[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                 GOVERNMENT SPENDING: HOW CAN WE BEST 

           ADDRESS THE BILLIONS OF DOLLARS WASTED EVERY YEAR?

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


                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT

                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 5, 2013

                               __________

                            Serial No. 113-6

                               __________

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
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan
RON DeSANTIS, Florida

                   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 5, 2013.................................     1

                               WITNESSES

Mr. Thomas A. Schatz, President, Citizens Against Government 
  Waste
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr. Ryan Alexander, President, Taxpayers for Common Sense
    Oral Statement...............................................    30
    Written Statement............................................    33
The Honorable Dan G. Blair, President, National Academy of Public 
  Administration
    Oral Statement...............................................    61
    Written Statement............................................    63
Mr. Jonathan M. Kamensky, Senior Fellow, IBM Center for the 
  Business of Government
    Oral Statement...............................................    75
    Written Statement............................................    77

                                APPENDIX

Record Taxpayer Cost Is Seen for Crop Insurance, The New York 
  Times Article Submitted by Rep. Cummings.......................   121
The Honorable Elijah E. Cummings, a Member of Congress from the 
  State of Maryland, Opening Statement...........................   123
National Academy of Public Administration, Responses for the 
  Record.........................................................   125
Sliding Past Sequestration, Taxpayers for Common Sense Article 
  Submitted by Rep. Mica.........................................   127


 GOVERNMENT SPENDING: HOW CAN WE BEST ADDRESS THE BILLIONS OF DOLLARS 
                           WASTED EVERY YEAR?

                              ----------                              


                       Tuesday, February 5, 2013

                   House of Representatives
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 12:59 p.m., in Room 
2154, Rayburn House Office Building, Hon. Darrell E. Issa 
[chairman of the committee] presiding.
    Present: Representatives Issa, Mica, Turner, Duncan, 
Jordan, Chaffetz, Lankford, Amash, Gosar, DesJarlais, 
Farenthold, Lummis, Massie, Collins, Meadows, Bentivolio, 
DeSantis, Cummings, Maloney, Norton, Tierney, Cooper, Connolly, 
Speier, Cartwright, Pocan, Duckworth, Davis, Cardenas, 
Horsford, and Lujan Grisham.
    Staff Present: Ali Ahmad, Majority Communications Advisor; 
Robert Borden, Majority General Counsel; Molly Boyl, Majority 
Parliamentarian; Joseph A. Brazauskas, Majority Counsel; 
Caitlin Carroll, Majority Deputy Press Secretary; Sharon Casey, 
Majority Senior Assistant Clerk; Steve Castor, Majority Chief 
Counsel, Investigations; John Cuaderes, Majority Deputy Staff 
Director; Adam P. Fromm, Majority Director of Member Services 
and Committee Operations; Linda Good, Majority Chief Clerk; 
Ryan M. Hambleton, Majority Professional Staff Member; Jennifer 
Hemingway, Majority Senior Professional Staff Member; Mark D. 
Marin, Majority Director of Oversight; Scott Schmidt, Majority 
Deputy Director of Digital Strategy; Matthew Tallmer, Majority 
Investigator; Peter Warren, Majority Legislative Policy 
Director; Rebecca Watkins, Majority Deputy Director of 
Communications; Meghan Berroya, Minority Counsel; Jaron Bourke, 
Minority Director of Administration; Krista Boyd, Minority 
Deputy Director of Legislation/Counsel; Ashley Etienne, 
Minority Director of Communications; Devon Hill, Minority 
Research Assistant; Carla Hultberg, Minority Chief Clerk; Elisa 
LaNier, Minority Deputy Clerk; Dave Rapallo, Minority Staff 
Director; and Mark Stephenson, Minority Director of 
Legislation.
    Chairman Issa. The committee will come to order one minute 
early.
    The Oversight Committee exists 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. It is our job to work tirelessly in partnership 
with citizen watchdogs to deliver the facts to the American 
people and bring genuine reform to Federal bureaucracy.
    Today we continue that mission. For months we have been 
engaged in a national discussion about how government takes and 
spends money from hardworking taxpayers. As this debate has 
unfolded, a lot of attention centers on which taxpayers should 
be paying more so that government could keep spending more. The 
question that hasn't been asked enough, although it has been 
asked, whether or not Washington should be taking more.
    I come from a business background, and the only way you can 
make more is to deliver a better product. You need to be 
transparent and you need your services to be delivered 
efficiently. Understanding we are not questioning that services 
need to be delivered here today but, rather, ensuring that the 
delivery of services be done in the most cost-effective 
possible way. Too often the distinction between needed services 
and wasteful government gets blurred. Perhaps it is for 
political purposes on occasion; perhaps it is simply because 
attacking waste in government often looks like you are 
attacking the underlying program.
    We are not an authorization committee, for the most part. 
We do not authorize most major spending programs. So I believe 
we can be an honest broker. We will end no programs, but we 
will work, and are working in our hearing today, at finding 
places to find out if in fact these financial realities need to 
be fixed and that they are clearly broken. Ignoring the problem 
is no longer an option. We are running out of time because, 
when government doesn't function properly, American people lose 
access to important government services.
    In any other enterprise producing nearly a $1 trillion 
deficit for the foreseeable future every year would in fact be 
shut down. Last year the government reported a total of $108 
billion in improper payments. It would have taken us down by 
one-tenth of our problem. In 2011, the inspector general 
community identified potential savings produced from government 
reform totaling another $100 billion.
    The General Accountability Office has published report 
after report identifying dozens and dozens of government 
agencies that do duplicate and overlapping and cost-inefficient 
projects that hardworking Americans pay tens of billions of 
dollars a year for.
    We need, and have, a blueprint to change that. What we need 
is the political will, from both parties and the President, to 
do so; and we have never had a better reason. Ultimately, as 
the debate in other committees is on tax increases or simply 
cutting programs to spend less money, we are the committee that 
needs to be part of a fix that is a win-win: a win for the 
taxpayer because he doesn't have to pay more; a win for the 
service recipient because, in fact, services can be delivered 
for less. That is our challenge; it is what we are here today 
to talk about.
    I don't believe it falls anywhere from the far left to the 
far right of the ideological spectrum to reform government. 
Just the opposite; I believe it is in the interest of all of 
us, no matter where you are in the spectrum, to spend less 
doing what we have agreed or disagreed to do so that, in fact, 
the American people have a smaller burden than they do today. I 
believe today's hearing will take us a long way in that 
direction. We have a distinguished panel here to tell us about 
it.
    With that, I would like to recognize the ranking member for 
his opening statement.
    Mr. Cummings. I want to thank you very much, Mr. Chairman, 
for holding this hearing. It is very encouraging that the first 
two committee hearings of this committee have been bipartisan 
and focused on the core jurisdiction of this committee. Your 
staff did an exemplary job leading up to this hearing in 
sharing information and making the planning of this hearing a 
bipartisan effort.
    The title of this hearing gets right to the heart of the 
issues we are examining today. The title is Government 
Spending: How Can We Best Address the Billions of Dollars 
Wasted Every Year?
    We in Congress talk all the time about cutting waste and 
making the government more efficient. It is time to go from 
talking to acting. I am looking forward to hearing from the 
witnesses testifying today about concrete actions the 
Administration and Congress can take to save taxpayers money.
    The Department of Defense is responsible for an appalling 
amount of wasteful spending each year through its contracts. 
DOD obligated $365 billion for contracts in fiscal year 2012 
and the Department has had significant problems with contract 
management and oversight.
    The Congressional Research Service recently reported that 
DOD acquisition programs have experienced ``poor performance 
against the backdrop of war in Afghanistan, spiraling contract 
costs, and decline in the size of the defense acquisition 
workforce.''
    In testimony before this committee last month, a witness 
from the Government Accountability Office said that several DOD 
IT investments ``experienced significant performance problems 
and were indeed high-risk.'' One of the specific examples the 
chairman and GAO pointed out in that hearing was a contract 
that the Air Force canceled last December, after having spent 
$1 billion. The Expeditionary Combat Support System was plagued 
by delays and cost overruns.
    Representative Speier highlighted this issue in a letter to 
us in December, Mr. Chairman, and I agree that it makes sense 
for the committee to adopt her proposal to investigate this 
contract further.
    Another example is the $750 million in overpayments by DOD 
to the contractor that provides food supplies to United States 
troops in Afghanistan. This is an issue that has been 
highlighted by the ranking member of the National Security 
Subcommittee, John Tierney, and the subcommittee's chairman, 
Mr. Chaffetz. Ranking Member Tierney has also been a leader in 
exposing problems with DOD's F-35 Joint Strike Fighter, the 
largest weapons procurement program in history, which has had 
substantial cost overruns and repeated schedule delays. Full 
production of the Joint Strike Fighter Program has been delayed 
by six years and the cost per unit have doubled.
    We are better than that. We can do much, much better.
    Another area of significant Federal spending is crop 
insurance. I ask unanimous consent to enter into the record a 
New York Times article from January 15, 2013, titled ``Record 
Taxpayer Cost Is Seen for Crop Insurance.''
    Chairman Issa. Without objection, so ordered.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Cummings. According to this article, the government 
pays $1.3 billion, $1.3 billion each year to 15 insurance 
companies. The article states ``government documents show the 
taxpayers have paid nearly $7 billion so far to subsidize 
premiums for 2012. The documents also show that taxpayers could 
pay another $7 billion to underwrite losses by the insurance 
companies and other costs.''
    These are just a few examples of government waste. There 
are many, many more. And I hope the committee will conduct 
vigorous oversight to expose these and other sources of 
wasteful spending and ensure that necessary actions are taken 
to address the root problems. As I have said many times, and I 
said just here today, that taxpayers want to make sure that 
their tax dollars are spent effectively and efficiently; and, 
Mr. Chairman, we are committed to work with you in a bipartisan 
way to not only see where that waste is taking place, but then 
to come up with meaningful solutions to try to address them.
    With that, Mr. Chairman, I yield back.
    Chairman Issa. I thank the gentleman, and we will.
    We now recognize our distinguished panel of witnesses.
    Mr. Tom Schatz is president of Citizens Against Government 
Waste; Ms. Ryan Alexander is the president of Taxpayers for 
Common Sense; the Honorable Dan Blair is president and CEO of 
the National Academy of Public Administration; and Mr. Jon 
Kamensky is a senior fellow at the IBM Center for The Business 
of Government.
    Lady and gentlemen, pursuant to the committee rules, would 
you please rise to take an oath and be sworn? And raise your 
right hands.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witnesses respond in the affirmative.]
    Chairman Issa. Please be seated.
    Let the record indicate all witnesses answered in the 
affirmative.
    Before I recognize Mr. Schatz, I just want to thank you all 
for being here. Often we talk about individuals coming before 
us as witnesses. Ultimately, you are all partners in the 
process of understanding and exposing waste in government, so I 
am particularly pleased to start off this oversight hearing 
with this panel.
    With that, you all are experienced; you know the five 
minutes, you know the red, green, black, blue, the whole bit, 
so I know you will finish up pretty close to that five minutes. 
With that, I recognize Mr. Schatz.

                      WITNESSES STATEMENTS

                 STATEMENT OF THOMAS A. SCHATZ

    Mr. Schatz. Thank you very much, Mr. Chairman. I ask that 
my full testimony be submitted for the record.
    Chairman Issa. Without objection, all testimonies will be 
entered in the record.
    Mr. Schatz. My name is Thomas Schatz. I am the president of 
Citizens Against Government Waste, a nonprofit organization 
with more than one million members and supporters nationwide.
    It is no secret that government waste is present throughout 
every agency and all functions could be performed more 
effectively and efficiently. Recommendations to eliminate 
waste, fraud, abuse, and mismanagement are regularly provided 
by GAO, CBO, the President's budget, and congressional 
committees. Outside of Congress, think tanks, advocacy groups, 
and private sector companies also provide information on 
government expenditures.
    For example, since 1993, CAGW has released Prime Cuts, a 
compendium of recommendations that emanate from both public and 
private sources. The most recent edition of Prime Cuts 
identified 691 recommendations that would save taxpayers $391.9 
billion in the first year and $1.8 trillion over five years.
    Over the years, there have really only been two large 
comprehensive studies of government spending, the Hoover 
Commission under President Truman and the Grace Commission 
under President Reagan. The Hoover Commission inspired many 
States to establish similar entities, especially the Little 
Hoover Commission in California, which has been operating 
continuously since 1962. However, there is no similar permanent 
entity at the Federal level.
    Now, any evaluation of government programs should both 
determine whether or not the expenditures are complying with 
statutory requirements and how the programs could and should 
function in today's world. In addition to thinking about how 
programs relate to current needs, there should also be a 
mechanism in place to prevent the establishment of new programs 
when current programs already serve a particular need.
    Indeed, an underlying reason for government waste and 
mismanagement is Congress's tendency to create a program to 
solve a problem. Unfortunately, neither the House nor Senate 
has adopted proposed rule changes that would require committee 
reports to contain an analysis by CRS on whether or not the 
bill creates a new Federal program that would duplicate or 
overlap any existing program. The reporting committee would 
also be required to explain why the creation of the new program 
would be necessary if a similar program already existed.
    On the other hand, Congress could act at any time to 
terminate or consolidate duplicative and overlapping programs, 
and particular findings that were produced by GAO in two annual 
reports published in 2011 and 2012. For example, in 2012, GAO 
recommended consolidating Federal offices, selling excess 
uranium at the Department of Energy, and cutting improper 
payments by Medicare and Medicaid.
    The 2012 report cited 209 Science, Technology, Engineering, 
and Math programs costing $3.1 billion spread across 13 
agencies in fiscal year 2010. More than one-third of those 
programs were adopted and first funded between fiscal years 
2005 and 2010, yet the United States still does not have enough 
future workers in STEM fields and U.S. students are still 
behind in math and science, compared to other highly 
technological nations.
    GAO found 47 job training programs in nine agencies that 
cost $18 billion in 2009. Only five have had an impact study 
completed since 2004 to determine whether or not participants 
secured a job as a result of the program, rather than a 
separate cause.
    Finally, and most absurdly, there are more than 50 programs 
across 20 agencies to promote financial literacy. There is no 
reliable data on the total cost of those programs, and a 
government that itself is going broke has no business trying to 
teach the American people how to balance their checkbooks.
    My written testimony contains several specific proposals to 
cut wasteful spending and improve efficiency, including 
replacing the one dollar bill with the one dollar coin, 
eliminating the Medium Extended Air Defense System, reducing 
identity theft at the IRS, increasing the use of Recovery Audit 
Contractors, and reducing or eliminating farm subsidies, 
particularly the sugar program and the proposed dairy market 
stabilization program.
    In regard to information technology, we commend the efforts 
by this committee to address wasteful spending in this area. 
Agencies should also be increasing the use of cloud services 
and, at the same time, reducing the number of unnecessary or 
excessive IT software licenses.
    Finally, we urge the committee to adopt structural reforms 
of the U.S. Postal Service, while avoiding a taxpayer bailout.
    While programs can be consolidated, reformed, or terminated 
by Congress at any time, such actions have been few and far 
between. In addition to taking action on specific proposals to 
cut wasteful spending, Congress should also consider 
establishing a new commission to provide recommendations to 
reorganize Federal agencies, as well as a sunset commission.
    I appreciate the opportunity to testify before the 
committee today and would be glad to answer any questions.
    [Prepared statement of Mr. Schatz follows:]

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    Mr. Mica. [Presiding.] Well, thank you so much, Mr. Schatz, 
for your testimony. We will withhold questions until we have 
heard from all of the witnesses, but appreciate your testimony.
    Let me now recognize Ryan Alexander, president of Taxpayers 
for Common Cause. You are welcome and recognized.

                  STATEMENT OF RYAN ALEXANDER

    Ms. Alexander. Thank you. Thank you for inviting me to 
testify this afternoon. I am president of Taxpayers for Common 
Sense, a national nonprofit budget watchdog.
    I sat before this committee nearly two years ago testifying 
on GAO's high-risk and duplicative program reports. I want to 
recognize one positive change since then: the wasteful 
volumetric ethanol excise tax credit expired in 2011. So there 
is some good news, but there is much more work to be done.
    Almost every major piece of legislation of the 112th 
Congress, from the Budget Control Act to the transportation 
bill to the fiscal cliff deal, highlighted the need to reduce 
waste without really reducing waste.
    The Department of Defense is the world's largest 
bureaucracy and extremely vulnerable to waste and duplication. 
The cost of TRICARE has more than doubled in the last decade 
and in fiscal year 2012 will exceed more than $50 billion due 
to unchanged premiums. We can modernize the program and 
maintain the promise of health care coverage for the men and 
women who have served our Country.
    Significant savings can also be found through acquisition 
and contracting reform. The Pentagon is the government's 
largest buyer, and many contractors rely on the government for 
the vast majority of their business. We are concerned that the 
2.0 version of DOD's Better Buying Power turns away from fixed 
price contracts. Contracts are not one size fits all, but this 
factor of losing billions of taxpayer dollars should be 
sufficient incentive for a company to control costs.
    The National Nuclear Security Administration's nuclear 
weapon laboratories and production plants are operated and 
managed by private corporations. These government-owned 
contractor-operated contracts have in some cases actually 
increased NNSA's persistent problems with inflated overhead 
costs, security breaches, and construction cost overruns.
    On the positive side, lawmakers appear ready to uphold the 
funding freeze on the CMRR project at Los Alamos National 
Laboratory. A similar fate should meet the Mixed-Oxide Fuel 
Program.
    Acquisition is a major challenge across Federal agencies, 
as evidenced by the failures of Future Combat Systems, SBInet, 
US-VISIT, Deepwater, and others. A common thread among these 
programs is the use of Lead System Integrators, where the 
government relies on the contractor to define and meet its 
needs. As then Senator Truman observed, I have never yet found 
a contractor who, if not watched, would not leave the 
government holding the bag.
    Public lands are taxpayer assets and should be managed in 
ways that preserve their value and ensure a fair return for 
taxpayers. Securing a fair return for the hundreds of newly 
proposed wind and solar projects on Federal lands is vital. 
Similarly, taxpayers are shortchanged by coal leases which 
allow companies to pay royalties based on domestic prices, not 
their actual export prices.
    Finally, the General Mining Law of 1872 collects no royalty 
from hard rock mining on Federal lands. Taxpayers cannot 
continue to simply give gold away.
    The Title XVII Loan Guarantee program jeopardizes billions 
of dollars if project loans default. Solyndra's $535 million 
default brought the program under increased scrutiny, but the 
$2 billion loan guarantee for the nearly bankrupt USEC and the 
$8.3 billion loan guarantee for the Southern Company carry much 
greater potential losses.
    Ineffective and duplicative agriculture policies waste 
billions of dollars. Direct payments must end immediately. The 
highly subsidized crop insurance program, which cost taxpayers 
a record $14 billion in fiscal year 2012, must be reined in and 
efforts to create shallow loss programs that crowd out private 
sector risk management options must be rejected.
    Congress consolidated programs and included performance 
measurements in MAP-21, but failed to address the underlying 
issue of demand for transportation projects exceeding revenue 
generated to cover their costs. In just five years, Congress 
transferred more than 50 billion to backfill the Highway Trust 
Fund.
    The Essential Air Service, which subsidizes flights between 
rural communities and regional hub airports, costing up to 
$1,000 per flight, should be eliminated except in Alaska, 
saving $1 billion. Many communities can maintain transportation 
links through intercity bus service with little or no subsidy.
    Tens of billions of dollars are lost to waste and fraud in 
Medicare and Medicaid. Last Congress, Senators Carper and 
Coburn introduced the Medicare and Medicaid Fighting Fraud and 
Abuse to Save Taxpayer Dollars Act and Representative Roskam 
introduced a companion. More needs to be done, but this 
represents a start.
    More than $1 trillion in Federal revenue is foregone each 
year due to nearly 200 tax expenditures, spending channel 
through the tax system that lacks oversight. Some tax 
expenditures Congress should look at for 10-year savings 
include prohibiting last in, first out accounting, any deferral 
on foreign earnings, and converting the mortgage interest 
deduction to tax credit and limiting it to one home totaling 
$500,000.
    The Army Corps of Engineers needs a prioritization system 
with explicit criteria from Congress. Up until the earmark 
moratorium, prioritization and guidance came in the form of 
project-by-project funding in annual appropriations. The Sandy 
supplemental and regular Energy and Water appropriations have 
pots of funding without enough guidance. Congress needs to 
increase the strings and direction without resorting to 
earmarks.
    We always like to point out that the Corps motto should be: 
we may take twice as long, but we cost twice as much.
    Superstorm Sandy brought into relief problems surrounding 
our approach to disasters. The current ad hoc, scattershot 
approach to disaster funding creates an opportunity for waste, 
fraud, and abuse. Worse, sometimes the money actually puts 
people and infrastructure back in harm's way. The number and 
cost of major disaster declarations has increased in recent 
decades due to an increase of major weather events, but also 
because our Nation's programs are more generous responding to 
disasters than pre-sponding to them.
    Through both the National Flood Insurance Program and the 
U.S. Army Corps of Engineers flood and storm damage reduction 
programs we encourage development in an unsustainable manner.
    Furthermore, research indicates that every dollar spent on 
mitigation saves four or more dollars in recovery. We should be 
helping people, communities, and States prepare for disaster 
and respond to disaster in a way that protects taxpayers and 
reduces future risks and costs.
    Thank you for the opportunity to testify today. My written 
testimony and reports we submitted contain much greater detail, 
and Taxpayers for Common Sense would be happy to work with the 
committee to identify other ways to ensure that our tax dollars 
are spent wisely and effectively. Sorry for the overrun.
    [Prepared statement of Ms. Alexander follows:]
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    Mr. Mica. Thank you for your testimony, and we will include 
your entire testimony and additional comments for the record.
    We will now recognize and welcome Dan Blair. Mr. Blair is 
president of the National Academy of Public Administration.
    Welcome, sir, and you are recognized.

            STATEMENT OF THE HONORABLE DAN G. BLAIR

    Mr. Blair. Thank you, Mr. Mica. It is good to see you, Mr. 
Cummings. I appreciate this opportunity to testify today and 
thank the committee members.
    I am Dan Blair, president and CEO with the National Academy 
of Public Administration. The Academy is a nationally 
recognized, nonpartisan, not-for-profit chartered by Congress 
to address and advise all levels of government on pressing 
issues of public administration. We are comprised of almost 750 
fellows who are selected by our membership for their 
significant contributions in the field of public 
administration. I ask consent that my entire written statement 
be accepted for the record, and I am pleased to summarize.
    Mr. Mica. Without objection.
    Mr. Blair. Your hearing today is timely and helps key up 
many important management issues that Congress and the 
Administration could tackle to solve some of the most pressing 
problems in government. Government has become increasingly 
complex, and actions on the Federal level resonate at the State 
and local level. We have, today, an opportunity to begin to 
find common ground to address long-term structural fiscal and 
governance problems before they potentially overwhelm our 
budget.
    Collaboration between Federal, State, local, and private 
sector stakeholders is critical for improving program delivery 
and minimizing waste, fraud, and abuse. To that end, the 
Academy began work with the Office of Management and Budget in 
October 2011 to involve stakeholders nationwide in developing 
pilot projects that test innovations in how States administer 
federally funded programs.
    Funded through the Partnership Fund for Program Integrity 
Innovation, the Collaborative Forum network has increased more 
than 750 in-person and online participants who share best 
practices and lessons learned for how to improve payment 
accuracy, improve service delivery and administrative 
efficiency, and reduce barriers to program access. To date, 
this work has resulted in the funding of nine pilot projects, 
with more expected to come.
    In addition to collaboration, evidence-based decision-
making can aid in identifying those programs worthy of 
continued government support. One use of this approach can be 
found in what is called Pay for Success. This approach utilizes 
a financing organization where private investors provide up-
front funding to help achieve a specific result and the 
government only pays if the agreed-upon goal is achieved. Using 
this third-party approach enables government to partner with 
private and nonprofit entities who already have demonstrated 
their ability to produce high returns on investments. The 
approach also maximizes flexibility and allows the government 
to piggyback on already existing infrastructures and networks, 
and, importantly, the risk if borne by the third party for 
producing the results.
    Another example of evidence-based decision-making involves 
a Washington State model. This model provides State 
administrators with tools to identify which programs are 
working and worthy of continued funding. This allows cuts in 
funding to be targeted to those programs which are not working.
    Apart from identifying ways of identifying government 
investment, challenges remain for agencies in identifying 
prospects for waste, fraud, and abuse. Such tools include 
greater use of data and analytics to strengthen financial 
management controls and facilitate improved mechanisms for 
preventing and detecting improper payments.
    My written statement identifies additional opportunities to 
streamline programs across the Federal Government. As Mr. 
Schatz noted, the 2012 and 2011 GAO reports on duplication 
overlap identified many areas for review. While a belts-and-
suspenders approach for some programs may be desirable, this 
overlap in duplication is often an unintended consequence of 
the proliferation in government programs.
    One way to address this is through the consolidation of 
programs within a department. Another way is through a virtual 
reorganization and the establishment of interagency councils. 
Broader structural reorganizations can compensate for 
deficiencies of current ones, but can be challenging in 
practice.
    In conclusion, Congress and the executive branch have an 
opportunity to work together to reduce waste, fraud, and abuse; 
invest in effective evidence-based programs; and create a 
results-oriented culture inside the Federal Government. The 
Memos to Leaders project my testimony highlights addresses 
issues in nine critical government management areas that are 
ripe for reform. Key areas include the nominations process, 
budget process reform, civil service reform, managing large 
public-private partnerships, rationalizing the 
intergovernmental system, and IT transparency.
    The Academy possesses a unique set of fellows who stand 
ready to assist in these critical management challenges. Thank 
you for the opportunity to testify this afternoon. I would be 
pleased to answer questions.
    [Prepared statement of Mr. Blair follows:]
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    Mr. Mica. Well, thank you, and we will, as I said, withhold 
questions.
    We will hear our last witness next, and that is Mr. 
Jonathan Kamensky, and he is a senior fellow with the IBM 
Center for The Business of Government.
    Welcome, sir, and you are recognized.

               STATEMENT OF JONATHAN M. KAMENSKY

    Mr. Kamensky. Thank you very much, Mr. Chairman.
    I am pleased to have the opportunity to testify before you 
on strategies to reduce cost and improve performance in the 
Federal Government's mission-support functions. I think this 
gets at your win-win criteria that you mentioned earlier.
    I am a senior fellow with the IBM Center for The Business 
of Government. The IBM Center connects public sector research 
with practice by sponsoring independent research by top minds 
in both academia and the nonprofit sector.
    Two years ago the IBM Center produced a report, summarized 
here, identifying seven leading commercial strategies that 
could contribute up to $1 trillion in reduced cost of Federal 
operations over a 10-year period, while improving performance. 
I would like to share these with you today, but, first, why do 
we think this magnitude of savings is possible?
    The mission-support costs in the Federal Government, for 
cross-government activities such as personnel processing, 
contracting, supply chain management, historically average 
about 30 percent of total operating costs, compared to about 15 
percent in the private sector. While the precise numbers may 
not compare well, they do suggest that changing the way 
mission-support functions are operated to reflect leading 
practices in the private sector may provide opportunities for 
cost savings.
    I would like to highlight four of the seven strategies 
outlined in our report. All seven are in my written statement.
    Strategy 1: Consolidate information technology 
infrastructure to the extent possible. The government's cost of 
operating its IT infrastructure are high when compared to the 
private sector. In addition, according to GAO, only about one-
third of the government's IT investment in fiscal year 2011 was 
actually spent on direct mission-related IT, such as air 
traffic control systems or the veterans benefit determination 
system. The Gartner Group reports that by reducing IT overhead 
management costs, consolidating data centers, eliminating 
redundant networks, and standardizing applications could lead 
to savings of 20 to 30 percent.
    Strategy 2: Streamline government supply chains to be more 
efficient and effective. The government annually procures about 
$550 billion in goods and services. These are purchased largely 
through independent procurement processes and individual 
agencies. In contrast, large corporations have transformed 
their procurement and supply chain systems by integrating them 
across the enterprise.
    Now, there have been efforts to do this in the Federal 
Government. For example, starting in 2005, OMB launched a 
strategic sourcing initiative to leverage the purchasing scale 
of the Federal Government. Progress to date has resulted in 
savings, but these savings have been less than one-half of one 
percent of the Federal Government's procurement spending. In 
contrast, private sector companies report savings of 10 percent 
or more. GAO, last year, concludes that if the government could 
achieve a 10 percent savings level, that could be savings of up 
to about $50 billion.
    Strategy 3: Apply advanced business analytics to reduce 
improper payments. The Administration is moving aggressively to 
reduce improper payments with strong congressional support. 
However, GAO says more could be done, and industry experience 
suggests that this is a valid conclusion. Industry experts 
believe that expanding the use of recovery audits and advanced 
business analytics could increase the identification rate of 
improper payments to about 40 percent. This could potentially 
generate an additional $200 billion over the next decade.
    Strategy 4: Move to a greater reliance on electronic self-
service and reduce the government's field operations footprint. 
Most government agencies have citizen-facing services that rely 
on largely manual, paper-based business processes. The 
government could both reduce cost and improve citizens' 
experiences by moving as many touch points to electronic 
platforms as possible and rethink the footprint of its field 
operations.
    Other countries have done this by creating a one-stop 
approach to social services. For example, Service Canada is an 
agency that delivers 70 services on behalf of 13 other agencies 
online, in person, and on the phone. This has allowed the 
Canadian Government to reduce the number of field offices, 
reduce costs, and improve service delivery at the same time.
    In conclusion, Mr. Chairman, it is important to emphasize 
that leadership and governance are key to implementation. The 
seven strategies outlined in my testimony are being addressed 
by the Administration, but with different levels of intensity. 
One approach to create concerted action might be for the OMB 
director to appoint a steering committee led by the deputy 
director for the management at OMB and a subset of departmental 
secretaries.
    A small central support team could be created, operating 
out of OMB or the President's Management Council, not unlike 
the Recovery Act implementation team, to ensure action. For 
each of the seven areas, a cross-agency sub-team could be 
created and work under the direction of a departmental deputy 
secretary who is charged with action.
    So I would like to conclude at this point and thank you 
again for the opportunity to speak before you, and I would be 
pleased to answer any of your questions.
    [Prepared statement of Mr. Kamensky follows:]
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    Mr. Mica. Well, thank you.
    We will now turn to some questions. I want to thank all of 
the panelists for their contribution today. It is interesting 
to have you all suggest these potential areas in which we can 
cut and save and be on that side of the aisle sometimes from a 
practical position. It is much more difficult on our side, 
again, of the witness table.
    But I recognize myself for five minutes, and then we will 
turn to other Members for questions.
    First of all, I think we are facing the prospect of 
sequestration. It is coming down the road and I my guess right 
now, I didn't think this before the holidays, but I think after 
the holidays I think it is going to go into effect, and that is 
going to, of course, impact dramatically probably Defense has 
the biggest cut, and some other programs. Most of the sort of 
core programs are protected.
    This is an opportunity to save some money, to institute 
some savings.
    Mr. Schatz, you cited a number of past studies and 
commissions, etcetera, several major commissions. Maybe another 
commission is necessary, but it still ends up coming back to 
Congress. Here we are in a situation where these cuts are going 
to come. I think the cuts could go beyond, and some of you 
described other potential areas of savings. Maybe we could go 
down and get your take on what you would do, again, with 
sequestration looming, to make cuts. You have talked about some 
things, but maybe some specifics you might suggest to Congress, 
since that looks like it is pretty imminent.
    Mr. Schatz, first.
    Mr. Schatz. Thank you, Mr. Mica. Sequestration, if it does 
go into effect, may push Congress to look at spending across 
the board because there is a large part of government 
expenditures that are simply not included in sequestration. 
Certainly, we have been very critical of excessive Defense 
spending. We led the effort to eliminate the alternate engine 
for the Joint Strike Fighter. Certainly TCS and other taxpayer 
groups were very helpful in that effort. And, yes, you can find 
specific examples, but across-the-board cuts eliminate both 
wasteful spending and what might be essential spending at the 
same time.
    Mr. Mica. But that could be targeted, could it not?
    Mr. Schatz. Well, my understanding of sequestration is 
that, at least the way it is set up now, it is across the 
board.
    Mr. Mica. But, again, sequestration will probably go into 
effect, and then what will happen is Congress will say----
    Mr. Schatz. Maybe they will wake up and say let's do this 
the right thing, or a better way.
    Mr. Mica. Exactly. Well, I am asking you, and you have a 
couple minutes here. Maybe we could impose something that 
redirects the cuts. Go beyond, of course, the big gouge for 
Defense. People talked about Defense contracting being out of 
control and IT across-the-board solutions that can save 
billions of dollars. You all gave lots of areas we could save. 
Here we have an opportunity, with sequestration coming up, and 
if it goes into effect there are going to be a lot of people 
who are going to run around with their hair on fire. But we 
have an opportunity to redirect that. How would you do that?
    Mr. Schatz. Well, again, I would look at everything.
    Mr. Mica. Okay, everything is on the table. There is 
probably not an agency, you would agree, that couldn't stand 
some trimming efficiencies, et cetera.
    Mr. Schatz. Oh, absolutely. Any organization can cut 
between 10 and 15 percent of its expenditures.
    Mr. Mica. Well, that is well within the range of what we 
are talking.
    Ms. Alexander?
    Ms. Alexander. We released a report last fall with $1.2 
trillion in deficit reduction called Sliding Past 
Sequestration, so one thing is people could just adopt all our 
recommendations, although I wouldn't expect that.
    Mr. Mica. Okay, we will look at those.
    Ms. Alexander. That was submitted with our testimony as 
part of the record, which we would like to be submitted into 
the record.
    I think a couple points, just to point out, I do think 
within the context of Defense spending, looking at service 
contracts as a particular area where there could be reductions 
in spending without necessarily affecting core function, I 
think that this committee in particular has a huge opportunity 
to help reshape how we do disaster spending. We waste a huge 
amount of money through disaster spending and both the recent 
disaster funds. There is just an opportunity to look at a 
better way.
    Mr. Mica. Well, we put in some of those things, although 
they got pretty hoggy at the end and funded projects.
    Ms. Alexander. And we made some reforms to the flood 
insurance program.
    Mr. Mica. Well, maybe the chairman gets a little bit of 
discretion here, or acting chairman. But you slammed 
transportation and the MAP program. The problem is sometimes 
you don't get the support from the groups. I remember FAA, on 
the twentieth extension, when I said this can't go on, this 
madness, because that cost millions of dollars, those 
extensions, leaving our programs at bay.
    So I sent out one extension, just cutting out airline 
ticket subsidies of $1,000 or more, and we closed down the FAA 
partially for two weeks; all hell broke loose. Where were you 
then, Ms. Alexander, when I was getting my brains beat out?
    Ms. Alexander. Well, A, I am pretty sure I can find a press 
release where we thanked you for doing that.
    Mr. Mica. I want to see that. We will make it part of the 
record.
    Mr. Blair and Mr. Kamensky, would you answer the 
sequestration and how we target? What would you do, again, in 
our shoes?
    Mr. Blair. I think that Congress will have a blueprint 
before it when GAO comes out with its new overlap and 
duplication list. I think that is going to give you an idea of 
areas in which efficiencies can be achieved that shows that 
multiple agencies or multiple departments are trying to deliver 
to the same constituency group on similar, non-duplicative 
programs, and that is a start.
    Mr. Mica. And I might say that I think in the Republican 
rules we put in the reports have to now show if it is 
duplicative, in addition to constitutionality.
    Mr. Kamensky, real quickly?
    Mr. Kamensky. Thank you, Mr. Chairman. Sequestration does 
not allow tradeoffs.
    Mr. Mica. We write the law. It will be the revised, come 
what may after sequestration A.
    Mr. Kamensky. But just plus or minus dollars will not solve 
the challenge. What will need to happen is changing the way 
government does business. For example, in energy efficiency, in 
order to be able to have much more energy efficient operations, 
sometimes it requires an investment up front for longer term 
savings. If you look only at the how do we cut dollars next 
month, sequestration will do that, but it may not actually 
improve operations very well.
    Mr. Mica. Look at long-term, too. Thank you.
    Ms. Norton?
    Ms. Norton. Thank you, Mr. Chairman. I am grateful to this 
panel for all of your very specific testimony and ideas. It 
brings to mind the words waste, fraud, and abuse. That is 
always thrown out when people can't think of what should be cut 
or how to preserve. I found your testimony edifying, indeed.
    I would like to ask Mr. Kamensky a question, because he 
pointed to a specific example that was, in part, under my own 
jurisdiction in another committee; it was your discussion of 
improper payments. Mr. Mica is aware of this because he was on 
the same committee, it was the committee that had jurisdiction 
over a great many of the Recovery Act funds, and my particular 
subcommittee, the subcommittee which I chaired, had 
jurisdiction over more than $5 billion of those funds, which 
were to go to each and every State, District of Columbia, and 
every territory, and we had to deliver the funds swiftly 
because of the recession. The whole point was to stimulate the 
economy and create jobs. So I was intrigued.
    I am now going to your testimony. I am intrigued by your 
discussion of the Administration's recovery board, apparently 
the first time anything of the sort had been used, and you say 
in preventing, rather than recovering, improper payments. And 
you say this shows the value of a concerted effort essentially 
up front and across agencies. Now, you point out that the 
Recovery Act was dealing with upwards of more than 25 agencies 
and we had nothing in place in those agencies beforehand to 
carry that out.
    So my question goes to how did this pilot, I will call it, 
effort prevent these overpayments through this special board? I 
don't know if this board still exists or whether you think we 
could apply this to other circumstances, because there are many 
instances where essentially you are distributing funds through 
many agencies or to all the States. I want to know how did 
they, given the speed with which this money had to go out, how 
did they prevent, rather than catch after the fact, these 
improper payments?
    Mr. Kamensky. Well, the Congress, as part of the 
legislation, required quarterly reporting, which actually 
turned into much more frequent reporting internally, within the 
agencies, and all the spending data were shared through this 
recovery operation center that Mr. Earl Devaney, who was the 
chair of the board, set up; and that way they were able to look 
at data from a number of different agencies at the same time 
and look for patterns that were suspicious.
    So, for example, when you notice funds from three or four 
different Recovery Act programs going to a yacht in the harbor 
of Miami, which is one of the examples that we gave, he said 
let's go look there and see whether this is a legitimate 
operation. So it is an ability to quickly find where things 
were being requested or being spent, and then moving in 
quickly.
    Ms. Norton. Well, now, I don't know if you know if the 
board exists or if you think this board would be useful in 
other circumstances. That was a very special circumstance. 
Recovery Act building is still going on; money is all out. Are 
there circumstances within the government today, in the usual 
course of business, where you think something similar, or would 
we be accused of establishing another ``bureaucracy''?
    Mr. Kamensky. The Recovery Act Transparency Board I believe 
is authorized through the end of this fiscal year. There is a 
Government Accountability Transparency Board that was 
administratively developed by President Obama, which is looking 
at ways of taking some of the lessons from the Recovery Board 
and extending them administratively, at least, and potentially 
even legislatively.
    Agencies such as the Center for Medicare and Medicaid 
Services have something like this for payments that they make. 
They make like one billion payments or transactions a year, so 
they have a mini version of it. But oftentimes it is when you 
are able to compare funding flows across agencies that you are 
able to detect patterns that are sort of anomalies. So 
something equivalent to that may be one of the lessons that 
comes out of the Recovery Act legislation.
    Ms. Norton. Well, the chairman of our full committee has 
shown an interest in institutionalizing some of that lessons 
learned. Thank you very much.
    Mr. Mica. I thank the gentlelady.
    The gentleman from Oklahoma, Mr. Lankford.
    Mr. Lankford. Thank you, Mr. Chairman. This is an area that 
we can have bipartisan agreement on. I go back to President 
Obama's inauguration speech, where he identified some Federal 
programs as outworn and inadequate. I would agree that we have 
some Federal programs that do need to be sunset, and we need to 
be able to identify and be able to work together, Republicans 
and Democrats, identify those programs and let's sunset them. 
Let's deal with that.
    But I do have a series of questions and one piece of good 
news for you, Mr. Schatz. I noticed in your testimony you 
referred to a Senate action to try to put into the Senate rules 
a duplication requirement, that that failed in the Senate last 
time. That is something I personally worked on and is in the 
House rules for this year, to be able to identify duplicative 
programs before they go into effect. So I need to get you a 
copy of the latest House rules so you get a chance to identify 
that, because that is a very important thing to us.
    There are two ways to deal with duplication: one is to get 
it out once it is there and one is to prevent it from starting. 
And our focus in the House is to try to find ways to prevent 
duplicative programs from beginning so we can take those on.
    In the middle of all your testimony, though, you also 
mentioned the RAC Audit process. You called it an effective 
process. There are billions of dollars that have been recovered 
in the RAC Audit process, still in Medicare and Medicaid, and 
how they are not doing pay-and-chase anymore; they are trying 
to identify some of those things. We do have some issues on 
that and I wanted to be able to just have some conversation 
about it as well.
    They are pulling about 30 percent of the files from these 
hospitals and now from doctors' offices for certain payments 
for just a normal doctor's visit; identifying those, not paying 
them for any length of time. It becomes a hostile exchange back 
and forth because 30 percent of their cash flow gets pulled. It 
is pulling honest physicians, their files, the same as it is 
for fraudsters and their files, and it can go back as far as 
they want it to.
    As of September of last year, if they want to go back to 10 
years ago and pull on a doctor or pull on a hospital and say we 
are going to pull this file and we are going to check it as 
well, they can. Since they are paid a commission, basically, 
somewhere between 9 and 12 percent per whatever fraud that they 
find, or wrong coding, they have great incentive to go back and 
search and go as far as they want to go.
    How do we identify fraud and waste, and not create a 
hostile relationship with good doctors and good physicians and 
hospitals that are doing the right job? How do you strike a 
balance on that?
    Mr. Schatz. Well, I think anybody who is asked questions 
about payments is going to have concerns about whether or not 
they were legitimate, and also be concerned about how they are 
conducting their business, but improper payments, as you know, 
constitute about $29 billion out of the $108 billion that was 
mentioned earlier, so it is a large amount, about a third of 
what is out there now.
    Mr. Lankford. A lot of those are paperwork; they miscoded. 
They go back and check them; they are not really fraud, they 
are just, in all the checks and everything that is going on. 
There is a tremendous amount of fraud as well, but just trying 
to narrow down what was just coded wrong and what is actually 
fraud. And that is what we want to go after initially.
    Mr. Schatz. Well, I think it is different. I think the RAC 
process is to look more at the waste, rather than the fraud. In 
terms of fraud, you have to have prosecution, and contractors 
can't prosecute somebody who is committing fraud; they can 
report it, of course. But our understanding is that they can 
only look at about 2 percent of the billings over a three-month 
period. Now, in some cases it may require some more paperwork; 
in others it may not.
    And everything can always be improved. There was a big 
objection to RAC when it first started, particularly from some 
of the Members of the California delegation. When it spread 
across the Country, clearly, as it moves ahead, there are going 
to be issues that can be addressed. But we think the process 
works well. They have saved billions of dollars for taxpayers 
so far, and when that $29 billion goes down further, that frees 
up more money for Medicare beneficiaries, and I think that is 
the ultimate goal, is to help the people that truly need help, 
and not keep the money out there that shouldn't be paid.
    Mr. Lankford. I completely agree. We have to be able to 
make those payments, but we have to find a way that doesn't 
trash the relationship. The Federal Government doesn't have a 
great relationship with several contractors anyway. Those that 
are doing a good job, we want to maintain we have a good 
relationship in the process.
    This is for any of you, as well. Quick story. Last weekend 
my MasterCard is stopped; I get a phone call immediately saying 
I no longer can use it until I call in. I do a quick call-in in 
automation; within 10 minutes it is back active again, as they 
have identified something.
    Is there anything comparable to that in the Federal program 
for identifying any of the anomalies that may come up, to say 
we are going to stop this and then can correct it in a 10-
minute turnaround?
    Mr. Schatz. Not that I know of. That would be nice to have. 
But that also is a function of incompatible accounting systems, 
financial systems that have been abysmal for years. One of the 
original Grace Commission findings, and I think it is still 
true, there are hundreds of incompatible systems across 
government. It makes it difficult to find out how the money is 
being spent.
    Mr. Lankford. Do we have any agency that is trying to 
implement something within payments close to that that we can 
raise up as an example and be able to encourage other agencies 
to look at? Yes, sir.
    Mr. Kamensky. There is a database that has been created by 
the Administration called the Do Not Pay List, and it is an 
integration of seven or eight different databases from 
different agencies to ensure that somebody that has been 
disbarred by one agency for improper dealings won't be given a 
contract in another agency.
    Mr. Lankford. Right, the suspension and debarment list. 
Okay, thank you.
    I yield back.
    Mr. Mica. The gentleman from Virginia I think is next, Mr. 
Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Welcome to our panel. Let me ask Mr. Blair, first. When we 
look at something like improper payments, one of the 
subcommittees, formerly, of this full committee looked at 
improperly payments and the estimate was something like $125 
billion a year. Maybe 50 of it is fraud, and Medicare fraud 
particularly. A lot of it is, as Mr. Lankford was saying, just 
bad coding, getting it wrong in terms of who is eligible and 
not eligible, and the like.
    If we are going to get our arms around $125 billion a year, 
that is not raising anyone's taxes, it is not cutting any 
strategic investment, it is just managing more efficiently, 
what would we have to do?
    Mr. Blair. I think you need to better engage stakeholders 
into what exactly the improper payment is. Also keep in mind 
that improper payments are not just overpayments or 
underpayments, as well. So you need to keep in mind that, as 
government goes about doing its business and putting out money, 
it needs to keep an accurate check as to what it is expending 
and what it is authorized to pay for.
    I think one of the ways that you can look at this is to 
look at what is going on in the States and localities, as well, 
and one of the things that we have been involved with at the 
National Academy is what is called a Collaborative Forum in 
which we brought in stakeholders from State, local, nonprofits, 
the cities in order to identify best practices and also lessons 
learned in trying to identify how to stop these kinds of 
improper payments and what more can be done to improve the 
administration of these programs.
    Mr. Connolly. Mr. Kamensky, I was kind of hoping Mr. Blair 
would include, however, in his answer the better deployment of 
technology. Maybe you could address that.
    Mr. Kamensky. Thank you very much, Mr. Connolly.
    Mr. Connolly. By the way, has anyone ever told you, if we 
close our eyes, you sound exactly like Harry Reid?
    [Laughter.]
    Mr. Connolly. And that is a compliment on this side of the 
aisle.
    [Laughter.]
    Mr. Kamensky. Thank you, sir. There are concrete examples 
of this happening. For example, IBM has worked with the New 
York Department of Taxation and Finance, and developed analytic 
applications which has saved over $2 billion. Its optimizer 
software uses a combination of data analytics and models that 
increase the efficiency of field agents so that they know which 
audits to go follow.
    In 2010 there was an overall increase in collections by 12 
percent as a result of better targeting which returns to go 
check out. The average age of a case decreased by about 10 
percent, so they were able to get quicker turnaround. So the 
use of analytics in figuring out where the risks are and where 
the potential returns are help place the agents where they need 
to be.
    The U.S. IRS recently created an Office of Compliance 
Analytics and they were able to identify, last year, during the 
tax season, where tax preparers were making consistent 
mistakes. They were able to send out notices to those people 
saying here is what you need to do to change it, and they 
managed to prevent over $100 million of money going out 
improperly during the course of the year so they wouldn't have 
to go back and recover it.
    Mr. Connolly. Right. I just point out the chairman 
rightfully pointed out sequestration. Sequestration, we are all 
worried about, is $1.2 trillion over 10 years. Improper 
payments are $1.25 trillion over 10 years. Getting our arms 
around that would be a really good downpayment in terms of the 
problem.
    One more question. GAO found that the Department of Defense 
relies heavily on contractors and then concluded, however, that 
the lack of an adequate number of trained acquisition and 
contract oversight personnel contribute to unmet expectations 
and placed the Department at risk of potentially paying more 
than necessary. An understatement if there ever was one.
    I would like your feedback in terms of how much does the 
lack of adequate training, adequate skilled procurement and 
contract personnel, perhaps, contribute to the problem of 
government waste.
    Mr. Blair. I think the backbone of attacking this problem 
is making sure you have the right people with the right people 
with the right skills in the right jobs to get this done. If 
you don't have the proper training or the proper skill sets, it 
is just pouring good money after bad. One of the things that 
sequestration and also across-the-board cuts do is puts in 
jeopardy and effectively negates any further efforts at 
training, because that is among the first monies that goes when 
you have these kind of cuts.
    So I think that Congress is going to have to be mindful 
that in the future. Our Federal workforce is at a crossroads, 
and has been over the last two decades, in terms of the 
changeover from people retiring, bringing in new people, 
recruitment and retention; and training is an integral part of 
that and you need to make sure that that money doesn't go when 
the budgets are cut for the departments and agencies, 
especially across the board.
    Mr. Connolly. Thank you.
    Chairman Issa. [Presiding.] I thank the gentleman.
    We now go to the gentleman from Arizona, Mr. Gosar.
    Mr. Gosar. Thank you, Mr. Chairman.
    I think you highlight a good starting point, but I also 
think that we have to start with a culture of accountability, 
and that starts with secretary heads, it starts with agency 
heads, and you have a whole mantra. I am from the private 
sector, so you are constantly reviewing our your workforce; you 
hold people accountable for that process.
    And I think there is also you can label this in we tend to 
be politically correct. A lot of this is theft, point blank 
theft. We had a hearing here. We actually had a large State in 
regards to Medicaid fraud, which was perpetrated within the 
State bureaucracy. I don't care how you slice it and dice it, 
it is theft, and we need to hold people accountable for it.
    The private sector is held to a different standard than 
public service. I mean, here you just get rotating chairs, and 
I think there is where we also have to have that accountability 
process. You have to be able to fire people. You have to have 
them, when they do intentional wrong, be held accountable for 
those services and restitution, as well as losing benefits. I 
think then you will have many eyes on the prize.
    I have a couple questions. As a practicing dentist, we have 
seen some of the problems within the Medicaid programs and 
Medicare programs. For Mr. Blair, in your testimony you 
mentioned that the OMB's Collaborative Forum has improved HHS 
grants, Medicare and Medicaid. What were those improvements?
    Mr. Blair. Those improvements were due to the fact that you 
could bring in State and local health care officials and the 
types of people who actually are the beneficiary of these 
programs to look at better ways of accounting for the money and 
for better ways of obtaining those results that they are trying 
to do. What the beauty of the Forum does is that it brings 
together multiple parties from Federal, State, and local 
sectors, the nonprofit sector, to talk about these types of 
things in an environment which encourages collaboration, best 
practices sharing, and also looking at problems and the common 
solution.
    It is an ongoing process, but to date we have brought in 
more than 750 local people, 750 participants, which include 
local, as well as State officials, and the beauty of this is 
that it recognizes that not all wisdom resides here in 
Washington, whether it is going back to the State and the 
locals in order to look at these problems and look at it not 
from a top-down solution, but from a bottom-up.
    Mr. Gosar. Interesting. So you would do that on like micro 
targeting, or would you have a bigger forum? How would you put 
those pieces together?
    Mr. Blair. Well, what we have done so far is we have 
targeted a few pilot projects. One was with the earned income 
tax credit, which was done through the Department of the 
Treasury, and the second one is looking at health care through 
the Washington State model, which uses analytics looking at 
what programs are actually working and what will continue to be 
funded.
    One of the other promising areas to look at in terms of 
this is what is called Pay for Success, in which a government 
grant is administered through a third party, and that grant is 
not given to that third party until certain results are 
achieved by way of the program.
    For instance, if you were doing health care or justice 
programs and you are looking at recidivism, you could say that 
the third party could agree with the State or local who is 
going to receive this money that you are going to reduce 
recidivism by X percent. And if it is not achieved and that 
third party doesn't get paid and the government is not at risk, 
it shifts the risk to these third-party payers.
    So what you are doing with this is you are giving up a 
little bit of control, but in fact you are actually enhancing 
accountability and responsibility by saying that the government 
is not at risk in these types of grant programs.
    Mr. Gosar. But I think in some of those that are patient-
specific, you are also dependent upon the patient base to be 
compliant as well, so you are going to have to be very careful 
with your metrics and how you measure that, because you could 
also skew it in an inappropriate way.
    Mr. Blair. The beauty of this, though, is that it is done 
through a third-party such as a philanthropic organization, a 
nonprofit, a local investor; and that way you don't have the 
Federal Government at risk. Most of these grants that the 
Federal Government does now with State and local governments is 
that they just pass the check through and you hope for results. 
This way money is not paid by the Federal Government until 
results are achieved.
    Mr. Gosar. But wouldn't you also want to have some risk to 
the Federal Government because they have skin in the game? You 
don't want to advocate that.
    Mr. Blair. You want skin in the game on all parties in 
order for something like this to be successful.
    Mr. Gosar. Absolutely. Okay. Thank you very much.
    I yield back.
    Chairman Issa. I thank the gentleman.
    We now go to the gentleman from Pennsylvania, Mr. 
Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    My questions are for you, Mr. Kamensky. Thank you for 
coming here today, sir. What I am going to ask you to do is 
elaborate on your testimony a little bit regarding the efforts 
of the Federal Government to reduce its energy use. And in your 
comments I hope you will include the Department of Defense.
    We freshman in Congress were treated to a CRS seminar some 
weeks ago, where they informed us, some panel members there, 
that as much as one-third of the DOD budget goes to energy 
consumption. In fact, you heard here today Ranking Member 
Cummings quoting CRS and its evaluation of DOD's overall 
efficiency as being poor performance.
    As you note in your testimony, the Federal Government is 
the Country's largest consumer of both energy and water. The 
Federal Government can lead by example in increasing energy 
efficiency, reducing greenhouse gas emissions, conserving 
water, and preventing pollution. And your organization has 
written about the ambitious efforts that the Administration has 
undertaken to make this a reality.
    Mr. Kamensky, tell us a little bit more about the Executive 
order President Obama issued that was aimed at making 
government operations more sustainable. What do you believe 
will be the short-and long-term impacts of that Executive 
order?
    Mr. Kamensky. Thank you, Mr. Cartwright. The Executive 
order draws upon a number of other Executive orders and 
statutes, and it sets a target of reducing greenhouse gas and 
increasing the reliance on alternative energy sources other 
than coal base.
    One of the things that we had a report that was done on the 
implementation of this Executive order by a Dr. Fiorino, who 
used to be, actually, at the Environmental Protection Agency 
and is now at American University, and he had a number of 
findings. He said there was mismatch between the expectations 
in the Executive order versus what can actually be done in 
terms of action by the agencies, in part because there is not 
an investment or a set of incentives. And one of the things 
that he was suggesting, much like in the private sector, is to 
allow sort of trading of energy costs between agencies, and the 
other is allow an investment fund so that agencies can borrow 
money, but have to then pay it back once there is energy 
savings that have been incurred. So this becomes something that 
takes place over a period of years.
    The Department of Defense has something similar to that 
where private industry will come in, they will put something in 
place, and then they will get paid back out of the energy 
savings that come out of that program, and that has been used 
in a number of military bases. I don't believe it is a 
widespread initiative across the Department, but it does show 
that there is a return on investment that comes from energy 
savings.
    Mr. Cartwright. And I know it has only been two years since 
that Executive order was issued, but how do you think the 
Administration has done so far in terms of implementing it?
    Mr. Kamensky. The Administration sent energy savings as a 
cross-agency priority goal. There are 14 in the Government 
Performance and Results Act modernization law earlier this 
year, or earlier last year. One of the 14 cross-cutting goals 
was around energy savings and it said that it would reduce 
greenhouse gas emissions by 28 percent by 2020 and indirect 
greenhouse gases by 13 percent from a 2008 baseline.
    So they have real measures. And they are reporting every 
quarter on the progress against their goals in a report that is 
posted on the Web. They are looking at the impact on 500,000 
buildings that the Federal Government manages, and in 2011 they 
reduced emissions by 8.3 percent from the 2008 fiscal year 
baseline. So there is progress being made against the targets 
that were set, in part because the Executive order helped put 
these things into motion.
    Mr. Cartwright. Thank you. Finally, where do you see a need 
for improvement in the Administration's implementation efforts?
    Mr. Kamensky. Well, one of the things, as Dr. Fiorino 
mentioned, is this ability to create incentives, much like in 
the private sector, of allowing tradeoffs between agencies, and 
the other is creating an investment fund so that agencies can 
go in with an ROI where they are going to recover the cost and 
therefore make longer term investments.
    Mr. Cartwright. Thank you very much.
    Chairman Issa. Would the gentleman yield for a question?
    Mr. Cartwright. Yield.
    Chairman Issa. Mr. Cartwright, I enjoyed this exchange. I 
think it was very good for us to hear it, but at the beginning, 
when you mentioned that as much as a third of DOD's budget went 
for energy, is it a little bit more minute than that? No one on 
our side seems to be able to find a third. In other words, when 
you get past labor, which is so much, there isn't a third left 
that we could find after labor and outsource contracting. Could 
you elaborate on what the nuance of that one-third is?
    Mr. Cartwright. That is why I raised it, Mr. Chairman. I 
was shocked when I heard that number. It was from one of the 
panelists presented by the CRS. I think that merits further 
investigation.
    Chairman Issa. Excellent. I would ask that you try to get 
the details of that. We will include it in the record, because 
I think that is an extremely important point and I was glad you 
made it.
    Mr. Cartwright. Thank you, sir.
    Chairman Issa. Thank you.
    I will now recognize myself for a round of questions.
    Ms. Alexander, you have the best title in Washington: 
Taxpayers for Common Sense. Now, next week we are going to have 
our annual high-risk list coming out, the 2013 list, and it is 
no surprise to you or Mr. Schatz, or any of you, that that list 
will include DOD, Medicare, Medicaid, the Post Office has 
managed to get on that. For the most part, the people that are 
on it are always on it and they never get off it, isn't that 
basically the truism?
    Ms. Alexander. Absolutely. I mean, they narrow or broaden 
or alter, but it seems like it is much more static of a list 
than we would like to see.
    Chairman Issa. Well, let me ask you a detailed question, 
but I will make it a little bit long. There is that expression 
about Albert Einstein saying if you keep doing the same thing 
over and over again, expecting a different result, that is the 
definition of insanity. We keep doing the same thing over and 
over again.
    Is it time, and I think it is, but is it time that we 
seriously look at our inspectors general at the act and the 
power to not just make suggestions, not just tell people that 
there is huge waste, but in fact take a more active role, an 
enforcement role in insisting those changes occur? Isn't it 
essentially at the GAO and the IG that we have recognized 
repeatedly these hundreds of billions, and through both 
Republican and Democratic administrations we have seen them 
come back saying they are going to do it, and then we see the 
exact same things or more on the list the next year? Either of 
you.
    Ms. Alexander. I absolutely think that there needs to be 
increased powers for GAO and the IGS in terms of enforcement. I 
know this committee has been looking at legislation to make 
that possible, and that is something we support. I think there 
are some agencies where we would be particularly happy to see 
that happen; of course, DOD because of the scale. Taxpayers for 
Common Sense has talked at length about the concerns about the 
Army Corps of Engineers. I think the Department of Interior, 
just, again, because of the sheer scale of what they manage in 
both revenue and programs. So we definitely would support 
efforts to give the IGS and GAO more authority and power to get 
information and enforce issues.
    Chairman Issa. Mr. Schatz?
    Mr. Schatz. Well, I agree generally with that point, but if 
there were no consequences for wasting money, money will 
continue to be wasted; and those consequences either come in 
the form of changing a program, eliminating a program, or 
sending someone to jail, though the last time I remember 
probably was the Boeing tank release, the original tank release 
debacle.
    Chairman Issa. The so-called lease.
    Mr. Schatz. The so-called lease, yes. So I am not 
suggesting that there are people out there that should be 
incarcerated, but either there should be an incentive for 
performing your job at a certain level; there have been 
suggestions that agencies retain some of the money they get 
back if they recover it; and there should also be a 
disincentive for performing your job incorrectly, and that 
really, rarely happens.
    Congress doesn't have the power to hire and fire people; 
neither does the President. You can do it by reducing budgets 
or cutting staff in an appropriations bill, but that is pretty 
rare.
    Chairman Issa. Well, let me ask you a question, a very 
tight question here. Currently, if you are an IG, you can talk 
about debarment, but you are not able to do it. Is that an 
example of something where actually bringing a debarment action 
by the IGS as a regular part of enforcing against contractors, 
and then perhaps other motions that could be brought where the 
IG would have direct standing even when it was not criminal.
    For example, the GSA scandal. All of you got to see them 
sitting here. You got to see the former administrator telling 
all us, to our amazement, that the reason that the individual 
in the bathtub got his bonus was because he was entitled to it. 
That is an example that the question is should we change the 
dynamic so that somebody other than the next person up the 
chain has input into whether you either deny somebody's ability 
to continue doing business with the government or at least, in 
the case if they are employees of the government, deny some of 
their ups and adds, affect their promotions, affect their pay 
grade increases, and certainly affect their bonuses.
    Mr. Schatz. You would probably have to change the Civil 
Service Act to address misconduct, for one, because I am sure 
there are rules that prevent that from happening.
    Chairman Issa. Well, bonuses are currently, by law, 
discretionary. It doesn't appear that way when you look at the 
performance versus the bonuses. And I will say that in a report 
that I recently reviewed of ours, what I noticed was that there 
are agencies that have very small bonuses and there are 
agencies that have huge percentage bonuses. And I can't say 
that as a bonus goes up as a percentage, that those agencies 
are the ones that you would be pleased with.
    Ms. Alexander. I mean, I certainly think that increasing 
the ability of IGs and kind of independent actors to do 
something would be positive, and I also think it may also have 
an effect on Congress' ability to respond to some of the waste 
they see, because we, all the time, criticize things that 
happen, but we know that it is difficult to find real agreement 
across party lines and across committee lines when you are 
trying to make a change. So I think if there is more action 
within the agency. And I think the question on bonuses, I mean, 
for debarment, for bonus payments on contracts, those legal 
issues are different than they are for government employees, 
but they are probably solvable without a statutory change, I 
would think.
    Chairman Issa. Okay, any other comments, Mr. Blair, Mr. 
Kamensky?
    Mr. Blair. I found really curious that statement about the 
bonuses being entitled, too, because, as you point out, they 
are not. Bonuses are supposed to be awarded for exceptional 
achievement, and it seems to be an abuse of that system when it 
is viewed as an entitlement and as part of your everyday 
salary.
    One of the questions that I would have about debarment and 
giving more authority to the IGs is is there a way that we can 
use this not after the fact, but before the fact, because we 
see a lot of these scandals occur and we are always looking at 
them after the money has already gone out the door, after the 
bad acting has occurred, and oftentimes after the bad actors 
may be out of government.
    Chairman Issa. And that is a great question for another 
hearing, and we will be picking up where you left off.
    With that, I am going to announce that we are going to go 
to the gentlemen from Wisconsin for five minutes, but we will 
then recess until immediately following the second vote. The 
gentleman is recognized.
    Mr. Pocan. Well, thank you, Mr. Chair, and thank you to the 
panel. I had a chance to read your reports last night and they 
were very comprehensive and very thoughtful, and some might 
even say fearless in some of the areas that you decided to 
point out to us. As a local government official, when I was on 
a county board I used to co-chair a reinventing government 
committee, where we looked at efficiencies and savings, and as 
a State legislator I served on Governor Scott Walker's waste, 
fraud, and abuse commission, where we did, again, the same 
thing at the State level. So I really appreciate this 
conversation, especially when we look at the thoughtful ways to 
do it.
    I guess one of the concerns I have, and when Mr. Mica was 
chairing he brought up sequestration. I have to admit, being 
one of the freshman and being new, there seems to be a 
Washington way of doing things and then a way the rest of the 
Country operates, especially those of us in the Midwest; I 
think we like to think we are a little more commonsense. If the 
car is about to run out of oil, we put oil in the tank rather 
than let it completely grind to a grinding halt and then try to 
fix it later.
    And sequestration is one of those issues that is coming up, 
as was talked about, it is in a few weeks. We can always come 
back and try to fix something later, but it just doesn't 
necessarily make sense.
    Ms. Alexander, I appreciated reading your report, Sliding 
Past Sequestration, and I notice you have a little bit of that 
midwestern common sense. You went to school in Wisconsin. 
Congratulations. And you have a line in here that says 
specifically sequestration is bad; it would cut the good along 
with the bad, the effective and the wasteful. It is 
irresponsible.
    Again, coming in new, not being from Washington or around 
when this happened, I would kind of concur with your thoughts 
on that, but I also have fears, as I talk to a lot of 
constituents about what is going to happen in the next few 
weeks, rather than trying to fix it after the fact.
    I was just wondering if you could maybe address, just for 
some of us who are new, although everyone is kind of running 
off to a vote right now, but some of the areas if we do the 
sequestration. You have done a great job in, and I think very 
fearless, covering a lot of different areas of cuts. What are 
some of the areas that, if sequestration happens, are some of 
those effective and some of those good that are going to 
potentially be hurt?
    Ms. Alexander. Well, I am midwestern, so I appreciate the 
midwestern kind of practicalness, and I think that is part of 
the reason why I do what I do. Coming from Wisconsin and 
Illinois, I have always looked for solutions.
    I think that if you look across the board, I mean, 
everybody agrees that we have a need for a strong national 
defense. Everybody agrees we need the Pentagon to operate at a 
very high level of efficiency, and there are good programs 
within the Pentagon. But that kind of conviction and consensus 
that we need a strong national defense has been exactly what 
has allowed the waste that exists at the Pentagon to thrive and 
grow.
    So I think there is kind of no way other than doing the 
very hard work of looking at things program by program, dollar 
by dollar, to say, actually, you know what, a return on 
investment for this is really good; we are reducing risk or we 
are getting something for it.
    I am trying to think of kind of within the context of the 
Pentagon. We are in the business of we are kind of naysayers a 
lot of the time, so I am much quicker with what not to do than 
with what to do. But I think that, again, I was thinking about 
what is our approach to reducing waste, our approach to 
reducing waste is just to do it. So you really just have to 
look program by program, because every program started for a 
reason, because somebody thought it was a good idea. There is 
going to be somebody to defend it.
    So you just have to make sure you are looking through and 
saying this has delivered on the promise that we said would be 
there, so, okay, let's give it a little more money or tweak it 
this way, and look at other things. Mr. Schatz and I have both 
worked on kind of the strike fighter and other programs, the 
alternate engine program, where it is just like we are just 
throwing good money after bad and we just have to stop.
    Mr. Schatz. If I could throw in one thing quickly. We did 
talk about these GAO reports a few times. Senators Coburn and 
Sessions estimate that the information shows about $400 billion 
in annual waste, duplication. Let's just call it duplication 
and overlap; it may not all be waste. But you have 209 of these 
stem programs. No one knows which one works. The GAO says the 
duplication is causing ineffectiveness. So if we are trying to 
improve something and get higher science and math achievement, 
get rid of the programs that don't work. And that is really 
where all of this should start.
    Mr. Pocan. And, Mr. Chair, again, I want to thank the 
panel. I really thought you went into a lot of areas of sacred 
cows, like we talked about, that are a little difficult 
sometimes for people to talk about, and I really appreciated 
the suggestions.
    With that, I would yield back time.
    Chairman Issa. I thank the gentleman, and, as promised, we 
will stand in recess until immediately following the second 
vote.
    [Recess.]
    Chairman Issa. The committee will come to order.
    I am going to yield to the first person that walks in the 
room, but you do understand the advantage of being the chair 
and back here first.
    We were talking, a little bit earlier, about IG 
empowerment, but the GAO, which is a part of this branch of 
government, does all this work again and again and again, but, 
Mr. Kamensky, maybe looking at it a little more from the IBM 
and the private enterprise standpoint, recognizing we have 
limitations in our branches and our separation, is there a 
fundamental problem in that administration after administration 
doesn't have, if you will, the continuity of government to 
really go after some of the deep problems and fix them?
    Well, Congress doesn't take an active role in oversight, 
meaning the GAO is almost the controller, the honest ombudsman 
and yet it has no authority, Congress, for the most part, and 
you saw it earlier in the discussion on CMS, for 20 years 
ignoring a law as to how much you could reimburse and 35 times 
giving reimbursement amounts greater than the law allowed, 
without recourse.
    Do any of you have institutional changes, in other words, 
major government reform changes that you believe structurally 
would help us and our successors do a better job here in this 
body for the benefit of the executive branch?
    Mr. Kamensky. If you are looking at specifically IT.
    Chairman Issa. Well, we could look at IT. The Data Act that 
we are trying to get out of the House again and get the Senate 
to live up to creates more transparency, an easier recognizing 
of the problems. Ms. Norton, I understand, while I was out over 
at judiciary, talked in terms of the RAC board and how they 
were able to look through and identify misspending better than 
in the past. Those would be examples of structural change where 
you actually have a process change that makes accountability 
easier.
    Mr. Kamensky. Well, there are several broad conceptual 
frameworks, and part of it is how do you create incentives to 
do the right thing, to do the win-win that you mentioned 
earlier. And one of these is disclosing hidden costs, and these 
are the costs that are buried into programs that are just 
accepted unless somebody asks a question about them.
    But you can't ask a question about them unless you can see 
them. Some of them in State and local governments are using 
budget capital charging. In other countries there was a very 
interesting initiative in New Zealand, probably about 20 years 
ago, that they had to budget explicitly for all capital costs 
in the agency and had to pay like interest to the government if 
you had capital that you had, and if you didn't use it, if you 
didn't want to be paying this interest charge on it----
    Chairman Issa. So it was sort of define your cap X, define 
your ROI, and pay on it.
    Mr. Kamensky. Well, that was for the agencies that actually 
had the ability to do some sort of revenue charging. For 
example, the forest service in New Zealand, they were given a 
target of 6 percent return to the government for whatever their 
activities were, with exceptions for like you can't chop down 
Yosemite Park type things.
    Chairman Issa. I knew a politician who once said it was a 
renewable resource, and he didn't win that election.
    Mr. Kamensky. But what was interesting was by creating this 
incentive for people to look at excess capital costs, because 
they were being charged for owning them, they would get rid of, 
automatically, things that were excess buildings. The New 
Zealand Embassy here sent a painting of Queen Elizabeth back, 
saying we don't need it, we will deal with a print. We don't 
want to have to pay the capital costs.
    Chairman Issa. Okay. That certainly would be a game-
changer.
    Let me ask a question. Many decades ago, before John Dingle 
was in Congress, there was a Hoover Commission, and my 
understanding is it is the poster child for the one time 
reorganization worked. Is it, in your opinions, time to do that 
again, to have that kind of a continuity of big thinking, 
reorganization at all levels, and then a continuity of doing it 
through multiple administrations?
    Mr. Blair?
    Mr. Blair. Mr. Chairman, I think it is time for that kind 
of big thinking. I think you need to look at what government 
does. I think one of the things that you can look at, you have 
a menu of options available to you, from looking within the 
departments and agencies themselves, and looking at overlap and 
duplication. But I would urge you to look at government from a 
unitary or a corporate perspective and saying what are we 
actually trying to do.
    In my testimony I built off the GAO list of overlap and 
duplicative programs, and some of those are intentionally 
duplicative. As I said in my testimony, you wants belts and 
suspenders on some programs because you want to avoid program 
failure or you want to avoid the risks associated with program 
failure.
    Chairman Issa. But is that the reason we do breast cancer 
research at DOD?
    Mr. Blair. Well, that is exactly the question.
    Chairman Issa. Or is it just because we can stick a little 
funding there?
    Mr. Blair. Do you need NIH and DOD? And now you fund breast 
cancer research through the Postal Service. So you can look at 
these kinds of things.
    Chairman Issa. But they deliver.
    Mr. Blair. That is right, they do, six days a week.
    Chairman Issa. Five very soon.
    Mr. Blair. That is right.
    [Laughter.]
    Mr. Blair. So what you can do, and one of the efforts that 
we have been involved with, it is called Smart Lean Government, 
and it takes a look at these programs and says what is the most 
effective way of delivering on these programs? That you don't 
need multiple agencies or departments doing the same thing with 
similar programs and similar mandates in order to accomplish 
the delivery of the service to the constituency group.
    If you eliminate that duplication and overlap, you can 
achieve savings while avoiding cutting the actual benefit. For 
instance, veterans health care. How many agencies are involved 
in something like that? Do you need that many agencies in order 
to get that final benefit down to the veteran?
    Chairman Issa. Well, I want to thank you.
    And I promised to yield as soon as someone came in, so I 
will get to you, Mr. Schatz.
    Mr. Collins, I will go to you in a second.
    I just wanted you to know the question was, is it time for 
a Hoover commission again, and the answer seemed to be yes. 
And, Mr. Schatz, if you could be brief.
    Mr. Schatz. Yes, Mr. Chairman. I appreciate that.
    I agree with Mr. Blair that this is something that should 
be done. It has been a long time. Of course, the Grace 
Commission, from which CAGW arose and was kind of the 
predecessor to our work, looked at more waste than 
reorganization, although there was certainly some 
reorganization. And also looking at a sunset commission, which 
has been very successful in the State of Texas, where, for 
every dollar that has been spent on the sunset process, 
taxpayers have saved $29. They have abolished 78 agencies; 37 
completely abolished, 41 transferred or moved into new agencies 
or existing agencies. That is another way that programs can be 
evaluated and agencies can be evaluated over time.
    Chairman Issa. Great idea; second only to closing law 
offices.
    Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate the 
opportunity.
    I thank you for being here. This is, I think, going to be 
one of the big topics as we go on government spending, and I 
have several questions.
    I will start with Ms. Alexander. In your prepared testimony 
you stated that loan guarantees for two nuclear reactors at 
Plant Vogtle in Georgia are now loans given to Solyndra. 
However, there is a major difference in the two situations. 
Solyndra was a startup company based on unproven technology 
with no history and assets to protect taxpayers; in the case of 
Plant Vogtle, in my home State of Georgia, the loans are backed 
by a 100-year-old A-rated investment company with $25 billion 
or more in assets.
    In the case of Plant Vogtle, taxpayers also have first lien 
to recover taxpayer money. Expansion of nuclear power will not 
only help lessen our dependency on foreign oil, but it provides 
a steady cost-effective source of power for customers.
    Having dealt with this in different ways in Georgia, based 
on these facts, is it not comparing apples and oranges when you 
are looking at these types of loan guarantees?
    Ms. Alexander. I don't think that it is comparing apples 
and oranges. I should just be clear for the record that our 
organization opposed the Title XVII Loan Guarantee program in 
2005. We opposed it all the way along the way. We think that 
the taxpayer protections in the program are just inadequate 
across the board. Our concerns specifically about the Vogtle 
loan guarantee really go to the fact that it has been a 
conditional loan guarantee where there is renegotiation after 
renegotiation without real transparency for the taxpayers, and 
it is a lot of money. It is just a lot of money.
    Mr. Collins. I don't disagree, but in the word of 
hyperbole, which is thrown around these halls very quickly, 
comparing a startup company with absolutely no history to a 
company that has been around forever, that is publicly traded, 
that is publicly regulated and others, I get the prospect. We 
are okay with where we are at. I think the Title XVII needs 
some issues, but are we not being a little hyperbolic when we 
state that and we put it in with Solyndra?
    Ms. Alexander. We didn't put it in with Solyndra.
    Mr. Collins. You did. You did in your testimony.
    Ms. Alexander. I did in my testimony and I will again, I am 
sure, but I don't want to back off on my statement.
    Mr. Collins. Okay, well, is that not apples and oranges?
    Ms. Alexander. But I am just saying the Title XVII Loan 
Guarantee program was created and expanded to include lots of 
different kinds of technology. It is the Title XVII Loan 
Guarantee program that we believe puts taxpayers at risk. There 
is not a single project in the pipeline that we don't have 
concerns about because we think the program does not adequately 
protect taxpayers. And time and again the protections we have 
seen for taxpayers we think have been eroded.
    Mr. Collins. Okay. I get your point. I think my concern is, 
especially in this situation here with a lot of transparency, 
what has been going on back where there is protection that has 
been made for this, especially in the two companies, my concern 
is you are just simply over-generalizing to make a point, and 
that is my concern there.
    I agree with you on the need for better consolidation, 
better treatment of that; it just struck me as very odd when 
you started comparing a very political favored industry such as 
Solyndra, which there was a lot of bad issues there, as 
compared to say you or I, when we were 17 and a loan given to 
us then when we had nothing, to now, when we probably have a 
decent backing. So I just wanted to state that for the record. 
I believe it to be apples and oranges.
    Mr. Schatz, I have a question for you. As a State 
representative in Georgia, I had authored a bill that 
consolidated State agencies as one of the things. For the first 
time in history as a Republican, we actually were able to 
follow through on what we believed, and that is a limited 
government, smaller government, and we were able to do that.
    On this committee we have discussed ways in which taxpayer 
funds can be saved through IT reform. Maybe a bigger question 
here. Redundant services, redundant services. I know this has 
been discussed some more, but I would like to hear your 
thoughts. Do you see potential cost savings through 
consolidated services or maybe even I'll go on and say entire 
agencies?
    Mr. Schatz. I think that every program should be examined 
to determine how it should function in today's world, which is 
what the Little Hoover Commission has been doing in California; 
also similar to, I imagine, the sunset process in Texas and 
other States.
    But in software, for example, agencies have hundreds of 
software assets that are unnecessary or excessive, particularly 
in licensing. GAO issued a report in July of 2011 noting that 
15 agencies did not list all of their software assets in their 
reports. Software is expensive, of course, and certainly if it 
is unnecessary, it shouldn't be purchased.
    The IT budget is $80 billion and this committee had a 
hearing a week or two ago identifying almost $20 billion in 
annual waste. We favor investment and modernization of 
information technology, but not when it is not managed 
properly; and that is true of how the money is spent in all 
agencies.
    The problem is listing all of the duplication and overlap, 
as GAO has done, is helpful, but without an evaluation of which 
of those programs are effective, Congress just keeps adding new 
programs.
    Mr. Collins. One last little follow-up. And that is why I 
am looking at it. Let's put a bill out there and let's let them 
fight over it, let's decide which is best; which one needs to 
be run and which one doesn't. And I believe in the end if one 
proves better than the other, then that is the one that wins, 
but if they both prove to be inadequate, then we may have a 
situation where we get rid of the entire program.
    So I appreciate your comments there and I think that is 
something we can definitely look at. It is something I am going 
to be looking at greatly.
    Chairman Issa. Mr. Collins, could you yield for a second?
    Mr. Collins. Definitely, Chairman.
    Chairman Issa. Ms. Alexander, I want to follow up on his 
question and ask it a little differently, his first question. 
Regardless of the challenges and the safeguards of Title XVII, 
if in fact a company has substantial skin in the game, very 
substantial, doesn't it, in general, reduce that risk? In other 
words, with Solyndra, they were operating to a great extent on 
our money, and some of the other entities even started with 
their money and then got a loan or a grant and substituted 
Federal money for the money that in fact they had.
    Isn't the gentleman's question valid, that if in fact any 
program the government does with the private sector, the 
private sector has a large percentage of skin in the game, that 
reduces the risk of failure simply because those companies are 
at least going to invest their money, generally, more wisely?
    Ms. Alexander. I mean, I don't mean to gloss over the fact 
that there are operational differences between the Solyndra 
loan, where the credit subsidy cost was covered by an 
appropriation, and Vogtle, which will have to cover the credit 
subsidy cost. We have concerns about the calculation of the 
credit subsidy cost. We have concern about whether or not their 
skin in the game is sufficient. If it is 90 percent or 100 
percent of the loan, we are very concerned about the credit 
subsidy cost calculation.
    So, yes, there is a difference between whether or not you 
have zero skin in the game. That is worse, I agree. But we 
still think this is not good.
    Chairman Issa. I appreciate that and I appreciate the 
clarification.
    Mr. Horsford, welcome to a committee that asks these kinds 
of questions a lot.
    Mr. Horsford. Thank you.
    Chairman Issa. The gentleman is recognized.
    Mr. Horsford. Thank you very much, Mr. Chairman, and it is 
an honor to be on this committee, particularly at a time when 
we are trying to find every way to responsibly balance the 
budget, while protecting the most essential parts of services 
that are provided. And as a former State legislator in Nevada, 
that is what we had to do over the last four years, with 30 
percent less revenue, was to basically comb through the budget 
and find areas that we had to cut back on.
    And I look at all of these issues and say that everything 
really needs to be on the table for consideration and 
discussion, so specifically I would like to ask that during 
these challenging economic times there have been certain 
companies, I will use oil and gas companies in this example, 
who have remained highly profitable. Taxpayers for Common Sense 
issued a report in May of 2011, I believe, that described these 
record profits, and in the report it said, ``In 2008, Exxon 
posted the largest annual corporate profit in U.S. history. 
Chevron became the second most profitable company in the United 
States. Shell, Exxon, Total S.A., BP, and Chevron together made 
a total of almost $150 billion.''
    So even with these profits, oil and gas companies continue 
to receive tax breaks and other corporate entitlements. The 
Office of Management and Budget estimates that taxpayers could 
save more than $43 billion over the next 10 years if these 
corporate entitlements were repealed.
    So my question to Ms. Alexander is do you believe that the 
oil and gas companies should be getting these tax breaks and 
corporate entitlements? And if not, how should Congress deal 
with that?
    Ms. Alexander. We have been on the record for a long time 
against oil and gas subsidies, whether through the direct 
spending or through the tax code. We have always treated 
subsidies through the tax code the same as financing mechanisms 
and spending mechanisms, or at least on equal footing in terms 
of analysis. So we would say the last in, first out accounting, 
prohibiting the use of that in U.S. tax returns is something 
that we think should be prohibited for all businesses, but is a 
particular benefit for oil and gas. The intangible drilling 
cost tax deduction is something that we would also support 
appealing.
    All of the subsidies that are listed in our 2011 report are 
things that we would be very happy to see Congress appeal. I 
will note that VEETC, which did go to oil companies, but also 
to the benefit of corn growers, has been eliminated, so that is 
awesome.
    I think that this is one of those very difficult issues 
because we work on energy subsidies and we work with Members 
from both sides of the aisle. There is kind of a starting point 
of when we say we think tax breaks that are targeted towards 
individual industries or significantly benefit individual 
agencies or subsidies, a lot of times we talk to people who 
just don't agree with that statement. We think that. We have 
been doing this for 17 years; we think that.
    So we think that is something you should look at, at kind 
of how are we picking winners and losers through the tax code, 
how are we picking winners and losers through spending. So we 
look at energy subsidies across the board, and for industries 
that have been profitable for so long and that have been around 
for so long. These are mature industries.
    It is hard to understand why we need to continue to give 
them the kind of tax preferences that they have received for 
100 years.
    Mr. Horsford. As a follow-up, Mr. Chairman, if I may, can 
you give any specific recommendations for ways that the 
Department of Interior can improve its oversight on the 
royalties that are provided to oil and gas companies?
    Ms. Alexander. I would be happy to follow up on the record 
with kind of longer detailed responses to that because that is 
something we have given a lot of thought to. I think certainly 
in the reorganization of the Department of Interior, since the 
Deepwater Horizon spill, we have seen some movement towards 
improvement in terms of making sure we hope we are getting 
better enforcement and collection of royalties from both 
offshore and onshore drilling.
    I think that the terms of leases need to be very carefully 
examined to make sure that we are getting a fair return on any 
kind of development, on public lands. But we would be happy to 
kind of give you the kind of specific recommendations that we 
have advanced over the years and work with you further on that.
    Mr. Horsford. Thank you.
    Mr. Jordan. [Presiding.] I recognize the gentleman from 
Tennessee, Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman. This 
is my 25th year here, and I can tell you that when I first came 
our national debt was, I think, $2.8 trillion, $2.9 trillion, 
and I thought that was too much. I was voting to reduce 
spending even then. Now it is $16,400,000,000,000, and they 
tell us under the most optimistic scenario it is going to go to 
$20 trillion, probably, more realistically, $22 trillion in the 
next four years; and we just passed major legislation that the 
CBO says is going to add another $4 trillion to our debt over 
the next 10 years. I mean, it is just incomprehensible, and I 
think that is the problem.
    But I remember Edward Rendell, when he was mayor of 
Philadelphia and, of course, later became governor of 
Pennsylvania, he was having trouble with city unions when he 
was mayor, and he testified, I think, in front of one of our 
committees and he said government does not work because it was 
not designed to. He said there is no incentive for people to 
work hard, so many do not. There is no incentive for people to 
save money, so much of it is squandered.
    I have always remembered that, and I think the problem and 
the reason there is so much waste, people are spending money 
that is not coming out of their own pockets and there is just 
not the incentives to save money. There are not the same 
incentives or pressures that there are in the private sector. 
And I am wondering, I would like to ask all of the witnesses, 
do you know of ways that we could create more incentives for 
Federal employees to save money? I mean, we hear these stories. 
For years we have all heard stories about how agencies use 60 
percent of their budget the first 11 months and then scramble 
around the last month to try to spend it so they won't be cut 
the next year. Can we come up with a program to give Federal 
employees bonuses if they hold down or save money within their 
particular agencies or programs?
    Mr. Schatz? How long have you been here?
    Mr. Schatz. I have been at Citizens Against Government 
Waste since 1986, and we certainly appreciate your voting 
record, because most people who come to Washington end up 
voting for more spending over time.
    Mr. Duncan. So you have been here slightly longer than I 
have.
    Mr. Schatz. Slightly longer, yes. Even before that; worked 
on the Hill before that.
    But I mentioned earlier the idea of having some kind of 
remuneration for either individuals or agencies that go out and 
either save money or collect money. Unfortunately, we probably 
need that kind of incentive to do a better job of managing our 
money. So that is something we have always supported.
    Mr. Duncan. Anybody else? Yes.
    Mr. Kamensky. Mr. Duncan, I have been in Washington, first 
with GAO, since 1977, so I have seen a lot of changes over 
time, and when I was given the opportunity to work for Vice 
President Gore, his deputy for reinventing government, this 
very issue was something that he raised, and there were pilots, 
gain-sharing programs in some agencies that were used that if 
they were able to save money, they were allowed, 
administratively, to give that money either back to the 
employees or to invest it in, for example, an upgrade in their 
technology in the office, or to paint the office. So it was 
done as a team rather than as individuals.
    Another thing that was done, and this was in the 1990s, is 
the Vice President said that a lot of employees are more than 
willing to do something if there is some recognition. So he 
created something called the Hammer Award, which was given to 
teams of employees that were able to put customers first, cut 
red tape, or to cut costs; and that award was given to about 
1400 teams. And as we were doing this over a period of years, 
we said that there are some savings associated, and we asked 
agency budget officers to calculate, behind each team's award, 
what kinds of savings were accruing or cost avoidances, and it 
totaled about $50 billion.
    And this wasn't something that came from Congress, it 
wasn't an IG report, it wasn't GAO, it wasn't OMB; it was the 
employees themselves.
    Mr. Duncan. And you said $50 billion with a B?
    Mr. Kamensky. Billion dollars. So, in part, I think 
employees, if given the inspiration or the incentive, are more 
than willing to do something. I had the opportunity to actually 
deliver some of these awards in ceremonies around the Country, 
and there were people in tears saying, I worked for 30 or 40 
years for the Federal Government and no one has ever told me 
thank you.
    Mr. Duncan. Well, we have to do more in this way because 
this debt problem gets worse and worse, and I can tell you many 
cities around the Country have had to come in and cut their 
pensions. Well, the Congress won't come in and cut Social 
Security, but we will just print more money and more money and 
more money, and pretty soon these veterans pensions and Social 
Security won't be able to buy anything.
    Mr. Blair, you want to say something?
    Mr. Blair. I do, Mr. Duncan. I think you bring up a good 
point, and you can look at it from more of a micro level of 
look at the Federal compensation system. It rewards longevity, 
not performance. There are ways of changing that, and it is 
difficult. There are a lot of employee groups and unions that 
oppose that, but at the end of the day compensation is the 
single largest tool you have in order to spur performance, so 
it needs to be more performance-oriented.
    It is interesting. I have heard this expression several 
times this afternoon, skin in the game. I think you need to 
give some agencies some skin in the game to reward them if they 
are doing a good job in managing and functioning well. You have 
this high-risk list that is coming out.
    Well, you have been here since 1986. I started in 1985 on 
the predecessor to this committee and I have seen a lot of 
this, and it seems like every year, every time the high-risk 
list comes out, Congress brings the agencies up, fusses at 
them, and then nothing really happens; Congress throws some 
money at them to correct the problem.
    But you have to have some real consequences, and I think 
that that, at the end of the day, is the largest issue in 
government, is you have to hold people accountable. And this 
diffusion of accountability by saying, well, if an agency head 
doesn't do this, let's give authority to this person. You have 
to hold the individual accountable.
    So I think that you can look at it on multiple levels, but 
at the end of the day it is about accountability and holding 
agency heads accountable and making sure they are answerable to 
Congress and holding Congress accountable as well. I mean, look 
at the budget process; it has been in shambles for years now, 
and I think that is just one of the things that can be done to 
strengthen that accountability.
    Mr. Duncan. Well, I appreciate your testimony. I know my 
time is up, but I will say, since it is a veteran panel, that 
when I am telling some of the newer Members that I have been 
here this long, they look at me; it sort of boggles their 
minds. But I will tell you they will be amazed at how fast the 
time passes.
    Thank you, Mr. Chairman.
    Mr. Jordan. Thank you, Mr. Duncan.
    Let me just pick up real quickly and then I will turn to 
Mr. DeSantis.
    So you can incentivize, as the panel talked about and as 
Mr. Duncan talked about. It seems to me you can also penalize. 
One of the things I am reading that our Majority staff put 
together is GSA sets a benchmark for what Federal agencies can 
spend at their conferences. The benchmark is $3,000 per 
attendee per conference, $6,000 per attendee per day.
    One hundred and eighty-three times the Federal Government, 
the various agencies, went above the benchmark. In fact, 64 
conferences the Department of Defense held they went above the 
benchmark; Social Security, 22 times at 22 different 
conferences; Department of Energy, 21 times. And, of course, 
GSA, which set the benchmark, went above the benchmark when 
they had their big shindig in Las Vegas.
    So it seems to me you can incentivize, but, frankly, we 
should penalize them. One simple piece of legislation, just 
after reading this here a few minutes ago, that I would be 
looking at doing is if you go above the benchmark and you spend 
more per conference, next year your budget gets cut by that 
exact amount. That is an incentive to do the right thing. That 
is the way everyone operates; you do something wrong, you 
should get penalized.
    So it seems to me we can do both of those as we are looking 
to save some dollars to deal with the $16.5 trillion debt that 
we now face.
    That is just me rambling; you don't have to answer that.
    We will go next to the gentleman from Florida.
    Mr. DeSantis. Good afternoon. Over here. Over here. Out in 
left field.
    Mr. Jordan. Hang on. I messed up. I didn't see the 
gentlelady from California. We have to go back and forth. She 
gets to go, then we will go to you and I won't interject next 
time.
    Mr. DeSantis. No problem, Mr. Chairman.
    Ms. Speier. Thank you, Mr. Jordan. I will join you in that 
amendment, if you want to offer it on the floor, because unless 
we start, as a committee, requiring accountability in these 
various departments, nothing is going to happen.
    And I am thrilled that each of you are here today to 
testify. If we spent the next year just implementing the 
recommendations that are in these great people's testimony 
today, we will have done something for the American people. The 
problem is is that we know what the problems are; we just never 
effectuate the changes that need to take place. The inspector 
general, the GAO constantly tell us where we should be making 
cuts, where we should be making reevaluations, and we just 
never act on it.
    So we, as a Congress, have got to take some blame for what 
is going on; and I think this committee is poised to do the 
right thing, and we are poised to do it in a bipartisan 
fashion. If we just take the recommendations that were 
presented here today, we will have done our work on behalf of 
the American people this year. So I hope that we can work 
together on that moving forward, and you can count me in on any 
of your efforts on that behalf.
    Let me just go back to something that is truly troubling, 
and any of you that have any perspective, I would appreciate 
it.
    The fact that the Air Force wasted $1 billion on the 
Expeditionary Combat Support System, that it came before us as 
a Congress a number of times, I believe the GAO had made 
recommendations, and we kept allowing it to continue to foment, 
and then finally it only got pulled after the Air Force said, 
hey, this isn't working. But we had already spent $1 billion.
    And then on top of it we ended up paying $8.2 billion as a 
parting gift to CSC for terminating the contract? Is that true? 
Or is it $8.2 million? Actually, this is a typo. It is $8.2 
million in contract termination fees. So they screw up, we 
spend $1 billion of taxpayer money on a system that doesn't 
work; finally the Air Force says it is not going to work; we 
terminate the contract and we pay them another $8.2 million.
    Does anyone have any perspective of why it got as bad as it 
did, went on for as long as it did without someone pulling the 
plug?
    Mr. Schatz. Unfortunately, it is not the first time, 
although we hope it is one of the last times, because there 
have been many other examples of projects, programs, not just 
in information technology, but elsewhere, that go over budget 
and, unfortunately, since there are really no consequences for 
spending more money by Congress to hope the program works 
eventually, that is one of the reasons why they keep going. It 
is not just the agencies that continue to come in and say we 
need more; it is Congress that doesn't put their foot down and 
say no.
    Ms. Speier. Exactly.
    Mr. Schatz. So ultimately, not to lecture the committee or 
the Congress, but it is their responsibility as a body to say 
this should just stop. Let's do something different or let's 
just not do it at all. And, unfortunately, it doesn't happen 
often enough.
    Ms. Alexander. I would say the one other thing I would add 
is I think that it is just incredibly important, and all we 
talk about in contract and acquisition reform is to have very 
clear consequences for failure to deliver what you say you are 
going to deliver. The cost of the termination fee was less than 
continuing the program, so that is the good news, but they 
didn't deliver what they said they were going to deliver which, 
ironically, was to help the Air Force meet its audit 
requirements. Of course, they still haven't done.
    So I think we just need to hold, make sure that in DOD, in 
particular just because it is so large, but across the 
government that when a contract is let to whatever service 
provider, that we have clear consequences; that we don't have 
to pay when they don't deliver. I think that is something that 
anybody who has been in business, if you enter into a contract 
with somebody, you know, there are some areas of gray, did you 
give me exactly what you I contract for, but there are some 
areas that are not gray, where it is pretty clear. We didn't 
get what we paid for, so we shouldn't have to pay for the rest 
of it.
    Ms. Speier. Mr. Chairman, I believe I only have 20 seconds, 
but if I could, any kind of discussion that we could have, a 
rational discussion on TRICARE would be greatly appreciated, 
because right now TRICARE is costing us an extraordinary amount 
of money and over time is going to eclipse what we pay in 
Defense expenditures for, I believe, other personnel costs. And 
TRICARE is being paid for individuals who have retired from the 
military, but are working in employment settings where they 
could get health insurance through their employer, and I want 
to know if you have any number as to how much that would save 
us.
    Ms. Alexander. We have done a little analysis, and we can 
follow up and send you some numbers on the record. But I think 
that this committee has a huge opportunity to play a role in 
that, somewhat difficult conversation about reforming TRICARE. 
It shouldn't be that difficult because we of course we are 
going to take care of the people who have served the Country so 
well, but we are subsidizing employers who have great employees 
who got trained by the U.S. Government, and we should think 
about that before we continue to spend money on it.
    I think that it is just worth noting that Congress has 
actually blocked some efforts by the Pentagon to put in cost 
reforms to TRICARE, so it is important that this committee lead 
the way.
    Ms. Speier. It is important to remember that, up until the 
year 2000, those who retired from the military were in the 
Social Security system, and TRICARE is actually a fairly new 
incarnation.
    Mr. Jordan. I thank the lady.
    The gentleman from Florida is recognized.
    Mr. DeSantis. Thank you, Mr. Chairman.
    Thank you for your testimony. The material that you 
provided is great.
    After he got elected in 2008, the President, then 
President-Elect, said that he thought it was important to go 
through the budget page by page, line by line, to eliminate 
unnecessary programs and operate existing programs in a cost-
effective way. As individuals who study this, has the 
Administration ever put forward a list of these programs that 
needed to be eliminated? Have they actually eliminated any 
programs? Have they introduced some legislation in Congress to 
make good on this promise four years later?
    Mr. Schatz. Not to defend everything they have done, but 
there are certainly some education programs that appeared in 
the President's budget: National Institute for Literacy, Even 
Start, Leveraging Educational Assistance Partnership. Others 
have been eliminated by Congress, but in that case maybe a few 
hundred million dollars in savings.
    So every President produces a list of terminations. 
Unfortunately, Congress only adopts about usually less than $15 
billion, often under $10 billion, less than one-half of one 
percent of Federal spending. But there are lists. Many of them 
have programs that have been around for, unfortunately, 10, 20, 
30 years; and overall it is a small percentage, but the answer 
is yes, there are lists that President Obama and others have 
put forward. They are just not large enough.
    Mr. DeSantis. And they haven't been actually enacted into 
law, by and large?
    Mr. Schatz. Some have, yes. There are some changes that 
have.
    Mr. DeSantis. But it is in the hundreds of millions, not 
billions, of dollars?
    Mr. Schatz. Well, again, just in the information we have on 
education programs, because that was the easiest to find, it is 
a few hundred million. But overall anywhere between $10 billion 
and $15 billion a year, I would say, gets adopted by Congress 
from the President's budget.
    Mr. DeSantis. Okay.
    Yes, sir.
    Mr. Kamensky. Mr. Congressman, the line-by-line review of a 
budget doesn't capture a lot of the costs that could be saved. 
There are system costs that are just hidden in the procurement 
system, in the personnel systems, etcetera. But there is also 
cost or savings potential by looking at tax expenditures, which 
is an alternative way of buying things for the Federal 
Government, and that is almost $1 trillion, about the 
equivalent of the general discretionary spending each year; and 
there is also money that is hidden through regulatory costs 
that are in the hundreds of billions of dollars, that you are 
shifting cost to the private sector that do things.
    There are also laws that are just hidden programs. For 
example, the General Mining Act of 1872 allows the miners to 
extract resources from Federal lands at costs far below the 
market value of the minerals that they are mining.
    So if you just restrict the look or the view only to what 
is in the discretionary budget, you wind up missing something 
that may be two or three times as large.
    Mr. DeSantis. I totally agree with that. I appreciate that. 
I was just trying to isolate what has been done; where do we 
stand four years out; what more can we do.
    My second question is we talk about individual items that 
can be cut, we talk about different things that can be done to 
save the Federal Government money, but I am wondering, in your 
judgments, what is the capacity of this body in the Congress to 
actually follow through on some of these things. And I guess my 
point is if you look at the last several decades, it seems that 
the incentive is always to spend more. And I am wondering if 
you think that we need an external pressure, constraint, such 
as a balanced budget amendment to the Constitution, to finally 
get us on a path to fiscal solvency.
    Mr. Schatz. Well, we have always supported a balanced 
budget amendment, but, again, all of this could be done. It is 
a political will issue. A good example of one project that was 
eliminated after 2010, that was kept in 2009, is the alternate 
engine to the joint strike fighter, which, before the change in 
the control of the House, I believe it was about 230 Members 
voted to keep it going. The Senate, by the way, always rejected 
it. In 2009 that vote took place, excuse me, 2010, prior to the 
election. In 2011 the vote was reversed.
    So perhaps, one by one, some of these wasteful programs can 
be eliminated. The House has done a much better job of voting 
to reduce wasteful spending; it simply has gotten stuck over in 
the Senate. But I think it is all a matter of finding 218 votes 
in the House and 60 or so in the Senate that agree that these 
changes should be made.
    Mr. DeSantis. My final question is I look through some of 
the materials about a lot of the improper payments. This is 
billions and billions of dollars, so it is a lot of good stuff 
that would be great to save. But I am wondering to what extent 
is that something that you can just isolate and fix, or to what 
extent is that just simply inherent in the nature of a big 
bureaucracy, so that the answer isn't that we can simply 
identify this $10 billion in improper payments and snap our 
fingers, but we actually may need to simply reduce the size and 
scope of the bureaucracy as the best way to be able to save 
money.
    Mr. Blair. I think there are ways of isolating certain of 
those improper payments. For example, paying dead Federal 
employees their retirement annuities. I think that was 
highlighted in one of the recent reports that came out a couple 
years ago, that we continue to pay these retirement annuities 
to people who died a year, two, or three years ago. I think 
that if you go through each of these you can identify areas 
where you can actually make a difference now.
    But you are, with a government as large and as broad as 
what we have, addressing waste, fraud, and abuse, you have to 
look in terms of the sheer volume, but you also have to look at 
it as part as a holistic part of government and something that 
we are going to have to live with. We just have to make sure 
that we have the processes in place that are stringent enough 
to keep it at a minimum, and that is what we don't have in 
place right now.
    Our government has grown up over the past 225 years to a 
point that, if we were reorganizing government today, it 
wouldn't look at all what we have in place now; it would be a 
totally different function. But we have, through the years, 
departments and agencies reform to respond to specific 
constituencies and to specific programs, and it is time to take 
a look at how governments administer and how governments 
organize in order to cut down the systemic waste that we have 
seen over the past few years.
    Mr. DeSantis. Thank you.
    Mr. Jordan. I thank the gentleman.
    Let me go back to where I just was. Mr. Schatz had said 
something earlier, before we went for votes: if there is no 
consequence for wasting money, money will continue to be 
wasted. The one example that jumped out to me was the one I 
gave just a few minutes ago, where we have this benchmark and 
183 times various Federal agencies exceeded the benchmark. Ms. 
Speier and I are going to do legislation on that specific 
thing.
    But I just wanted to know if there are no consequences, you 
are going to see money continue to be wasted. What other 
specific things, specific, would you point to that we can get 
at where there are consequences for wasting taxpayer money? We 
can just go down the line.
    Mr. Schatz. Well, one consequence would be to, again, 
penalize Members of Congress who vote to waste money in some 
manner.
    Mr. Jordan. Well, that happens on election day. I get that.
    Mr. Schatz. Well, that would help. Because, again, the 
Congress cannot fire people who overspend; they can change how 
the budget process works.
    What seems to happen, however, is when something is either 
not working or something is trying to be achieved, the STEM 
programs really strike me as the best example because a third 
of those 209 STEM programs were added between 2005 and 2010, 
which means that both sides of the aisle were responsible. 
Somebody sees a science and math failure; we need to achieve 
more, we will spend more.
    Spending money does not solve problems. So this is a 
fundamental change in the approach to spending. That is one of 
the reasons that one of the Grace Commission recommendations 
was to change the Office of Management and Budget to the Office 
of Federal Management.
    So management comes first; the spending comes later, 
because the planning here is totally different than it is 
outside of Congress, where someone looks at a problem, says can 
we solve it, how do we solve it, and then how do we either 
raise the money to resolve it or can we afford to do this, or 
is there something else that exists that already achieves this; 
all the questions that really don't get asked. So I am happy to 
see that there now is this rule that identifies duplicative 
programs, because at least that information is there. It 
doesn't mean Congress won't vote to create a new program, but 
at least there will be more transparency on that, and that may 
help, in and of itself.
    Mr. Jordan. Anyone else?
    Ms. Alexander. I think in the context of contract reforms, 
I think looking at kind of when contractors are entitled to 
termination fees.
    Mr. Jordan. Okay. That is a specific.
    Ms. Alexander. And going back into the context of fixed 
price contracts particularly for goods, where kind of having 
the government as a client should be a pretty good incentive to 
keep your costs down. So looking at kind of the very specific 
things to make sure that contractors have adequate skin in the 
game, to use the phrase of the day, but also just adequate 
controls so that we don't have to pay people who aren't doing 
what we want them to do.
    Mr. Jordan. Okay.
    Mr. Blair. We talked about, earlier, a more accountable pay 
system for Federal employees and also a reorganized government, 
but one of the things I would urge you to take just a brief 
look at is a project that the Academy worked on with the 
American Society for Public Administration called Memos to 
National Leaders. It was intended to be addressed to both 
Congress and the Administration over the next four years in 
identifying the toughest management areas in government. And 
some of the things to look at is better use of technology. We 
talked about realtime technology, more analytics to identify 
waste, fraud, and abuse; better use of social media to inform 
constituency groups. FEMA has used this in the past, but how 
about other agencies as well?
    One of the things that our memos talked about was 
strengthening the intergovernmental system. I say in my 
testimony that actions at the Federal level reverberate on both 
the State and local level, and we don't seem to have, here in 
Washington, as firm a grip on this as we need, because we still 
haven't funded mandates that trickle down to the State and 
local level.
    We need to do a better job of recognizing the budget 
constraints that they have at the State and local level and 
really strengthen that Federal system so that, while 
recognizing the independence that our States and localities 
have, the Federal Government should be a unified approach at 
least with some of the programs, and there are ways of doing 
that; better collaboration, bringing stakeholders together 
through online dialogues and other technological innovations.
    But the bottom line is that we really need to do a better 
job of communicating and highlighting the transparency and 
accountability of government.
    Mr. Jordan. Mr. Kamensky, do you want to comment?
    Mr. Kamensky. Thank you. The emphasis on greater 
transparency is a good one. The overall goal should be trying 
to create some sort of incentive to save money. One of the 
things that has been interesting is a barrier for some of the 
savings that I mentioned that were around the back-off as 
administrative costs is because many of those savings are not 
scoreable; and because it is not scoreable, neither OMB, nor 
the Congress, seem to want to pay attention to them, even 
though there will be savings that result from them.
    There are processes to make things like that scoreable, but 
it takes a lot of effort. So the transparency, by creating more 
scoreable savings figures, can be a strategy that would help.
    Mr. Jordan. One last thing. Maybe what you have suggested 
is part of the inspectors generals' reports. But we have 73 
different inspectors generals who, in 2011, their reports, when 
you total it up, is almost $94 billion that the government 
save. It seems to me these are sharp people; they make good 
salary; they have a staff. I think the average salary of an 
inspector general is $165,000; sharp people working identifying 
things.
    Do you agree with the inspectors generals' report, the 
compilation of all that, that there is that kind of savings 
achievable? And, if so, what do we need to do to make sure that 
happens? Obviously, we need to pass a law or whatever, but give 
me your thoughts on that real quick. And I apologize if you 
talked about it before I was here, but let's just, real quick, 
do that, then I will let you all go.
    Mr. Blair. Well, one of the things I would look at in that 
inspector general report, and I am not that familiar with it, 
is I recall what I think is something like $75 billion in that 
was achieved through the savings of the Postal Service IG 
looking at the pension system.
    Mr. Jordan. Okay. I have not looked at it that closely.
    Mr. Blair. And correct me if I am wrong on this, but if you 
take that off the table, you look at the other instances of 
potential waste, fraud, and abuse, I think it is important to 
say that a lot of that is potential; and I think more work 
needs to be done in addressing and highlighting exactly what 
can be done, because I think that would give Congress a good 
blueprint from which to start.
    I would also urge you, in addition to the IG report, to 
look at this upcoming GAO list of duplicative programs, because 
I think that that gives you the starting point from which to 
ask why are we continuing to do that.
    Mr. Jordan. Oh, we can do that anywhere. I just haven't 
done a little bit of work in the welfare reform area. We have, 
I think, 73 different means tested social welfare programs, job 
training, education, nutrition, health care, scattered all over 
the various agencies in government. We might help families a 
little better if we didn't have 73.
    Mr. Blair. And you might get that money to the families who 
need it a little quicker.
    Mr. Jordan. Exactly. No, that is the whole point.
    Mr. Blair. Rather than going through 73 different agencies.
    Mr. Jordan. Save money and help more people. Imagine that. 
Imagine that.
    Mr. Schatz.
    Mr. Schatz. Well, I think that is also an approach that 
should be taken in discussing what to do about duplication and 
waste, because whenever someone talks about it, and we have all 
seen this over the years, well, we are going to ``eliminate, 
terminate,'' someone thinks they are not going to get something 
that they may or may not deserve, but certainly expect. But to 
show how more people will be helped through the consolidation 
of programs, through better management of programs, through 
more information about programs is something that needs to be 
better communicated, I think.
    Mr. Jordan. We are actually having a subcommittee hearing 
on that very subject next week.
    Mr. Schatz. Right. Because it will enable Members of 
Congress to feel a little better about talking about how these 
things are going to work and how people will be helped.
    Ms. Alexander. I just think the one other thing I would say 
that I think this committee is in a position to do is factor in 
the duplication within the congressional process, because 
sometimes there is a lot of duplication in programs because 
there are multiple committees of jurisdiction; and this 
committee is in a unique position to do oversight over multiple 
programs that have jurisdiction of other committees.
    Mr. Jordan. That will win us a lot of friends with our 
colleagues.
    Ms. Alexander. Win friends and influence people, I know, 
but it is something that this committee can do.
    Mr. Jordan. I understand. No, good idea.
    I had one other thing and it has escaped me. Oh, I am just 
curious. And I should know this, and our staff will work on 
finding this out. Is the scheduled sequester, the $85 billion 
in reductions and spending scheduled to happen in twenty-some 
days, would that be one of the largest cuts government has ever 
implemented since, I would assume, World War II, in the modern 
times? Do you know? Mr. Schatz said you have been here twenty-
some years, since 1986. I am just curious.
    Mr. Schatz. Well, again, remember, it is reduction of an 
increase, so it is not necessarily a cut. It may be a cut for 
some areas, but maybe under Gramm-Rudman. I don't recall what 
that number was.
    Mr. Kamensky. That was in 1986.
    Mr. Schatz. A hundred billion, maybe? I think. I am trying 
to remember.
    Mr. Kamensky. But it didn't last.
    Mr. Schatz. Right.
    Mr. Jordan. We know they don't. They never last.
    Mr. Schatz. Right.
    Mr. Jordan. We are trying to make some of them last.
    Mr. Blair. I think it was for a period of a few years.
    Mr. Schatz. I think Gramm-Rudman might have been larger, 
but not by much.
    Mr. Jordan. Okay.
    Mr. Blair. Gramm-Rudman was only for a few days, wasn't it? 
Didn't Congress act that sequester? I can't recall.
    Mr. Schatz. We remember a lot more about how much they 
spend.
    Mr. Jordan. You are highlighting the problem. You are 
highlighting the problem.
    I want to thank you all for being here. I know it has been 
a while and you had to break in the middle. We appreciate the 
good work you are doing and the work you have helped with the 
committee.
    We are adjourned.
    [Whereupon, at 3:38 p.m., the committee was adjourned.]
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