[Congressional Record (Bound Edition), Volume 146 (2000), Part 2]
[House]
[Pages 2324-2334]
[From the U.S. Government Publishing Office, www.gpo.gov]



                GOVERNMENT WASTE CORRECTIONS ACT OF 1999

  Mr. SESSIONS. Mr. Speaker, by direction of the Committee on Rules, I 
call up House Resolution 426 and ask for its immediate consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 426

       Resolved, That at any time after the adoption of this 
     resolution the Speaker may, pursuant to clause 2(b) of rule 
     XVIII, declare the House resolved into the Committee of the 
     Whole House on the state of the Union for consideration of 
     the bill (H.R. 1827) to improve the economy and efficiency of 
     Government operations by requiring the use of recovery audits 
     by Federal agencies. The first reading of the bill shall be 
     dispensed with. General debate shall be confined to the bill 
     and shall not exceed one hour equally divided and controlled 
     by the chairman and ranking minority member of the Committee 
     on Government Reform. In lieu of the amendment recommended by 
     the Committee on Government Reform now printed in the bill, 
     it shall be in order to consider as an original bill for the 
     purpose of amendment under the five-minute rule the amendment 
     in the nature of a substitute printed in the report of the 
     Committee on Rules accompanying this resolution. That 
     amendment in the nature of a substitute shall be considered 
     as read. Points of order against that amendment in the nature 
     of a substitute for failure to comply with clause 4 of rule 
     XXI are waived. During consideration of the bill for 
     amendment, the Chairman of the Committee of the Whole may 
     accord priority in recognition on the basis of whether the 
     Member offering an amendment has caused it to be printed in 
     the portion of the Congressional Record designated for that 
     purpose in clause 8 of rule XVIII. Amendments so printed 
     shall be considered as read. The Chairman of the Committee of 
     the Whole may: (1) postpone until a time during further 
     consideration in the Committee of the Whole a request for a 
     recorded vote on any amendment; and (2) reduce to five 
     minutes the minimum time for electronic voting on any 
     postponed question that follows another electronic vote 
     without intervening business, provided that the minimum time 
     for electronic voting on the first in any series of questions 
     shall be 15 minutes. At the conclusion of consideration of 
     the bill for amendment the Committee shall rise and report 
     the bill to the House with such amendments as may have been 
     adopted. Any Member may demand a separate vote in the House 
     on any amendment adopted in the Committee of the Whole to the 
     bill or to the amendment in the nature of a substitute made 
     in order as original text. The previous question shall be 
     considered as ordered on the bill and amendments thereto to 
     final passage without intervening motion except one motion to 
     recommit with or without instructions.

  The SPEAKER pro tempore. The gentleman from Texas (Mr. Sessions) is 
recognized for 1 hour.
  Mr. SESSIONS. Mr. Speaker, for purposes of debate only, I yield the 
customary 30 minutes to the gentlewoman from New York (Ms. Slaughter), 
pending which I yield myself such time as I may consume.
  During the consideration of this resolution, all time is yielded for 
the purpose of debate only.
  Mr. Speaker, House Resolution 426 is an open rule providing for the 
consideration of H.R. 1827, the Government Waste Corrections Act. This 
rule provides 1 hour of general debate, evenly divided and controlled 
by the chairman and ranking member of the Committee on Government 
Reform.
  The rule provides that, in lieu of the amendment recommended by the 
Committee on Government Reform and printed in the bill, that the 
amendment in the nature of a substitute printed in the report of the 
Committee on Rules accompanying the resolution shall be considered as 
the original text for the purpose of amendment.
  The rule waives clause 4 of rule XXI against provisions included in 
the amendment in the nature of a substitute. The rule provides that the 
amendment in the nature of a substitute shall be open for amendment at 
any point. The rule accords Members who have preprinted their 
amendments in the Record prior to their consideration priority in 
recognition to offer their amendment, if otherwise consistent with 
House rules.
  The rule allows the chairman of the Committee of the Whole to 
postpone votes during consideration of the bill, and to reduce voting 
time to 5 minutes on a postponed question, if the vote follows a 15-
minute vote. Finally, the rule provides one motion to recommit, with or 
without instructions.
  Mr. Speaker, when the Republican party became the majority party in 
1995, Congress began enacting a series of commonsense reforms. These 
reforms have changed the way the Federal government operates and have 
saved billions of taxpayer dollars.
  One of the first things Congress did was apply all laws that it 
passes to itself. Previously, Congress would pass burdensome 
regulations on the private sector, but exclude itself from compliance 
to these laws. In 1995, Congress passed the Paperwork Reduction Act to 
identify and reduce burdensome Federal paperwork requirements on the 
private sector, especially small businesses.
  Continuing toward a goal of creating a 21st century government, in 
1996 Congress passed the Federal Acquisition Reform Act to reduce 
bureaucratic requirements within the Federal procurement system.
  We have all heard examples of inflated prices, like the 187 screw 
sets purchased by the government for $75.60 each. More often than not, 
such fleecing of taxpayer dollars is due to the cumbersome Federal 
procurement system, not fraud. The Federal Acquisition Reform Act has 
streamlined the process of doing business with the Federal government 
by significantly reducing such waste.
  In 1997, Congress passed the Travel and Transportation Reform Act, 
legislation to remedy poor management of the Federal government's 
massive travel expenditures. This bill is now law, and has led to a 
concerted effort by Federal managers to improve the Federal travel 
efficiency and cost effectiveness. The Congressional Budget Office 
estimates savings of $80 million per year.
  With the passage last year of the Presidential and Executive Office 
Financial Accountability Act, Congress created a chief financial 
officer for the White House. This nonpartisan CFO position in the 
Executive Office of the President will facilitate prevention and early 
detection of waste, fraud and abuse. Accordingly, the bill promotes 
efficiency and cost reductions within the White House.
  Today Congress takes another step toward increasing efficiency and 
saving taxpayer dollars with consideration of the Government Waste 
Corrections Act.
  In private industry, companies routinely audit themselves to 
determine if they have overpaid vendors and suppliers. Overpayments are 
a fact of life for businesses, government entities, and even our own 
households. Overpayments become more likely with larger volumes of 
payments.
  Overpayments occur for a variety of reasons, including duplicate 
payments, pricing errors, and missed discounts or rebates. On average, 
private industry recovers $1 million for each $1 billion that is 
audited. Overpayments at the Federal level are an especially serious 
problem when considering the size and complexity of Federal operations, 
as well as the widespread financial management weaknesses of the 
Federal government.
  Recovery auditing and activity already occurs in limited areas of the 
Federal government. Recovery audits of the Department of Defense alone 
have identified errors averaging .4 percent of Federal payments 
audited, or $4 million out of every $1 billion. Recovery efforts 
throughout the entire Federal Government could save billions of dollars 
more.
  With this in mind, the Government Waste Corrections Act requires 
Federal agencies to perform audits if their direct purchases for goods 
and services total $500 million or more per fiscal year. Agencies that 
must undertake recovery auditing would also be required

[[Page 2325]]

to institute a management improvement program to address underlying 
problems of their payment systems.
  The Government Waste Corrections Act is a commonsense government 
reform that incorporates proven, money-saving private sector practices 
to the Federal government.
  Mr. Speaker, I encourage all Members to support the rule and the 
underlying legislation.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1245

  Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Texas (Mr. 
Sessions) for yielding me the customary 30 minutes, and I yield myself 
such time as I may consume.
  Mr. Speaker, I rise in support of this open rule, and I urge my 
colleagues to pass it so that all germane alternatives and potential 
improvements to this legislation may be considered.
  The underlying bill, H.R. 1827, the Government Waste Corrections Act 
of 1999, is designed to address the problem of overpaying vendors that 
provide goods and services to Federal agencies. Rooting out this 
problem is a worthy goal and one I wholeheartedly support. Our 
government has paid through the nose so often it has developed a bad 
cold that has resisted a cure. These overpayments waste money of the 
taxpayers and divert the Federal resources from their intended use.
  Overpayments can occur for a variety of reasons, including duplicate 
payments, pricing errors, missed cash discounts, rebates, or other 
allowances. But with this bill, we take the first step toward a cure. 
The identification and recovery of such overpayments, commonly referred 
to as recovery auditing and activity, is an established business 
practice with demonstrated large financial returns.
  Recovery auditing has already been employed successfully in limited 
areas of Federal activity. It has great potential for expansion to many 
other Federal agencies and activities, thereby resulting in the 
recovery of substantial amounts of overpayments annually. Congress must 
ensure that overpayments made by the Federal Government that would 
otherwise remain undetected are identified and recovered.
  I understand from Committee on Rules testimony last week that the 
underlying bill would not apply to excess Medicare payments. I think 
this is a shame, because Medicare is a system that needs looking into.
  A measure that I have authored, H.R. 418, the Medicare Universal 
Product Number Act of 1999, which I have cosponsored with the gentleman 
from New York (Mr. Houghton) would go a long way towards cracking down 
on improper federal reimbursements.
  I would urge the Committee of Government Reform and Oversight to 
continue this effort to crack down on excessive payments and take a 
hard look at Medicare in the process. The taxpayers need to know that 
Congress means business when it comes to handling their money.
  Mr. Speaker, I support this open rule to allow full debate and all 
perfecting amendments to this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, previously I served on the Committee on Government 
Reform, and I found that the leadership that was provided by the 
chairman of that committee really has had a lot to do with the 
provisions of the laws that have changed. I believe that the gentleman 
from Indiana (Mr. Burton), perhaps one of the greatest things he has 
brought to us is the old axiom that the light of day is the best 
disinfectant.
  Mr. Speaker, I am delighted to yield such time as he may consume to 
the gentleman from Indiana (Mr. Burton), the chairman of the Committee 
on Government Reform.
  Mr. BURTON of Indiana. Mr. Speaker, I thank the gentleman for his 
kind remarks.
  Let me just say that the gentleman from Texas (Mr. Sessions), as the 
chairman of the Results Caucus, has provided invaluable service to the 
country and to this body in working with us to formulate this 
legislation.
  I would like to also thank the gentleman from Texas (Mr. Turner), the 
ranking minority member on the Subcommittee on Government Management, 
Information and Technology for his hard work on this. The gentleman 
from California (Mr. Ose) and the gentleman from Texas (Mr. Armey) were 
very instrumental in helping draft the legislation, bringing it up to 
the position we have today, where we can bring it to the floor. I want 
to thank them for their participation.
  I would like to also thank the gentleman from California (Mr. 
Dreier), the chairman of the Committee on Rules, for his expeditious 
handling of this bill before the Committee on Rules and bringing it to 
the floor, along with the gentleman from California (Mr. Sessions).
  I think this is a good rule. It does provide an open rule so Members 
can amend the bill if they find it necessary, although I do not expect 
many amendments, if any.
  Let me just say to the gentlewoman from New York (Ms. Slaughter) who 
just spoke. We did consider provisions involving Medicare. Because of 
all the aspects of Medicare, we thought that it would encumber the bill 
at this time. However, let me just tell my colleagues that that is one 
of the things that we ought to be looking at and will be looking at 
because Medicare allegedly does waste billions of dollars. I think the 
same accounting procedures in the future ought to be considered by the 
entire body, and we will work toward that end.
  Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
  Mr. SESSIONS. Mr. Speaker, I yield back the balance of my time, and I 
move the previous question on the resolution.
  The previous question was ordered.
  The resolution was agreed to.
  A motion to reconsider was laid on the table.
  The SPEAKER pro tempore (Mr. Sessions). Pursuant to House Resolution 
426 and rule XVIII, the Chair declares the House in the Committee of 
the Whole House on the State of the Union for the consideration of the 
bill, H.R. 1827.

                              {time}  1250


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 1827) to improve the economy and efficiency of Government 
operations by requiring the use of recovery audits by Federal agencies, 
with Mr. Barrett of Nebraska in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the rule, the bill is considered as having 
been read the first time.
  Under the rule, the gentleman from Indiana (Mr. Burton) and the 
gentleman from Texas (Mr. Turner) each will control 30 minutes.
  The Chair recognizes the gentleman from Indiana (Mr. Burton).
  Mr. BURTON of Indiana. Mr. Chairman, I yield myself such time as I 
may consume.
  Mr. Chairman, today we are going to do something that is a little bit 
unusual for the Congress. We are going to vote on a bill that will save 
taxpayers' money instead of spending their money. Today we are going to 
vote on the Government Waste Corrections Act.
  The Federal Government is one of the biggest consumers and customers 
in the world. Every year, Federal agencies spend hundreds of billions 
of dollars buying goods and services, pens, papers, computers, cars, 
trucks. You name it, and the government buys it.
  Along the way, mistakes are made. Someone punches in the wrong code, 
and a vendor gets paid too much, and taxpayers' money gets wasted.
  Nobody knows exactly how much money gets wasted each year, but we do 
know this, it is not thousands of dollars, and it is not millions of 
dollars. The General Accounting Office estimates that billions of 
dollars are wasted each year in erroneous overpayments.
  Private sector companies are very aggressive about trying to catch 
these

[[Page 2326]]

errors and get their money back. Most Federal agencies do not.
  My bill would focus agencies on getting back these millions and 
billions of dollars in overpayments. My bill takes a proven private 
sector financial management tool called recovery auditing and applies 
it to the Federal Government. It is used very successfully by Fortune 
500 companies to identify and recover overpayments.
  The Congressional Budget Office estimates that if government agencies 
use recovery auditing, they will collect back at least $180 million 
over the next 5 years. I think it will be a lot more than that. What 
will happen with all this money? Well, part of the money can be used to 
pay for recovery audits. Part of the money can be used to improve 
financial management systems. At least 50 percent of that money will be 
returned to the Federal Treasury.
  CBO says that this bill will save taxpayers at least $100 million 
over the next 5 years. That is probably just the tip of the iceberg.
  I remember last fall, we were trying to finalize the Federal budget. 
There were negotiations over a 1 percent across-the-board cut in the 
Federal budget to try to help balance the budget. We asked all Federal 
agencies if they could find 1 percent of their budgets where there was 
waste or excess spending that could be eliminated. Well, it seemed like 
most of them screamed bloody murder. They accused us of trying to cut 
into critical programs. There was nothing that could be cut, not one 
penny of waste, many of them said.
  Well, we finally agreed on an across-the-board cut of four-tenths, 
about four-tenths of 1 percent. When we think about the trillions of 
dollars we spend, that is just a drop in the bucket.
  Well, there is waste, and there are errors, and there are 
overpayments, billions of dollars in overpayments. They can be 
recovered. That is what this bill is all about.
  Here is a brief explanation of what this bill will do. It requires 
agencies to conduct recovery auditing if they spend more than $500 
million annually on goods and services, and most of the agencies do. 
Recovery auditing uses sophisticated computer software to analyze 
billing records and identify overpayments.
  This bill does not apply to programs that make direct payments to 
beneficiaries like Medicare or Social Security. It applies to the 
purchase of goods and services for the Federal Government. As I said to 
the gentlewoman from New York (Ms. Slaughter) a few moments ago in the 
colloquy we had, we will be looking at Medicare and waste in that area 
down the road.
  Agencies can either conduct recovery audits in house, or they can use 
private contractors, whichever is the most efficient. At least 50 
percent of the amounts recovered must be returned to the Federal 
Treasury, and I think that is very good news.
  Agencies are allowed to spend up to 25 percent of the recovered funds 
for management improvement programs. Lord knows we need to improve 
management in most agencies.
  Agencies can use a portion of the recovered funds to cover the costs 
of the audits. Recovery auditing has been used very successfully in the 
demonstration programs at the Defense Department. The Army and the Air 
Force exchange systems have used recovery auditing for several years. 
The most recent audit recovered $25 million.
  In 1996, the Defense Supply Center in Philadelphia began a pilot 
program. Potential overpayments there have been estimated at $23 
million.
  The bill we have before us has a number of technical changes that 
have been added since it was passed by the committee. These have been 
discussed at length with the minority and Members of the other 
interested committees. Several definitions have been added to clarify 
our intent.
  This bill is designed to get at inadvertent overpayments. To help 
clarify this distinction, the definition of facial-discrepancy payment 
error has been addressed. Recovery auditors are to identify 
overpayments based on what is on the face of the payment records. They 
are not authorized to make determinations about the quality or the 
value of products provided to the Federal Government.
  Many government contractors were concerned that recovery auditors 
might come to their offices and demand to go through their files. This 
bill does not allow them to do that. Recovery auditors are only allowed 
to analyze the agency's records. The manager's amendment explicitly 
prohibits a recovery auditor from establishing a physical presence, to 
set up shop, so to speak, at any contractor's office.
  The bill originally contained a provision allowing OMB to exempt 
certain agencies from recovery auditing if it would not be cost 
effective. The manager's amendment authorizes agency heads to request 
exemptions from OMB based on these same criteria. However, it is my 
view that exemptions should be only offered in rare circumstances and 
that most agencies would benefit from recovery auditing.
  The manager's amendment also stipulates that recovery auditing will 
apply to the Defense Department's major weapons systems only after 
these contracts have been closed. This change addresses concerns raised 
by Members of the Committee on Armed Services, especially the gentleman 
from Virginia. Multi-year contracts for major weapons systems are very 
complex. They often involve estimated payments that are reconciled in 
later billing periods. Conducting recovery audits at the completion of 
these contracts will avoid unnecessary confusion.
  Mr. Chairman, in essence, this bill does three things that are very 
important. First, it eliminates waste. CBO says it will save taxpayers 
at least $100 million over the next 5 years. Second, it puts private 
sector business practices to work in the Federal Government; and that 
is something we should have done a long time ago. Third, it gives 
Federal agencies new resources to improve their financial management 
programs.
  The Government Waste Corrections Act passed through the committee 
with bipartisan support. It is supported by the administration.
  I want to thank the leadership for scheduling this bill today. I want 
to thank the gentleman from California (Mr. Horn), Chairman of the 
Subcommittee on Government Management, Information and Technology for 
his hard work on this issue, and also the gentleman from California 
(Mr. Waxman), my ranking member. I have already said I wanted to thank 
the subcommittee ranking member for his hard work as well.
  We have all worked together to resolve several issues so that this 
bill could get the bipartisan support. So I ask all of my colleagues to 
support this bill. It is a good bill. Its time has come. We need to 
expand it in the future, but we will look back at that later on.
  Mr. Chairman, I reserve the balance of my time.
  Mr. TURNER. Mr. Chairman I yield myself such time as I may consume.
  Mr. Chairman, I rise in strong support of H.R. 1827, the Government 
Waste Corrections Act of 1999. I want to commend the gentleman from 
Indiana (Mr. Burton) for his leadership on this issue. I also want to 
thank the gentleman from California (Mr. Waxman), ranking member, for 
his hard work on the bill, as well as the gentleman from California 
(Mr. Horn), chairman of the Subcommittee on Government Management, 
Information and Technology.
  The gentleman from Indiana (Mr. Burton) stated it very correctly, 
this is a bill that will save money for the taxpayers. It is a 
wonderful opportunity to have a bill like this before the floor.

                              {time}  1300

  So many times we find ourselves spending money, and this bill, 
clearly, will save money for our taxpayers.
  This bill requires the use of a technique referred to as recovery 
auditing. Recovery auditing is a proven financial tool that has been 
used to identify overpayments in the private sector for a number of 
years. It has been used by the automobile industry, by the retail 
trades industry, and by food services industries. It is a practice 
employed by

[[Page 2327]]

most of the Fortune 500 companies. However, few agencies of the Federal 
Government have ever utilized this technique. The exceptions are the 
Army and Air Force Exchange Services, which recovered $25 million in 
overpayments through the use of recovery auditing in 1998.
  Every year Federal agencies make billions, and I say billions of 
dollars in overpayments. No matter how efficient a financial management 
system, we must face the fact that overpayments do occur in government. 
In fact, the larger the volume of government purchases, the greater 
likelihood of mistakes in overpayments.
  As an example, the Department of Defense, which contracts for 
billions of dollars in goods and services every year, found that 
between the years 1994 and 1998 defense contractors in the private 
sector voluntarily returned $984 million in overpayments to the 
Department of Defense. These returned payments were unknown to the 
Department of Defense until the money was returned.
  Clearly, there is a need for recovery auditing in the Federal 
Government. This legislation requires Federal agencies to conduct 
recovery audits on all payment activities over $500 million annually on 
goods and services for the use or direct benefit of the agencies. 
Recovery audits will be optional for other payment activities.
  Agencies would be authorized to conduct recovery audits in-house or 
contract with private recovery specialists or use a combination of the 
two. At least 50 percent of the overpayments recouped would go back to 
the general treasury, and not more than 25 percent of the overpayments 
recouped could be used for a management improvement program designed to 
prevent future overpayments and waste by the agency. The Congressional 
Budget Office estimates that H.R. 1827 will result in collections of at 
least $180 million in the first 5 years.
  This bill was introduced by the gentleman from Indiana (Mr. Burton) 
back in May of 1999. We had a hearing before the Subcommittee on 
Government Management, Information and Technology, and the full 
committee reported the bill with some amendments. There were a number 
of concerns that were discussed at the time of the hearing on the bill, 
and these have been addressed.
  In full committee, I offered an amendment relating to privacy 
protection for individually identifiable information, and the gentleman 
from California (Mr. Waxman) offered another amendment which requires 
agencies to conduct a private-public cost comparison before deciding 
whether to contract out in the private sector for recovery auditing 
services or to do the task in-house with agency personnel. I appreciate 
the bipartisan manner in which the chairman, the gentleman from Indiana 
(Mr. Burton), approached both of these amendments; and we are pleased 
that they were included in the bill.
  In an effort to alleviate other concerns, discovered after the full 
committee markup we have clarified the bill's intent by adding several 
new definitions and making technical clarification in other parts of 
the bill through the amendment in the nature of a substitute offered by 
the gentleman from Indiana (Mr. Burton). Under the amendment, agency 
heads are now expressly authorized to request an exemption from the 
program if it goes against the agency's mission or would not be cost 
effective.
  And in response to concerns raised by vendors who feared that 
recovery auditors might barge into their offices as a part of the 
recovery auditing process, the amendment in the nature of a substitute 
prohibits a recovery auditor from establishing a physical presence, 
that is, setting up shop at the entity that is being audited.
  Finally, we also stipulated in the amendment in the nature of a 
substitute that recovery auditing will apply only to the Department of 
Defense's major weapon system programs after the contracts have been 
closed. These concerns were expressed to the committee and to the 
chairman and myself by the gentleman from Virginia (Mr. Bateman), by 
the gentleman from Virginia (Mr. Sisisky), the gentleman from Virginia 
(Mr. Scott), and others; and the amendment clarifies the bill in this 
regard and addresses those concerns.
  Mr. Chairman, this bill clearly represents a significant step forward 
in dealing with the billions of dollars in overpayments that are made 
by the Federal Government. I am pleased to be a cosponsor of the bill. 
It is simply good government. Again, I commend the gentleman from 
Indiana (Mr. Burton) for his leadership on the issue.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BURTON of Indiana. Mr. Chairman, I yield 5 minutes to the 
gentleman from California (Mr. Ose), a very valued member of the 
committee, and I also thank the gentleman from Texas (Mr. Turner) for 
all his hard work on this bill as the ranking member on the 
subcommittee.
  Mr. OSE. Mr. Chairman, today I rise in strong support of this 
remarkable piece of legislation, the Government Waste Corrections Act.
  I would first like to especially commend my two chairmen on this 
committee, that being the gentleman from Indiana (Mr. Burton) and the 
gentleman from California (Mr. Horn), for their exceptional work on 
this. It is a pleasure to actually have the opportunity to work with 
two people of such skill and knowledge and have something fruitful, 
such as this, come to the floor. So my compliments to both gentlemen.
  To the gentleman from Texas (Mr. Turner), on the minority side, I 
appreciate his steady leadership and hand in keeping us on the straight 
and narrow, so to speak; and I welcome his bipartisan approach to this 
because this is an important issue.
  One of the reasons I ran for Congress was to come to this House and 
try to instill a private sector mentality into government operations. 
The Government Waste Corrections Act does just that. Under this 
legislation, agencies will adopt recovery auditing, a practice widely 
used in the private sector. Recovery auditing is the process of 
reviewing all payment transactions in order to uncover duplicate 
payments, vendor pricing mistakes, and missed discounts.
  Now, my colleagues may ask, is this bill really needed? Are our 
agencies not already careful with taxpayer money? Well, interestingly, 
both the General Accounting Office and the inspector generals 
throughout our agencies have repeatedly reported and testified that 
overpayments to government contractors are a serious, high-risk 
problem. However, I want to emphasize one thing here, and that is that 
this is not fraud or abuse; these are just mistakes that we are trying 
to catch in the process.
  A couple of examples of the mistakes that have occurred is that some 
agency inspector generals have made that upwards of $15 billion has 
erroneously been paid out under our programs for food stamps or housing 
programs in a given year. And as the gentleman from Texas (Mr. Turner) 
pointed out over at the Department of Defense, private contractors, of 
their own volition, have voluntarily returned $984 million in 
overpayments to the Department of Defense over the last 4 years. This 
may represent only a fraction of the total amount of money that we are 
trying to address here.
  Now, the gentleman from Indiana has highlighted that this legislation 
has been estimated to save $100 million of the taxpayers' money over 
the next 5 years. That is a remarkable sum. I happen to think that is 
on the low end. I am hopeful that we will be far more successful than 
that.
  Finally, Mr. Chairman, the Government Waste Corrections Act is 
another great example of how we can take management techniques from the 
private sector and apply them to the Federal Government's practices 
ultimately for the benefit of all Americans and our taxpayers. I urge 
my colleagues to support this bill. Let us let the savings begin.
  Mr. BURTON of Indiana. Mr. Chairman, I yield 5 minutes to the 
gentleman from Virginia (Mr. Bateman), my classmate and a great 
American.

[[Page 2328]]


  Mr. BATEMAN. Mr. Chairman, I thank the gentleman and my good friend 
from Indiana for yielding me this time.
  Mr. Chairman, I rise today in support of this legislation and 
certainly want to commend my colleague for his untiring efforts to 
improve the economy and the efficiency of government operations. We are 
all in his debt for doing so.
  I am rising in support of this bill. However, I do want to point out 
that I have some remaining trepidations with the bill and which, 
hopefully, can be further improved as it goes through the legislative 
process.
  In the fiscal year 1996 and 1998 national defense authorization acts, 
Congress directed and then expanded a demonstration project to identify 
overpayments made to vendors by the Department of Defense. This 
initiative and these pilot programs were at the initiative of the 
Subcommittee on Military Readiness of the Committee on Armed Services, 
which I chair. And certainly I applaud these efforts and know that even 
those programs where it has been tried it has been effective and real 
savings have been the result.
  During the course of this demonstration project, recovery auditing 
has proven to be a particularly effective management tool for 
identifying and collecting overpayments on contracts that are most 
analogous to commercial retail contracts. Indeed, for certain retail 
business areas, the Department of Defense has used recovery auditing to 
identify and collect overpayments at a higher rate than has been found 
in the private sector.
  The problem lies in the application of recovery auditing to all 
business areas, particularly the procurement of major weapon systems. 
Contracts for the procurement of major weapon systems are executed over 
several years and are based on unique pricing guidelines. All payments 
are subject to routine and extensive contract audit and management 
activities designed to ensure accurate payments throughout.
  Payments are made periodically and adjusted regularly to account for 
contract progress. Therefore, recovery auditing on contracts for the 
procurement of major weapon systems will not only be redundant but, in 
some cases, may also be virtually impossible to conduct. The bill 
before us now attempts to address this issue by providing that recovery 
auditing will not apply to major defense system acquisition programs 
until they have become closed.
  I applaud the sponsors for their efforts to address these concerns. I 
am convinced, however, that H.R. 1827 could be further refined to 
address the problems I raise today. The Congressional Budget Office 
agrees with me and has stated in its cost estimate on H.R. 1827 that it 
expects OMB would exempt research, testing and procurement of military 
weapons from the requirement of this act.
  In closing, Mr. Chairman, let me reiterate that I strongly support 
any measure that enhances government efficiency and effectiveness and 
reduces the waste of taxpayer dollars, but I do urge caution when doing 
so may be redundant and counterproductive.
  Mr. TURNER. Mr. Chairman, I yield myself such time as I may consume 
to thank the gentleman from Virginia (Mr. Bateman) for his leadership 
in trying to clarify the bill. I know the gentleman from Virginia (Mr. 
Sisisky) and the gentleman from Virginia (Mr. Scott) had similar 
concerns, and through their work we were able to address those 
concerns. We certainly hear the request that was made and look forward 
to working as this bill moves forward to be sure we have accomplished 
the desired result.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BURTON of Indiana. Mr. Chairman, I yield 5 minutes to the 
gentleman from California (Mr. Horn), the subcommittee chairman, and a 
very valued member of the Committee on Government Reform.

                              {time}  1315

  Mr. HORN. Mr. Chairman, we appreciate the leadership of the gentleman 
from Indiana (Mr. Burton) on this. I want to thank the gentleman from 
Texas (Mr. Turner), the ranking Democrat on our subcommittee that held 
some of these hearings. We have had very strong cooperation from the 
gentleman from Texas (Mr. Turner), and I am most grateful.
  H.R. 1827, the Government Waste Corrections Act, would require 
executive branch departments and agencies to use a process called 
``recovery auditing'' to review the various payment transactions in 
order to check for erroneous overpayments. Some of it is completely 
innocent. It is just a process that sometimes does not work.
  H.R. 1827 represents a milestone in the effort to reduce the 
widespread waste and errors that do exist in various Federal programs 
and that are costing taxpayers billions of dollars each year.
  Last session, the gentleman from Indiana (Mr. Burton) held hearings 
on waste and mismanagement. He had witnesses from the Inspectors 
General of Agriculture, Health and Human Services, and Housing and 
Urban Development. Each of them testified about various program and 
management problems in their departments. One of the most prevalent 
involved erroneous payments.
  On March 31, 1999, the Subcommittee on Government Management, 
Information, and Technology that I chaired examined the government-wide 
consolidated financial statement for fiscal year 1998.
  The General Accounting Office, which audited these statements on our 
behalf, testified that one of the most serious areas of waste and error 
throughout the Government were the millions of dollars in improper 
payments being made to contractors, vendors, and suppliers.
  Most Federal overpayments go undetected because agencies do not track 
and report these improper payments. And there is no law requiring them 
to do so. Each year, however, this ongoing waste squanders huge amounts 
of taxpayer dollars and detracts from the effectiveness of Federal 
operations by diverting resources intended for other purposes.
  H.R. 1827 addresses the problem of inadvertent overpayments by 
requiring that the Government use a successful private sector business 
practice, known as recovery auditing.
  In a typical recovery audit, an agency's purchases and payments would 
be reviewed to identify where overpayments have occurred. Common areas 
involve such things as vendor pricing mistakes, missed discounts, or 
duplicate payments. Once an error has been identified and verified, the 
vendor would be notified. Valid overpayments would be recovered through 
direct payments to the agency or by administrative offsets.
  Although agencies may already have the authority to contract for 
recovery auditing, the process is simply not being utilized government-
wide. And it should be. Agencies may need to consider using the 
services of the private sector because the process requires specialized 
skills, databases, and software development.
  When the gentleman from Indiana (Chairman Burton) introduced this 
legislation and it was referred to our subcommittee, we held further 
hearings in June of 1999 in which witnesses testified about the 
successful use of recovery auditing in the Department of Defense.
  The Army and Air Force Exchange Service makes purchases of $5 million 
per year. Recently they completed their recovery auditing, and that 
yielded almost $25 million, which is not hay.
  A witness from the Defense Supply Center of Philadelphia testified 
about a recovery audit pilot program being conducted at that supply 
center. The supply center expects to recover over $27 million in 
overpayments over a 3-year period.
  This bill requires agencies to use recovery auditing for purchases of 
$500 million or more annually. However, agencies are encouraged to use 
recovery auditing for all procurements regardless of the amount of the 
transaction. However, the bill only applies recovery auditing to an 
agency's spending for direct contracting.
  Examples of direct contracting include payments made to a contractor

[[Page 2329]]

to build a new Veteran's Administration hospital and the payments the 
Defense Department would make for the purchase of a new weapons system.
  H.R. 1827 would not require recovery auditing for programs that 
involve payments to third parties for the delivery of indirect 
services, such as education, drug treatment grants, or payments to 
intermediaries to administer the Medicare program.
  Federal payments in those programs must make their way through a 
number of entities, including State and local governments and nonprofit 
organizations, before the service is really delivered to the general 
population. Those payment systems are often so complex that it is 
uncertain at this time where and how the recovery auditing procedure 
would best be applied.
  Mr. Chairman, it is important to note that this legislation addresses 
the problems that cause the overpayments. This bill would require 
agencies to use part of the money they recover to improve their 
management and financial systems. As a priority, agencies would have to 
work toward improving their overpayment error rate.
  In addition to the obvious benefits to Federal agencies, the 
Congressional Budget Office estimates that this legislation would 
result in collections of at least $180 million over the next 5 years.
  H.R. 1827 would be a win for the Government and a win for the 
American people. I urge all my colleagues to support this legislation.
  Mr. TURNER. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, I want to thank the gentleman from California (Chairman 
Horn) for his hard work on this bill. It has been a pleasure to serve 
on the subcommittee with him; and, as always, I appreciate the 
bipartisan manner in which he conducts his business.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BURTON of Indiana. Mr. Chairman, I yield such time as he may 
consume to the gentleman from Connecticut (Mr. Shays), one of the more 
valued members of our committee.
  Mr. SHAYS. Mr. Chairman, I thank my esteemed chairman for yielding me 
the time. I appreciate the opportunity to address the committee.
  Mr. Chairman, I rise in support of the Government Waste Corrections 
Act. In my judgment, this is simply common sense legislation. It is 
another important step in Congress's ongoing efforts to eliminate 
waste, fraud, and abuse in Federal agencies and programs.
  I mean, let us face it, in a Federal budget that exceeds $1.7 
trillion, there will be some waste, quite a lot in fact. If we focus 
our efforts on rooting out this waste, we are better able to focus our 
limited resources on otherwise underfunded requirements.
  For example, the Department of Defense, which I oversee, will be able 
to direct this money to spare parts, training, and other critical 
needs. Getting our financial house in order means more than simply 
passing a balanced budget. It means ensuring the money is spent the way 
it is intended, not wasted through overpayments and billing errors.
  Recovery audits are a way for the Government to better manage its 
finances. This is the same tool used by the private sector firms across 
this country to assure their expenditures are also in order.
  These audits pay for themselves. Because agencies can use a portion 
of the amounts collected back to finance their recovery audit costs, 
they will not have to appropriate their own limited funds to audit 
activities.
  Audits are also a way to pass savings on to taxpayers. In fact, this 
legislation requires a minimum of 50 percent of the money collected to 
be returned back to the U.S. Treasury.
  I thank my colleagues for working on this legislation. It is a 
pleasure to be on the Committee on Government Reform, and I am happy 
they brought out this legislation.
  Mr. TURNER. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, I understand we have a manager's amendment and an 
amendment offered by the gentlewoman from Texas (Ms. Jackson-Lee) 
which, of course, I support.
  Mr. TERRY. Mr. Chairman, I am a cosponsor of H.R. 1827, the 
Government Waste Corrections Act. I commend our leadership for bringing 
this bill to the floor. At a time when there is a lot of talk about 
reducing waste, fraud and abuse in executive branch programs, I am 
pleased that the House is taking some action.
  I want to express particular concern about HCFA, and that agency's 
lax oversight of Medicare contractors. By HCFA's own admission, 
billions of dollars are lost through waste and abuse each year.
  Testimony from GAO, as well as the Inspector General of the 
Department of Health and Human Services, has documented that Medicare 
contractors have improperly paid claims and failed to recoup 
overpayments to providers.
  Recently, GAO has cited ``integrity problems'' and ``pervasive'' 
fiscal mismanagement among Medicare contractors. This has included such 
questionable activity as arbitrarily turning off computer audits of 
claims, altering documents that involved questionable claims, and even 
falsification of documents and reports to HCFA. Yet these contractors 
are the very same companies that are supposed to be HCFA's front line 
force for the identification and recovery of Medicare overpayments. 
There is an inherent conflict of interest in having Medicare 
contractors both pay for provider claims and then audit their own 
performance.
  This certainly is not the way that insurance companies in Omaha and 
across the country do business. When private resources are at risk, 
insurers obtain independent reviews to identify and recover 
overpayments. In protecting public resources HCFA would do well to 
follow the private example, perhaps turning to some of the same 
businesses that have extensive experience in the area.
  GAO will report to Congress later this year on the results of a study 
HCFA's performance in the identification and collection of Medicare 
overpayments. The HHS Inspector General's office also has plans to 
compare Medicare overpayment and recovery methods with those of private 
insurers. I am hopeful that the result of these studies will be that 
HCFA does what the Veterans Administration already has done--that is, 
approved use of private firms for cost recovery.
  The bill now before us is an important first step recovering the 
millions of dollars the federal government over-pays each year. This is 
an important bill, and I urge its approval.
  Mr. WALDEN of Oregon. Mr. Chairman, I rise today in strong support 
for the Government Waste Corrections Act. This bipartisan legislation 
will save the taxpayers at least $180 million over the next 5 years by 
making the Federal Government less wasteful through adoption of 
private-sector solutions to problems with contract payments.
  I am a cosponsor of this important piece of legislation because I 
believe it is common-sense reform. As a small business owner, I 
understand the importance of keeping a close eye on disbursements. If 
we treat the funds of our own business with that kind of care, don't 
taxpayers deserve the same treatment for their money? I think so, and 
I'll bet most Americans you ask think so too.
  For some years, the Department of Defense has used a method known as 
recovery auditing to cut down on the amount of overpayment to 
contractors. The 1996 Defense Authorization Act authorized a recovery 
auditing demonstration program at the Defense Supply Center in 
Philadelphia. The audit turned up more than $27 million in 
overpayments. Due to disputes, only $2.6 million of this amount has 
been returned to the Government, but the DOD is optimistic that more 
money will be returned soon, and the recovery audit is seen as a 
success.
  H.R. 1827 would implement this audit method throughout the Federal 
Government, saving taxpayers millions more. It would allow agencies to 
perform the audit internally or through a contractor, providing 
sufficient flexibility to account for differences between agencies. And 
it would allow agencies to give cash awards to employees who identify 
wasteful spending practices.
  Mr. Chairman, I applaud the efforts of Chairman Burton and Chairman 
Horn to improve the efficiency of the Federal Government and save 
taxpayers money. I urge passage of the common-sense Government Waste 
Corrections Act.
  Mr. WAXMAN. Mr. Chairman, I rise in support of H.R. 1827, the 
Government Waste Correction Act of 2000, which requires agencies to use 
a financial management technique known as recovery auditing.
  Implementation of recovery auditing has the potential to save 
millions of taxpayers' dollars by ensuring that overpayments made by 
the federal government are both identified and collected. Just like in 
the private sector, the federal government makes overpayments. And

[[Page 2330]]

just like in the private sector, efforts should be made to recovery 
such overpayments.
  These overpayments are often not intentional. Frequently, these are 
inadvertent overpayments due to duplicate payments, pricing errors, 
missed cash discounts and the like. By requiring the performance of 
recovery auditing, we are increasing the efficiency and effectiveness 
of the Federal Government.
  Mr. Chairman, I want to highlight two important provisions of H.R. 
1827 which ensure (1) fundamental privacy rights and (2) fair treatment 
of federal workers. H.R. 1827 requires audits of services that are for 
the ``direct benefit and use'' of government agencies. A number of such 
services involve the use of individuals' personal information, 
including health information. For example, health care services 
provided to veterans by community based health clinics under contract 
with the Federal Government may be subject to audits under the bill.
  Our colleague, Representative Jim Turner, deserves credit for making 
sure these audits won't infringe on legitimate privacy concerns. His 
amendment, which was adopted by the Government Reform Committee, 
provides essential privacy protections for individually identifiable 
information obtained by contractors through recovery audits and 
recovery activities under this bill. The Turner amendment adds needed 
balance and safeguards to H.R. 1827.
  I am also encouraged by the inclusion of my amendment to H.R. 1827 
requiring public-private cost comparisons. We should let federal 
employees--not private contractors--perform recovery audits when the 
federal employees can do a better job at lower cost to the taxpayer 
than private contractors. This amendment, which provides for current 
Office of Management and Budget (OMB) circular cost comparisons, 
ensures that federal workers will not be prevented from doing recovery 
auditing work because of any arbitrary federal full time equivalent 
ceilings.
  Mr. Chairman, recovery auditing is an important tool and should be 
used to identify inadvertent overpayments. I urge my colleagues to 
support H.R. 1827.
  Mr. STERNS. Mr. Chairman, I am here today to express my support for 
H.R. 1827, the Government Waste Corrections Act.
  Over the years, several studies have focused on the waste and abuse 
that occurs within the Federal Government. A few months ago, GAO 
reported the financial statement reports of nine federal agencies. Mr. 
Speaker, do you want to know what they found? There were improper 
payments of $19.1 billion for major programs that these agencies 
administered in FY 1998 alone.
  These figures are extremely disturbing, but they don't begin to 
capture the full extent of the Federal Government's financial problems. 
Neither federal agencies nor GAO has a good estimate of the 
overpayments that occur each year. Unfortunately, the extent of 
overpayments is expected to be significant due to the poor state of 
these federal agencies' financial and accounting records.
  This is completely unacceptable, H.R. 1827 will help resolve this 
problem, by demanding agencies to give greater attention to identify 
and recover overpayments, saving the American taxpayer millions of 
dollars. To be more specific, CBO estimates that agencies would collect 
back $180 million over five years.
  Mr. Chairman, this bill will be truly effective in the fight against 
government waste, and I urge its support.
  Mr. TURNER. Mr. Chairman, I yield back the balance of my time.
  Mr. BURTON of Indiana. Mr. Chairman, we have no more speakers on our 
side, and I yield back the balance of my time.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the rule, the amendment in the nature of a substitute 
printed in House Report 106-506 is considered as an original bill for 
the purpose of amendment and is considered read.
  The text of the amendment in the nature of a substitute is as 
follows:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Government Waste Corrections 
     Act of 2000''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds the following:
       (1) Overpayments are a serious problem for Federal 
     agencies, given the magnitude and complexity of Federal 
     operations and documented and widespread financial management 
     weaknesses. Federal agency overpayments waste tax dollars and 
     detract from the efficiency and effectiveness of Federal 
     operations by diverting resources from their intended uses.
       (2) In private industry, overpayments to providers of goods 
     and services occur for a variety of reasons, including 
     duplicate payments, pricing errors, and missed cash 
     discounts, rebates, or other allowances. The identification 
     and recovery of such overpayments, commonly referred to as 
     ``recovery auditing and activity'', is an established private 
     sector business practice with demonstrated large financial 
     returns. On average, recovery auditing and activity in the 
     private sector identify overpayment rates of 0.1 percent of 
     purchases audited and result in the recovery of $1,000,000 
     for each $1,000,000,000 of purchases.
       (3) Recovery auditing and recovery activity already have 
     been employed successfully in limited areas of Federal 
     activity. They have great potential for expansion to many 
     other Federal agencies and activities, thereby resulting in 
     the recovery of substantial amounts of overpayments annually. 
     Limited recovery audits conducted by private contractors to 
     date within the Department of Defense have identified errors 
     averaging 0.4 percent of Federal payments audited, or 
     $4,000,000 for every $1,000,000,000 of payments. If fully 
     implemented within the Federal Government, recovery auditing 
     and recovery activity have the potential to recover billions 
     of dollars in Federal overpayments annually.
       (b) Purposes.--The purposes of this Act are the following:
       (1) To ensure that overpayments made by the Federal 
     Government that would otherwise remain undetected are 
     identified and recovered.
       (2) To require the use of recovery audit and recovery 
     activity by Federal agencies.
       (3) To provide incentives and resources to improve Federal 
     management practices with the goal of significantly reducing 
     Federal overpayment rates and other waste and error in 
     Federal programs.

     SEC. 3. ESTABLISHMENT OF RECOVERY AUDIT REQUIREMENT.

       (a) Establishment of Requirement.--Chapter 35 of title 31, 
     United States Code, is amended by adding at the end the 
     following:

                    ``SUBCHAPTER VI--RECOVERY AUDITS

     ``Sec. 3561. Definitions

       ``In this subchapter, the following definitions apply:
       ``(1) Amounts collected.--The term `amounts collected' 
     means monies actually received by the United States 
     Government.
       ``(2) Chief financial officer.--The term `Chief Financial 
     Officer' means the official established by section 901 of 
     this title, or the functional equivalent of such official in 
     the case of any agency that does not have a Chief Financial 
     Officer under that section.
       ``(3) Director.--The term `Director' means the Director of 
     the Office of Management and Budget.
       ``(4) Disclose.--The term `disclose' means to release, 
     publish, transfer, provide access to, or otherwise divulge 
     individually identifiable information to any person other 
     than the individual who is the subject of the information.
       ``(5) Facial-discrepancy payment error.--The term `facial-
     discrepancy payment error'--
       ``(A) except as provided in subparagraph (B), means any 
     payment error that results from, is substantiated by, or is 
     identified as a result of information contained on any 
     invoice, delivery order, bill of lading, statement of 
     account, or other document submitted to the Government by a 
     supplier of goods or services in the usual and customary 
     conduct of business, or as required by law or contract to 
     substantiate payment for such goods or services, including 
     any such document submitted electronically; and
       ``(B) does not include payment errors identified, 
     resulting, or supported from documents that are--
       ``(i) records of a proprietary nature, maintained solely by 
     the supplier of goods or services;
       ``(ii) not specifically required to be provided to the 
     Government by contract, law, regulation, or to substantiate 
     payment;
       ``(iii) submitted to the Government for evaluative purposes 
     prior to the award of a contract, as part of the evaluation 
     and award process.

     Records, documents, price lists, or other vendor material 
     published and available in the public domain shall not be 
     considered sources of facial-discrepancy payment errors, but 
     may be used to substantiate, clarify, or validate facial-
     discrepancy payment errors otherwise identified.
       ``(6) Individually identifiable information.--The term 
     `individually identifiable information' means any 
     information, whether oral or recorded in any form or medium, 
     that identifies the individual or with respect to which there 
     is a reasonable basis to believe that the information can be 
     used to identify the individual.
       ``(7) Oversight.--The term `oversight' means activities by 
     a Federal, State, or local governmental entity, or by another 
     entity acting on behalf of such a governmental entity, to 
     enforce laws relating to, investigate, or regulate payment 
     activities, recovery activities, and recovery audit 
     activities.
       ``(8) Payment activity.--The term `payment activity' means 
     an executive agency activity that entails making payments to 
     vendors or other nongovernmental entities that provide 
     property or services for the direct benefit and use of an 
     executive agency.

[[Page 2331]]

       ``(9) Recovery audit.--The term `recovery audit' means a 
     financial management technique applied internally by 
     Government employees, or by private sector contractors, and 
     used by executive agencies to audit their internal records to 
     identify facial-discrepancy payment errors made by those 
     executive agencies to vendors and other entities in 
     connection with a payment activity, including facial-
     discrepancy payment errors that result from any of the 
     following:
       ``(A) Duplicate payments.
       ``(B) Invoice errors.
       ``(C) Failure to provide applicable discounts, rebates, or 
     other allowances.
       ``(D) Any other facial-discrepancy errors resulting in 
     inaccurate payments.
       ``(10) Recovery activity.--The term `recovery activity' 
     means executive agency activity otherwise authorized by law, 
     including chapter 37 of this title, to attempt to collect an 
     identified overpayment.
       ``(11) Recovery audit contractor.--The term `recovery audit 
     contractor' means any person who has been hired by an 
     executive agency to perform a recovery audit pursuant to a 
     recovery audit contract.

     ``Sec. 3562. Recovery audit requirement

       ``(a) In General.--Except as exempted under section 3565(d) 
     of this title, the head of each executive agency--
       ``(1) shall conduct for each fiscal year recovery audits 
     and recovery activity with respect to payment activities of 
     the agency if such payment activities for the fiscal year 
     total $500,000,000 or more (adjusted by the Director annually 
     for inflation);
       ``(2) may conduct for any fiscal year recovery audits and 
     recovery activity with respect to payment activities of the 
     agency if such payment activities for the fiscal year total 
     less than $500,000,000 (adjusted by the Director annually for 
     inflation); and
       ``(3) may request that the Director exempt a payment 
     activity, in whole or in part, from the requirement to 
     conduct recovery audits under paragraph (1) if the head of 
     the executive agency determines and can demonstrate that 
     compliance with such requirement--
       ``(A) would impede the agency's mission; or
       ``(B) would not, or would no longer be, cost-effective.
       ``(b) Procedures.--In conducting recovery audits and 
     recovery activity under this section, the head of an 
     executive agency--
       ``(1) shall consult and coordinate with the Chief Financial 
     Officer and the Inspector General of the agency to avoid any 
     duplication of effort;
       ``(2) shall implement this section in a manner designed to 
     ensure the greatest financial benefit to the Government;
       ``(3) may conduct recovery audits and recovery activity 
     internally in accordance with the standards issued by the 
     Director under section 3565(b)(2) of this title, or by 
     procuring performance of recovery audits, or by any 
     combination thereof; and
       ``(4) shall ensure that such recovery audits and recovery 
     activity are carried out consistent with the standards issued 
     by the Director under section 3565(b)(2) of this subchapter.
       ``(c) Scope of Audits.--
       ``(1) In general.--Each recovery audit of a payment 
     activity under this section shall cover payments made by the 
     payment activity in the preceding fiscal year, except that 
     the first recovery audit of a payment activity shall cover 
     payments made during the 2 consecutive fiscal years preceding 
     the date of the enactment of the Government Waste Corrections 
     Act of 2000.
       ``(2) Additional fiscal years.--The head of an executive 
     agency may conduct recovery audits of payment activities for 
     additional preceding fiscal years if determined by the agency 
     head to be practical and cost-effective subject to any 
     statute of limitations constraints regarding recordkeeping 
     under applicable law.
       ``(d) Recovery Audit Contracts.--
       ``(1) Authority to use contingency contracts.--
     Notwithstanding section 3302(b) of this title, as 
     consideration for performance of any recovery audit procured 
     by an executive agency, the executive agency may pay the 
     recovery audit contractor an amount equal to a percentage of 
     the total amount collected by the United States as a result 
     of overpayments identified by the contractor in the audit.
       ``(2) Additional functions of recovery audit contractor.--
       ``(A) In general.--In addition to performance of a recovery 
     audit, a contract for such performance may authorize the 
     recovery audit contractor (subject to subparagraph (B)) to--
       ``(i) notify any person of possible overpayments made to 
     the person and identified in the recovery audit under the 
     contract; and
       ``(ii) respond to questions concerning such overpayments.
       ``(B) Limitation.--A contract for performance of a recovery 
     audit shall not affect--
       ``(i) the authority of the head of an executive agency, or 
     any other person, under the Contract Disputes Act of 1978 and 
     other applicable laws, including the authority to initiate 
     litigation or referrals for litigation; or
       ``(ii) the requirements of sections 3711, 3716, 3718, and 
     3720 of this title that the head of an agency resolve 
     disputes, compromise, or terminate overpayment claims, 
     collect by setoff, and otherwise engage in recovery activity 
     with respect to overpayments identified by the recovery 
     audit.
       ``(3) Limitation on authority.--Nothing in this subchapter 
     shall be construed to authorize a recovery audit contractor 
     with an executive agency--
       ``(A) to require the production of any record or 
     information by any person other than an officer, employee, or 
     agent of the executive agency; and
       ``(B) to establish, or otherwise have a physical presence 
     on the property or premises of any private sector entity as 
     part of its contractual obligations to an executive agency.
       ``(4) Required contract terms and conditions.--The head of 
     an executive agency shall include in each contract for 
     procurement of performance of a recovery audit requirements 
     that the contractor shall--
       ``(A) protect from improper use, and protect from 
     disclosure to any person who is internal or external to the 
     firm of the recovery audit contractor and who is not directly 
     involved in the identification or recovery of overpayments, 
     otherwise confidential or proprietary business information 
     and financial information that may be viewed or obtained in 
     the course of carrying out a recovery audit for an executive 
     agency;
       ``(B) provide to the head of the executive agency and the 
     Inspector General of the executive agency periodic reports on 
     conditions giving rise to overpayments identified by the 
     recovery audit contractor and any recommendations on how to 
     mitigate such conditions;
       ``(C) notify the head of the executive agency and the 
     Inspector General of the executive agency of any overpayments 
     identified by the contractor pertaining to the executive 
     agency or to another executive agency that are beyond the 
     scope of the contract; and
       ``(D) promptly notify the head of the executive agency and 
     the Inspector General of the executive agency of any 
     indication of fraud or other criminal activity discovered in 
     the course of the audit.
       ``(5) Executive agency action following notification.--The 
     head of an executive agency shall take prompt and appropriate 
     action in response to a notification by a recovery audit 
     contractor pursuant to the requirements under paragraph (4), 
     including forwarding to other executive agencies any 
     information that applies to them.
       ``(6) Contracting requirements.--Prior to contracting for 
     any recovery audit, the head of an executive agency shall 
     conduct a public-private cost comparison process. The outcome 
     of the cost comparison process shall determine whether the 
     recovery audit is performed in-house or by a recovery audit 
     contractor.
       ``(e) Inspectors General.--Nothing in this subchapter shall 
     be construed as diminishing the authority of any Inspector 
     General, including such authority under the Inspector General 
     Act of 1978.
       ``(f) Privacy Protections.--
       ``(1) Limitation on disclosure of individually identifiable 
     information.--(A) Any nongovernmental entity that obtains 
     individually identifiable information through performance of 
     recovery auditing or recovery activity under this chapter may 
     disclose that information only for the purpose of such 
     auditing or activity, respectively, and oversight of such 
     auditing or activity, unless otherwise authorized by the 
     individual that is the subject of the information.
       ``(B) Any person that violates subparagraph (A) shall be 
     liable for any damages (including nonpecuniary damages, 
     costs, and attorneys fees) caused by the violation.
       ``(2) Destruction or return of information.--Upon the 
     conclusion of the matter or need for which individually 
     identifiable information was disclosed in the course of 
     recovery auditing or recovery activity under this chapter 
     performed by a nongovernmental entity, the nongovernmental 
     entity shall either destroy the individually identifiable 
     information or return it to the person from whom it was 
     obtained, unless another applicable law requires retention of 
     the information.

     ``Sec. 3563. Disposition of amounts collected

       ``(a) In General.--Notwithstanding section 3302(b) of this 
     title, the amounts collected annually by the United States as 
     a result of recovery audits by an executive agency under this 
     subchapter shall be treated in accordance with this section.
       ``(b) Use for Recovery Audit Costs.--Amounts referred to in 
     subsection (a) shall be available to the executive agency--
       ``(1) to pay amounts owed to any recovery audit contractor 
     for performance of the audit;
       ``(2) to reimburse any applicable appropriation for other 
     recovery audit costs incurred by the executive agency with 
     respect to the audit; and
       ``(3) to pay any fees authorized under chapter 37 of this 
     title.
       ``(c) Use for Management Improvement Program.--Of the 
     amount referred to in subsection (a), a sum not to exceed 25 
     percent of such amount--
       ``(1) shall be available to the executive agency to carry 
     out the management improvement program of the agency under 
     section 3564 of this title;

[[Page 2332]]

       ``(2) may be credited for that purpose by the agency head 
     to any agency appropriations that are available for 
     obligation at the time of collection; and
       ``(3) shall remain available for the same period as the 
     appropriations to which credited.
       ``(d) Remainder to Treasury.--Of the amount referred to in 
     subsection (a), there shall be deposited into the Treasury as 
     miscellaneous receipts a sum equal to--
       ``(1) 50 percent of such amount; plus
       ``(2) such other amounts as remain after the application of 
     subsections (b) and (c).
       ``(e) Limitation on Application.--
       ``(1) In general.--This section shall not apply to amounts 
     collected through recovery audits and recovery activity to 
     the extent that such application would be inconsistent with 
     another provision of law that authorizes crediting of the 
     amounts to a nonappropriated fund instrumentality, revolving 
     fund, working capital fund, trust fund, or other fund or 
     account.
       ``(2) Subsections (c) and (d).--Subsections (c) and (d) 
     shall not apply to amounts collected through recovery audits 
     and recovery activity, to the extent that such amounts are 
     derived from an appropriation or fund that remains available 
     for obligation, or that remain available for recording, 
     adjusting, and liquidating obligations properly chargeable to 
     that appropriation or fund at the time the amounts are 
     collected.

     ``Sec. 3564. Management improvement program

       ``(a) Conduct of Program.--
       ``(1) Required programs.--The head of each executive agency 
     that is required to conduct recovery audits under section 
     3562 of this title shall conduct a management improvement 
     program under this section, consistent with guidelines 
     prescribed by the Director.
       ``(2) Discretionary programs.--The head of any other 
     executive agency that conducts recovery audits under section 
     3562 that meet the standards issued by the Director under 
     section 3565(b)(2) may conduct a management improvement 
     program under this section.
       ``(b) Program Features.--In conducting the program, the 
     head of the executive agency--
       ``(1) shall, as the first priority of the program, address 
     problems that contribute directly to agency overpayments; and
       ``(2) may seek to reduce errors and waste in other programs 
     and operations of that executive agency by improving the 
     executive agency's staff capacity, information technology, 
     and financial management.
       ``(c) Integration With Other Activities.--The head of an 
     executive agency--
       ``(1) subject to paragraph (2), may integrate the program 
     under this section, in whole or in part, with other 
     management improvement programs and activities of that agency 
     or other executive agencies; and
       ``(2) must retain the ability to account specifically for 
     the use of amounts made available under section 3563 of this 
     title.

     ``Sec. 3565. Responsibilities of the Office of Management and 
       Budget

       ``(a) In General.--The Director shall coordinate and 
     oversee the implementation of this subchapter.
       ``(b) Guidance.--
       ``(1) In general.--The Director, in consultation with the 
     Chief Financial Officers Council and the President's Council 
     on Integrity and Efficiency, shall issue guidance and provide 
     support to agencies in implementing the subchapter. The 
     Director shall issue initial guidance not later than 180 days 
     after the date of enactment of the Government Waste 
     Corrections Act of 2000.
       ``(2) Recovery audit standards.--The Director shall include 
     in the initial guidance under this subsection standards for 
     the performance of recovery audits under this subchapter, 
     that are developed in consultation with the Comptroller 
     General of the United States and private sector experts on 
     recovery audits, including such experts who currently use 
     recovery auditing as part of their financial management 
     procedures.
       ``(c) Fee Limitations.--The Director may limit the 
     percentage amounts that may be paid to contractors under 
     section 3562(d)(1) of this title.
       ``(d) Exemptions.--
       ``(1) In general.--The Director may exempt an executive 
     agency, in whole or in part, from the requirement to conduct 
     recovery audits under section 3562(a)(1) of this title if the 
     Director determines that compliance with such requirement--
       ``(A) would impede the agency's mission; or
       ``(B) would not, or would no longer be cost-effective.
       ``(2) Report to congress.--The Director shall promptly 
     report the basis of any determination and exemption under 
     paragraph (1) to the Committee on Government Reform of the 
     House of Representatives and the Committee on Governmental 
     Affairs of the Senate.
       ``(3) Exemption of major defense system acquisition 
     programs.--
       ``(A) In general.--Unless determined otherwise by the head 
     of the agency authorized to conduct a Department of Defense 
     major system acquisition program, the requirements of section 
     3562(a) of this title shall not apply to such a program 
     procured with a cost-type contract until the contract has 
     become a closed contract.
       ``(B) Department of defense major system acquisition 
     program defined.--In this paragraph, the term `Department of 
     Defense major system acquisition program' has the meaning 
     that term has in Office of Management and Budget Circular A-
     109, as in effect on the date of the enactment of the 
     Government Waste Corrections Act of 2000.
       ``(e) Reports.--
       ``(1) In general.--Not later than 1 year after the date the 
     Director issues initial guidance under subsection (b), and 
     annually for each of the 2 years thereafter, the Director 
     shall submit a report on implementation of the subchapter to 
     the President, the Committee on Government Reform of the 
     House of Representatives, the Committee on Governmental 
     Affairs of the Senate, and the Committee on Appropriations of 
     the House of Representatives and of the Senate.
       ``(2) Contents.--Each report shall include--
       ``(A) a general description and evaluation of the steps 
     taken by executive agencies to conduct recovery audits, 
     including an inventory of the programs and activities of each 
     executive agency that are subject to recovery audits;
       ``(B) an assessment of the benefits of recovery auditing 
     and recovery activity, including amounts identified and 
     recovered (including by administrative setoffs);
       ``(C) an identification of best practices that could be 
     applied to future recovery audits and recovery activity;
       ``(D) an identification of any significant problems or 
     barriers to more effective recovery audits and recovery 
     activity;
       ``(E) a description of executive agency expenditures in the 
     recovery audit process;
       ``(F) a description of executive agency management 
     improvement programs under section 3564 of this title; and
       ``(G) any recommendations for changes in executive agency 
     practices or law or other improvements that the Director 
     believes would enhance the effectiveness of executive agency 
     recovery auditing.

     ``Sec. 3566. General Accounting Office reports

       ``Not later than 60 days after issuance of each report 
     under section 3565(e) of this title the Comptroller General 
     of the United States shall submit a report on the 
     implementation of this subchapter to the Committee on 
     Government Reform of the House of Representatives, the 
     Committee on Governmental Affairs of the Senate, the 
     Committee on Appropriations of the House of Representatives 
     and of the Senate, and the Director.''.
       (b) Application to All Executive Agencies.--Section 3501 of 
     title 31, United States Code, is amended by inserting ``and 
     subchapter VI of this chapter'' after ``section 3513''.
       (c) Deadline for Initiation of Recovery Audits.--The head 
     of each executive agency shall begin the first recovery audit 
     under section 3562(a)(1) title 31, United States Code, as 
     amended by this section, for each payment activity referred 
     to in that section by not later than 18 months after the date 
     of the enactment of this Act.
       (d) Clerical Amendment.--The analysis at the beginning of 
     chapter 35 of title 31, United States Code, is amended by 
     adding at the end the following:

                    ``SUBCHAPTER V--RECOVERY AUDITS

``Sec.
``3561. Definitions.
``3562. Recovery audit requirement.
``3563. Disposition of amounts collected.
``3564. Management improvement program.
``3565. Responsibilities of the Office of Management and Budget.
``3566. General Accounting Office reports.''.

  The CHAIRMAN. During consideration of the bill for amendment, the 
Chair may accord priority in recognition to a Member offering an 
amendment that he has printed in the designated place in the 
Congressional Record. Those amendments will be considered read.
  The Chairman of the Committee of the Whole may postpone a request for 
a recorded vote on any amendment and may reduce to a minimum of 5 
minutes the time for voting on any postponed question that immediately 
follows another vote, provided that the time for voting on the first 
question shall be a minimum of 15 minutes.


               Amendment Offered by Mr. Burton of Indiana

  Mr. BURTON of Indiana. Mr. Chairman, I offer an amendment.
  The Clerk read as follows:

       Amendment offered by Mr. Burton of Indiana:
       In section 3(a), in the proposed section 3561(1), strike 
     ``actually received'' and inserting ``received or credited, 
     by any means, including setoff,''.
       In section 3(a), in the proposed section 3561(5)--
       (1) in subparagraph (A), strike ``document submitted'' the 
     first place it appears and insert ``submission given'';
       (2) in subparagraph (B)(ii), add ``or'' after the 
     semicolon; and

[[Page 2333]]

       (3) strike the matter following subparagraph (B)(iii).
       In section 3(a), in the proposed section 3562(c)(1), strike 
     ``the 2 consecutive fiscal years'' and all that follows 
     through the period and insert ``the fiscal year in which the 
     Government Waste Corrections Act of 2000 is enacted, and 
     payments made in the preceding fiscal year.''.
       In section 3(a), in the proposed section 3562(d)(4)(A), 
     strike ``and financial information'' and insert ``, and any 
     financial information,''.
       In section 3(a), in the proposed section 3562, after 
     subsection (e) insert the following (and redesignate the 
     subsequent subsection as subsection (g)):
       ``(f) Relationship to Other Audit Authority.--Nothing in 
     this subchapter shall be construed as diminishing the 
     authority granted under section 3726 of this title.
       In section 3(a), in the proposed section 3562(g) (as so 
     redesignated), strike paragraph (2) and insert the following:
       ``(2) Destruction or return of information.--(A) Upon the 
     date described in subparagraph (B), a nongovernmental entity 
     having possession of individually identifiable information 
     disclosed in the course of a recovery audit or recovery 
     activity under this chapter performed by the nongovernmental 
     entity shall destroy the information or return it to the 
     person from whom it was obtained, unless another applicable 
     law requires retention of the information.
       ``(B)(i) Except as provided in clause (ii), the date 
     referred to in subparagraph (A) is the date of conclusion of 
     the matter or need for which the information was disclosed.
       ``(ii) If on the date referred to in clause (i) the 
     nongovernmental entity has actual notice of any oversight of 
     the recovery auditing or recovery activity, the date referred 
     to in subparagraph (A) is the date of the conclusion of such 
     oversight.
       In section 3(a), in the proposed section 3563(e)(2), strike 
     ``, or that remain available for recording, adjusting, and 
     liquidating obligations properly chargeable to that 
     appropriation or fund''.
       In section 3(a), in the proposed section 3565(e)(1), strike 
     ``Not later than 1 year after the date the Director issues 
     initial guidance under subsection (b),'' and insert ``Not 
     later than 30 months after the date of the enactment of the 
     Government Waste Corrections Act of 2000,''.

  Mr. BURTON of Indiana (during the reading). Mr. Chairman, I ask 
unanimous consent that the amendment be considered as read and printed 
in the Record.
  The CHAIRMAN. Is there objection to the request of the gentleman from 
Indiana?
  There was no objection.
  Mr. BURTON of Indiana. Mr. Chairman, this amendment contains 
technical and clarifying corrections to the legislation that I have 
worked out in advance with our ranking member, the gentleman from 
California (Mr. Waxman), and the gentleman from Texas (Mr. Turner), the 
subcommittee ranking member.
  There are eight changes that include such things as correctly 
aligning reporting dates and clarifying language used in definitions. 
These changes serve to make the intent of the bill as clear as 
possible.
  I think this is an amendment that everybody will support. It is 
technical in nature and has been cleared with the ranking minority 
members, as well.
  Mr. TURNER. Mr. Chairman, I rise in support of the amendment.
  Mr. Chairman, as the gentleman from Indiana (Mr. Burton) stated, 
after this bill went to the Committee on Rules, it was discovered that 
there was a need for some technical corrections and clarifications. 
This amendment does that. It is bipartisan. It is noncontroversial.
  I thank the gentleman from Indiana (Mr. Burton), the gentleman from 
California (Mr. Waxman), and the gentleman from California (Mr. Horn) 
of our subcommittee for the work they did in addressing these concerns. 
I urge adoption of the manager's amendment.
  The CHAIRMAN. The question is on the amendment offered by the 
gentleman from Indiana (Mr. Burton).
  The amendment was agreed to.


             Amendment Offered by Ms. Jackson-Lee of Texas

  Ms. JACKSON-LEE of Texas. Mr. Chairman, I offer an amendment.
  The Clerk read as follows:

       Amendment offered by Ms. Jackson-Lee of Texas:
       At the end of the bill add the following:

     SEC.    . STUDY.

       (a) In General.--The Director of the Office of Management 
     and Budget shall conduct a study of the effects of recovery 
     audits conducted by executive agencies, including any 
     significant problems relating to the provision of improper or 
     inadequate notice of recovery audits to persons who are the 
     subjects of such audits.
       (b) Report.--The Director shall report to the Congress the 
     findings, conclusions, and recommendations of the study under 
     this section.

  Ms. JACKSON-LEE of Texas (during the reading). Mr. Chairman, I ask 
unanimous consent that the amendment be considered as read and printed 
in the Record.
  The CHAIRMAN. Is there objection to the request of the gentlewoman 
from Texas?
  There was no objection.
  Ms. JACKSON-LEE of Texas. Mr. Chairman, I thank the gentleman from 
Indiana (Chairman Burton); the gentleman from California (Mr. Waxman), 
the ranking member; the gentleman from California (Mr. Horn), the 
subcommittee chair; and the gentleman from Texas (Mr. Turner) for their 
cooperation on the amendment that I am about to offer. I want to 
commend my colleagues for their bipartisan fashion on working on this 
legislation.
  I believe a study should be incorporated to properly assess due 
process concerns raised by recovery audits performed on a contingency 
basis for their constituency or error identification.
  Let me say that the underlying bill I applaud, and I do believe that 
it will be an important new vehicle to help save the Government money. 
In particular, for example, in purchases such as a new weapons system, 
it is extremely important for us to be able to recover overpayments. 
However, I think this amendment will provide us with additional 
assistance.
  The Government Waste Corrections Act focuses on recovery auditing of 
an agency spending for direct contracting, the purchase of goods and 
services for direct benefit and the use of the Government.
  The legislation, appropriately, does not require recovery auditing 
for programs that involve payments to third parties. Indeed, this 
legislation could include audits of payments to a contractor to build a 
new veteran's hospital or other systems. Regretfully, however, the bill 
does not contain sufficient explanation of the procedural aspects, such 
as due process concerns for those affected of recovery auditing that 
will occur on a contingency basis.
  For example, notices of payments on demand are very important to 
targets of audits. This ensures that everyone understands what is owed. 
Recovery auditing may provide the wrong kind of incentives to those 
justifiably trying to identify Government waste.
  Therefore, I am offering an amendment to require the Office of 
Management and Budget to study the effects of recovery audits 
authorized by this legislation, including any significant problems 
about proper notice to persons who are subjects of such audits.
  I think if we do this research, Mr. Chairman, we will be able to 
determine whether or not we are giving the appropriate notice so that 
those who are the subject of an audit can appropriately respond but, as 
well, appropriately refund the monies that may have been overspent by 
the Government.
  I ask my colleagues to join me in supporting this amendment to a very 
good piece of legislation that will address both the issue of 
overpayments but, as well, the questions of due process and being fair 
to our large, medium, and small businesses that do business with the 
United States Government.
  Mr. BURTON of Indiana. Mr. Chairman, I rise in support of the 
amendment.
  Mr. Chairman, there is a reporting requirement in the bill in section 
3565(c) of the legislation under the Responsibilities of the Office of 
Management and Budget. However, if the gentlewoman from Texas (Ms. 
Jackson-Lee) feels like this is necessary to have an additional study, 
even though I think that is covered in the bill, we have no objection 
to it, and we will accept the amendment.
  Mr. TURNER. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, I rise in support of the amendment offered by my 
colleague from Texas (Ms. Jackson-Lee).
  This amendment would require OMB to conduct a study on the adequacies 
of

[[Page 2334]]

the notices on overpayments provided to the companies that are subject 
to recovery audits.
  Companies that are audited deserve to know detailed information about 
the nature of the overpayments that the recovery auditors identify.

                              {time}  1330

  I appreciate the remarks made by the gentleman from Indiana. I think 
it is appropriate that we include this in this bill. I want to commend 
the gentlewoman from Texas for bringing this amendment forward. I would 
urge its adoption.
  The CHAIRMAN. The question is on the amendment offered by the 
gentlewoman from Texas (Ms. Jackson-Lee).
  The amendment was agreed to.
  The CHAIRMAN. The question is on the amendment in the nature of a 
substitute, as amended.
  The amendment in the nature of a substitute, as amended, was agreed 
to.
  The CHAIRMAN. Under the rule, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mrs. 
Fowler) having assumed the chair, Mr. Barrett of Nebraska, Chairman of 
the Committee of the Whole House on the State of the Union, reported 
that that Committee, having had under consideration the bill (H.R. 
1827) to improve the economy and efficiency of Government operations by 
requiring the use of recovery audits by Federal agencies, pursuant to 
House Resolution 426, he reported the bill back to the House with an 
amendment adopted by the Committee of the Whole.
  The SPEAKER pro tempore. Under the rule, the previous question is 
ordered.
  Is a separate vote demanded on any amendment to the amendment in the 
nature of a substitute adopted by the Committee of the Whole? If not, 
the question is on the amendment.
  The amendment was agreed to.
  The SPEAKER pro tempore. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. BURTON of Indiana. Madam Speaker, I object to the vote on the 
ground that a quorum is not present and make the point of order that a 
quorum is not present.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this question will be postponed.
  The point of no quorum is considered withdrawn.

                          ____________________