[Senate Hearing 112-613]
[From the U.S. Government Publishing Office]


                                                         Hrg. 112-613

                    MOVING FROM SCANDAL TO STRATEGY:
                   THE FUTURE OF THE GENERAL SERVICES
                             ADMINISTRATION
=======================================================================

                                HEARING

                               BEFORE THE 

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 12, 2012

                               __________

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

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        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
                     Troy H. Cribb, Senior Counsel
                      Jonathan M. Kraden, Counsel
               Carly A. Covieo, Professional Staff Member
               Nicholas A. Rossi, Minority Staff Director
           J. Kathryn French, Minority Deputy Staff Director
                   Jennifer L. Tarr, Minority Counsel
                  Trina Driessnack Tyrer, Chief Clerk
                 Patricia R. Hogan, Publications Clerk
                    Laura W. Kilbride, Hearing Clerk
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Collins..............................................     3
    Senator Johnson..............................................    14
    Senator McCaskill............................................    17
Prepared statements:
    Senator Lieberman............................................    27
    Senator Collins with attachments.............................    31

                               WITNESSES
                     Wednesday, September 12, 2012

Hon. Daniel M. Tangherlini, Acting Administrator, U.S. General 
  Services Administration........................................     6
Hon. Brian D. Miller, Inspector General, U.S. General Services 
  Administration.................................................     9

                     Alphabetical List of Witnesses

Miller, Hon. Brian D.:
    Testimony....................................................     9
    Prepared statement...........................................    43
Tangherlini, Hon. Daniel M.:
    Testimony....................................................     6
    Prepared statement...........................................    37

                                APPENDIX

Management Deficiency Report: General Services Administration, 
  Public Buildings Service, 2010 Western Regions Conference, 
  April 2, 2012, submitted for the Record by Mr. Miller..........    47
Letter submitted for the Record to Mr. Tangherlini from Senator 
  Ron Johnson, dated April 30, 2012..............................    70
Letter submitted for the Record to Mr. Miller from Senators 
  Lieberman and Collins, dated May 10, 2012......................    72
Letter submitted for the Record from Mr. Miller to Senators 
  Lieberman and Collins, dated May 30, 2012......................    74
Letter submitted for the Record from Mr. Miller to Senators 
  Lieberman and Collins, dated July 19, 2012.....................    79
Letter submitted for the Record to Mr. Tangherlini from Senators 
  Lieberman and Collins, dated May 10, 2012......................    81
Letter submitted for the Record from Mr. Tangherlini to Senators 
  Lieberman and Collins, dated June 20, 2012, with an attachment.    90
Letter submitted for the Record to Regional Administrators, 
  General Services Administration, from Senators Lieberman and 
  Collins, dated May 17, 2012....................................   120
Letter submitted for the Record from Regional Administrators, 
  General Services Administration, to Senators Lieberman and 
  Collins, dated August 16, 2012, with enclosures................   123
Response to post-hearing questions for the Record:
    Mr. Tangherlini..............................................   157

 
                    MOVING FROM SCANDAL TO STRATEGY:
                   THE FUTURE OF THE GENERAL SERVICES
                             ADMINISTRATION

                              ----------                              


                     WEDNESDAY, SEPTEMBER 12, 2012

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, McCaskill, Collins, and 
Johnson.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. The hearing will come to order. Good 
morning and welcome. This morning our focus is on what the 
General Services Administration (GSA) is doing to move beyond 
the scandals that have recently dominated its activities and 
the public's impression of it and get back to saving the 
taxpayers money, which is its function, of course, through the 
efficient acquisition of goods and services and smart 
management of government property.
    The agency's mission has been sadly compromised by these 
scandals involving a minority of employees at the agency, but 
unfortunately, that is the reality.
    Former Administrator Martha Johnson stepped down in April, 
after the Inspector General (IG) reported truly outrageous and 
offensive spending on a GSA Western Regions Conference (WRC) 
that cost over $800,000. Her replacement, Acting Administrator 
Daniel Tangherlini, is with us today to discuss what he has 
done since then and where the agency goes from here.
    I want to say that I have been impressed by your efforts, 
Mr. Tangherlini, to curb irresponsible spending and to conduct 
a top-to-bottom review of GSA policies and operations to 
determine if there are other areas where the agency has been a 
careless steward of taxpayer dollars.
    The Committee's interest in this subject is based on our 
jurisdiction over government operations generally. Sometimes 
people focus on the homeland security part of our jurisdiction, 
but the traditional, longstanding jurisdiction is governmental 
affairs. And we have specific jurisdiction over the GSA.
    To most Americans, the General Services Administration is 
probably unknown or is an obscure Federal agency, but its 
purpose could not be more important to the way our government 
spends their taxpayer dollars. I think GSA's history is 
relevant and interesting. I just want to touch on it briefly.
    In 1947, Congress established a Commission on Organization 
of the Executive Branch of the Government to recommend ways to 
streamline the government while spending ``the lowest amount 
consistent with the efficient performance of essential 
services.'' The Commission recommended creation of a separate 
agency to purchase goods and services and maintain public 
property across the government as a way to eliminate 
duplication, streamline operations, limit government spending, 
and help other agencies be more efficient. In other words, the 
status quo then was that the agencies were all doing this 
themselves.
    In its final report, the Commission said, ``To the general 
public, the housekeeping activities . . . are little known, but 
unless they are properly administered, the Executive Branch 
cannot be effectively managed.''
    The words of the Commission ring as true today as they did 
in 1947, in some ways even more loudly because of the period of 
economic stress we are in and because of the unprecedented, 
enormous debt that the Federal Government is running. So we 
have to do more with less, and GSA is one of the lead agencies 
that can help us do that.
    It actually has an enormous portfolio of responsibilities. 
GSA negotiates contracts worth more than $40 billion a year, 
manages $500 billion in assets, mostly real estate, and owns or 
leases 9,600 buildings around the country. That is a big 
operation.
    The agency is critical to the maintenance, for instance, of 
our courthouses, ports of entry, and Social Security offices. 
It makes sure that Federal workers have what they need to 
perform their jobs, from office supplies to information 
technology (IT) services. It takes care of what the 1947 
Commission called ``housekeeping'' matters so that the agencies 
of the Federal Government can focus more exclusively on their 
missions, and it leverages the purchasing power of the entire 
Federal Government to get the best deal possible for the 
taxpayer.
    We know that most GSA employees go to work every day with 
one overriding goal, and that is, to serve their country, not 
themselves. But obviously, we also now know that some GSA 
employees were falling very far below that standard--eight 
trips by GSA employees to plan for a Las Vegas conference and 
awards ceremony that cost the taxpayers $822,000. Conference 
organizers spent over $146,000 on food, $75,000 for a team-
building exercise that involved building bicycles, thousands of 
dollars more on after-hours parties, and over $6,000 on 
commemorative coins.
    We have heard that litany of irresponsibility before, but 
it bears repetition as we consider what has happened since 
those disclosures and what will happen going forward.
    Unfortunately, the Las Vegas conference was not an isolated 
instance of bad judgment. We now know from the work of the IG 
and other work that has been done, and some evidence that our 
own Committee has collected, that there was what I would call a 
culture of abuse and irresponsibility in GSA's Region 9, with 
all of that extravagant travel, misuse of government purchase 
cards, and a very poorly run awards program that allowed 
employees to treat themselves to iPods and DVD players.
    We found questionable, to say the least, bonuses awarded 
throughout the agency, thousands of dollars spent on cooking 
classes for employees in the Kansas City region, and a $270,000 
awards ceremony where taxpayers paid for GSA employees to beat 
on drums. I mean, really, in too many parts, GSA had become an 
agency out of control.
    Acting Administrator Tangherlini has shown he understands 
this and agrees and has instituted new procedures directly for 
the approval of conferences and has canceled 47 conferences 
that he determined to be questionable. These changes have saved 
the taxpayers over $11 million. He has also strengthened the 
Chief Financial Officer's authority over GSA's regional 
offices, which I strongly endorse, and has cut 85 percent of 
Senior Executive Service (SES) bonuses. Today Mr. Tangherlini 
will report on his review of GSA to get the agency back on 
track to fulfill its core mission, as I have described it.
    GSA Inspector General Brian Miller is also here with us 
today. He is a real hero in this story, his work having 
uncovered the flagrant and inexcusable spending by some GSA 
employees. Today he will help us understand how these scandals 
fit into the agency's overarching management problems.
    I was struck by the enormous award to the whistleblower of 
over $100 million for uncovering the tax fraud that was going 
on, and I do not think we can award you that sum of money this 
morning, Mr. Miller, but you have our invaluable, I hope, and 
really quite sincere gratitude for your work that uncovered 
this mess.
    Bottom line, we have to go forward together--the GSA, 
Congress, and the Administration--to ensure that spending 
abuses like those uncovered at the agency are never repeated 
and to help GSA return to the fundamentals of helping our 
government do more with less. Of course, I hope that our 
hearing today helps to keep that process in motion. Senator 
Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman. First of all, I 
want to thank you for holding this important oversight hearing 
on the GSA, the agency that is the Nation's landlord for 
Federal agencies and is supposed to be the Federal Government's 
leader in procurement and administrative services.
    Let me begin my remarks today by sharing with you the 
following excerpt from a Fortune magazine article that 
describes some of the problems at GSA.
    ``The new Administrator claims that there have been 
improvements in GSA . . . GSA is, nevertheless, the most 
durable mess in Washington. . . . The story involves great U.S. 
corporations and marginal operators . . . Chicago politicians; 
Washington influence peddlers and fixers . . . and, above all, 
time-serving bureaucrats who are . . . just job holders, 
glowing with contempt for the U.S. taxpayer. Happily, the cast 
also includes some honest, capable, GSA employees . . . 
harried, half underground, and hoping for better days.''
    I, too, am hoping for better days, but my hope is tempered 
by the fact that these words were written in 1955, and yet here 
we are again.
    In April of this year, we learned about the inexcusable 
waste of taxpayer money at the 2010 Western Regions Conference 
where GSA employees, as the Chairman has indicated, spent more 
than $800,000 for a Las Vegas conference and eight off-site 
planning meetings in advance of the real meeting. The Inspector 
General has found that GSA violated numerous contracting 
regulations and policies, including the Federal Travel 
Regulation, in connection with this conference. The IG also 
said that this situation raises ``special concern'' because 
GSA, as the Federal Government's manager of acquisition policy, 
should be a ``model'' in contracting and managing travel and 
conference costs. He has underscored that ``the absence of 
agency financial controls and top-down accountability allowed 
the 2010 (Las Vegas conference) expenditures to occur 
unchecked.'' But that is not all.
    Since then, our Committee's investigation has uncovered a 
2012 leadership conference in Napa Valley costing $40,000 
before accounting for travel costs, $300,000 in relocation 
compensation for an employee who left the agency after just 1 
year, 5- to 6-day trips to Hawaii for a one-hour ribbon-cutting 
ceremony, and questionable monetary awards and bonuses for some 
of the very same people involved in planning the Las Vegas 
conference.
    Now, GSA employees knew that this was wrong. One admitted 
to the IG, ``I never tell my friends what I spend . . . because 
they are all out of work . . . and they would say, `Are you 
kidding me?' ''
    Undoubtedly, I would say to our witnesses and our Committee 
Members, that is the reaction of all taxpayers footing the 
bill.
    All of this tells me that there is not just an inexcusable 
lack of financial controls and accountability at GSA. There is 
also a culture problem that says that this is OK, that this is 
acceptable, but just do not talk about it.
    After the Las Vegas conference scandal broke, some tried to 
claim that the problem was isolated to the Western Regions or 
even only Region 9 based in San Francisco. But additional facts 
suggest otherwise. We have read press reports about GSA 
spending $20,000 for cooking classes for employees in Kansas 
City for team-building exercises. GSA also threw a 1-day award 
celebration in November 2010 at a cost of nearly $269,000. This 
is the event that the Chairman mentioned at which GSA employees 
received drumsticks so that they could all drum together. The 
cost of this drumming exercise with each employee having their 
own GSA-purchased drumsticks was almost $30,000.
    In light of these continuing revelations, this Committee 
has sought explanations from the IG, the Acting Administrator, 
and all 11 Regional Administrators. Their responses highlighted 
the importance of the top-to-bottom review, which I want to 
commend the new Acting Administrator for undertaking, as well 
as the urgent need to implement organizational change and 
improve accountability.
    The Regional Administrators were not able to answer even 
basic questions about the budgets and spending in their own 
regions. They reported that the Public Buildings Service (PBS) 
and the Federal Acquisition Service (FAS) ``operate with 
separate budgets and with separate reporting structures.'' But 
here is what is most troubling. The fact is that no one in the 
agency has been able to provide detailed information on 
conference spending and related contracts within the regions 
because there has been no system to track such basic 
expenditures. Consequently, the top leadership in each region 
had little to no authority over the regional activities and 
spending of PBS and FAS. The convoluted configuration makes no 
sense and does not promote accountability.
    GSA also appears to have an extremely generous award policy 
that has little correlation with excellent performance by 
recipients, and let me make clear that I recognize there are 
some top-notch employees at GSA. I have had some of them 
detailed to my Committee staff, and some of them have 
extraordinary competence and dedication.
    But we learned that 50 people involved in planning the Las 
Vegas conference received awards totaling $35,500. And what was 
the outstanding performance for which these employees were 
being rewarded? For most, it was solely their role in planning 
this conference. An employee who led the Las Vegas conference 
planning received an award of $16,500, and this award was given 
after GSA leadership was informed of the IG's initial findings 
related to the conference scandal. Other executives involved in 
the conference received similarly generous awards ranging from 
$15,800 to a head-shaking total of $54,640.
    This was not just related to officials who planned the 
Western Regions Conference. One Federal Acquisition Service 
executive received awards totaling $79,000. This is outrageous 
and particularly so in the midst of what is supposed to be a 
freeze on pay in the Federal Government, a bad economy, and 
high unemployment.
    I very much appreciate that the Acting Administrator has 
recognized this problem as well during the course of his review 
and found that there are ``clear deficiencies in the area of 
performance awards'' and has frozen awards pending further 
review.
    The top-to-bottom review must result in lasting, 
sustainable reforms. Not one more dollar at this agency can 
afford to be wasted. The time for patiently hoping for better 
days is over.
    I am encouraged by the Acting Administrator's actions so 
far, but aggressive congressional oversight must continue 
because, to quote from that 1955 article, GSA seems to be ``the 
most durable mess in Washington.''
    Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Collins. It is 
interesting that we both separately went back decades, both to 
the founding of GSA and then only 7 or 8 years later it had 
already become a durable mess. So eternal vigilance is the 
price of efficiency in this case.
    Before I introduce our two witnesses, I want to thank both 
of them for their answers to the oversight letters that Senator 
Collins and I sent following the Western Regions Conference 
scandal.
    Acting Administrator Tangherlini and every GSA Regional 
Administrator was asked a series of detailed questions about 
the financial management of GSA, the organizational structure 
of the agency, conference and travel expenses, and a range of 
contracting issues. We also offered our thoughts to the IG on 
ways that his continued oversight might be helpful to our 
Committee, and he responded quite positively.
    I want to note that these letters, as well as the 
responses, are all posted on our Committee's Web site for 
public view, and we will also include them in the record of 
this hearing.\1\ And I think it is an indication that this 
Committee, which will be under new leadership, at least in 
part, next year, intends to continue the oversight of GSA.
---------------------------------------------------------------------------
    \1\ The letters referenced by Chairman Lieberman appear in the 
Appendix on page 72.
---------------------------------------------------------------------------
    With that, I will call on the Acting Administrator of GSA, 
Dan Tangherlini.

      TESTIMONY OF HON. DANIEL M. TANGHERLINI,\2\ ACTING 
      ADMINISTRATOR, U.S. GENERAL SERVICES ADMINISTRATION

    Mr. Tangherlini. Good morning, Chairman Lieberman, Senator 
Collins, Members, and staff of the Committee. Thank you very 
much for having me here this morning.
---------------------------------------------------------------------------
    \2\ The prepared statement of Mr. Tangherlini appears in the 
Appendix on page 37.
---------------------------------------------------------------------------
    I want to start by thanking the Members of this Committee. 
Your responsible and thorough oversight brought many of the 
issues that we have investigated in recent months to our 
attention. I would also like to thank our Inspector General, 
Brian Miller, and his staff, who joins me here today. From my 
first day in this position, I made it a priority to build a 
constructive relationship with him and his entire team. Along 
the way, he has contributed many important recommendations for 
reform.
    Five months ago, I was ordered by President Obama to assume 
the role of Acting Administrator of the General Services 
Administration in the wake of an investigation into the 2010 
GSA Western Regions Conference. What happened at that 
conference was a complete waste of the taxpayers' money and an 
unacceptable breach of their trust. This event was the result 
of a pattern of misjudgments at GSA that took place over 
several years and multiple administrations. This pattern has no 
place in any Federal agency, but it is particularly at odds 
with the priorities of this Administration and the mission of 
GSA.
    Since we were founded in the wake of World War II, our 
mission has been to deliver value for the taxpayers as well as 
consistent and responsive services to the agencies of the 
Federal Government. In this time of shrinking budgets, our 
mission has never been more important, and it is critical that 
we find a way to make every last taxpayer dollar count. 
Refocusing GSA on this core mission has been the driving force 
behind every action we have taken since I have arrived.
    As Acting Administrator, I immediately moved to build 
systems to prevent this kind of waste and abuse. I instituted a 
series of reforms that centralized the review of proposed 
conferences and cut back on employee travel. This resulted in 
the elimination of nearly 50 conferences and reduced travel 
budgets. These actions have already saved more than $11 million 
in taxpayer funds. We have also created mandatory online 
training on conference attendance to ensure that every employee 
at GSA understands our expectations of what is acceptable at 
conferences.
    My next step was to put together a team of experts from 
both outside and inside GSA that spent the next 5 months 
conducting a top-to-bottom review of this agency. Our task was 
to examine how GSA operated and what reforms could be 
implemented to help the agency better accomplish its mission. 
The top-to-bottom review has been conducted along several 
simultaneous tracks. We conducted interviews and meetings with 
agency employees, both one-on-one and with the leadership of 
two dozen major operating units within GSA, to discuss 
strategy, operations, and human capital.
    Through the ``Great Ideas Hunt,'' GSA employees across the 
country sent in their ideas for saving money and other reforms, 
generating more than 600 ideas and thousands of comments. So 
far, the ideas implemented from this effort have already 
generated nearly $6 million in potential savings.
    We also looked beyond the Federal Government and met with 
business leaders in procurement and real estate to find best 
practices from comparable private sector business models. At 
the same time, we performed exhaustive analysis of financial 
and performance data within the agency as well as studied 
Inspector General and Government Accountability Office (GAO) 
reports.
    Finally, we held more than a dozen meetings with other 
Federal agencies for feedback and to identify areas where GSA 
can provide greater savings.
    Through this review, GSA has instituted reforms addressing 
the problems that exist within the agency while also enabling 
us to better serve the American people and other agencies in 
the future.
    To start with, I issued an order to consolidate all budget, 
finance, and accounting personnel under the Chief Financial 
Officer. By placing the responsibility for all spending and 
budgeting decisions in this position, we will be able to 
increase transparency, accountability, and oversight on GSA 
spending, giving Congress and taxpayers a better understanding 
of how and where their funds are being used.
    One of the key findings of our top-to-bottom review was 
that the consolidation of the Chief Information Officer (CIO) 
functions provides an opportunity to improve the performance 
and cost-effectiveness of GSA's IT portfolio. Previously, the 
CIO had limited authority over project development, budgets, 
and performance. This week, I will be notifying Congress of my 
intent to consolidate all information technology personnel, 
budgets, and systems under the CIO.
    By creating a central authority over the development and 
maintenance of information systems, GSA will streamline its IT 
investments while also increasing access to agency data.
    GSA will also be notifying Congress of our intent to 
consolidate hiring responsibilities and human capital 
management personnel and operations under the Chief People 
Officer to eliminate multiple redundant layers of dispersed 
human resources activities and functions.
    Another area within GSA where we found a need for reform 
was performance awards. It is imperative that we never forget 
that the quality of the work we do must not be dependent on 
rewards and bonuses. The quality of our work should be based on 
our pride in our mission and in serving our fellow citizens to 
the very best of our ability. Going forward, this will be the 
bar we set for ourselves.
    To this end, we have already cut bonuses substantially, 
with senior executive performance awards being reduced by 85 
percent this year and the suspension of all performance awards 
given out in the Administrator's office. But we will go further 
by reducing the budget for all performance awards across the 
agency. I believe that these awards should be issued for 
notable service that goes above and beyond the basic expected 
level of performance.
    In the future, GSA will refocus our awards program by 
integrating cost savings and efficiency goals--the core 
elements of our mission--into every employee's 
responsibilities. It will be by those standards--standards 
which define our agency--that our employees will be judged and 
rewarded.
    Moving forward, I have instituted a targeted hiring freeze 
across the agency. As we examine how GSA is structured and what 
is the most efficient and effective compensation process for 
our employees, we must ensure that any new hires are aligned 
with the outcomes of our ongoing review.
    Last week, we filled an important leadership position at 
GSA by naming Dr. Dorothy Robyn as the agency's new 
Commissioner for the Public Buildings Service, and we are 
working on finding a new Federal Acquisition Service 
Commissioner as well. These leaders will help return GSA to its 
core mission of saving taxpayer dollars and reinvigorating 
GSA's two main business lines.
    Finally, as part of our mission to deliver value as well as 
President Obama's campaign to cut waste, we also examined 
multiple ways that GSA could better save taxpayer money. For 
example, we found that many of the fees assessed on other 
agencies for use of GSA schedules or other services have not 
been reviewed or adjusted in many years. Based on our review, 
we will be proposing the reduction of targeted fees from our 
Federal Acquisition Service. This will result in savings across 
the government of millions of dollars.
    We are also convening an interagency working group to 
review and develop recommendations on the overall fee structure 
for the schedules, and we will be reporting back to Congress on 
those findings.
    Over the past 5 months, we have already made significant 
progress toward building a better GSA. This agency is filled 
with talented individuals who do outstanding work on behalf of 
the people of this country every day. This review has helped us 
begin to transform GSA into an organization that can utilize 
those talents to their fullest potential.
    I am confident that, with the support of Congress, we can 
accomplish these reforms and create a culture of continuous 
evaluation and improvement at GSA. That is the kind of culture 
we need to restore the trust of the American people and refocus 
this agency on providing the highest level of value and service 
to this country.
    I welcome the opportunity to be here today and answer any 
questions that you may have. Thank you.
    Chairman Lieberman. Thank you very much, Acting 
Administrator Tangherlini.
    Mr. Miller, thanks again for your good work, and we welcome 
your testimony now.

 TESTIMONY OF HON. BRIAN D. MILLER,\1\ INSPECTOR GENERAL, U.S. 
                GENERAL SERVICES ADMINISTRATION

    Mr. Miller. Chairman Lieberman, Senator Collins, and 
Members of the Committee, thank you for the opportunity to 
testify at today's hearing. We have several ongoing 
investigations involving conferences, and we have an ongoing 
audit of conferences held between October 2011 and April 2012. 
We expect that the issues we have identified thus far will be 
remedied with the changes Acting Administrator Tangherlini has 
begun to implement. We look forward to advising the Committee 
when we complete those reviews and have definitive conclusions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Miller appears in the Appendix on 
page 43.
---------------------------------------------------------------------------
    Our audits of contracting practices at GSA also continue, 
and we have issued three reports recently that are available on 
our Web site. Those reports found, among other things, that the 
Federal Acquisition Service's Network Services Division, 
Pacific Rim, lacks written procedures and management controls 
over contract administration, and the contract file 
documentation for FAS Blanket Purchase Agreements did not 
support award decisions or provide a complete history of the 
acquisition. Management concurred with the findings and 
recommendations in those reports.
    With regard to purchase cards, our Office of Forensic 
Auditing and our Office of Investigations continue to conduct 
reviews and investigations of suspicious transactions across 
the charge card program. These ongoing reviews have recovered 
over $1.9 million in government charge card cases through 
forfeitures, restitutions, fines, seizures, recoveries, and 
penalties since 2009.
    We report on significant management challenges at GSA each 
year. Our audits and investigations are structured around these 
challenges and focus on high-dollar contracts and Federal 
buildings. We will continue to update Congress and work with 
the agency on any serious challenges we uncover within its 
programs and operations.
    Finally, I would like to briefly address the steps being 
taken to reduce fraud, waste, and abuse at GSA. I am encouraged 
by the steps Acting Administrator Tangherlini has undertaken to 
make sure that something like the 2010 Western Regions 
Conference could never occur again at GSA. The first step in 
stopping waste is to identify it, and to accomplish that, 
employees need to be willing to come forward when they learn of 
questionable activities. The Acting Administrator and I 
conducted town hall meetings throughout the regions to 
reiterate the valuable role GSA employees have as the first 
line of defense against fraud, waste, and abuse. In the month 
following the report's release, the number of incoming hotline 
tips more than doubled, and I believe that we are seeing 
improvement in employees' willingness to raise concerns. I 
would also note that GSA has responded to each recommendation 
made in the Western Regions Conference report and, among other 
things, GSA has moved to centralize the Office of the Chief 
Financial Officer and other offices. It is also my 
understanding that the Office of Administrative Services is 
implementing controls over conferences, including spending and 
procurement, to ensure top-down accountability, and 47 
conferences have been canceled. Additionally, GSA has 
introduced a new online training session on conference 
attendance that is mandatory for every employee.
    Thank you again for the opportunity to testify. I would be 
happy to answer any questions the Committee may have. Thank 
you.
    Chairman Lieberman. Thanks very much, Mr. Miller.
    We will begin with a 7-minute round of questions from the 
Members.
    Mr. Miller, as you know, on May 10, 2012, Senator Collins 
and I sent you a letter asking that you conduct additional 
investigations into conference and travel expenses at GSA so we 
could have a fuller understanding of the scope of the problems 
at GSA.
    Since that time, I know that the Acting Administrator has 
also referred other questionable activities to you to 
investigate, including that $270,000 awards ceremony held by 
the Federal Acquisition Service that we have referred to.
    I know these are ongoing, but I wonder whether it is 
possible for you to give us an update on whether you have seen 
further evidence of the scope of the management problems--in 
other words, beyond the Western Regions.
    Mr. Miller. Senator, as you know, with ongoing reviews, it 
is difficult to reveal a lot. I will tell you the parameters of 
the audit. We are looking at conferences that occurred in 
fiscal years 2011 and 2012 that have over 25 employees 
attending and are over $10,000. And so we are looking at those 
conferences. We are identifying the high-risk conferences, that 
is, conferences where the price per attendee is over the 
average price for attendees. So we are identifying them in 
terms of high risk.
    In terms of the scope, we are looking at similar problems 
that occurred at WRC, and there are many problems that 
occurred----
    Chairman Lieberman. Similar problems within----
    Mr. Miller. That occurred in the WRC. In the WRC report.
    Chairman Lieberman. Western Regions, right.
    Mr. Miller. Western Regions Conference. There were many 
problems that were identified. There were problems with the 
event planners, and we are looking to see if that is unusual or 
not. There were problems with following contracting procedures. 
We are looking to see if those problems are unusual or not, and 
unusual expenditures, and we will continue to look at that. We 
are focusing on those sorts of issues. As far as we can tell, 
we have an example in the Western Regions Conference of 
problems, and Acting Administrator Tangherlini has put into 
place some controls to address those problems. And we are 
looking at the recent conferences to see if there are any other 
problems outside of those.
    Chairman Lieberman. Right.
    Mr. Miller. And, certainly, if we find some, we will report 
them as soon as possible. But Acting Administrator Tangherlini 
has put into place some controls that prevent problems like WRC 
from happening again, and I am not sure how many examples the 
Committee needs to support the fact that these controls are 
needed.
    Chairman Lieberman. So at this point you are not prepared 
to say more than that because your investigation, in response 
to our letter and independently, is ongoing.
    Mr. Miller. It is ongoing, Mr. Chairman. I would love to 
tell you more. I do not want speed to in any way inhibit 
accuracy, and I would rather be fully accurate in what I tell 
you.
    Chairman Lieberman. Good enough. I appreciate it.
    Mr. Tangherlini, I welcome the statement in your testimony 
that you are going to revisit the level of fees that GSA 
charges other agencies for use of its contracts under its 
Multiple Award Schedules program. The fee, I would say for the 
benefit of others, which is expressed as a percentage of the 
dollar value of orders placed under the contracts, has remained 
stable--that is, the same--at 0.75 percent since fiscal year 
2004.
    In recent years, the fees have generated well over $250 
million a year. Both GAO and the IG have questioned whether the 
fee could be lowered to save the agencies money, and of course, 
we welcome that. But the reason is an important one, which is 
that the fees have now generated more than is needed to 
actually run the Schedules program. IG Miller's audit of the 
fee program earlier this year found that as of September 2009, 
the revolving fund where the fees are deposited had reserves of 
over $687 million--a considerable amount of money.
    Mr. Miller, is there an update from September 2009 about 
how much is in that fund at this time?
    Mr. Miller. I do not have an update right now on the amount 
in the fund, but you are correct about our audit findings.
    Chairman Lieberman. To the extent that you have a more 
recent number or can come up with one, I would welcome you to 
submit it to the Committee for our record.
    Let me come back to you, Mr. Tangherlini. As the IG had 
pointed out in his audit, the fees can be used, interestingly, 
to fund administrative costs of the Schedules program or to 
help fund other programs run by the Federal Acquisition 
Service, or excess funds can actually be returned to the 
Treasury. But it seems that the decisionmaking process for what 
happens to these reserve funds is effectively a black box at 
this point.
    So I want to ask you two questions. One is whether you have 
thought about what you would recommend be done with the excess 
funds. And second, are you prepared to do something that will 
make the process of handling these funds, which are, after all, 
public money, more transparent?
    Mr. Tangherlini. Thank you very much, Mr. Chairman. To 
answer your second question because that is the easier one, the 
answer is yes. We need to increase the transparency of all 
these processes, particularly when they involve agency and, by 
extension, taxpayer monies so that people know they are getting 
the best value for the resources that they put in.
    I do want you to know that it was really the IG report and 
the GAO reports that were foundational for us taking a look at 
the way we charge these fees, the way we build these reserve 
balances, what those balances are for. And there are some very 
strong and important business reasons why Congress gave the 
authority to FAS to reserve these funds so that they can make 
sure that they can continue to provide services.
    But that having been said, we do not think that they have 
been substantially revisited in quite some time, and we think 
that it is worthy of a good deep dive and inspection and a 
better understanding of what should be the right level for 
reserve and how can we provide a more transparent process so 
people can see what is going on within FAS. And at the same 
time, we think that there is already an opportunity for us to 
reduce fees. We have a surcharge on the Federal Strategic 
Sourcing Initiative contracts right now that in many ways 
discourages agencies from doing the right thing and using the 
strategic-sourced contracts. And we want to take away that fee. 
We want to reduce some other fees, and we really want to kick 
off a broader discussion with our agency partners and say, 
``What is the right structure for these fees going forward,'' 
recognizing the analysis done by the IG and the GAO.
    Chairman Lieberman. I welcome that response. So I agree 
with you that there was a reason for establishing the reserve 
fund, so we do not want to eliminate the reserve fund. But on 
the other hand, this is clearly a time in our Federal 
Government where every dollar counts, and you have millions of 
dollars, I would guess, in excess in this reserve fund. So I 
urge you to go forward to figure out both how to reduce the 
fees to the agencies so in turn that will reduce pressure to 
raise those dollars by taxes, but also to figure out, 
presumably with the Office of Management and Budget (OMB), how 
best to use the excess funds there now to help us in your own 
small way to get back toward balance.
    My time is up. Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Mr. Tangherlini, I want to talk to you about the 
compensation for GSA employees and in particular about employee 
awards, incentives, and bonuses. The data that we have looked 
at surprise me. It told us that more than 40 percent of GSA 
employees received compensation in excess of $100,000, that 14 
GSA employees received compensation exceeding $200,000, with a 
high of $279,352.
    Now, in some cases, this may be warranted. For example, a 
GSA procurement officer who is deployed to a war zone in Iraq 
or Afghanistan clearly gets additional funds, additional 
compensation. There did seem to be a pattern of extraordinary 
and uncontrolled overtime of employees working in one city but 
responsible for activities in another city and incurring 
incredible travel costs and per diem costs. And all of that is 
cause for concern to me and something I want to explore with 
you. But today, I want to talk to you specifically about some 
of the employee awards.
    Now, it is my understanding that for fiscal year 2011, 159 
GSA employees received multiple awards that totaled $10,000 or 
more. Now, here is what is interesting about this. The Office 
of Personnel Management (OPM) has a process that says that each 
agency head may authorize payment of a cash award up to 
$10,000. It then says that awards over $10,000 are ``quite 
rare'' and that if an employee's performance is significant 
enough to warrant a cash award of over $10,000, the agency must 
submit a request to OPM.
    We went to OPM and we asked, did OPM receive any request 
from GSA to approve for any of these 159 employees the awards 
that totaled $10,000 or more, and the answer was that OPM did 
not.
    When we further examined this, it looked like GSA 
circumvented the rules by giving multiple awards smaller than 
$10,000 rather than one-time awards that were $10,000 or more.
    Do you believe that giving multiple awards that eventually 
total $10,000 or more in the fiscal year circumvents the OPM 
approval process?
    Mr. Tangherlini. I certainly do not believe it is in the 
spirit of what was intended by the OPM approval process. Now, I 
would want to point out, there is one exception, and it is a 
pretty significant one: SES performance awards in excess of 
$10,000 do not require OPM approval. So putting aside that, 
which is a pretty sizable group of that number, but also 
another area that we have identified as being in need of some 
substantial review, and that is why we cut the SES bonus budget 
by 85 percent.
    But in our top-to-bottom review, we also identified that 
there are 15 different award categories within GSA that people 
are eligible for, and because we did not have the clear 
transparency and accountability straight down to the field 
level in our Finance Office and our Human Capital Office, it 
was possible for people to get one of these awards at some 
level within the organization.
    So I am not in any way going to try to explain or defend 
what happened before. I am going to say going forward that we 
are building systems and structures that will prevent that from 
happening, and we are cutting back the budgets because we are 
reminding folks that their salary compensation is really what 
is there to pay them for doing the work and that awards should 
really be reserved for very special and exemplary service, and 
it should be easily explained and completely justifiable.
    Senator Collins. Well, you are correct that there is an 
exemption for SES, but I will tell you that our initial 
analysis is that these 159 employees are not just SES 
employees, and I think you would agree with that.
    Mr. Tangherlini. I do.
    Senator Collins. But let us go to an SES employee. How 
could the Region 8 Pubic Buildings Service Administrator 
receive a bonus of almost $55,000, which appears to have been 
awarded for planning the Western Regions Conference? I mean, 
how could that happen?
    Mr. Tangherlini. I do not know the specifics of that 
particular individual. I do know that there were a number of 
individuals who won the Presidential Rank Awards. That is a 
statutory award that requires third-party review of the 
submission, and those awards are quite substantial. They are 
from 20 to 35 percent of pay. So if you have an SES employee--
the top end of the SES range is $179,000--you can get to some 
pretty sizable awards if you win one of those very significant 
and special awards.
    I think in the case of the individual you are speaking 
about, he won one of those Presidential Rank Awards, but I do 
not know or understand the justification of that particular 
one.
    Senator Collins. And would it not trouble you that anyone 
who was involved in planning the Western Regions Conference 
that was so extravagant and was such a waste of taxpayer 
dollars received any kind of bonus?
    Mr. Tangherlini. Well, that is why we think we have to 
really take a good, hard look at the performance system within 
the organization and recognize one of the ways that we should 
judge performance is not just meeting numbers but also 
providing leadership and accountability. A step in that 
direction that we are taking is we want to institute a 360-
degree review process for all leaders within the organization 
so that they can be assessed not simply by their superiors, but 
also by their peers and by their employees so that we can get a 
sense of where we need to develop further the leadership skills 
of our employees.
    Senator Collins. I want to also point out that if a 
recommended award is in excess of $25,000, which many of these 
awards that we have reviewed were, the Director of OPM reviews 
the nomination, and the President's approval is actually 
required.
    Mr. Tangherlini. Right.
    Senator Collins. My point is that it is not as if there are 
not systems in place to try to put a check on excessive awards 
to individuals who have not warranted that kind of recognition. 
But it sure looks to me like GSA ignored those checks and 
circumvented the safeguards in order to give extraordinary 
awards to many employees. And in many cases--not all, and I 
want to be clear on that--the awards do not seem to have been 
justified. Would you agree with that based on your review so 
far?
    Mr. Tangherlini. Based on our review, I think our actions 
speak to our analysis, the fact that we cut the budget for 
these awards by 85 percent and said back to our folks that, 
listen, this is going to be something you get for really 
special, exemplary, extremely justifiable acts for which, 
frankly, the test is going to be, can I explain it at a Senate 
hearing.
    Senator Collins. That is always a good test. Thank you, Mr. 
Chairman.
    Chairman Lieberman. Thanks, Senator Collins. Senator 
Johnson, good morning.

              OPENING STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Good morning. Thank you, Mr. Chairman, and 
thank you for holding this hearing. I have always felt the best 
disinfectant is the light of day, and I would say having to 
explain in front of a Senate hearing is probably a pretty good 
benchmark.
    Senator Collins, it is interesting. As I was looking 
through some of the briefing materials, the thing that jumped 
out at me was the drumsticks, close to $30,000. Have you seen 
the video, by any chance?
    Senator Collins. No.
    Senator Johnson. I viewed that yesterday, and Inspector 
General, I appreciate the fact that your staff now has agreed 
to let us release that video because I think it is important. 
Although we are not talking billions of dollars here, I think 
those anecdotal examples of just outrageous spending by the 
Federal Government are extremely important. And it is important 
to note that this is not just one conference. The drumstick 
incident occurred at an awards ceremony in 2010 where $30,000 
was also spent on time/temperature picture frames that were 
apparently handed out to the participants. So, again, I 
appreciate that and look forward to that video being publicly 
released because I think the American people need to see that 
type of abuse.
    Mr. Tangherlini, you have canceled 47 conferences. Can you 
tell me what the purposes of those conferences were and why 
they were ever scheduled in the first place?
    Mr. Tangherlini. Well, that was part of the reason why we 
canceled them. Every conference now has to come through with an 
explanation. It has to detail what the benefit to the taxpayer 
is and the results we will get out of it. And in some cases, a 
valuable conference--the GovEnergy conference, there were just 
so many flaws in the way it was constructed that we referred it 
to the Inspector General for additional analysis. We had our 
legal team look at it. And while we thought that there was 
value to the conference, we did not think we could explain or 
justify the mechanism by which the conference was put together.
    Other conferences, frankly, we just did not feel that there 
was sufficient justification for us to use taxpayer money to 
send people to them.
    Senator Johnson. Can you describe what some of those things 
were about? Because my guess would be those have been going on 
for decades, and they are going on today in other agencies. So 
I just want to get an explanation of what some of these 
government conferences are all about.
    Mr. Tangherlini. Well, I think the primary focus is to 
bring people together and to improve their training 
opportunities, to exchange ideas, to build connections and 
relations. And so there is nothing in principle wrong with a 
conference. The question is, are there other ways to do it? Are 
there other means of making those connections? Are there other 
events such as our annual Expo event where people could do it 
instead? And so that has really been our test, to really push 
back on the organization and say, listen, it is very important 
that we recognize the limitation we are facing with these 
resources, and it is important that we look at different ways 
for us to get whatever value they thought they were going to 
get out of that event.
    Senator Johnson. Well, the conferences that you are going 
to allow to go forward, what are those about?
    Mr. Tangherlini. Those are about training, and those are 
about connections between vendors, particularly small 
businesses and the agencies they serve. They are things like 
the Expo conference, during which we brought together thousands 
of vendors. We brought together thousands of government 
contracting officers. We provided hundreds of hours of 
training. We made sure, though, that when people got there, 
they recognized that they were going to a government training 
conference and it was going to look every bit the way that 
sounds, and that meant that it was going to be austere, it was 
going to be focused, and it was going to be mission oriented. 
And if people did not have business to do there, they needed to 
(a) not come or (b) leave once they were done.
    Senator Johnson. Now, both you gentlemen have worked for 
other government departments, correct? I think you were with 
the Department of Treasury, and you were with the Department of 
Justice.
    Mr. Miller. Yes.
    Senator Johnson. Without ratting them out, but I guess I am 
asking you to rat them out, is it a similar type of process in 
terms of having 50-60 conferences a year? I will start with 
you, Mr. Tangherlini.
    Mr. Tangherlini. Well, I came from the Treasury Department 
where I know that from the Secretary on down, we took very 
seriously our stewardship of taxpayer resources. So certainly 
in the 3 years I was there, I never saw anything like that.
    Senator Johnson. Mr. Miller.
    Mr. Miller. Neither have I. I did not see that at the 
Department of Justice.
    Senator Johnson. So GSA is the only one that is holding 
conferences? I mean, we are hearing about judicial conferences 
and----
    Mr. Miller. They would have conferences, usually training, 
and it would be at the National Advocacy Center in South 
Carolina. And they would train Assistant U.S. Attorneys and 
trial attorneys, those types of conferences, and they would 
have a heavy agenda of substantive training.
    Senator Johnson. What would those conferences typically 
cost? Was a typical budget hundreds of thousands of dollars?
    Mr. Miller. I would doubt that very much.
    Senator Johnson. Speaking of budgets, in my briefing 
materials, I have listed that GSA's budget is about a quarter 
of a billion dollars, which, unfortunately, in our government 
is a rounding error. That is not your full budget, though, 
correct?
    Mr. Tangherlini. No.
    Senator Johnson. What is the total amount flowing through 
GSA in terms of your fees?
    Mr. Tangherlini. The best number to use for the GSA budget 
is about $23 billion. There are about another $40 billion, as 
the Chairman pointed out, that flow through our vehicles, but 
not directly through GSA.
    Senator Johnson. As a business person, when you see some 
department that is really out of control, you either eliminate 
it or you drastically cut its budget. I am highly skeptical, 
when you see the comments going back decades about how out of 
control this agency has been, that we are going to be able, as 
phenomenal as you may be in terms of managerial abilities, to 
get this under control. I really do believe in many cases these 
agencies just have to be cut. What percent cut in terms of the 
budget could the GSA live with? And would that not be really 
the best way to force efficiencies?
    Mr. Tangherlini. Well, I would be concerned about doing any 
kind of across-the-board cut. I think the really important 
thing is to look at the mission that the GSA supports.
    Senator Johnson. But have not people been doing that for 
decades and simply not been able to get control over it?
    Mr. Tangherlini. Well, I think part of the concern is, for 
instance, on the Federal facilities side, we need to make sure 
that we are not cutting the budget so badly that we cannot take 
care of the facilities. The big issue here is: Are we applying 
the resources that we have been given in the way that they are 
meant to be applied? Are we applying them to repairing 
buildings? Are we applying them to providing the most efficient 
acquisition services? And I think that is what makes people 
really upset, is if you have $800,000 spent on a conference 
that could have gone into building a better heating or 
ventilation system for a building that saved taxpayer money by 
reducing energy, that is incredibly unfortunate, and that is 
where it is abusive.
    Senator Johnson. Just quickly on another subject, I just 
want to get your response. I sent a letter on April 30, 2012, 
about the U.S. Green Building Council's Leadership in Energy 
and Environmental Design program.
    Mr. Tangherlini. Right.
    Senator Johnson. The 2012 program is a pretty drastic 
departure. I am highly concerned about products not being able 
to be utilized in government buildings anymore that will cost 
jobs. Are you working actively on that? Are we going to put a 
stop to utilization of that, or are we going to start costing 
jobs?
    Mr. Tangherlini. We are looking at those standards, and we 
want to make sure that there is a fair, open process for those 
standards. I do not know where we are in responding yet to the 
rulemaking, so I want to be careful that I do not upset that 
very complicated legal process. But I will say that we have 
heard many of those concerns and others, and we are trying to 
reflect them in the way we handle that going forward.
    Senator Johnson. I will enter this letter in the record,\1\ 
and I would really like to work with your staff to get some 
answers on where we are in moving on that process. Thank you, 
Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The letter submitted by Senator Johnson appears in the Appendix 
on page 70.
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    Chairman Lieberman. Thanks very much, Senator Johnson.
    Senator McCaskill, thanks for being here. Good morning.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Good morning. It is good to be here this 
morning, and I want to start first with Mr. Miller.
    Mr. Miller, I have a very vivid memory of the two of us 
sitting in an office in the GSA building in Kansas City going 
over one of your audits, and I remember as a former auditor, 
you said some things to me in that meeting that went in my hard 
drive, and this was way back before the conference ever saw the 
light of day in Las Vegas. This was all about what I found in 
terms of a public relations contract that had been given out in 
Kansas City without a bid that seemed to be terribly wasteful 
and, frankly, without much in the way of results. And I 
remember you communicating to me in that meeting that you as a 
wizened auditor in government were surprised and, frankly, 
deeply concerned over some of the responses you had received to 
some of your audit findings. And that is when I began to 
realize that there was a really rotten problem at the very top 
of GSA.
    I also have a vivid recollection of talking to the head of 
the Public Buildings Service on my cell phone--I even remember 
where I was standing--when I was complaining to him that he was 
not taking aggressive action against the woman who had misled 
this Committee at a hearing about that contract and that you 
had documented that she had misled this Committee.
    Mr. Miller. Yes.
    Senator McCaskill. And I remember talking to him and 
saying, ``What are you going to do?'' And he basically said, 
``Nobody reads that stuff.'' And that was the moment when I 
understood how big a problem we had at GSA because he was just 
dismissing the IG's findings. And then I found out later they 
had given her a bonus. She had made a huge mistake in judgment. 
She had violated procurement. She was a regional boss, and she 
had misled this Committee, and you had documented that. And 
they gave her a bonus.
    So I just want to compliment you for your doggedness. I 
want to compliment you for what you do. I am hopeful that we 
can get our GAO Improvement Act passed. It is being held right 
now. It is on the floor but being held, and we are going to try 
to call out the secret holds because the more we empower the 
auditors, the more we make sure that you are doing your job, 
the more likely it is that we are going to be able to clean up 
messes like this.
    Now, Mr. Tangherlini, I think you are trying very hard. I 
have great respect for the bold moves you have made. And if 
anybody does not think what you have done is bold, they do not 
understand SES. They do not understand the SES service in the 
Federal Government if they do not understand that when you cut 
the bonus budget by 85 percent, that is an earthquake in SES 
world. There are a lot of nodding heads in the room because a 
lot of people in this room understand the calcified power of 
SES in the Federal Government. And that is one of the questions 
I want to ask you about. And I know there are arguments on both 
sides, but in a very tricky move between the transitions of 
Administrations, the SES and GSA basically took the political 
appointments from these different areas in the country and 
removed all of their power. When no one was watching between 
the Bush Administration and the Clinton Administration, they 
took the regional political appointments that are the eyes and 
ears of Congress into this agency, and they basically put them 
out to pasture and took away all of their power.
    Nobody ever said anything. No one ever realized this 
happened until all of a sudden, when the new people were put in 
place, they found they had an office with nobody reporting to 
them, they had no authority to do anything, so this woman in 
GSA in Kansas City basically did not have to listen to the 
Regional Administrators that had been appointed through the 
political process whatsoever. No power.
    So is that a good idea? And why did no one ever say 
anything about that? Because all it did was, in fact, muscle up 
the calcified middle management of this agency at the expense 
of congressional oversight.
    Mr. Tangherlini. I will take the first stab at it. I 
actually agree with you that there were substantial problems 
with the way that those organizational changes have been made, 
and that is why I have done everything I can to reverse them 
and clarify the role of the Regional Administrator. Some of 
those changes are going to require some additional work on what 
is the long-term role of the Regional Administrator, how does 
the region fit within the organization. Those are bigger 
questions. But in the meantime, I do not want Regional 
Administrators out there who feel that they are not empowered 
to call out waste or abuse or concerns and say that they do not 
have power to resolve them.
    And so we have done a couple of things. We have given them 
the head of contracting authority so that they are the ones who 
get to determine whether things can be bought. They work 
closely with our Senior Procurement Executive to determine who 
has warrants and, frankly, who does not have them anymore to 
obligate the Federal Government. We have a weekly phone call 
with the Regional Administrators and with our Deputy 
Administrator. If there is any concern, if there is any 
problem, if someone is not listening to them, I have told them 
that if they cannot resolve it, bring it to the Deputy 
Administrator, bring it to me, call me, or email me. Because if 
someone does not think that they report to the Regional 
Administrator, I certainly hope they do not think they do not 
report to me. And so that is what we have been doing to try to 
make sure that we have clarity of role and responsibility in 
the organization.
    Senator McCaskill. Well, you understand when the Regional 
Administrator in Kansas City tried to impact this situation, he 
was called to Washington and asked to sign a loyalty oath, 
which was, frankly, shocking to me that would occur. He was 
trying to point out some of the problems, and he was called on 
the carpet. And I then began a mission to see if we could 
rattle the very top cages in GSA. I am glad that Las Vegas came 
along because that toppled the entire structure, which needed 
to go. And as time went on and I became more and more familiar 
with some of the decisions that were being made, I was more and 
more surprised at some of the judgment calls that were being 
made.
    Inspector General, do you have any comments on this 
calcification in middle management at GSA that really began to 
pull the curtains on aggressive oversight by removing the power 
of the Regional Administrators to have any kind of supervisory 
authority whatsoever?
    Mr. Miller. Well, Senator, I think we found two data 
points: One with Kansas City where there was an out-of-control 
regional commissioner and many problems that you uncovered in 
your hearings; and another data point obviously is the Western 
Regions Conference, where we had a regional commissioner, 
again, who was out of control so that structure was not 
working.
    Ultimately, how an agency organizes itself and how it 
chooses to manage itself is an agency function, and it is not 
really the job of the Inspector General to tell them how to 
organize themselves. I feel like it is a bit out of my lane.
    Senator McCaskill. Well, I just want the Chairman to know 
that this happened, and it was almost as if they waited in the 
confusion of the transfer of Administrations, knowing that no 
one was going to be paying close attention, and they moved 
quickly and cleanly to change the supervisory authority of the 
appointments in which Congress has a role. And I think the 
reason Congress has a role in those appointments is that it 
augments and enhances the oversight capacity of Congress. And 
so far, I will tell you, I am a big fan of the Acting 
Commissioner. I think he has taken really aggressive steps that 
are hard to do in government to clean up this mess, and I do 
not think we can keep flaying the horse when the horse is 
trying very hard to clean up everything. But I do think it is 
something that we ought to take a look at as to exactly when 
and how this happened because I think it is really problematic 
that they had enough nerve to do this when no one was looking.
    Chairman Lieberman. Thanks, Senator McCaskill. I agree with 
you, and we will take a further look at it. Thanks for bringing 
that to light.
    I have a few more questions so we will go to another round. 
I wanted to talk with you about purchase card abuse. A 
longstanding concern of our Committee has been whether agencies 
generally exercise proper controls over purchase cards, which 
are government charge cards given to employees for making small 
procurements.
    Overall, it needs to be said, use of these purchase cards 
saves the government money because it helps eliminate 
paperwork. The numbers are really remarkable, and again, it 
shows how large the Federal Government has become. Federal 
employees spend over $30 billion annually using these purchase 
cards, and this generates, it is a pleasure to say, 
approximately $2 billion in rebates to agencies from the credit 
card companies. But obviously, we have to guard against abuses 
by those who use the charge cards for illegal or fraudulent 
purposes.
    I will add here, shamelessly but I think constructively, 
that it is my strong hope that before Congress adjourns this 
session that we give final passage to a bill sponsored by 
Senators Collins, Grassley, and me, which is S. 300, to require 
agencies to adopt better internal controls over the purchase 
cards.
    GSA, as you well know, Mr. Tangherlini, is the agency that 
negotiates the contracts with the major credit card companies 
for the charge cards that Federal employees use. So, obviously, 
we would hope that GSA would see itself as having a special 
responsibility for being a good steward of charge cards, and 
that is why it added insult to injury when we learned that in 
Region 9, Jeff Neely's deputy was arrested in 2010 and pleaded 
guilty for embezzling taxpayer money for personal use on items 
such as luxury hotels, meals, and spa treatments.
    One of the things that was interesting to me that I learned 
in your responses to the questions that Senator Collins and I 
posed in our letters was that there have been very few 
disciplinary actions at GSA for purchase card abuse in the last 
5 years--only one action in 2007, one in 2008, and none at all 
for years 2009 through 2011. Now, maybe that is because there 
is no purchase card abuse. On the other hand, when we see some 
of the other irresponsible behavior, you have to wonder. And I, 
therefore, wanted to ask you, going forward, are you either 
looking into whether there have been abuses that should have 
led to disciplinary action or are you taking proactive steps 
now to make sure that there are no, to the best of your 
ability, abuses of the use of these purchase cards?
    Mr. Tangherlini. Well, the answer to both questions is yes. 
On the retrospective work, we will work closely with the 
Inspector General as we go through and look at particularly 
these conferences and other spending, and spending in areas 
where we saw a pattern of abuse, and go and reconcile a past 
purchase card or travel card to see if we can find anything 
there.
    But going forward, I think it is important that we create 
the same kind of systems and oversight that make it impossible 
for people to hide behind the organizational complexity and 
raises our visibility into how people are spending taxpayer 
money within GSA. So we are doing a couple of things.
    One, we have reduced the number of purchase cards within 
the organization by nearly 15 percent with just simply taking 
back a bunch of the cards.
    The other thing we are going to do starting in the next 
fiscal year is we are going to buy a set of analytical tools so 
that we can really look at the purchase card volume through GSA 
and try to find patterns and try to discern information. This 
is something that the purchase card companies provide as an 
extra service, and we are going to avail ourselves to it so we 
get better data, more transparency, more visibility, so we can 
actually see what is going on in the field.
    Chairman Lieberman. I appreciate that.
    Mr. Miller, do you want to comment on the use of purchase 
cards in the agency?
    Mr. Miller. Yes. We have ongoing reviews of purchase cards, 
and since 2009, we have recovered $1.9 million in purchase card 
cases. I highlighted that in my opening statement. We continue 
to analyze them. Our Office of Forensic Auditing analyzes the 
data and makes referrals to our Office of Investigations, and 
we currently have criminal investigations going regarding abuse 
of purchase cards.
    Chairman Lieberman. That is important. So it does not 
really seem accurate or adequate that there were only two 
disciplinary actions in the last 5 years at the agency for 
improper use of purchase cards. Do you agree?
    Mr. Miller. I cannot dispute that figure. I do not have 
information about disciplinary actions taken against holders of 
purchase cards. I do note in one case that is ongoing, the 
purchase card authority was reduced.
    Chairman Lieberman. Yes.
    Mr. Miller. So that did occur. Now, of course, a criminal 
prosecution is not a disciplinary action. That is a criminal 
prosecution. The person is usually fired as a result.
    Chairman Lieberman. Right. Is that one going on now?
    Mr. Miller. Criminal investigation?
    Chairman Lieberman. Yes.
    Mr. Miller. I believe we have more than one.
    Chairman Lieberman. Yes. And outside the Western Region.
    Mr. Miller. Yes, at least one of them is outside. We have 
others going, too.
    Chairman Lieberman. OK.
    Mr. Miller. Yes, they are all outside of Western Region, 
but we also have criminal investigations in Region 9 as well.
    Chairman Lieberman. Right. Well, that is important and 
certainly says, Administrator Tangherlini, that what you are 
doing to try to curb the possibility of purchase card fraud by 
employees of GSA is totally justified. So I thank you for that.
    I want to just pick up on a couple of the questions that 
Senator McCaskill was asking about the GSA regions because 
obviously we have talked a lot about how important it is to get 
the regions under control from the central or headquarters 
operation. But I think there are other questions to ask about 
the regions as well, and I will start with you with a broader 
question, Mr. Tangherlini. GSA now has 11 regions--the National 
Capital Region office and 10 other offices--and I wanted to ask 
you whether you have thought about the baseline question of 
whether this is too many regions, whether GSA really needs that 
many regions.
    Mr. Tangherlini. Actually, that has been the first question 
we asked in each one of the top-to-bottom discussions we had 
with each of the regions. And by the 11th time I asked the 
question, I will point out, they got much better at answering 
it. But the fact is that what we do has such a retail component 
to it, if you will. We actually manage over 9,000, close to 
10,000 individual facilities, and those facilities, leased or 
government-owned, have specific local needs, and they have 
specific local requirements. We do contracting work with 
agencies that are spread throughout the entire country, and so 
there are specific needs that those agencies have.
    The big question we have to ask ourselves, though, is: How 
do we structure those regions? And do we need redundant and 
duplicative systems in those regions? And how do we overcome 
some of the challenges that have faced the organization since 
that piece in 1955, the ability to have transparency and 
visibility into what is happening at the local level and making 
sure that there is consistency in the way the services are 
delivered?
    One of the things that was very striking to me and really 
supported our decision to move forward with consolidating our 
IT function is that we have 11 different building management 
systems. Each region has its own IT system for managing 
building operations.
    Chairman Lieberman. Right.
    Mr. Tangherlini. And buildings, yes, they are different, 
each one is different, but there is not that kind of variation. 
And so as a result, we do not have as much visibility into the 
way these buildings are operated, the expenditures. We make Mr. 
Miller and his team's job even harder. And as a result, we do 
not have the best control, management, and oversight of our 
resources.
    So we need to untangle that web of reporting of 
transparency, and then I think we have to ask ourselves the 
bigger question, the question that has not really been asked 
since we were founded in the late 1940s, early 1950s: What is 
the best way for us to cover the map, if you will, and deliver 
services?
    Chairman Lieberman. So your answer today is that you are 
considering the question of whether the 11 regions are 
appropriate or too many?
    Mr. Tangherlini. I think that is fair to say, that is a 
broader discussion that we want to have as part of the budget 
process. We want to continue to have it within the 
organization. In the meanwhile, though, that is not a reason 
for us not to make sure that the Regional Administrators do not 
have the power, the resources, and the accountability they need 
to oversee those functions. It is a big country, lots of 
buildings, lots of transactions, so we are going to need some 
regional infrastructure. What does it look like? How does it 
work? I think it is reasonable for us to keep asking those 
questions.
    Chairman Lieberman. I would just ask for Senator Collins' 
patience for one more question on this subject, which Senator 
McCaskill touched on in a way, too. Do you think we need a 
political appointee over each region, or should this rather be 
a civil service person?
    Mr. Miller. Mr. Chairman, that is, I think, really out of 
my lane to opine on that. Obviously, there is a sense in which 
the Regional Administrators are the eyes and ears of the Senate 
because they have a great deal of input into the political 
appointments.
    On the other hand, I have always been a career employee, so 
I have a great deal of faith in career employees, too.
    It really is not up to me to make this sort of a call. I 
have seen abuses each way.
    Chairman Lieberman. Sure. Mr. Tangherlini, do you want to 
step into that thicket?
    Mr. Tangherlini. I was actually hoping he would answer for 
me. [Laughter.]
    But since he did not, I have to keep going with it, I 
guess. I think that is also one of those baseline questions we 
have to ask ourselves. So how do we structure ourselves, and 
then how do we make sure that we have the right level of 
accountability within the organization? You heard Senator 
McCaskill make a very good point about the need to make sure 
that we do not install a group of folks who sit there for so 
long that they do not feel that they need to report to anyone.
    That having been said, it is hard on a continual political 
replacement cycle to find that many high-quality people to 
consistently do those jobs.
    Chairman Lieberman. Exactly.
    Mr. Tangherlini. That is the balance we have to strike. We 
have the budget process. We have started this review. These 
questions are being asked. We do have a constitutional event 
happening in November that will allow us then to rejigger, term 
to term or Administration to Administration, and so I think it 
is the right time to be asking those questions.
    Chairman Lieberman. Very good. Thank you. Senator Collins.
    Senator Collins. Thank you, Mr. Chairman. I am going to 
pick up where you left off because Mr. Tangherlini and I had 
the same discussion when we were talking on the phone.
    I think this is a difficult issue. How do you ensure 
accountability and appropriate authority and in whom should it 
be vested? I served as a Regional Administrator of the Small 
Business Administration for New England in the final year of 
the first President Bush's Administration. I loved the job. I 
felt we made a real difference at a time when New England was 
going through a lot of bank failures. But I also heard from the 
employees, with whom I was privileged to work, about previous 
Regional Administrators in some previous Administrations who, 
how shall I say it, did not take the job as diligently as I 
did.
    So I think this is a difficult call because these are 
short-term political appointees. Some of them are terrific, 
believe in public service, are excellent managers, and have 
terrific skills. Some of them, frankly, are being rewarded for 
helping the President be elected, and they may not have the 
skills that are necessary.
    I do not know the answer to this question. I truly do not. 
And I think it is something we need to talk more about. 
Clearly, there is an absence of authority and accountability, 
and that must be solved. But I do not know how we solve it 
because it depends so much on the person who is appointed.
    Mr. Tangherlini. So I feel the need to put in a plug for 
the Regional Administrators we have. We have a great team. They 
are committed, they are engaged, and they are involved.
    I think one of the big problems that has not been resolved 
since that Fortune article from 1955, which I also read and was 
amused to see how many similarities there were, is that we 
really have not built the strong accountability and 
transparency systems, the real visibility down to the field 
level of work. And so what happens is we have kind of 
bureaucratic cloud cover that prevents us from really seeing 
what is going on in those organizations, and because we do not 
have the commonality of the systems, it is very hard for us to 
compare the data.
    The Chairman pointed out the fact that we simply could not 
say how much we had spent on conferences because we did not 
collect the data in that way and we did not have a central 
repository for recording that kind of expenditure. We need to 
have that, and that is what we think will help us maybe solve 
some of the problems that we had not been able to solve up to 
this point.
    Senator Collins. Staying with the theme of accountability, 
Mr. Miller, you mentioned the recoveries for improper use of 
purchase cards, and I think you said that there have been 
recoveries of $1.9 million, which is a considerable amount. Is 
there an effort underway to get costs recovered from the 
improper expenditures related to the private parties at the 
Western Regions Conference that were charged to the taxpayer? I 
understand there was a $120 birthday cake, that an employee's 
spouse allegedly impersonated a GSA employee in order to get 
into certain events, that per diem meal charges were submitted 
even though meals were provided as part of the conference. Is 
there an effort to recover those costs?
    Mr. Miller. That was one of the first conversations I had 
with Mr. Tangherlini, and I will let him tell you how he has 
actually submitted bills to these employees.
    Mr. Tangherlini. With the assistance of the Inspector 
General and his team helping us review the expenditures, we 
actually have submitted bills to a number of the employees. We 
have received reimbursement from a number of employees who were 
involved in some of those questionable activities. We have 
withheld final payments of severance or other benefits for some 
of the employees who are no longer with GSA. And in one case, 
we received reimbursement from a contractor that had provided 
ineligible expenses on their voucher to us.
    So working very closely with the Inspector General, I will 
commit to you, if there is a dollar we can get back, I am going 
to try to get it.
    Senator Collins. I am glad to hear that. That is part of 
accountability, and it also serves as deterrence. And it does 
not substitute for disciplinary action that should be taken, 
but it should be part of the attempts to make the taxpayers 
whole, and I am pleased that you are being aggressive on that.
    I also want to follow up on the Chairman's questions about 
purchase cards. You mentioned that you had reduced the number 
of people who had access to purchase cards, and I think that is 
a step in the right direction. I am wondering if you have also 
considered putting a limit on how much can be charged to a 
purchase card. For example, our investigation revealed that an 
employee used a single purchase card for purchases totaling 
over $1 million during a 7-month period, and some purchases 
were from a vendor that was paid $104,000 when the purchase 
orders appeared to only authorize $55,000.
    But this raises a bigger issue in my mind, and that is, do 
we really want a single employee to be able to charge in excess 
of $1 million over just 7 months?
    Mr. Tangherlini. Well, I think the question is, what kind 
of controls are in place and what kind of additional 
authorizations are required. If the employee is a buyer and is 
using the purchase card for how it is set up to be used, as the 
Chairman pointed out, to save considerably on the amount of 
paperwork and the amount of back-shop work, you could have a 
position where it is perfectly reasonable or fine for someone 
to spend that kind of money. Is there appropriate oversight? 
Are there controls? Are other people signing off? Or do they 
have the singular ability to spend that kind of money? If it is 
the latter, that is deeply concerning.
    Senator Collins. And I would mention that many of the 
purchases were related to that 1-day Federal Acquisition 
Service awards ceremony that has been so troubling to us as 
well.
    Mr. Tangherlini. I would just like to add that it was 
actually our review, working with the Inspector General and at 
the request of Congress, of prior conferences that led me to 
refer that particular conference to the Inspector General 
because we saw enough problems with it that we really wanted 
their additional insight into whether there was something more 
than just problematic, something more than just inappropriate 
about it, whether there was anything actually illegal.
    Senator Collins. I have a final question for Mr. Miller. I 
worked on Capitol Hill when the Competition in Contracting Act 
was passed, and as I read through the materials, I saw a 
notable disregard for the requirements to seek out competition 
in the award of Federal contracts by GSA in order to ensure 
that we are getting the lowest price at the best quality.
    This to me is extraordinary because GSA is supposed to set 
the standard. GSA, as you have said, is supposed to be the 
model. I believe the contract to the resort at which the 
infamous conference was held was a sole-source contract, 
despite the fact that there were clearly many hotels that would 
have been happy to bid on that conference.
    Could you talk to us a bit about the violations of the 
competition requirement that you found so far as parts of your 
audits?
    Mr. Miller. Senator, you are exactly right. There are many 
violations, unfortunately, of the Competition in Contracting 
Act. We have uncovered a number of those violations in 
connection with Recovery Act projects, and I have testified on 
those violations in other committees. We have submitted a 
proposal that would require GSA to report a violation of the 
Competition in Contracting Act to their oversight committees, 
much like the Anti-Deficiency Act, because currently we 
identify the violations but there is no remedy. And so we do 
have plenty of audits that have that as a finding, that they 
did not have adequate competition, they violated the act, and 
unfortunately, it is not isolated. It occurs a lot.
    Senator Collins. Thank you. In many ways, those are the 
hidden costs.
    Mr. Miller. Yes.
    Senator Collins. Because we do not know how much would have 
been saved if the service or good had been put out to a bid. 
And we will probably never know how much additional lost 
taxpayer money was involved. So I do think that is important, 
and I like your suggestion of the report to Congress. That is 
something I think we will follow up on with you.
    Thank you both for your testimony. Again, I want to thank 
you both for taking on this task in such a serious manner. We 
do have to get this straightened out. There is nothing that 
erodes the confidence of taxpayers more than reading of these 
scandalous examples of wasted dollars at a time when the public 
is struggling to put food on the table. Thank you.
    Chairman Lieberman. Thanks, Senator Collins. Obviously, I 
could not agree with you more, and Mr. Miller, I thank you for 
being a real steward of public trust and by your work, in some 
sense, making the public angry, but also putting the agency 
under pressure to get better.
    Human nature being what it is, probably at this time the 
prospect of a repeat of the outrageous behavior at the Las 
Vegas conference and the other things that were happening in 
Western Region 9 are slight. In other words, people understand 
that GSA is under the klieg lights now. But what I appreciate 
that both of you are doing, and I thank you particularly as 
Acting Administrator, Mr. Tangherlini, is that this is the 
moment to try to put into place systems that will stop a 
repetition of the infuriating behavior of GSA employees when 
the memory of what happened in Western Region 9 is gone, which 
is another part, unfortunately, of human nature and history in 
organizations that repeats itself. So I think you are well on 
the way to doing that. It does require constant oversight and 
strong leadership--strong leadership in the agency and constant 
oversight by Congress. And certainly I know this Committee will 
continue to do that.
    The record of this hearing will remain open for 15 days for 
additional questions and statements by yourself and others, if 
you would like. With that, I thank you again very much and 
adjourn the hearing.
    Mr. Tangherlini. Thank you.
    Mr. Miller. Thank you.
    [Whereupon, at 11:38 a.m., the Committee was adjourned.]
                            A P P E N D I X

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