[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


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                      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:]
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    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.
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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.
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    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.]

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    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:]

    [GRAPHIC] [TIFF OMITTED] T8047.096
    
    [GRAPHIC] [TIFF OMITTED] T8047.097
    
    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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