House Hearing, 113TH Congress - Government Spending: How Can We Best Address The Billions of Dollars Wasted Every Year?

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. 1136

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA,
JOHN L. MICA, Florida
MICHAEL R. TURNER, Ohio
JOHN J. DUNCAN, JR., Tennessee
PATRICK T. MCHENRY, North Carolina
JIM JORDAN, Ohio
JASON CHAFFETZ, Utah
TIM WALBERG, Michigan
JAMES LANKFORD, Oklahoma
JUSTIN AMASH, Michigan
PAUL A. GOSAR, Arizona
PATRICK MEEHAN, Pennsylvania
SCOTT DESJARLAIS, Tennessee
TREY GOWDY, South Carolina
BLAKE FARENTHOLD, Texas
DOC HASTINGS, Washington
CYNTHIA M. LUMMIS, Wyoming
ROB WOODALL, Georgia
THOMAS MASSIE, Kentucky
DOUG COLLINS, Georgia
MARK MEADOWS, North Carolina
KERRY L. BENTIVOLIO, Michigan
RON DESANTIS, Florida
California, Chairman
ELIJAH E. CUMMINGS, Maryland, Ranking
Minority Member
CAROLYN B. MALONEY, New York
ELEANOR HOLMES NORTON, District of
Columbia
JOHN F. TIERNEY, Massachusetts
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
JIM COOPER, Tennessee
GERALD E. CONNOLLY, Virginia
JACKIE SPEIER, California
MATTHEW A. CARTWRIGHT, Pennsylvania
MARK POCAN, Wisconsin
TAMMY DUCKWORTH, Illinois
DANNY K. DAVIS, Illinois
PETER WELCH, Vermont
TONY CARDENAS, California
STEVEN A. HORSFORD, Nevada
MICHELLE LUJAN GRISHAM, New Mexico
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
(II)
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CONTENTS
Page
Hearing held on February 5, 2013 .........................................................................
WITNESSES
Mr. Thomas A. Schatz, President, Citizens Against Government Waste
Oral Statement .................................................................................................
Written Statement ............................................................................................
Mr. Ryan Alexander, President, Taxpayers for Common Sense
Oral Statement .................................................................................................
The Honorable Dan G. Blair, President, National Academy of Public Administration
Oral Statement .................................................................................................
Mr. Jonathan M. Kamensky, Senior Fellow, IBM Center for the Business
of Government
Oral Statement .................................................................................................
5
7
30
33
61
63
75
77
APPENDIX
Record Taxpayer Cost Is Seen for Crop Insurance, The New York Times
Article Submitted by Rep. Cummings ................................................................
The Honorable Elijah E. Cummings, a Member of Congress from the State
of Maryland, Opening Statement .......................................................................
National Academy of Public Administration, Responses for the Record .............
Sliding Past Sequestration, Taxpayers for Common Sense Article Submitted
by Rep. Mica .........................................................................................................
(III)
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GOVERNMENT SPENDING: HOW CAN WE BEST

ADDRESS THE BILLIONS OF DOLLARS
WASTED EVERY YEAR?
Tuesday, February 5, 2013
HOUSE OF REPRESENTATIVES
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
COMMITTEE
ON
(1)
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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 hasnt 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 doesnt 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 doesnt
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 dont believe it falls anywhere from the far left to the far right
of the ideological spectrum to reform government. Just the oppo-
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site; 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 todays 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 subcommittees chairman, Mr. Chaffetz. Ranking
Member Tierney has also been a leader in exposing problems with
DODs F35 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.
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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.
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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
Presidents 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
todays 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 Congresss 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 fis-
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cal 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
GAOs 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 worlds 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 governments 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 DODs 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 Administrations 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 NNSAs 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
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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. Solyndras $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 MAP21, 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 harms way. The number and cost of major disaster declarations has increased in recent decades due to an in-
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crease of major weather events, but also because our Nations programs are more generous responding to disasters than presponding 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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61
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 net-
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works, 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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75
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
Governments 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 crossgovernment 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 governments 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 governments 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
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savings have been less than one-half of one percent of the Federal
Governments 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 governments 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 Presidents 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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89
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 didnt 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 lets 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-theboard 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?
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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 couldnt 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
wouldnt 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 dont get the support
from the groups. I remember FAA, on the twentieth extension,
when I said this cant 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?
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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 cant 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 Administrations 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 dont 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.
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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 lets 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 dont 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
Obamas 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 lets sunset them. Lets
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.
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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 doctors 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 cant 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 shouldnt be paid.
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Mr. LANKFORD. I completely agree. We have to be able to make
those payments, but we have to find a way that doesnt trash the
relationship. The Federal Government doesnt 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 wont 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 anyones 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.
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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 wouldnt 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 dont have
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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 doesnt 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 dont
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
OMBs 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
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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 doesnt 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 dont 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 wouldnt you also want to have some risk to the
Federal Government because they have skin in the game? You
dont 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.
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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 DODs overall efficiency as being poor performance.
As you note in your testimony, the Federal Government is the
Countrys 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 shortand 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 dont 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
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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 Administrations 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 DODs 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 isnt 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, isnt 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? Isnt it essentially at the GAO and the IG that we
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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 doesnt 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 somebodys 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.
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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 doesnt 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 cant 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 Walkers 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.
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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 doesnt 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
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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, lets 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. Lets 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 dont 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 doesnt have, if you will, the continuity of
government to really go after some of the deep problems and fix
them?
Well, Congress doesnt 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 prob-
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lems. 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 cant 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 didnt use it, if you didnt 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 cant chop down Yosemite Park type things.
Chairman ISSA. I knew a politician who once said it was a renewable resource, and he didnt 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
dont need it, we will deal with a print. We dont 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
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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 dont 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.
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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 dont 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 dont 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 didnt 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 dont 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 dont 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,
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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 Ill go on and say entire agencies?
Mr. SCHATZ. I think that every program should be examined to
determine how it should function in todays 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 shouldnt 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. Lets put a bill out there and lets let them fight over
it, lets decide which is best; which one needs to be run and which
one doesnt. 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, doesnt 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
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or a grant and substituted Federal money for the money that in
fact they had.
Isnt the gentlemans 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 dont 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
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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 dont 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
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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 wont 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
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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 teams award, what kinds of savings were
accruing or cost avoidances, and it totaled about $50 billion.
And this wasnt something that came from Congress, it wasnt an
IG report, it wasnt GAO, it wasnt 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 wont 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 wont 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 doesnt do this, lets 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.
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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 dont 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 didnt see the gentlelady
from California. We have to go back and forth. She gets to go, then
we will go to you and I wont 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 peoples 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,
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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 isnt
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 doesnt 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 doesnt
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. Lets do something different or lets just not do it at all.
And, unfortunately, it doesnt 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 didnt 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
havent 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 dont have to pay when they dont 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
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clear. We didnt get what we paid for, so we shouldnt 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 shouldnt
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 Presidents 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.
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Mr. DESANTIS. And they havent 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
Presidents budget.
Mr. DESANTIS. Okay.
Yes, sir.
Mr. KAMENSKY. Mr. Congressman, the line-by-line review of a
budget doesnt 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 Sen-
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ate. 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
isnt 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 dont 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 wouldnt 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.
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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 dont 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 doesnt mean Congress wont 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 dont
have to pay people who arent 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
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level, and we dont seem to have, here in Washington, as firm a
grip on this as we need, because we still havent 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 lets 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.
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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 havent 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
didnt 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,
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but maybe under Gramm-Rudman. I dont 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 didnt last.
Mr. SCHATZ. Right.
Mr. JORDAN. We know they dont. 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, wasnt it?
Didnt Congress act that sequester? I cant 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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House Hearing, 113TH Congress - Government Spending: How Can We Best Address The Billions of Dollars Wasted Every Year?

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House Hearing, 113TH Congress - Government Spending: How Can We Best Address The Billions of Dollars Wasted Every Year?

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GOVERNMENT SPENDING: HOW CAN WE BEST

ADDRESS THE BILLIONS OF DOLLARS WASTED

Serial No. 1136

For sale by the Superintendent of Documents, U.S. Government Printing Office

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

LAWRENCE J. BRADY, Staff Director

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Hearing held on February 5, 2013 .........................................................................

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GOVERNMENT SPENDING: HOW CAN WE BEST

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