially in law, but also
    in practice, and that there are a lot of lessons learned about
    putting this type of responsibility in a theater without
    appropriate training and support that needs to be done
    adequately to oversee it. So, yes, I agree with you that
    there's probably lessons learned, and we can provide some of
    our thoughts on that to you.
        Mr. Tierney. That would be excellent if you would. We would
    appreciable that.
        Particularly concerning private security contractors, there
    has been a real persistent problem with how they are managed in
    both of those areas, Iraq and Afghanistan, of course. And last
    year CENTCOM got a task force together to figure out how many
    private security contractors they actually employed in
    Afghanistan, and the number came into tens of thousands on
    that. In Iraq, the State Department is about to take on a lot
    of the responsibilities from the Department of Defense, and
    they are hiring additional private security contractors on
    that. So how much confidence should we have that as DOD
    transitions to the State Department in this area, that they're
    going to be able to oversee effectively all of those thousands
    of private security contractors that they're bringing on?
        Mr. Dodaro. That's an area that I think needs some focus. I
    believe we have work under way in that area to assess that, and
    I would be happy to provide a briefing to you.
        Mr. Tierney. How far along are you in that work?
        Mr. Dodaro. Early on.
        Mr. Tierney. Well, it's a pretty immediate situation, so I
    hope we're going to expedite that a bit and be able to move
    that forward, because we have had hearings on that regularly
    throughout, and we don't seem to be getting too far along on
    examining it. And I say ``we''--not meaning your agency, but
    State Department and the Department of Defense--talk about it,
    they know there is a problem, but we're not really there yet.
    Your work would be very helpful on that.
        The other problem that we have, of course, is we don't seem
    to have enough people to really oversee those contractors that
    we do put it out to. That has been a real serious problem in
    USAID, the State Department, and other places on that. The
    Wartime Contracting Commission that Jim Leach and I had the
    legislation on--they finally got out and started doing their
    job--they found out that we were hiring private contractors to
    oversee other private contractors on that.
        So how do you assess the Department of Defense's progress
    in in-sourcing those critical roles of oversight and management
    of contracts?
        Mr. Dodaro. Yeah, our assessment is that contracting
    decisions are made much too often on an ad hoc basis. There
    really isn't a systematic assessment of what should be
    contracted out, what should be in-sourced, and for what should
    be in-sourced, how you build your capabilities and your
    staffing and expertise to be able to do that, what expertise do
    you need to oversee the contractors? So we have encouraged and
    recommended systematic assessments of that. That is the only
    way you can deal with that issue over time.
        Mr. Tierney. We have some serious issues. As we start to
    analyze that, do you have any ideas for how they might ramp
    that up and separate those out so that those inherently
    governmental functions of oversight of the contractors can
    actually be brought back in or in-sourced? Is there an
    impediment that exists that you can recognize and do something
    about, or do you think that this analysis is going to just wind
    its way out before we get some effective recourse?
        Mr. Dodaro. Well, I think it all has to start with what
    mission do you want to really achieve there and what's the best
    way to be able to do it. I don't think there's going to be a
    magic solution to that, that there's going to be a set of rules
    on this and that, particularly when you get into environments
    when you are in contingency operations and planning. You need
    to have something that's a little bit more robust as a
    foundation, but then you need to be able to allow some
    flexibility to be put into place. But you have to have proper
    oversight over it, Congressman, and that's where I think things
    break down.
        Mr. Tierney. Well, we even saw out of the blue a program
    with the Coast Guard, where they had large ships being made. We
    had a contractor out there doing components. Then we had a
    contractor analyzing the job. We had them managing the job, we
    had them overseeing the job, and then when the job got all
    messed up, we almost hired the same people to come in and
    assess how we can fix it.
        Mr. Dodaro. Yeah. Government needs--for those areas that
    you know you are going to contract out, you need the proper
    people to oversee it that are government employees to be able
    to make sure you've got the duty of loyalty and you have the
    expertise and continuity to oversee it in the best interests of
    the government and the taxpayer.
        Mr. Tierney. So getting a grip on not outsourcing jobs that
    shouldn't be outsourced, and the ones that should be
    outsourced, making sure we can manage them properly, I agree
    with you, is a serious issue for us.
        Mr. Dodaro. Yes, it is.
        Mr. Tierney. Thank you.
        Thank you, Mr. Chairman.
        [The prepared statement of Hon. John F. Tierney follows:]

        [GRAPHIC] [TIFF OMITTED] T8047.004

        [GRAPHIC] [TIFF OMITTED] T8047.005

        Chairman Issa. The gentleman from Michigan Mr. Walberg for
    5 minutes.
        Mr. Walberg. Thank you, Mr. Chairman.
        And thank you to the panel for being here. It has been
    enlightening, at least the portions that I've been in. I wish I
    could have been here for the entire time.
        Mr. Dodaro, in your written testimony you state that excess
    or underutilized buildings cost over $1.6 billion annually to
    operate. I guess the question I would flow from Mr. Ross'
    earlier is what has prevented the Federal Government from doing
    something that makes so much sense, such as selling the
    properties? You stated that you wouldn't pick the properties,
    but what has kept us from doing that?
        Mr. Dodaro. There are certain barriers that we have
    recommended that OMB focus on. For example, there are a lot of
    stakeholder interests in some of these buildings and properties
    that need to be dealt with to be able to do it. There are some
    legal requirements that are in place. But none of these
    barriers are insurmountable. And our point is that you need to
    aggressively identify them. They're different for each
    property, as you might imagine, but they need to be dealt with
    on a more concerted, aggressive basis.
        Mr. Walberg. What is the hesitancy toward this aggressive
    action, from your perspective?
        Mr. Dodaro. To be honest with you, I am not quite sure,
    other than it takes a lot of hard work and effort to be able to
    go forward on these initiatives. We have been pushing for plans
    to be developed to be able to do that. We are pleased they're
    getting better data, and also what the situation is like, but
    actually implementing a lot of these things, it appears to be
    more difficult. To be honest with you, I am not quite sure
    exactly what the reason is, but----
        Mr. Walberg. Any concern about any impropriety in
    stakeholder issues that go beyond simply dragging feet, or
    arguments that we don't have the resources or time or energy? I
    mean, is there anything that would go beyond that to
    something----
        Mr. Dodaro. There is nothing--I'll go back and check with
    our team to make sure that my answer is correct on this, and if
    there are any things of that nature, we will provide them to
    you. But in some cases, like, for example, there are some
    historic preservation issues that need to be dealt with with
    some of these buildings and other, you know, legal concerns.
    But I'll provide a listing to you of some of the barriers, and
    also if there are any improprieties, we will certainly let you
    know.
        [The information referred to follows:]
        [Note.--The information was not provided to the committee.]
        Mr. Walberg. Thank you.
        Dr. de Rugy, I am tempted to just say my question is how
    would you expand on your statement already, but I won't do
    that. Maybe the question will allow that to take place. I
    appreciate what you had to say.
        In your written submission you identify three areas of
    Federal spending that should be addressed, one being Federal
    spending on functions that should be reserved for the States;
    two, Federal spending on functions that should be reserved for
    the private sector; and three, Federal spending on items or
    services that government has no business purchasing in the
    first place. I would like to focus my question mostly on this
    first area.
        It is apparent that you strongly believe in the 10th
    Amendment, reserving powers to the States not enumerated to the
    Federal Government.
        Ms. de Rugy. I do.
        Mr. Walberg. Then do you believe a reevaluation, and likely
    a limitation, of the grants the Federal Government makes is the
    best way to reorganize Federal priorities, or does Congress
    need to do something more explicit? And if so, what is it?
        Ms. de Rugy. I mean, I can't talk to the legal aspect
    because I am not a lawyer, I am an economist, so I will go to
    the money. I really do think that restructuring the money that
    goes to the States, either by cutting it off or actually
    turning a lot of it into block grants instead of matching
    grants, which induce inefficiency, promote overspending, would
    be a good way to do it. First, it would allow States to have
    time to think about how they are going to be providing these
    services.
        And one of the problems with the matching system that we
    have now, on top of the fact that it induces overspending, as I
    have said, is the fact that it's a one-size-fits-all type of
    thing. When you have a grant from the Federal Government, it
    also comes with strings attached and things that you have to do
    in a certain way, and that doesn't take under consideration the
    specificity of the State.
        So that would be the first step. I would either cut a lot
    of this money off or turn the rest into block grants.
        Mr. Walberg. So cutting it off, you are not concerned that
    the job can't be done then? I say that facetiously.
        Ms. de Rugy. I mean, there is always this understanding,
    this belief, that if the Federal Government doesn't do it, it
    won't happen, but it's just not true. And the States are
    already--for instance, education, I mean, most of the spending
    already comes from the States. And it is a State function or a
    private-sector function. And if the States don't get this
    money, then they will be thinking about what they actually
    truly need to do. And maybe a lot of these functions that they
    are providing right now they should turn to the private sector.
    So, no, I am not concerned.
        Mr. Walberg. Thank you very much.
        Chairman Issa. I thank the gentleman.
        We now recognize the gentlelady from the District of
    Columbia Ms. Norton for 5 minutes.
        Ms. Norton. Thank you very much, Mr. Chairman.
        Mr. Dodaro, I would like to ask you a question that has, I
    am sure, perplexed members of this committee and certainly the
    public. It has to do with very large, sometimes huge,
    contractors whose abuses or poor performance is so severe that
    they are brought before this committee, or there are headlines
    on them.
        I want to describe the response of Federal agencies in
    awarding them contracts again. For example, if you did the
    functional equivalent of what some of these contractors have
    done as an employee, you would be out the door. Nobody would
    ever hire you again in the field, it would seem. But let me
    give you a couple of examples.
        KBR, doing work in Iraq for the Department of Defense, was
    so faulty on the maintenance of electrical equipment that
    deaths resulted, including dozens of deaths of American
    soldiers, but DOD then awards KBR a $2.8 billion contract to
    provide support services--additional support services for our
    troops in Iraq.
        Or let's take the most notorious, perhaps, Blackwater and
    private security, because that has been a headliner. The State
    Department after those headlines awarded them contracts for
    protective services in Afghanistan. Now, these people were seen
    as having themselves committed perhaps--or at least accused of
    committing what would amount to in prosecution crimes while
    they are doing their work.
        Does DOD, and in the case of Blackwater, give contracts
    again to such companies because of the difficulty of a startup?
    Is it too wasteful? This is, after all, a competitive process.
    Why in the world, if a contractor has exposed the agency to
    such embarrassment and infamy, would the agency want to give
    that contract again? There must be some inherent reason for
    doing so.
        Mr. Dodaro. Typically what we find when there is a lack of
    competition, there are either reasons for expediency, they need
    to move very quickly in an area--they need to have people who
    have the proper background, security clearances, that type of
    thing--or there's limited numbers of companies that could
    provide that service. But what we have focused on is making
    sure there is more competition in the process. It's a better
    value to the government.
        There needs to be adequate consideration of past contractor
    performance in the process. There are safeguards built into the
    process through suspension and debarment that need to be put
    into place and then followed adequately through the process.
        Ms. Norton. Is suspension and debarment used?
        Mr. Dodaro. It's used, but I think our work has shown that
    it's not always properly checked before some of the awards are
    made on a cross-government kind of basis.
        Ms. Norton. Is there a way to structure the contract up
    front, for example, so that if waste such as the ORF,or worse,
    failure to maintain the electrical system in Iraq occurs,
    somehow you owe the government rather than the government
    continuing to owe you?
        Mr. Dodaro. Well, you definitely need to have provisions in
    there to protect the government from nonperformance on a
    contract.
        Ms. Norton. What kind of provisions protect them now?
        Mr. Dodaro. I'd have to go back and look and provide some
    explanations.
        What we did find, though, and this is being addressed, is
    that many times there are incentive rewards and fees there that
    contractors were being paid the incentive fee and really
    weren't meeting the standards of performance as what you would
    think they should be.
        But I'll go back, I'll provide to you and this committee
    the standard provisions that are in there.
        [The information referred to follows:]
        [Note.--The information was not provided to the committee.]
        Ms. Norton. It does seem to me that a system of rewards--I
    love incentives, frankly--of rewards and penalties, carrots and
    sticks, have always been thought to work.
        Thank you very much.
        Mr. Dodaro. Just for the record, we are doing work
    currently on suspension and debarment practices, which we will
    be happy to share with this committee as that work is being
    completed, and that we will provide you the Federal acquisition
    regulations that protect the government.
        Ms. Norton. Thank you.
        Thank you, Mr. Chairman.
        Chairman Issa. I thank the gentlelady.
        We now recognize the gentleman from South Carolina Mr.
    Gowdy for 5 minutes.
        Mr. Gowdy. Thank you, Mr. Chairman.
        It is impossible for me to explain to the folks I work
    for--and I suspect most of my colleagues would have similar
    difficulty explaining to the people we work for--the
    pervasiveness and longevity of government waste, fraud and
    abuse. And I commend you for gathering with us today to seek
    solutions. And I want to start with the one that I find most
    compelling, which would be criminal consequences.
        Do you have an estimate--and I'll throw this open to all
    four of you--an estimate, negligence, gross negligence,
    criminal negligence. Where is the preponderance of the waste,
    fraud and abuse? Where does it fall in that paradigm? Not all
    at once.
        Mr. Frakes. I can tell you from the Medicare and Medicaid
    side, a lot of what happens in terms of the prosecution of
    fraudulent claims within CMS unfortunately does not occur until
    it meets a certain threshold of money. So a lot of these----
        Mr. Gowdy. Whose threshold is that?
        Mr. Frakes. I am sorry?
        Mr. Gowdy. Who sets the threshold?
        Mr. Frakes. It's within CMS, and they are the ones who
    determine, based on their allocation of resources, what claims
    that they can go after.
        Mr. Gowdy. Well, let me ask you about the allocation of
    resources, because if my numbers are correct, there are almost
    50 different ``investigative agencies'' that are seeking waste,
    fraud and abuse just within health care. That alone is an
    example of waste and fraud and abuse. Fifty different agencies?
        Mr. Frakes. And the huge irony that exists within that--and
    it's an excellent point--is that there is waste that's going on
    between all those organizations in the sense that there's a
    lack of data sharing that's going on between them. So, for
    instance, even within, let's say, Medicare Part A and Part D,
    you are missing data sharing between those two that they would
    be able to use to identify who potential crooks are. And so as
    a result, they are losing out on being able to cross-reference
    these individuals, and some of these people might actually be
    claiming to be legitimate suppliers for Medicare Part A when
    they were already identified as a potential fraudulent supplier
    for Part D. And so that lack of interaction, that lack of
    sharing is leading to a lot of the negligence that you are
    speaking of.
        Mr. Gowdy. Well, it's also inexplicable, it is impossible
    to understand--to explain to anybody outside this ZIP code how
    you can have that.
        And with respect to the question asked by my colleague from
    the District of Columbia about carrots and sticks, I prefer the
    sticks. So tell me what is being done with respect to criminal
    prosecution consequences to ameliorate what has been, if my
    numbers are accurate, a two-decade-long acknowledged problem?
    How many investigations have been started, how many matters,
    how many declinations by the U.S. Attorney's Office?
        Mr. Dodaro. We can provide that information to you for the
    record. There are reports that the IG inspector has put out
    that show the matters referred, how many have been
    investigated, and the prosecutions that have been prosecuted as
    well. So we can provide that information to you.
        [The information referred to follows:]
        [Note.--The information was not provided to the committee.]
        Mr. Dodaro. And the thresholds typically are set by the
    Justice Department in terms of how much monetary money would
    have to be sort of broached before they would feel it would be
    efficient and productive to go through the judicial system and
    that process. But those figures are available, and we will
    provide them to you.
        Mr. Gowdy. OK. Thank you.
        I would yield back the balance of my time, Mr. Chairman.
        Chairman Issa. Would the gentleman yield for just a moment?
        Mr. Gowdy. Sure.
        Chairman Issa. In the case of the question of prosecution,
    is the biggest problem the lack of prosecution, from your
    studies, or is it the lack of catching in real time these
    individuals before the money is taken? Which do you think leads
    to more of the long-term abuse, the fact that people can
    continue stealing again and again in various ways, or the fact
    that we don't prosecute them at a low enough level?
        Mr. Dodaro. Well, we haven't studied that issue directly,
    Mr. Chairman. I think part of the issue is that there is--it's
    not that--you can continue to abuse the system with low
    potential of getting caught. So I think that--just intuitively,
    just to tell you from that standpoint. I will go back and take
    a look and see if we have a more definitive answer.
        Chairman Issa. OK. And one followup question on an earlier
    one. Wouldn't it be impossible for the government to contract
    directly with everyone, meaning at some point the government
    does have to rely on government contractors to do jobs; thus
    it's inevitable that you will have a contractor hiring other
    contractors?
        Mr. Dodaro. Yes. As long as it's in a typical prime
    contractor-subcontractor mode, I think that's fine. But when
    the government contracts out its responsibility to oversee the
    prime contractor, then I think you have an issue.
        Chairman Issa. Which we all agree with.
        We now recognize the gentlelady from California Ms. Speier
    for 5 minutes.
        Ms. Speier. Thank you, Mr. Chairman.
        I am very pleased with this hearing and frankly think that
    if we spent the rest of this year just dealing with the issues
    that were raised here and actually got some results, we would
    have done our job. I have much frustration with the fact that
    we hold hearings, we uncover problems, and then nothing
    happens.
        To you, Comptroller, congratulations on your official
    appointment.
        You have a High-Risk List. There are agencies that stay on
    this High-Risk List year after year with no penalties, no
    results, no changes, and I think that is inexcusable. And if
    you need to have more authority to force these agencies to do
    what you recommend, then we should introduce legislation to
    make sure that happens, because we look foolish, and the
    American people look at us as if we are totally ineffective
    when we cannot deliver once we have uncovered a problem.
        Let me move on to an area that you just editorialized in
    the New York Times about just 2 days ago. A percentage of the
    proceeds from gas and oil companies that drill on Federal lands
    are supposed to be paid. And evidently, according to your
    report, there are substantial funds that could be generated--
    some $9 billion in fiscal year 2009--but it appears that it is
    on your High-Risk List in part because the oil and gas
    companies aren't paying their proper share.
        So I guess my question is how long have they been
    underreporting? Why do we allow them to underreport? Why aren't
    the taxpayers getting the proper payments that they should be
    receiving because the drilling is going on on Federal lands?
        Mr. Dodaro. Basically I had agreed, as a result of an
    earlier question, to go back and provide a listing of the
    underreporting point. What I would say, though, there really
    are a couple of issues. One, there is too much reliance on
    self-reported data that needs to be checked. Second, we found
    problems with the verification process that the Interior
    Department is supposed to use to make sure that the production
    figures are correct as well.
        Ms. Speier. Wait a minute. Excuse me. Are you telling me
    that the oil and gas companies are self-reporting, and we're
    supposed to trust them?
        Mr. Dodaro. Well, there are supposed to be checks that are
    put in place as well----
        Ms. Speier. By whom?
        Mr. Dodaro. By the Interior Department.
        Ms. Speier. And are they?
        Mr. Dodaro. Well, that's what we found some gaps in in
    that, and also the verification of production numbers, which
    are things that we believe need to be addressed. And that's one
    of the reasons that we're highlighting this as a high-risk
    area.
        The other reason is that the Federal Government's basic
    system to assess what the costs would be for Federal leasing
    hasn't been revisited for 25 years, and that when the Federal
    Government--what it charges for leasing on Federal lands is
    compared to what's charged in other countries and even some
    States, it ranks extremely low in its charges to begin with.
        Ms. Speier. Mr. Chairman, I would recommend that we have a
    hearing specifically on this issue. The taxpayers deserve to
    get fair market value for the leases that they provide to
    anyone, be they the next-door neighbor, or an oil and gas
    company. And I think we should be getting what is justifiably
    ours. We are the stewards of the taxpayers' money, and I think
    this is a ripe area.
        I think this is a ripe area.
        I would like to move very quickly to the Alaska Native
    Corp. I don't know if you have looked into it. If you have not,
    I would request through the committee that you do so. The
    Washington Post did a piece on November 26th, which is
    astonishing to me. Anytime you allow for sole contracts--sole-
    source contracts, there is mischief that is going to take
    place. And in this case evidently a contract for $250 million
    was offered to a subsidiary of the Alaska Native Corp., a
    gentleman living in Delaware, whose office was his colonial
    four-bedroom home, and he was providing sexual assault and
    harassment training, except he had no experience doing that,
    and his last contract with the government was for $73,000, and
    it was for janitorial service.
        There has been $29 billion provided to the ANC over the
    last decade, most of the money not going to the Natives, most
    of it going to the non-Natives. It is an absolute abuse of the
    program, and I think we should look into that as well.
        Mr. Dodaro. We issued reports in the past on that with
    recommendations, and we currently are looking at it again and
    would be happy to share.
        Ms. Speier. That is my problem. You issue reports, nothing
    happens, and there is another story written because we haven't
    done anything about it. I want to be a part of a committee this
    year that actually delivers on results; not just have a bunch
    of hearings, but show that we are saving the American taxpayers
    money.
        I yield back.
        Mr. Platts [presiding]. Chairman Issa had to go to the
    floor. There are several amendments that he had to deal with,
    and so I am honored to step in as the chair. I am up in the
    order, so it is good timing. So I yield myself the 5 minutes.
        First I want to thank each of you for your testimony and
    your work on these important issues. As the gentlewoman just
    said, we could spend the rest of this session just on what you
    are sharing with us and still not get everything done that we
    need to as doing good oversight. But Chairman Issa has made a
    priority of just this, oversight of how the Federal Government
    is handling the people's money, and we are glad to have you
    here.
        While I thank all of you, General Dodaro, I especially want
    to thank you. I believe this is your first time testifying
    before this committee as the newly sworn-in Comptroller
    General. Congratulations on your confirmation and your 30-plus
    years of service at GAO that brings great leadership to the
    agency with that experience.
        And I am going to start with you, and one is to thank you
    for your flexibility in our subcommittee hearing dealing with
    the consolidated financial reports that we moved back to March
    9th. I look forward to hearing your testimony then, and also to
    your upcoming report, I believe March 1st, on duplicative
    Federal programs. We are anxious to see that, and I know this
    is a first-time report, although you have addressed some of
    those issues in other ways in the past.
        And as chair of the Subcommittee on Organization,
    Efficiency and Financial Management, we look forward very much
    to working with you and your staff, because when we think of
    efficiency, what duplication of effort certainly is not an
    efficient use of taxpayer funds. So is there anything you want
    to give us a primer on, what we may see, or should we wait
    until March 1st?
        Mr. Dodaro. Well, I think we were charged with doing an
    annual report. So this will be our first annual report on this.
    It will basically summarize the work that we have done and new
    work that we have started since the requirement was put in
    place.
        We focus a lot on discretionary spending programs in this
    first area, both civilian and defense. We think it is important
    for defense to be on the table as well. So you will see a
    number of issues on that. In subsequent years we will focus on
    mandatory spending and also tax expenditures as well.
        We have this on a 3-year cycle to cover the entire Federal
    Government. This first report will identify 34 different areas
    that touch hundreds of programs and virtually every major
    mission and agency in the Federal Government. I think you will
    find plenty of opportunities to delve into some of these issues
    very well.
        You will also find that there are some limitations on the
    ability of us to give definitive answers to the questions about
    how much money you actually will save if you consolidate this
    because of limitations on information that is collected on a
    reliable basis from the agencies as well.
        We are adding to that another 50 items of cost-savings
    opportunities beyond the overlap and duplication and revenue
    enhancements that could be--or additional revenue could be
    brought into the Federal Government to help close what is now
    an estimated $290 billion tax gap. So both revenue-generating
    enhancements and cost-savings opportunities.
        So we are looking forward to unveiling the report and
    providing appropriate followup support to the Congress.
        Mr. Platts. And hopefully, given the timing as we are
    debating the new CR today, and that still is going to be an
    ongoing dialog between us and the Senate no matter what we pass
    today or tomorrow, this may give us additional information as
    we try to really look at how to be most efficient with the
    taxpayer funds, even in the immediate term in this current
    year.
        When you look at discretionary--I do agree that you do need
    to look at everything, including DOD and the duplication of
    efforts. I assume it is more a duplication of programs, but not
    items such as the ongoing debate on the duplication of whether
    we have one or two engines on the Joint Strike Fighter. I
    assume that is outside the scope of this report.
        Mr. Dodaro. That is correct.
        Mr. Platts. I am going to run out of time here quick. One I
    would add, on the oil and gas royalty, and I apologize because
    of trying to multitask here if you have already answered this,
    is there even a rough estimate--you know, when we see $9
    billion, I think, in 2009 from these royalties, if they are off
    by even 10 percent, that is almost $1 billion, 900 million. Is
    there an estimate of what you think may be lost because of the
    lack of good material--of material witnesses in their
    structure?
        Mr. Dodaro. Yes. We do not have an estimate at this time.
        Mr. Platts. And one final quick comment is we look forward
    to getting into the financial management at DOD. When we look
    at discretionary spending, there is no bigger entity than DOD,
    and if they can't manage their finances--we know that they are
    the best in the world in defending us and winning wars, but as
    I know from my previous chairmanship of the subcommittee, their
    financial management leaves a lot to be desired. So we look
    forward to working with you on that.
        Mr. Dodaro. I do as well. I look forward to the upcoming
    hearing on the financial audits and to working with you in the
    subcommittee chair capacity.
        Mr. Platts. Thank you.
        I now yield 5 minutes to Mr. McHenry.
        Mr. McHenry. Thank you for being here. It has been a long
    morning with votes that haven't agreed with our schedule here.
        But, Dr. de Rugy, in your previous answer to Mr. Walberg
    and in your testimony, you talk about the flypaper effect, the
    fact that these Federal transfers with matching grants at the
    State and local level actually increases spending and over the
    long term increases taxation.
        This is particularly interesting in light of the stimulus
    which--$150 billion, roughly, that was in direct Federal
    transfers to States and thereby increasing spending.
        So, you know, the question is is the Federal Government
    really complicit in the State and municipal governments'
    financial woes by these operations?
        Ms. de Rugy. Yes, it is. I mean----
        Mr. McHenry. Will you elaborate?
        Ms. de Rugy. There is a bit of economic literature that
    actually documents this problem, and yet, you know, the system
    goes on. One of the things that people always bemoan is the
    fact that if we cut Federal spending going to the States, the
    States are going to end up with big holes. But this always
    rests on the assumption that the Federal Government has deep
    pockets, and it is not the case.
        For every dollar that the Federal Government spends,
    whether it is on the States or the private sector, it has to
    tax people, taxpayers who live in those 50 States, and they
    also have to borrow money. The more the Federal Government
    does, and this is how it works, it sends money to the States,
    because it can borrow also this money, it actually pushes the
    Federal Government to a more irresponsible behavior and more
    debt.
        Mr. McHenry. So in my subcommittee on this committee, we
    have had discussions about the muni and State bond issue, the
    lack of real transparency there.
        Ms. de Rugy. There is another issue there, right, is the
    fact that the Federal Government has actually been complicit in
    granting special treatment to investors who think it is a
    really good idea to lend money to a bankrupt city in the form
    of tax deductions and Build America Bonds, where actually the
    Federal Government subsidized lending money, the rates to lend
    money to bankrupt cities. That is complicit.
        Mr. McHenry. OK. So in terms of this, do you think that the
    State and municipal financial position is worse than currently
    known?
        Ms. de Rugy. Yes, I think it is. I mean, if you take the
    economic approach of actually valuing the pension unfunded
    liability, instead of the less than $500 billion that State
    pensions have on their books, you come up with the number of at
    least $3 trillion. So, yes, the fiscal pictures in the States
    is much worse than we think.
        Mr. McHenry. OK. And in terms of--well, here is a separate
    question. I don't know if you would want to answer it. But in
    terms of our ability to know or your ability when you are doing
    research to see the long-range unfunded liabilities of States,
    municipalities, even the Federal Government, is it knowable for
    the average taxpayer to see where their city or State is in
    terms of financial liabilities over the long range?
        Ms. de Rugy. I think it is very important. Not everyone
    might want to look at it. But I can tell you that I find that
    it is way easier to look at data at the Federal level. I find
    it extremely complicated to look at data at the State and
    municipal level. And more importantly, there are a lot of
    accounting standards that apply only to the government that are
    different from the accounting standards that apply to the
    private sector that makes the size of the liability of Federal
    Government, State, and municipal governments much smaller than
    it is. And it would be a good thing to not only make the States
    transparent, but also to value it at its present value so that
    we can see what the true size of this liability is.
        Mr. McHenry. OK. So this is GASB versus FASB, in essence,
    to speak the lingo. But basically the private sector has to
    value things differently than governments value things based on
    accounting standards?
        Ms. de Rugy. Yes.
        Mr. McHenry. So you see some flaw from government
    accounting standards?
        Ms. de Rugy. There are real flaws with accounting
    standards. I mean, and it makes--it all points in one direction
    as making the size of the liability, and what taxpayers
    ultimately will have to pay, and the bill they will have to
    burden look way smaller, and that is a real problem.
        Mr. McHenry. So FASB standards would give you greater
    transparency and a better ability to understand the true nature
    of the liability?
        Ms. de Rugy. Yes, and also value the liability in the
    future at its present value so you know actually what you are
    going to have to pay in the future and what you need to
    actually put down right now with actual realistic rate of
    return, rather than, you know, completely optimistic 8 percent
    rate of return.
        Mr. McHenry. Thank you.
        Ms. de Rugy. You are welcome.
        Mr. Platts. Thank you, gentlemen.
        Just a follow on that quickly, you are talking a little bit
    about accrual method of a more accurate--having the Federal
    Government be fully disclosing. So when we talk about our $14
    trillion of debt, if we add in all of our unfunded liabilities
    on Medicare and Medicaid, we are really in the $50 to $60
    trillion.
        Ms. de Rugy. Actually currently on the financial
    accounting--the financial statement of the U.S. unfunded
    liabilities reach almost $80 trillion.
        Mr. Platts. Exactly. And that is really it is not well
    focused on because we focus on the publicly held debt, which is
    just a small fraction of that whole cost.
        Ms. de Rugy. And one of the things we don't talk very much
    about is the fact that the intragovernmental debt, which is
    supposed to be actually the already funded part of the promises
    we have made to seniors, actually this money is gone. There are
    IOUs in those trust funds, but the only way the IOUs are going
    to be cashed and paid back to this program is if the Federal
    Government taxes people or borrows more money.
        Mr. Platts. Thank you.
        We thank each you again for your testimony and the great
    resources you have provided today and what we know you will
    continue to do, and as a committee we look forward to
    continuing to partner with you. So thank you.
        And we are going to move to our third panel then if our
    witnesses want to work their way toward the witness table.
        Chairman Issa [presiding]. On the third panel today, I
    would like to recognize Thomas Schatz. He is president of
    Citizens Against Government Waste. Mr. Andrew Moylan is vice
    president of government affairs for the National Taxpayers
    Union, and Mr. Gary Kalman is director of U.S. PIRG Federal
    legislative office.
        As you saw in the previous panel, pursuant to the rules,
    all witnesses will be sworn, if you would please rise and raise
    your right hands.
        [Witnesses sworn.]
        Chairman Issa. Let the record reflect that all witnesses
    answered in the affirmative.
        Thank you. Please be seated.
        I will tell you that we prefer to have only one main panel,
    but we have saved the best for last. Since it is this
    committee's primary duty to work with watchdog groups and
    whistleblowers, you are among the most important people that
    ever come before us, so we look forward to your testimony.
        Mr. Schatz, please try to stick to 5 minutes, and we will
    have a lively round of questions afterwards.

      STATEMENTS OF THOMAS A. SCHATZ, PRESIDENT, CITIZENS AGAINST
    GOVERNMENT WASTE, WASHINGTON, DC; ANDREW MOYLAN, VICE PRESIDENT
     OF GOVERNMENT AFFAIRS, NATIONAL TAXPAYERS UNION, ALEXANDRIA,
    VA; AND GARY KALMAN, DIRECTOR, FEDERAL LEGISLATIVE OFFICE, U.S.
                          PIRG, WASHINGTON, DC

                     STATEMENT OF THOMAS A. SCHATZ

        Mr. Schatz. Thank you very much, Mr. Chairman and Ranking
    Member Cummings. I appreciate the opportunity to appear before
    you today, and I have appeared before this committee,
    regardless of who has been chairman, because we hope that we do
    contribute nonpartisan information about where the government
    can become more efficient.
        I am Thomas A. Schatz, president of Citizens Against
    Government Waste. CAGW was founded in 1984 to build support for
    implementation of President Ronald Reagan's Grace Commission
    recommendations and other waste-cutting proposals. Since then
    we have helped save more than $1.08 trillion through the
    implementation of those recommendations.
        GAO's High-Risk Series is a valuable contribution to the
    effort to eliminate wasteful spending. We have long recognized
    the importance of this report. Back in 1993, CAGW produced a
    report called Risky Business, which summarized the GAO High-
    Risk Series. That was the year we also first produced Prime
    Cuts, a compilation of recommendations from GAO, CBO, Members
    of Congress and other sources. And I ask that the entire Prime
    Cuts report be entered into the record for this hearing.
        Chairman Issa. Without objection, so ordered.
        [The information referred to follows:]
        [Note.--The cover of the Citizens Against Government Waste
    report entitled, ``Prime Cuts 2010, A Commonsense Guide to
    Leaner Government,'' is provided as a reference. A complete
    copy of the report may be found in committee files.]

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        Mr. Schatz. Thank you, Mr. Chairman.
        The most recent report identified 763 recommendations that
    would save taxpayers $350 billion in 1 year and $2.2 trillion
    over 5 years.
        CAGW has also published this week Critical Waste Issues for
    the 112th Congress, and there are 10 of our top recommendations
    in there. I also ask that this report be entered into the
    record.
        Chairman Issa. Without objection, so ordered.
        [The information referred to follows:]
        [Note.--The cover of the Citizens Against Government Waste
    report entitled, ``Critical Waste Issues for the 112th
    Congress,'' is provided as a reference. A complete copy of the
    report may be found in committee files.]

    [GRAPHIC] [TIFF OMITTED] T8047.061

        Mr. Schatz. Thank you.
        That list includes reforming or eliminating outdated or
    inequitable agriculture subsidies, commonsense ideas such as
    replacing the $1 bill with the $1 coin, preventing further
    exposure to hundreds of billions of dollars in taxpayer-funded
    bailouts by reforming Fannie Mae and Freddie Mac, and promoting
    innovations in the private sector by keeping the government
    from regulating the Internet.
        There are several recommendations in Prime Cuts that stand
    out more than others. The Market Access Program, for example,
    helps agricultural producers promote U.S. products overseas.
    Both President Obama and the Republican Study Committee have
    identified this as a source of waste. Simply put, it is
    corporate welfare when companies like Sunkist, that reported
    $860.5 million in revenues in 2009, received $2.1 million from
    this program to promote its products overseas.
        We have been looking closely at the dollar coin, and we
    understand that the Government Accountability Office will be
    issuing a new report next month on how savings can be achieved
    in that area. We are not quite sure that Congress will be able
    to score it as we think it will save money, and something that
    really should be a very simple decision for the United States,
    which is the only country that has such a low denomination for
    its paper currency. Savings from GAO several years ago were
    $500 million a year. We will see what those numbers appear to
    be in this next report.
        As I mentioned, we have looked at other areas: ethanol
    program, sugar program, dairy, peanuts, NASA Constellation, and
    then there are programs that sound well-intentioned, such as
    the Prevention and Public Health Fund that will spend $14
    billion over the next 10 years under the health care law on
    antiobesity and tobacco control. In other words, the government
    will be using tax dollars to try to modify individual behavior.
    We have seen this work not so well in the Office of National
    Drug Control Policy with antidrug ads, and we hope that the
    committee will look at this not just for whether it is
    effective, but also whether some of the grantees are using this
    money to lobby for more regulations and higher taxes, which
    don't usually solve that problem.
        And finally, looking at oversight in general, I was very,
    very pleased to see, Mr. Chairman, that you said last October
    that oversight is not and should not be used as a political
    weapon. We understand that is the most important function of
    this committee. Taxpayers deserve to know, as you said in your
    mission statement, how their money is being spent. When this
    committee or any other committee decides that a program is not
    being effective, taxpayers want to know why so that when action
    is taken to reform or terminate the expenditure of their money,
    they want to know why it is being done. And if something is
    being expanded, they want to know why it is being effective.
        We have often suggested that constituents ask their Members
    of Congress for the 10 most effective and 10 least effective
    programs. Unfortunately, the answer often is the 10 programs on
    which Congress spends the most money and the 10 programs on
    which they spend the least money. That is never the right
    answer, and we hope that every Member becomes more educated and
    spends a lot more time reviewing which programs truly are
    effective.
        Thank you for allowing me to testify today.
        Chairman Issa. Thank you.
        [The prepared statement of Mr. Schatz follows:]

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        Chairman Issa. Mr. Moylan.

                       STATEMENT OF ANDREW MOYLAN

        Mr. Moylan. Thank you, Chairman Issa and Ranking Member
    Cummings, for allowing me to testify today on behalf of the
    American taxpayer. My name is Andrew Moylan, and I am the vice
    president of government affairs for the National Taxpayers
    Union. We are a nonpartisan citizens group founded in 1969 to
    work for lower taxes and smaller government at all levels. We
    are the oldest such organization in the world. We have 362,000
    members nationwide in every single State, and likely in all of
    your districts as well.
        I will start with an old joke that our budget tells us what
    we cannot afford, but it sure doesn't keep us from spending
    money on it. Unfortunately, that has been true of Washington
    for far too long. Our current situation is bleak, and I wanted
    to point out just a couple of nuggets to illustrate that.
        First of all, President Obama's recent budget estimate
    estimated our overspending problem this year at roughly $1.6
    trillion, which is equal in inflation-adjusted terms to the
    entire Federal budget of 1982. To restate that a bit, we will
    raise through the Tax Code and spend in real terms roughly the
    Federal budget of 2003, and on top of that we will also spend
    the budget of 1982 in real terms.
        Second, in the President's budget outline, the lowest
    single-year deficit is $607 billion, which is a number higher
    in absolute terms than every deficit from 1789 to 2008 and
    roughly equal in real terms to overspending in war-mobilized
    1944.
        Finally, while many in Congress have attributed the recent
    spending surge to crisis response due to financial meltdown and
    the resulting recession, the Federal Government has actually
    run a deficit in 51 of the last 60 years, which is something
    that we think ought to give pause to even die-hard Keynesians,
    who believe that in economic growth cycles surpluses should be
    a norm.
        But instead of just listing a parade of horribles, I wanted
    to drop a parade of solutions for you. There is a lot of hard
    stuff that needs to be done, and much of that we deal with in
    the written testimony that I submitted to the committee. But I
    wanted to instead focus my remarks on what we regard as the
    low-hanging fruit of waste.
        It won't shock anyone in this committee to hear that the
    NTU thinks that the Federal Government spends too much money.
    Whether or not you agree with that assessment, I hope you can
    agree that we can spend that money in a much smarter fashion
    than we are today.
        That is why we joined with the U.S. Public Interest
    Research Group, with whom we have many disagreements, but some
    agreements as well, to author a report called Toward Common
    Ground: Bridging the Political Divide to Reduce Spending. In
    that report we identified over 30 specific recommendations to
    reduce Federal spending by up to $600 billion by tackling waste
    by the middle part of the decade. And incidentally, I would
    note that NTU and PIRG were sitting together before the State
    of the Union made it cool, as our previous work includes issues
    like spending transparency.
        To steal a joke from Conan O'Brien, I heard that President
    Obama took his daughters to see a 3-D version of Avatar, and at
    the end of the film, one of his daughters elbowed him and said:
    Now, that is how you spend half a billion dollars.
        And unfortunately, the American taxpayers are spending half
    a trillion dollars on such things as flood insurance for
    repeatedly flooded homes; overpayments to the SSI program; or
    the National Drug Intelligence Center, which is located in the
    heart of the drug war in Johnstown, Pennsylvania, among many,
    many other things. These items have been on watchdog lists for
    years, and opposition to these recommendations tends not to be
    primarily political or ideological, but parochial.
        Just a couple of the highlights: $62billion in savings we
    identified from eliminating wasteful subsidies for agricultural
    products and corporations; $353 billion in improvements in
    contracting and asset acquisition; $77 billion in improvements
    to program execution; and $107 billion in canceling or
    modifying ineffective military programs.
        I would note that our earlier estimates were closer to $1
    trillion by the middle part of the decade, but we tried as hard
    as we could to back up each one of these suggestions with a
    credible estimate of the real spending impact as well as an
    unimpeachable source like CBO or GAO.
        The NTU-PIRG report demonstrates that reducing wasteful
    spending is not a question of right or left, but a question of
    right or wrong. And I conclude by noting that I believe this
    hearing is properly focused on the issue of really what is
    causing our budget woes, which is overspending. While revenue
    is set to return to postwar averages in relatively short order,
    even if we extend the 2001 and 2003 tax cuts, spending is
    projected to be well above postwar averages for the coming
    decade and will skyrocket after that. That is why it is
    important for Congress to eliminate wasteful spending, tackle
    entitlement reform, and institute constitutional limits on the
    size of government moving forward.
        If we fail to seize that opportunity, the result could be a
    painful debt crisis that will develop not over the span of 6
    months, but over the span of 6 hours on a Sunday evening as we
    are sitting with our families and folks in Asian markets are
    beginning to stampede away from American debt.
        To modify a line from our President, I hope we can look
    back together on this time and say that this was the moment
    when the rise of red ink began to slow and our budget began to
    heal.
        Thank you, and I look forward to your questions.
        Chairman Issa. Thank you.
        [The prepared statement of Mr. Moylan follows:]

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        Chairman Issa. Mr. Kalman.

                        STATEMENT OF GARY KALMAN

        Mr. Kalman. Chairman Issa, Ranking Member Cummings and
    members of the committee, I thank you for inviting me to
    testify today on behalf of the U.S. Public Interest Research
    Group, U.S. PIRG. U.S. PIRG, the federation of State PIRGs, is
    a nonprofit, nonpartisan organization that advocates and
    educates on matters to encourage a fair and sustainable
    economy; protect the public health; and foster responsive,
    democratic government.
        The level of Federal spending is of great concern to
    Americans. A November Pew Research Center poll showed that 70
    percent of Americans believe that Federal spending is an urgent
    problem. Other opinion research indicates that the public
    concerns are focused on waste, whether it is fought for and won
    by narrow special interests, programs that have outlived their
    usefulness, or blatant inefficiencies that have been allowed to
    continue for years.
        We are proud to have partnered with the National Taxpayers
    Union to develop the list of spending reductions detailed in
    our October 2010 report, Toward Common Ground. The report
    details more than $600 billion in specific spending cuts over 5
    years. These spending cuts are a good place to start, but not
    only because of the current budget situation. In good fiscal
    times and bad, during years of budget surpluses or deficits,
    taxpayers deserve to know that their money is being well spent,
    that it is going to true public priorities, and there is
    accountability in the system through commonsense reforms.
        While there are any number of issues that may divide U.S.
    PIRG and NTU and our respective memberships, there are broad
    areas where we can come together and support responsible and
    accountable spending of taxpayer dollars. One message of our
    joint report is for Congress to start where there is agreement
    across the political spectrum.
        I would like to share with you U.S. PIRG's approach to the
    spending cuts. We entered our partnership with NTU guided by
    four basic principles: First, to oppose subsidies that provide
    incentives to companies that do direct harm to the public
    interest or do more harm than good. An example here, we would
    say, is subsidies to ethanol, for which, according to
    researchers at the University of Minnesota and elsewhere, there
    is very little to any truth of the benefits of ethanol, and
    there are clearly adverse environmental impacts.
        Second, we oppose subsidies to mature profitable industries
    that don't need the incentives. These companies would engage in
    the activity regardless of taxpayer support. We would include
    in this category subsidies, as has been mentioned now by all
    three of us, the Market Access Program, which, among other
    things, effectively pay for overseas television advertising and
    other marketing of specific products to successful
    multibillion-dollar companies. These companies have both the
    incentive and the resources to do their own product promotion
    without taxpayer handouts.
        Third, support commonsense reforms to make the government
    more efficient. Examples here include reducing the inventory of
    unused or underused government buildings, as it was mentioned
    before. And as Congresswoman Speier pointed out, we have a lot
    to do in contracting, and I would be happy to talk later on
    about a report that we did called Forgiving Fraud and Failure,
    which was the repeated issuance of contracts and renewing of
    contracts despite the fact that they didn't deliver.
        Fourth, and finally, we would oppose funding where there is
    authoritative consensus to do so. This means strong independent
    agreement across the political spectrum that a program is
    wasteful, and the agency or department receiving the funding
    has actually argued against it. A specific example here, again,
    just to repeat, the National Drug Intelligence Center, which
    has been the subject of numerous unfavorable reports about its
    impact and effectiveness. The GAO has concluded that it
    duplicates existing efforts.
        A particular value of the recommendations detailed in the
    report is that they are specific. They focus upon agreed-upon
    wasteful spending. Along those lines I would just note that
    U.S. PIRG does not support across-the-board cuts. Such policies
    fail to differentiate between true public priorities and where
    there is genuine waste and inefficiencies in the system.
    Americans certainly prioritize national defense, but if
    efficiencies can be made in the way in which we repair military
    vehicles--the military is often exempt from across-the-board
    cuts--that savings is no less important than the reforms to
    streamline the costs of Medicare.
        While not in the report, U.S. PIRG would also urge the
    committee to review special-interest carve-outs through tax
    expenditures and loopholes. These expenditures have the same
    bottom-line effect on our Nation's deficit as direct line-item
    spending. Regardless of whether spending takes place through
    the Tax Code or the appropriations process, it should be part
    of the conversation and should be transparent, accountable and
    serve the public.
        Let me end by saying that many of the items on our list
    challenge longstanding subsidies to narrow special interests.
    While these expenditures serve little or no continuing public
    purpose, there will no doubt be intense lobbying efforts to
    preserve the handouts. We urge you to resist those efforts and
    take the first, important steps toward addressing our Federal
    spending problem and ensuring that any public expenditure is
    for the public interest. We applaud the committee for looking
    anew at these giveaways and urge you to challenge tradition in
    the difficult decisions to reform the budget, decisions that
    lie ahead. Thank you.
        Chairman Issa. Thank you.
        [The prepared statement of Mr. Kalman follows:]

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        Chairman Issa. I recognize myself for the first round of
    questions for 5 minutes.
        Mr. Schatz, your critical waste issue of the 112th
    Congress, it has an area that piqued my interest on page 17.
    And I would ask unanimous consent that this entire document be
    placed in the record. Without objection. So ordered.
        But on page 17, it makes a statement--USA Today is the
    source for it--that 83 percent of all public-employee jobs pay
    greater than their comparable private-sector counterparts.
        When we are looking at trying to figure out waste, would
    you categorize paying more than what the private sector pays
    for comparable work as a waste? And if so, would this be
    perhaps the largest waste there is in all of government?
        Mr. Schatz. There are some caveats that went with that
    proposal. There are some arguments that Federal workers are
    more educated on average than the private-sector workers. But
    looking at apples to apples, we would like to see a report from
    the Congress that really details where this lies. I mean, the
    CATO Institute has looked at this for years, and I think people
    used to believe that this was not the case. I think currently,
    based on both compensation and benefits, that public employees
    at every level of government are being paid at a higher level.
        Now, whether that means there are too many of them, they
    are overcompensated, are we getting something out of them that
    is worth that compensation, these are all questions that need
    to be examined. We don't want to say--we do actually think that
    Federal salaries should be reduced because the private sector,
    if you have a job, you are lucky to have one. Most people
    haven't had a raise. I was encouraged that the President has
    looked at salaries and said we should freeze them. That is a
    good first step.
        Then we have to determine which programs are worth
    continuing, and within there what is a fair rate of pay so that
    we are really not overpaying. As I said, compensation and
    benefits in particular, especially the benefits, now are much
    better than the private sector.
        Chairman Issa. One of the questions I would have following
    up on that would be do you believe that the government can come
    up with a--and I will use the British word--scheme in which we
    can have a dynamic pay schedule similar to the private sector
    so that we don't underpay? Obviously some of the public-sector
    employees are underpaid compared to comparable private sector,
    and this is it often where we get a drain. So do you believe it
    is possible at all for the Federal Government to significantly
    improve so that we don't overpay and underpay? And wouldn't
    that be inherently a complete change in our schedules?
        Mr. Schatz. Absolutely. We have seen a lot of changes over
    the years, or attempts to change, civil service compensation. I
    recall when President Carter came in, that was one of the first
    things he did, and nobody really talked to him for a while
    after that. But it is something that needs to be done. It needs
    to be done on a bipartisan basis.
        There are some very high-level and very well-educated
    positions that we do need. Think about security or nuclear
    weapons. You can't just take somebody off the street
    essentially and have them perform that task. So they may be
    underpaid compared to the private sector. But one of the
    examples given in here was a cook literally was being paid at a
    far greater rate than a comparable private-sector individual.
        And as I said, I think this committee in particular would
    be well served to come up with something that is objective,
    that looks at it program by program, and really makes a good
    determination about what is the fair level, because we could
    save a lot of money. And we do recommend here, by the way, an
    across-the-board reduction of 10 percent, and we think that is
    consistent with what needs to be done to get spending under
    control in general.
        Chairman Issa. I appreciate that.
        I am going to go a little off script because it is
    important because I don't often get such a good panel here to
    go into another area. The first panel, and every panel that has
    been before Congress so far, has said the only way to get to a
    reasonably balanced budget deal--in other words, deal with our
    overspending--includes waste, including closing unnecessary
    programs, includes pay analysis, but it also includes taking
    out entitlements.
        I am going to ask you the toughest question. Do you believe
    that Congress can successfully convince the American people
    that entitlements, Social Security and Medicare, are not, in
    fact, an entitlement, an absolute health care program for the
    aged and absolute retirement program, but rather part of a
    social welfare safety net and thus can be means tested?
        Mr. Schatz. I think that is one approach certainly. Raising
    the retirement age is another. People are living longer. You
    may not recall this, but the first individual that received
    Social Security was named Ida Mae Fuller. She lived until she
    was, I believe, 88, which was far longer than expected, so the
    actuarial tables are not accurate.
        There was an anomaly in Medicare when it was first enacted
    that also looked at how long people lived, because you can't
    have an insurance program or payment program and have it be
    sustainable financially if they are going to pay out more than
    they take in. That is just simple math.
        So there are a lot of ways to look at reforming these
    programs. We think that it has to be done. We were encouraged
    by what the President said.
        Chairman Issa. But I am asking you for the tougher question
    here.
        Mr. Schatz. Whether it is social welfare or----
        Chairman Issa. Can we define it as social welfare safety
    net--I will use the entire term--so we can, in fact, means test
    in some way both of those programs at least partially?
    Everybody says there are only so many solutions. That is the
    one that is seldom talked about, which is the only way to say
    if you are like myself, and you have enough income outside of
    Congress, that when I am 70, I actually won't need my Social
    Security in order to still be well to do.
        Yes or no, do you believe Congress has the ability to
    convince the American people, separate from do they have the
    will?
        Mr. Schatz. I think that conversation needs to be started,
    because if it is started as an entitlement, people don't want
    to give it up. We have a health care bill where now people
    think health care is an entitlement. So I think it is really
    expanding more than it is being reduced.
        Mr. Moylan. Mr. Chairman, if I may, do I think that
    Congress has the ability? Yes, I do. Am I convinced that
    Congress will utilize that ability? That I am not so convinced
    of yet. And the way that I keep talking to people about these
    programs is whether we like it or not, they are gutting
    themselves from the inside right now. If we do not make serious
    changes to them, we are going to rapidly approach the point
    where Medicare and Medicaid and Social Security take up nearly
    as large a portion of our economy as a whole as the entire
    Federal budget today. And to be able to head that off, we need
    to start entitlement reform now.
        Chairman Issa. Mr. Kalman, just a yes or no, if you could.
    If you can. I will come back in a second round otherwise. OK.
    Thank you.
        I now recognize the ranking member.
        Mr. Cummings. You know, I was just listening to you all's
    testimony. It is very interesting. And, you know, when it
    comes--you all heard Senator McCaskill. Were you all here for
    that? And you heard all the discussion with regard to these
    contracts that we are--particularly in defense, we don't seem
    to be in control of. I just wondered what comments did you have
    on that, Mr. Moylan?
        Mr. Moylan. Thank you for the question.
        Mr. Cummings. If you could be brief, because I have a
    number of things.
        Mr. Moylan. It is an extraordinarily important part of the
    puzzle in terms of tackling wasteful spending, and that was
    actually a big part of the report that we did with U.S. PIRG
    identifying some of those reforms that could be made. The
    bipartisan Defense Acquisition Panel made some very worthwhile
    suggestions, and those were part of our report.
        Mr. Schatz. Very briefly, we were around when the Klinger-
    Cohen Act came around. We have seen a lot of defense
    procurement. Twenty-five percent of the Grace Commission's
    recommendations dealt with defense. And our organization helped
    publicize the $436 hammers and the $640 toilet seats. So we are
    well aware of what needs to be done in contracting in defense.
        Mr. Cummings. I am just wondering, when you look at your
    organizations, and you are dedicated to effective and efficient
    use of taxpayer dollars, and you hear I think it was Ms.
    Speier, who talked about how frustrating it is to constantly be
    going over these problems over and over and over again, and we
    end up looking kind of--it looks as if we can't get it done, or
    else we don't want to get it done.
        And then we look at all the resources that are being put
    into these hearings. And don't get me wrong, I am glad that the
    chairman held this hearing, and I am glad that we are on the
    road that we are on. But I guess what I am trying to get to is
    that, I mean, the older I get, the more I value my time, and I
    am trying to make sure that the time that we have under our
    watch, all of ours, is that we do something to actually make a
    difference.
        And so I appreciate the fact that these two organizations
    got together. That is great. I think that is a good start. But
    I am just trying to figure out, you know, what do you want--I
    mean, what do you see--in other words, I am trying to get to
    how do we not be where Ms. Speier talked about, where 2 years
    from now we are talking about the same problems and they are
    getting worse.
        You know, we were able to make some difference in the Coast
    Guard. That is a smaller organization, but it was through just
    sheer pushing and setting deadlines, as the chairman often
    talks about. I mean, how do you work yourself out of a job is
    what I am trying to get to?
        Mr. Schatz. Mr. Chairman, I have been at this probably
    longer than these gentlemen.
        Mr. Cummings. Yes, and I am very serious about this. You do
    a great job, but I don't want you to die still fighting and the
    problem is worse.
        Mr. Schatz. Part of the problem is the priorities in
    Congress, that Members traditionally have been happier spending
    the money, putting their name on a boat or a building, and
    taking credit for doing something, whatever it might be,
    because they think that might help them get reelected, to be
    perfectly frank. If we can get enough Members that say, I will
    fix a problem because that is the right thing to do, they will
    probably get reelected with an even bigger majority, because
    they will be able to go home and say, look, I did something
    that made the government work better.
        We don't want people to have less faith in the government.
    And, yes, we talk a lot about what is wrong because that gets
    people's attention, but fixing it is something that needs to be
    at the forefront of people's minds. A lot of times agency heads
    come in, presidents come in and say, let us fix the problem.
    There is entrenched bureaucracy that doesn't want to change. So
    it takes--it is a very--it has to be an effort that is a
    collaboration between the executive branch, Congress, among
    these organizations, and so that when people look at something,
    they say, we are going to give you credit for fixing the
    problem, not just going around spending money.
        Mr. Kalman. Congressman, it is a great question, and I am
    glad you all are focused on this. I would say a couple of
    things. One is that it is the fact that we need, I think, to
    start where we can agree. And in other words, a lot of these
    fights end up happening at the places we disagree. And so the
    value, and what I said in my testimony would reiterate, is the
    value of a group like NTU partnering with U.S. PIRG gives a you
    a road map for a few places where, if the parties got together
    and said, this is where we can go, then you would actually have
    backup from folks who could talk to their memberships across
    the country. That is the first thing.
        Second thing I would say is there are some places where
    there has been progress made. Not, obviously, enough. But last
    year in a unanimous--unanimously through the House there was
    acquisitions reforms that were made to the weapons procurement
    system. That took care of about 20 percent of the problem. But
    if we can go after weapons systems, which arguably is one of
    the harder things to go after, hopefully we can introduce, and
    you all can pass, a bill that would take care of the remaining
    80 percent. So I think there are building blocks on which you
    can focus on to make serious progress.
        Over on the Senate side, the last thing I would say, on a
    number of, for example, issues like offshore tax havens, which
    is not necessarily something that everybody agrees on, Mr.
    Grassley and Mr. Levin are getting together and talking about
    how to close some of those abuses and ways to raise some
    revenues.
        So I think there are things and seeds that are out there,
    but we need to focus on where we agree.
        Mr. Moylan. I think that--and I submitted this in my
    written testimony--that the amount of the dollars and cents is
    easy. It is the political calculus that has been difficult.
    Just to explain part of that, President Obama's recent budget
    had some suggestions for terminations, over $1 billion of which
    were repeated suggestions from President Bush's last proposed
    budget. So there are $1 billion worth of reductions that both
    of those very different men agreed upon that have still not
    been implemented in terms of reductions.
        I think that those are things that we ought to be
    targeting. That is the low-hanging fruit. We identified $600
    billion more that we think is low-hanging fruit. And after that
    point, that is when we can climb up a little higher, fight
    about what fruit to pick and how big they ought to be.
        And I can say that we as an organization and I as an
    individual are committed to making that political calculus
    easier because that is the only way we are ever going to get
    this done.
        Mr. Cummings. Thank you very much, Mr. Chairman.
        Chairman Issa. Ms. Speier for 5 minutes.
        Ms. Speier. Thank you, Mr. Chairman.
        I have to say that if there ever was a moment in time when
    we can come together and show the American people that
    Republicans and Democrats want to save the taxpayers money, and
    we commit to do that from this committee. I mean, we can change
    the world in a small way, but a very significant way. And I
    think the fact that Mr. Moylan and Mr. Kalman have come
    together from very different places and have created a list for
    us of things that they can agree on, then I would suggest, Mr.
    Chairman, we should sit down and see if we can agree on these
    particular suggested areas. If, in fact, the suggestion that we
    can save hundreds of millions of dollars by just ending the
    orders for obsolete spare parts for the military--come on. If
    we can't do that, we should get the heck out of here.
        So I would suggest that we take this list, we come
    together, and this committee come forward with at the very
    least a number, if not all, of these suggested savings.
        I want to--if we have buildings--we have 55,000 Federal
    buildings that are not utilized or underutilized. Let us just
    take the not utilized ones and get rid of those.
        Or the folks that are living in areas that continue to
    flood, and we are spending $891 million on repeat claims, where
    1 percent of the policies are generating 25 to 30 percent of
    the claims. I would like to know what that specific number is.
    We could probably give them $500,000 apiece to buy homes in
    other areas and save a lot of money.
        So those are the kinds of things that I would like to see
    us pursue, Mr. Chairman.
        Let me ask about this Market Access Program. This, to me,
    is pretty outrageous that we are paying Sunkist and McDonald's
    to advertise in France and other locales around the world. What
    could possibly justify us to continue that program? Will each
    of you respond to that?
        Mr. Schatz. We have all been looking at this for quite some
    time. NTU and CAGW have been cosigning letters on this program
    for probably 10 years. Representative Chabot from Ohio, who was
    recently elected, used to bring amendments to the floor every
    year on the appropriations bills. And I believe an amendment
    was being offered on the continuing resolution. I don't know
    what happened to it.
        I do know, by the way, that the National Drug Intelligence
    Center amendment was adopted, so hopefully that will finally
    disappear.
        But Market Access, it is the power of the companies that
    get the money that keeps it going, and we hope that there is
    now the political will to say this is a huge amount of
    corporate welfare, should be eliminated. There has been
    bipartisan support, but just not a majority so far. But it is
    really due to the power of these companies and their lobbying
    operations coming in and saying, no, no, we really need this
    million dollars. It is going to help increase sales and jobs.
    And, by the way, we have a plant in your district.
        Mr. Moylan. I would say that while it is absolutely key to
    point out that there are large corporations that are benefiting
    from it, it is not just corporations. There are also large
    trade associations that are, of course, comprised of a lot of
    those that benefit as well, and they make very high-minded
    arguments about raising demand for certain types of products.
    There was an article recently where a gentleman was making the
    argument that we need to raise foreign demand for cotton so
    that we have greater demands for products that the cotton
    farmers in this country are producing.
        The way that we look at it as an organization is that
    entities like this that have significant profits on their own
    ought to be able to fund their own advertising and promotion
    techniques. And taxpayers have many more important things to
    deal with. And whether you know, as Gary said, whether the
    budget situation is good or bad, it does not make sense to be
    subsidizing entities like that.
        Mr. Kalman. I would just quickly add that, you know, there
    presumably is a debate to be had whether or not the Commerce
    Department has a role in going out to open up foreign markets
    for American businesses.
        When you start saying, no, no, no, we're going to get
    specific companies to advertise to sell Big Macs in Paris, the
    argument really begins to fall into the absurdity. And so we
    would argue that whatever original purpose the program may have
    had, it's completely veered off that original purposes and is
    now not serving any kind of purpose that promotes any value to
    the American taxpayer.
        Mr. Schatz. By the way, very cleverly, they changed the
    name from the Market Promotion Program, when it was promoting
    our products, to Market Access, meaning we want access to
    markets overseas because they may be excluding our products. So
    even there it sounds even a little better than what they had in
    the past.
        Ms. Speier. My time is almost expired. Just tell me some of
    the companies, besides Sunkist and McDonald's--who are the
    other companies receiving money?
        Mr. Schatz. Our report notes Nabisco; Fruit of the Loom;
    Mars, Inc. There's a long list of many others where that came
    from.
        Ms. Speier. Thank you. I yield back.
        Chairman Issa. Thank you.
        We're going to do a very brief second round.
        Mr. Kalman, I kind of cut you off without being able to
    answer the question, but I'll rephrase it, and I'll do it this
    way. I had a prominent bank chairman, somebody with a seven-
    figure salary and the large home in a low-tax State, who came
    in to see me. He's a little older than his wife. He has a 10
    and a 12-ayear-old, but he's over 65. His two children each
    receive $800 a month because back in Lyndon Johnson's day we
    decided that retirees should have supplemental funds and death
    benefits that would go to the children directly over and above.
        We talked about corporate welfare. Is there any reason
    today that shouldn't be part of the waste within Social
    Security? If somebody's making a six- or seven-figure salary,
    just because they're over 65 and have children under 18, should
    we automatically continue that? And that's why, when I said
    entitlement, everything is an entitlement once we write it into
    law. But is it really an entitlement to somebody who doesn't
    need the money and for a program that actually never defined
    its real purpose; is there a purpose to give children under 18
    $800 simply because one of their parents is over 65, even if
    that parent is still working and earning a handsome income?
        So I'll leave it to you, because this is about waste, it's
    about government waste, but the two biggest potential rocks in
    the knapsack of our country that might take us down are Social
    Security and Medicare, in the opposite order. If you would like
    to respond.
        Mr. Kalman. Sure.
        Chairman Issa. And, by the way, that's not going to
    completely balance the budget if we just do away with the high
    income over 65 with children under 18.
        Mr. Kalman. I understand and appreciate that.
        Let me say two things. One is, just to be quite frank, is
    that U.S. PIRG doesn't take positions on the level of benefits
    for Social Security or Medicare. That said, we actually do have
    in our----
        Chairman Issa. And the question wasn't is that a wrong
    benefit? It's is it the type of benefit that Congress should
    look at anew relative to recategorizing it in some way for
    means testing, or at least not to make it an automatic
    entitlement?
        Mr. Kalman. And I apologize, we don't have a specific
    position on that. But let me say this, that we do think that,
    for example, there are a number of things in Medicare and
    Medicaid in particular that should be looked at. We're not
    against looking at that. In fact, in Medicaid, for example,
    there are a number of States in which name-brand
    pharmaceuticals have gotten into the States to adopt actuaries
    that forbid Medicaid from purchasing generic drug alternatives.
    So Medicaid ends up spending a lot more money than they
    otherwise would----
        Chairman Issa. They've lobbied for built-in monopolies.
        Mr. Kalman. Protections. So people who say, oh, we should
    leave entitlements off the table, we think that there are huge
    efficiencies, billions and billions of taxpayer dollars, that
    program that's not just--I mean, obviously we can all agree on
    the actual fraud in Medicare, we should go after that----
        Chairman Issa. By guarantee your housing, it shouldn't have
    to be the Ritz Carlton?
        Mr. Kalman. Exactly. So we do believe that there are
    opportunities to make huge savings in those programs by looking
    at how they're actually being implemented. On that side we can
    agree.
        Chairman Issa. Any other responses?
        Mr. Moylan. I would also point out, and you touched on the
    public opinion portion of it, that I think that there is
    something of a structural problem in how these programs are
    reviewed. People are well aware of the payments that they make
    into these systems for years and decades, and so I think they,
    to some extent rightly, feel that when they get to retirement
    age, that they ought to be able to draw upon those benefits as
    they were promised to them.
        Chairman Issa. If they only knew that they only pay into
    Part A; B, C and D are not, in fact, paid for out of
    withholding, but rather through general tax revenue.
        Mr. Moylan. Well, it's a more basic problem than that,
    which is that when Social Security was first drawn up, it was
    not something akin to a forced savings program. We had this
    pay-as-you-go system. I think that's a part of the big
    disconnect that we face here today, and that's a part of what
    makes dealing with these programs more difficult than it might
    otherwise be.
        Chairman Issa. I'm going to ask one closing question very
    quickly because this one hits home. In a little while I think
    we're going to have an amendment that we're going to vote on
    that would make an across-the-board cut to the branch,
    literally to consider further cutting the budget that the
    ranking member and I share to try to go after waste and misuse
    of government funds, and I'm probably going to vote no because
    I don't believe you cutoff the auditor's fund in order to get
    better running of an enterprise.
        But in this report that's already in, I noticed something.
    There is a proposal here that Members of Congress cutoff
    franking in election years; in other words, not just 90 days,
    but cut it off altogether. I'd appreciate a little elaboration
    because I found it to be very insightful that although I think
    we should be able to respond to inquiries--in other words, our
    mail should continue--but the history of franking right up
    until the eve of the cutoff for the primary or general is
    certainly something that, if we look at ourselves through a
    fair mirror, we're going to see something we don't like.
        Mr. Schatz. Well, first, the Senate does limit franking----
        Chairman Issa. I yield to the gentlelady from California.
        Ms. Speier. Thank you, Mr. Chairman.
        I must say that I have discovered the franking, ``benefit''
    to be outrageous. And if you want to associate on that issue, I
    would be delighted.
        Chairman Issa. I thank the gentlelady.
        Ms. Speier. And I found that out by happenstance. I was
    doing a one-a-year newsletter to my constituents to tell them
    what I had done during the year and found out it was going to
    cost $100,000 to send it out, and I refused to do it. And with
    the eve of the electronic newsletter and everything else we
    have at our disposal, I think that benefit should cease.
        Mr. Schatz. As we said in the report, in the days of the
    Pony Express, this might have made sense, but it certainly
    doesn't now. There's so much information--Twitter, Facebook, My
    Space--I don't want to leave anyone out--e-mail, texting, town
    hall meetings, tele town halls--if a Member of Congress wishes
    to let their constituents know what they're doing, there are so
    many outlets now that did not exist before that we believe
    firmly, and we have always believed this, that a Member of
    Congress should only respond to a constituent if they're asked
    a question, because that's a legitimate function of what
    Members of Congress do. We've got C-SPAN, we've got everything
    going on. There's more information now about the hearings with
    the new rules.
        Chairman Issa. We are both being advertised here today with
    this hearing, I'm sure.
        Mr. Schatz. Exactly. Exactly. So I think that this is
    something whose time has come. And I know NTU in particular has
    done a great job on this issue over the years, so I would love
    to have Andrew make a comment as well.
        Mr. Moylan. I mean, we've done a tremendous amount of work
    on abuses of the franking process. But I wanted to touch on
    sort of the more general point that you made.
        I often make the argument that one of the reasons that I
    believe so deeply in limited government is precisely because I
    don't think that we spend enough money on the things that
    matter. And that's why across-the-board cuts ought to be sort
    of a last resort rather than a first resort, because, as our
    organizations jointly have pointed out and many others, there
    are higher-priority things, and there are lower-priority
    things, And we ought to start by eliminating the lower-priority
    things first. And so I think that a franking benefit is among
    those. As Tom pointed out, there are innumerable ways that you
    can communicate with our constituents that don't require
    taxpayers to underwrite it, and I think that we ought to pursue
    those.
        Chairman Issa. Thank you. And I know that if I had gotten
    into the study of malt liquor and marijuana, in combination,
    which is being funded, we might have had another 10 minutes,
    but I recognize the ranking member for final comments.
        Mr. Cummings. Thank you very much. I want to thank you all
    for being here.
        And I just want to go to you, Mr. Schatz, and make one
    quick comment. I was listening to your responses with regard to
    public employees. I think we have to be very, very careful when
    we try to make these comparisons and contrasts, and I think
    you've been sensitive to it.
        And I know you all speak in a lot of places, and you tell a
    lot of stories, but this is what I want you to tell them:
    Almost every one of my employees on this committee took a
    substantial pay cut. They are here night after night. Many of
    them--we have Harvard Law School graduates, I mean, sitting
    right up here. And I'm sure that--I don't know what happened on
    the other side, but what I'm saying is we've got a lot of great
    people who do a lot of sacrificing.
        And I tell you, it makes me want to scream sometimes when I
    hear--and I'm not just talking about Democrats, I'm talking
    about Republican staff, too--about public employees and how
    they've got these high salaries, and they couldn't do better in
    private industry. I guarantee you, most of them could. But
    you've got a lot of people who dedicate their lives to just
    trying to do what is right and make things better for people.
    And I get kind of emotional about it because I hear it over and
    over again, and I think it's quite unfair so often.
        Then I want to talk about this whole thing of systemic
    fraud. I'm doing a speech at Howard University soon, and I'm
    going to be talking about the fact that we need to create a new
    normal. And that is is that it seems like, when I listen to the
    thing about contracting, I think it has become normal for
    certain contractors to expect to fraudulently get money from
    the government. It has become a part of the process. And that's
    sad, it really is. And so that's the normal.
        And, I mean, I think it was the chairman maybe was asking
    questions about--it was somebody on the Republican side, and it
    was a very good question--about is this criminal, is it
    whatever? And I think it was Mr. Dodaro who said something
    about, well, there's a certain threshold that we look at and
    whatever.
        But the fact is is that the normal has become ``let's get
    something from the government.'' And I'm convinced that we can
    do better than that, we really can.
        And when I think about where we are with regard--and I was
    mentioning this to the chairman a few minutes ago--where we are
    with regard to technology, you know, the things--we can
    literally take GPS and zero in on somebody's back yard. You
    mean to tell me we can't keep up with contracts, I mean,
    particularly when these contracts are costing the American
    people so much money?
        I agree with the chairman with regard to our mission
    statement. This is bigger than us, and it's bigger than one
    party. It's bigger than Democrats and Republicans. It's about
    taking the hard-earned dollars of Americans and trying to make
    sure that they are spent effectively and efficiently.
        And the two things that I just said are linked, the thing
    about employees. We've got a lot of great employees, and I
    think we need to be careful about beating up on them all the
    time. And I'm not just talking about the people up here.
    They're the same public employees that collect our trash, the
    same ones that deliver our mail. I mean, that's real. And a lot
    of these people, I think, probably most of them, are underpaid.
        And at the same time, we also need to use our technology
    to--we've got the bashing over here, but then we need to move
    to our technology and say, OK, how do we use this technology to
    bring that effectiveness and efficiency to government to help
    those employees accomplish the things that they need to
    accomplish? That's what it's all about.
        And so we can spend, spend, spend--and we've been
    concentrating on spending here lately--but we also need to--and
    I think the chairman said it in his opening that when we find
    ways that we can save money, we need to double-down on that. We
    need to do that because if we can save some pennies, that means
    everybody benefits. And when government is really doing things
    effectively and efficiently, we all benefit. And then that way
    we bring value, more value, to the lives of all Americans, and
    that's what it's all about.
        Thank you very much, Mr. Chairman.
        Chairman Issa. I thank the gentleman, and I thank our
    witnesses today. I think if there's ever a time in which points
    were scored for the American people and not by one party or the
    other here on the dais, today was that day.
        Again, I would like to thank all the witnesses for their
    testimony. The record will stay open for 7 days. If there are
    additional comments that you would like to have placed in the
    record, I would ask unanimous consent at this time that you
    would able to do so. And without objection, so ordered.
        [The information referred to follows:]

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        Chairman Issa. And with that, we stand adjourned.
        [Whereupon, at 1:56 p.m., the committee was adjourned.]
        [The prepared statements of Hon. Justin Amash, Hon.
    Edolphus Towns, Hon. Gerald E. Connolly, and Hon. Bruce L.
    Braley follow:]

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