Current Shareware 1994 January/SHAR194.ISO/textfile/npr1993.zip/NPR01.TXT

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Chapter 1


Cutting Red Tape


*********************************
About 10 years ago, two foresters returned from a hard day in the
field to make plans for the coming week. Searching for a detail
of agency policy,  they found themselves overwhelmed by
voluminous editions of policy manuals,  reports, and binders
filled with thousands of directives. One forester recalled the
very first  Forest Service manual- -small enough to fit into
every ranger's shirt pocket, yet  containing everything foresters
needed to know to do their jobs.

"Why is it that when we have a problem," the other forester
asked, "the solution is always to add something--a report, a
system, a policy--but never take something away?"

The first replied: "What if . . . we could just start over?" 1
**********************************

     The federal government does at least one thing well: It
generates red tape. But not one inch of that red tape appears by
accident. In fact, the government creates it all with the best of
intentions. It is time now to put aside our reverence for those
good intentions and examine what they have created--a system that
makes it hard for our civil servants to do what we pay them for,
and frustrates taxpayers who rightfully expect their money's
worth.

     Because we don't want politicians' families, friends, and
supporters placed in "no-show" jobs, we have more than 100,000
pages of personnel rules and regulations defining in exquisite
detail how to hire, promote, or fire federal employees.2 Because
we don't want employees or private companies profiteering from
federal contracts, we create procurement processes that require
endless signatures and long months to buy almost anything.
Because we don't want agencies using tax dollars for any
unapproved purpose, we dictate precisely how much they can spend
on everything from staff to telephones to travel.

     And because we don't want state and local governments using
federal funds for purposes that Congress did not intend, we write
regulations telling them exactly how to run most programs that
receive federal funds. We call for their partnership in dealing
with our country's most urgent domestic problems, yet we do not
treat them as equal partners.

     Consider some examples from the daily lives of federal
workers, people for whom red tape means being unable to do their
jobs as well as they can--or as well as we deserve. The district
managers of Oregon's million-acre Ochoco National Forest have 53
separate budgets--one for fence maintenance, one for fence
construction, one for brush burning- -divided into 557 management
codes and 1,769 accounting lines. To transfer money between
accounts, they need approval from headquarters. They estimate the
task of tracking spending in each account consumes at least 30
days of their time every year, days they could spend doing their
real jobs.3 It also sends a message: You are not trusted with
even the simplest responsibilities.

     Or consider the federal employees who repair cars and trucks
at naval bases. Each time they need a spare part, they order it
through a central purchasing office--a procedure that can keep
vehicles in the shop for a month. This keeps one-tenth of the
fleet out of commission, so the Navy buys 10 percent more
vehicles than it needs.4 Or how about the new Energy Department
petroleum engineer who requested a specific kind of calculator to
do her job? Three months later, she received an adding machine.
Six months after that, the procurement office got her a
calculator--a tiny, hand-held model that could not perform the
complex calculations her work required. Disgusted, she bought her
own.5

     Federal managers read the same books and attend the same
conferences as private sector managers. They know what good
management looks like. They just can't put it into
practice--because they face constraints few managers in the
private sector could imagine.

     Hamstrung by rules and regulations, federal managers simply
do not have the power to shape their organizations enjoyed by
private sector managers. Their job is to make sure that every
dollar is spent in the budget category and the year for which it
was appropriated, that every promotion is consistent with central
guidelines, and that every piece of equipment is bought through
competitive bidding. In an age of personal computers, they are
asked to write with quill pens.


***********************

Never tell people how to do things. Tell them what you want to
achieve, and they will surprise you with their ingenuity.

General George S. Patton
1944
***********************

     This thicket of rules and regulations has layer upon layer
of additional oversight. Each new procedure necessitates
someone's approval. The result is fewer people doing real work,
more people getting in their way. As management sage Peter
Drucker once said, "So much of what we call management consists
of making it difficult for people to work."6

     As Robert Tobias, president of the National Treasury
Employees Union, told participants at the Philadelphia Summit on
Reinventing Government, "The regulations and statutes that bind
federal employees from exercising discretion available in the
private sector all come about as a response to the humiliations,
mistakes, embarrassments of the past." Even though, as Tobias
noted, "those problems are 15, 20, 30 years old," and "the
regulations and the statutes don't change." The need to enforce
the regulations and statutes, in turn, creates needless layers of
bureaucracy.

     The layers begin with "staff" agencies, such as the General
Services Administration (GSA) and the Office of Personnel
Management (OPM). These staff agencies were designed originally
to provide specialized support for "line" agencies,  such as the
Interior and Commerce departments, that do government's real
work. But as rules and regulations began to proliferate, support
turned into control. The Office of Management and Budget (OMB)
which serves the President in the budget process, runs more than
50 compliance, clearance, and review processes. Some of this
review is necessary to ensure budget control and consistency of
agency actions--with each other and with the President's
program--but much of it is overkill.

     Line agencies then wrap themselves in even more red tape by
creating their own budget offices, personnel offices, and
procurement offices. Largely in response to appropriations
committees, budget offices divide congressional budgets into
increasingly tiny line items. A few years ago, for example, base
managers in one branch of the military had 26 line items for
housing repairs alone.7 Personnel offices tell managers when they
can and cannot promote, reward, or move employees. And
procurement offices force managers to buy through a central
monopoly, precluding agencies from getting what they need, when
they need it.

     What the staff agencies don't control, Congress does.
Congressional appropriations often come with hundreds of strings
attached. The Interior Department found that language in its 1992
House, Senate, and conference committee reports included some
2,150 directives, earmarks, instructions, and prohibitions.8 As
the federal budget tightens, lawmakers request increasingly
specific report language to protect activities in their
districts. Indeed, 1993 was a record year for such requests. In
one appropriations bill alone, senators required the U.S. Customs
Service to add new employees to its Honolulu office, prohibited
closing any small or rural post office or U.S. Forest Service
offices; and forbade the U.S. Mint and the Bureau of Engraving
and Printing from even studying the idea of contracting out guard
duties.

     Even worse, Congress often gives a single agency multiple
missions, some of which are contradictory. The Agency for
International Development has more than 40 different objectives,
disposing of American farm surpluses, building democratic
institutions, and even strengthening the American land grant
college system.9 No wonder it has trouble accomplishing its real
mission--promoting international development.

     In Washington, we must work together to untangle the knots
of red tape that prevent government from serving the American
people well. We must give cabinet secretaries, program directors
and line managers much greater authority to pursue their real
purposes.

     As Theodore Roosevelt said: "The best executive is the one
who has the sense to pick good men to do what he wants done, and
self-restraint enough to keep from meddling with them while they
do it."

     Our path is clear: We must shift from systems that hold
people accountable for process to systems that hold them
accountable for results. We discuss accountability for results in
chapter 3. In this chapter, we focus on six steps necessary to
strip away the red tape that so engulfs our federal employees and
frustrates the American people.

     First, we will streamline the budget process, to remove the
manifold restrictions that consume managers' time and literally
force them to waste money.

     Second, we will decentralize personnel policy, to give
managers the tools they need to manage effectively--the authority
to hire, promote, reward, and fire.

     Third, we will streamline procurement, to reduce the
enormous waste built into the process we use to buy $200 billion
a year in goods and services.

     Fourth, we will reorient the inspectors general, to shift
their focus from punishing those who violate rules and
regulations to helping agencies learn to perform better.

     Fifth, we will eliminate thousands of other regulations that
hamstring federal employees, to cut the final Lilliputian ropes
on the federal giant.

     Finally, we will deregulate state and local governments, to
empower them to spend more time meeting customer
needs--particularly with their 600 federal grant programs--and
less time jumping through bureaucratic hoops.

     As we pare down the systems of over-control and
micromanagement in government, we must also pare down the
structures that go with them: the oversized headquarters,
multiple layers of supervisors and auditors, and offices
specializing in the arcane rules of budgeting, personnel,
procurement, and finance. We cannot entirely do without
headquarters, supervisors, auditors, or specialists, but these
structures have grown twice as large as they should be.

     Counting all personnel, budget, procurement, accounting,
auditing, and headquarters staff, plus supervisory personnel in
field offices, there are roughly 700,000 federal employees whose
job it is to manage, control, check up on or audit others.10 This
is one third of all federal civilian employees.

     Not counting the suffocating impact these management control
structures have on line managers and workers, they consume $35
billion a year in salary and benefits alone.11 If Congress enacts
the management reforms outlined in this report, we will
dramatically cut the cost of these structures. We will reinvest
some of the savings in the new management tools we need,
including performance measurement, quality management, and
training. Overall, these reforms will result in the net
elimination of approximately 252,000 positions. (This will
include the 100,000 position reduction the President has already
set in motion.)

     A reduction of 252,000 positions will reduce the civilian,
non-postal work force by almost 12 percent--bringing it below two
million for the first time since the 1966.12

     This reduction, targeted at the structures of control and
micromanagement, is designed to improve working conditions for
the average federal employee. We cannot empower employees to give
us their best work unless we eliminate much of the red tape that
now prevents it. We will do everything in the government's power
to ease the transition for workers, whether they choose to stay
with government, retire, or move to the private sector.

     Our commitment is this: If an employee whose job is
eliminated cannot retire through our early retirement program,
and does not elect to take a cash incentive to leave government
service, we will help that employee find another job offer,
either with government or in the private sector.

     Normal attrition will contribute to the reduction. In
addition, we will introduce legislation to permit all agencies to
offer cash payments to those who leave federal service
voluntarily, whether by retirement or resignation. The Department
of Defense (DOD) and intelligence community already have this
"buy-out" authority; we will ask Congress to extend it to all
agencies. We will also give agencies broad authority to offer
early retirement and to expand their retraining, out-placement
efforts, and other tools as necessary to accomplish the 12%
reduction. Agencies will be able to use these tools as long as
they meet their cost reduction targets.

     These options will give federal managers the same tools
commonly used to downsize private businesses. Even with these
investments, the downsizing we propose will save the taxpayer
billions over the next 5 years.

     None of this will be easy. Downsizing never is. But the
result will not only be a smaller workforce, it will also be a
more empowered, more inspired, and more productive workforce.
     As one federal employee told Vice President Gore at one of
his many town meetings, "If you always do what you've always
done, you'll always get what you always got." We can no longer
afford to get what we've always got.


Step 1: Streamlining The Budget Process

     Most people can't get excited about the federal budget
process, with its green-eyeshade analysts, complicated
procedures, byzantine language, and reams of minutiae. Beyond
such elements, however, lies a basic, unalterable reality. For
organizations of all kinds, nothing is more important than the
process of resource allocation: what goal is sought, how much
money they have, what strings are attached to it, and what
hurdles are placedble reality. For organizations of all kinds,
nothing is more important than the process of resource
allocation: what goal is sought, how much money they have, what
strings are attached to it, and what hurdles are placed before
managers who must spend it.

     In government, budgeting is never easy.  After all, the
budget is the most political of documents.  If, as the political
scientist Harold D. Lasswell once said, politics is "who gets
what, when, how," the budget answers that question.13 By crafting
a budget, public officials decide who pays what taxes and who
receives what benefits. The public's largesse to children, the
elderly, the poor, the middle class, and others is shaped by the
budgets that support cities, states, and the federal government.
     But if budgeting is inherently messy, such messiness is
costly. Optimally, the budget would be more than the product of
struggles among competing interests. It also would reflect the
thoughtful planning of our public leaders. No one can improve
quality and cut costs without planning to do so.

     Unfortunately, the most deliberate planning is often
subordinated to politics, and is perhaps the last thing we do in
constructing a budget. Consider our process. Early in the year,
each agency estimates what it will need to run its programs in
the fiscal year that begins almost 2 years later. This is like
asking someone to figure out not only what they will be doing,
but how much it will cost 3 years later--since that's when the
money will be spent. Bureau and program managers typically
examine the previous year's activity data and project the figures
3 years out, with no word from top political leaders on their
priorities, or even on the total amount that they want to spend.
In other words, planning budgets is like playing "pin the tail on
the donkey." Blindfolded managers are asked to hit an unknown
target.

     OMB, acting for the President, then crafts a proposed budget
through back-and forth negotiations with departments and
agencies, still a year before the fiscal year  it will govern.
Decisions are struck on dollars--dollars that, to agencies, mean
people, equipment, and everything else they need for their jobs.
OMB's examiners may question agency staff as they develop options
papers, OMB's director considers the options during his
Director's Review meetings, OMB "passes back" recommended funding
levels for the agencies, and final figures are worked out during
a final appeals process.

     Early the next year, the President presents a budget
proposal to Congress for the fiscal year beginning the following
October 1. Lawmakers, the media, and interest groups pore over
the document, searching for winners and losers, new spending
proposals, and changes in tax laws. In the ensuing months,
Congress puts its own stamp on the plan. Although House and
Senate budget committees, guide Congress' action, every committee
plays a role.

     Authorizing committees debate the merits of existing
programs and the President's proposals for changes within their
subject areas. While they decide which programs should continue
and recommend funding levels, separate appropriations committees
draft the 13 annual spending bills that actually comprise the
budget.

     Congressional debates over a budget resolution,
authorization bills, and appropriations drag on, often into the
fall. Frequently the President and Congress don't finish by
October 1, so Congress passes one or more "continuing
resolutions" to keep the money flowing, often at the previous
year's level. Until the end, agency officials troop back and
forth to OMB and to the Hill to make their case. States and
localities, organizations and advocates seek time to argue their
cause. Budget staffs work non-stop, preparing estimates and
projections on how this or that change will affect revenues or
spending. All this work is focused on making a budget--not
planning or delivering programs.

     Ironies riddle the process.

     ╖ Uncertainty reigns: Although they begin calculating their
budget 2 years ahead, agency officials do not always know by
October 1 how much they will have to spend and frequently don't
even receive their money until well into the fiscal year.
     ╖ OMB is especially prone to question unspent funds--and
reduce the ensuing year's budget by that amount. Agency officials
inflate their estimates, driving budget numbers higher and
higher. One bureau budget director claims that many regularly ask
for 90 percent more than they eventually receive.

     ╖ Despite months of debate, Congress compresses its actual
decision-making on the budget into such a short time frame that
many of the public's highest priorities--what to do about drug
addiction, for example, or how to prepare workers for jobs in the
21st century--are discussed only briefly, if at all.

     ╖ The process is devoid of the most useful information. We
do not know what last year's money, or that of the year before,
actually accomplished. Agency officials devise their funding
requests based on what they got before, not whether it produced
results.

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There are two ways to reduce expenditures. There is the
intelligent way...going through each department and questioning
each program. Then there is the stupid way: announcing how much
you will cut and getting each department to cut that amount.  I
favor the stupid way.

Michel Belanger  Chairman, Quebec National Bank  May 7, 1992
****************************

     In sum, the budget process is characterized by fictional
requests and promises, an obsession with inputs rather than
outcomes, and a shortage of debate about critical national needs.
We must start to plan strategically--linking our spending with
priorities and performance. First, we must create a rational
budgeting system.


Action: The President should begin the budget process with an
executive budget resolution, setting broad policy priorities and
allocating funds by function for each agency.14

     Federal managers should focus primarily on the content of
the budget, not on the process. A new executive budget resolution
will help them do that. The President should issue a directive in
early 1994 to mandate the use of such a resolution in developing
his fiscal year 1996 budget. It will turn the executive budget
process upside down.

     To develop the resolution, officials from the White House
policy councils will meet with OMB and agency officials. In those
sessions, the administration's policy leadership will make
decisions on overall spending and revenue levels, deficit
reduction targets, and funding allocations for major inter-agency
policy initiatives. The product of these meetings--a resolution
completed by August--will provide agencies with funding ceilings
and allocations for major policy missions. Then, bureaus will
generate their own budget estimates, now knowing their agency's
priorities and fiscal limits.

     Our own Environmental Protection Agency (EPA) tried a
similar approach in the 1970s as part of a zero-based budgeting
trial run. Although zero-based budgeting fell short, participants
said, two important advantages emerged: a new responsiveness to
internal customer needs and a commitment to final decisions. When
participants voted to cut research and development funds because
they felt researchers ignored program needs, researchers began
asking programs managers what kind of research would support
their efforts. EPA also found that, after its leaders had
agonized over funding, they remained committed to common
decisions.

     Critics may view the executive budget resolution process as
a top-down tool that will stifle creative, bottom-up suggestions
for funding options. We think otherwise. The resolution will
render top officials responsible for budget totals and policy
decisions, but will encourage lower-level ingenuity to devise
funding options within those guidelines. By adopting this plan,
we will help discourage non-productive micro-management by senior
department and agency officials.


Action: Institute biennial budgets and appropriations.15

     We should not have to enact a budget every year. Twenty
states adopt budgets for 2 years. (They retain the power to make
small adjustments in off years if revenues or expenditures
deviate widely from forecasts). As a result, their governors and
legislatures have much more time to evaluate programs and develop
longer-term plans.

     Annual budgets consume an enormous amount of management
time--time not spent serving customers. With biennial budgets,
rather than losing months to a frantic "last-year's
budget-plus-X-percent" exercise, we might spend more time
examining which programs actually work.

     The idea of biennial budgeting has been around for some
time. Congressman Leon Panetta, now OMB director, introduced the
first biennial budgeting bill in 1977, and dozens have been
offered since. Although none have passed, the government has some
experience with budget plans that cover 2 years or more. In 1987,
the President and Congress drafted a budget plan for fiscal years
1988 and 1989 that set spending levels for major categories,
enabling Congress to enact all 13 appropriations bills on time
for the first time since 1977.

     In addition, Congress directed the Defense Department to
submit a biennial budget for fiscal 1988 and 1989 to give
Congress more time for broad policy oversight. At the time,
Congress asserted that a biennial budget would "substantially
improve DOD management and congressional oversight," and that a
two-year DOD budget was an important step toward across-the-board
biennial budgeting.  Administrations have continued to submit
biennial budgets for DOD.

     The 1990 Budget Enforcement Act and the 1993 Omnibus Budget
Reconciliation Act set 5-year spending limits for discretionary
spending and pay-as-you-go requirements for mandatory programs.
With these multi-year caps in place, neither the President nor
Congress has to decide the total level of discretionary spending
each year. These caps provide even more reason for biennial
budgets and appropriations. In Congress, 7 out of 10 members
favor a biennial process with a 2-year budget resolution and
multi-year authorizations. The time is ripe.

     We recommend that Congress establish biennial budget
resolutions and appropriations and multi-year authorizations. The
first biennium should begin October 1, 1996, to cover fiscal
years 1997 and 1998. After that, bienniums would begin October 1
of each even-numbered year. Such timing would allow President
Clinton to develop the first comprehensive biennial federal
budget, built on the new executive budget resolution. In off
years, the President would submit only amendments for exceptional
areas of concern, emergencies, or other unforeseen circumstances.

     Biennial budgeting will not make our budget decisions
easier, for they are shaped by competing interests and
priorities. But it will eliminate an enormous amount of busy work
that keeps us from evaluating programs and meeting customer
needs.


Action: OMB, departments, and agencies will minimize budget
restrictions such as apportionments and allotments.16

     Congress typically divides its appropriations into more than
1,000 accounts. Committee reports specify thousands of other
restrictions on using money. OMB apportions each account by
quarter or year, and sometimes divides it into sub-accounts by
line-item or object class--all to control over-spending.
Departmental budget offices further divide the money into
allotments.

     Thus, many managers find their money fenced into hundreds of
separate accounts. In some agencies, they can move funds among
accounts. In others, Congress or the agency limits the transfer
of funds, trapping the money. When that happens, managers must
spend money where they have it, not where they need it. On one
military base, for example, managers had no line item to purchase
snowplow equipment, but they did have a maintenance account. When
the snowplow broke down they leased one, using the maintenance
account. Unfortunately, the 1-year lease cost $100,000--the same
as the full purchase price.

     Such stories are a dime a dozen within the federal
bureaucracy. (They may be the only government cost that is coming
down.) Good managers struggle to make things work, but, trapped
by absurd constraints, they are driven to waste billions of
dollars every year.

     Stories about the legendary end-of-the-year spending rush
also abound. Managers who don't exhaust each line item at year's
end usually are told to return the excess. Typically, they get
less the next time around. The result: the well-known spending
frenzy. The National Performance Review received more examples of
this source of waste--in letters, in calls, and at town
meetings--than any other.

     Most managers know how to save 5 or 10 percent of what they
spend. But knowing they will get less money next year, they have
little reason to save. Instead, smart managers spend every penny
of every line item. Edwin G. Fleming, chief of the Resources
Management Division of the Internal Revenue Service's Cleveland
District, put it well in a letter to the Treasury Department's
Reinvention Team:

     Every manager has saved money, only to have his allocation
  reduced in the subsequent year. This usually happens only
once, then the manager becomes a spender rather than a
planner. Managing becomes watching after little pots of
money that can't be put where it makes business sense
because of reprogramming restrictions. So managers, who are
monitors of these little pots of money, are rewarded for the
ability to maneuver, however limitedly, through the baroque
and bizarre world of federal finance and procurement.
     Solutions to these problems exist. They have been tested in
local governments, in state governments, even in the federal
government. Essentially, they involve budget systems with fewer
line items, more authority for managers to move money among line
items, and freedom for agencies to keep some or all of what they
save--thus minimizing the incentive for year-end spending sprees.

     Typically, federal organizations experimenting with such
budgets have found that they can achieve better productivity,
sometimes with less money.

     During an experiment at Oregon's Ochoco National Forest in
the 1980s, when dozens of accounts were reduced to six,
productivity jumped 25 percent the first year and 35 percent more
the second. A 1991 Forest Service study indicated that the
experiment had succeeded in bringing gains in efficiency,
productivity, and morale, but had failed to provide the Forest
Service region with a mechanism for complying with congressional
intent. After 3 years of negotiations, Washington and Region 6,
where the Ochoco Forest is located, couldn't agree. The region
wanted to retain the initial emphasis on performance goals and
targets so forest managers could shift money from one account to
another if they met performance goals and targets. Washington
argued that Congress would not regard such targets as a serious
measure of congressional intent. The experiment ended in March
1993.17
     When the Defense Department allowed several military bases
to experiment with what was called the Unified Budget Test, base
commanders estimated that they could accomplish their missions
with up to 10 percent less money. If this experience could be
applied to the entire government, it could mean huge savings.
     Beginning with their fiscal year 1995 submissions to OMB,
departments and agencies will begin consolidating accounts to
minimize restrictions and manage more effectively. They will
radically cut the number of allotments used to subdivide
accounts. In addition, they will consider using the Defense
Department's Unified Budget plan, which permits shifts in funds
between allotments and cost categories to help accomplish
missions.

     OMB will simplify the apportionment process, which
hamstrings agencies by dividing their funding into amounts that
are available, bit by bit, according to specified time periods,
activities, or projects. Agencies often don't get their funding
on time and, after they do, must fill out reams of paperwork to
show that they adhered to apportionment guidelines. OMB will also
expedite the "reprogramming" process, by which agencies can move
funds within congressionally appropriated accounts. Currently,
OMB and congressional subcommittees approve all such
reprogrammings. OMB should automatically approve reprogramming
unless it objects within a set period, such as five days.

     While understandable in some cases, such earmarks hamper
agencies that seek to manage programs efficiently. Agencies
should work with appropriations subcommittees on this problem.


Action: OMB and agencies will stop using full-time equivalent
ceilings, managing and budgeting instead with ceilings on
operating costs to control spending.18

     In another effort to control spending, both the executive
and legislative branches often limit the number of each agency's
employees by using full-time equivalent (FTE) limits. When
agencies prepare their budget estimates, they must state how many
FTEs they need in addition to how many dollars. Then, each
department or agency divides that number into a ceiling for each
bureau, division, branch, or other unit. Congress occasionally
complicates the situation by legislating FTE floors.

     Federal managers often cite FTE controls as the single most
oppressive restriction on their ability to manage. Under the
existing system, FTE controls are the only way to make good on
the President's commitment to reduce the federal bureaucracy by
100,000 positions through attrition. But as we redesign the
government for greater accountability, we need to use budgets,
rather than FTE controls, to drive our downsizing. FTE ceilings
are usually imposed independently of--and often conflict
with--budget allocations. They are frequently arbitrary, rarely
account for changing circumstances, and are normally imposed as
across-the-board percentage cuts in FTEs for all of an agency's
units- -regardless of changing circumstances. Organizations that
face new regulations or a greater workload don't get new FTE
ceilings. Consequently, they must contract out work that could be
done better and cheaper in-house. One manager at Vice President
Gore's meeting with foreign affairs community employees at the
State Department in May 1993 offered an example: his FTE limit
had forced him to contract out for a junior programmer for the
Foreign Service Institute. As it turned out, the programmer's
hourly rate equaled the Institute Director's, so the move cost
money instead of saving it.

     The President should direct OMB and agency heads to stop
setting FTE ceilings in fiscal year 1995.

     For this transition, the agencies' accounting systems will
have to separate true operating costs from program and other
costs. Some agencies already have such systems in place; others
must develop financial management systems to allow them to
calculate these costs. We address this issue in a separate
recommendation in chapter 3.

     This recommendation fully supports the President's
commitment to maintain a reduced federal workforce. Instead of
controlling the size of the federal workforce by employment
ceilings--which cause inefficiencies and distortions in managers'
personnel and resource allocation decisions--this new system will
control the federal workforce by dollars available in operating
funds.



Action: Minimize congressional restrictions such as line items,
earmarks, and eliminate FTE floors.19

     Congress should also minimize the restrictions and earmarks
that it imposes on agencies. With virtually all federal spending
under scrutiny for future cuts, Congress is increasingly applying
earmarks to ensure that funding flows to favored programs and
hometown projects.

     Imagine the surprise of Interior Secretary Bruce Babbitt,
who a few months after taking office discovered that he was under
orders from Congress to maintain 23 positions in the
Wilkes-Barre, Pennsylvania, field office of his department's
anthracite reclamation program. Or that his department was
required to spend $100,000 to train beagles in Hawaii to sniff
out brown tree snakes. Edward Derwinski, former secretary of
Veteran Affairs, was once summoned before the Texas congressional
delegation to explain his plan to eliminate 38 jobs in that
state.20


Action: Allow agencies to roll over 50 percent of what they do
not spend on internal operations during a fiscal year.21

     As part of its 13 fiscal year 1995 appropriations bills,
Congress should permanently allow agencies to roll over 50
percent of unobligated year-end balances in all appropriations
for operations. It should allow agencies to use up to 2 percent
of rolled-over funds to finance bonuses for employees involved.
This approach, which the Defense Department and Forest Service
have used successfully, would reward employees for finding more
productive ways to work. Moreover, it would create incentives to
save the taxpayers' money.

     Shared savings incentives work. In 1989, the General
Accounting Office (GAO) discovered that the Veterans
Administration had not recovered $223 million in health payments
from third parties, such as insurers. Congress then changed the
rules, allowing the VA to hire more staff to keep up with the
paperwork and also to keep a portion of recovered third-party
payments for administrative costs. VA recoveries soared from $24
million to $530 million.22

     If incentives to save are to be real, Congress and OMB will
have to refrain from automatically cutting agencies' budgets by
the amount they have saved when they next budget is prepared.
Policy decisions to cut spending are one thing; automatic cuts to
take back savings are quite another. They simply confirm
managers' fears that they will be penalized for saving money.
Agencies' chief financial officers should intervene in the budget
process to ensure that this does not happen.



Step 2: Decentralizing Personnel Policy

     Our federal personnel system has been evolving for more than
100 years--ever since the 1881 assassination of President James
A. Garfield by a disappointed job seeker. And during that time,
according to a 1988 Office of Personnel Management publication:
     ...anecdotal mistakes prompted additional rules. When the
 rules led to new inequities, even more rules were added.
Over time...a maze of regulations and requirements was
created, hamstringing managers...often impeding federal
managers and employees from achieving their missions and
from giving the public a high quality of service.

     Year after year, layer after layer, the rules have piled up.
The U.S. Merit Systems Protection Board reports there are now 850
pages of federal personnel law--augmented by 1,300 pages of OPM
regulations on how to implement those laws and another 10,000
pages of guidelines from the Federal Personnel Manual.


****************************
Catch-22
Our federal personnel system ought to place a value on
experience. That's not always the case. Consider the story of
Rosalie Tapia. Ten years ago, fresh from high school, she joined
the Army and was assigned to Germany as a clerk. She served out
her enlistment with an excellent record, landed a job in Germany
as a civilian secretary for the Army, and worked her way up to
assistant to the division chief. When the Cold War ended, Tapia
wanted to return to the U.S. and transfer to a government job
here. Unfortunately, one of the dictates contained in the
government's 10,000 pages of personnel rules says that an
employee hired as a civil servant overseas is not considered a
government employee once on home soil. Any smart employer would
prefer to hire an experienced worker with an excellent service
record over an unknown. But our government's policy doesn't make
it easy. Ironically, Tapia landed a job with a government
contractor, making more money-- and probably costing taxpayers
more-- than a job in the bureaucracy would have paid.
***************************

     On one topic alone--how to complete a standard form for a
notice of a personnel action- -the Federal Personnel Manual
contains 900 pages of instructions. The full stack of personnel
laws, regulations, directives, case law and departmental guidance
that the Agriculture Department uses weighs 1,088 pounds.

     Thousands of pages of personnel rules prompt thousands of
pages of personnel forms. In 1991, for example, the Navy's Human
Resources Office processed enough forms to create a "monument"
3,100 feet tall--six times the height of the Washington monument.
Costs to the taxpayer for this personnel quagmire are enormous.
In total, 54,000 personnel work in federal personnel positions.23
We spend billions of dollars for these staff to classify each
employee within a highly complex system of some 459 job series,
15 grades and 10 steps within each grade.

     Does this elaborate system work? No.

     After surveying managers, supervisors and personnel officers
in a number of federal agencies, the U.S. Merit Systems
Protection Board recently concluded that federal personnel rules
are too complex, too prescriptive, and often counterproductive.

     Talk to a federal manager for 10 minutes: You likely will
hear at least one personnel horror story. The system is so
complex and rule-bound that most managers cannot even advise an
applicant how to get a federal job. "Even when the public sector
finds outstanding candidates," In 1989, Paul Volcker's National
Commission on the Public Service explained, "the complexity of
the hiring process often drives all but the most dedicated away."
Managers who find it nearly impossible to hire the people they
need sometimes flaunt the system by hiring people as consultants
at higher rates than those same people would earn as federal
employees. The average manager needs a year to fire an
incompetent employee, even with solid proof. During layoffs,
employees slated to be laid off can "bump" employees with less
seniority, regardless of their abilities or performance--putting
people in jobs they don't understand and never wanted.

     Vice President Gore heard many stories of dissatisfaction as
he listened to federal workers at meetings in their agencies. A
supervisor at the Centers for Disease Control complained that it
can take six to eight months and as many as 15 revisions to a job
description in order to get approval for a position he needs to
fill. A secretary from the Justice Department told the Vice
President she was discouraged and overworked in an office where
some secretaries were slacking off--with no system in place to
reward the hard workers and take action against the slackers.

     A worker from the Agency for International Development
expressed her frustration at being so narrowly "slotted" in a
particular GS series that she wasn't allowed to apply for a job
in a slightly different GS series --even though she was qualified
for the job. An Air Force lieutenant colonel told the vice
president that her secretary was abandoning government for the
private sector because she was blocked from any more promotions
in her current job series. The loss would be enormous, the
colonel told Gore, because her secretary was her "right-hand
person". One of the Labor Department's regional directors for
unemployment insurance complained that even though he is charged
with running a multimillion a year program, he isn't allowed to
hire a $45,000-a-year program specialist without getting approval
from Washington.

     To create an effective federal government, we must reform
virtually the entire personnel system: recruitment, hiring,
classification, promotion, pay, and reward systems. We must make
it easier for federal managers to hire the workers they need, to
reward those who do good work, and to fire those who do not. As
the National Academy of Public Administration concluded in 1993,
"It is not a question of whether the federal government should
change how it manages its human resources. It must change."


Action: OPM will deregulate personnel policy by phasing out the
10,000-page Federal Personnel Manual and all agency implementing
directives.24

     We must enable all managers to pursue their missions, freed
from the cumbersome red tape of current personnel rules. The
President should issue a directive phasing out the Federal
Personnel Manual and all agency implementing directives. The
order will require that most personnel management authority be
delegated to agencies' line managers at the lowest level
practical in each agency. It will direct OPM to work with
agencies to determine which FPM chapters, provisions, or
supplements are essential, which are useful, and which are
unnecessary. OPM will then replace the FPM and agency directives
with manuals tailored to user needs, automated personnel
processes, and electronic decision support systems.

     Once some of the paperwork burden is eased, our next
priority must be to give agency managers more control over who
comes to work for them. To accomplish this, we propose to
radically decentralize the government's hiring process.


Action: Give all departments and agencies authority to conduct
their own recruiting and examining for all positions, and abolish
all central registers and standard application forms.25

     We will ask Congress to pass legislation decentralizing
authority over recruitment, hiring, and promotion. Under the
present system, OPM controls the examination system for external
candidates and recruits and screens candidates for positions that
are common to all agencies, with agencies then hiring from among
candidates presented by OPM. Under the new system, OPM could
offer to screen candidates for agencies, but agencies need not
accept OPM's offer.

     Under this decentralized system, agencies will also be
allowed to make their own decisions about when to hire candidates
directly--without examinations or rankings - -under guidelines to
be drafted by OPM. Agencies able to do so should also be
permitted to conduct their own background investigations of
potential candidates. We will make sure the system is fair and
easy for job applicants to use, however, by making information
about federal job openings available in one place. In place of a
central register, OPM will create a government-wide, employment
information system that allows the public to go to one place for
information about all job opportunities in the federal
government.

**************************
First, we must cut the waste and make government operations more
responsive to the American people. It is time to shift from
top-down bureaucracy to entrepreneurial government that generates
change from the bottom up. We must reward the people and ideas
that work and get rid of those that don't.

President Bill Clinton
February 17, 1993
**************************

     Next, we must change the classification system, introduced
in 1949 to create fairness across agencies but now widely
regarded as time-consuming, expensive, cumbersome, and intensely
frustrating--for both workers and managers.

     After an exhaustive 1991 study of the system, the National
Academy of Public Administration recommended a complete overhaul
of the system. Classification standards, NAPA argued, are "too
complex, inflexible, out-of-date, and inaccurate," creating
"rigid job hierarchies that cannot change with organizational
structure." They drive some of the best employees out of their
fields of expertise and into management positions, for higher
pay. And managers seeking to create new positions often fight the
system for months to get them classified and filled.26

     There is strong evidence that agencies given authority to do
these things themselves can do better. Using demonstration
authority under the 1978 Civil Service Reform Act, several
agencies have experimented with simpler systems. In one
experiment, at the Naval Weapons Center in China Lake,
California, and the Naval Oceans Systems Center, in San Diego,
the system was simplified to a few career paths and only
four-to-six broad pay bands within each path. Known as the "China
Lake Experiment," it solved many of the problems faced by the two
naval facilities. It:

     ╖ classified all jobs in just five career
paths--professional, technical, specialist, administrative and
clerical;

     ╖ folded all GS (General Schedule) grades into four, five,
or six pay bands within each career path;

     ╖ allowed managers to pay market salaries to recruit people,
to increase the pay of outstanding employees without having to
reclassify them, and to give performance-based bonuses and salary
increases;

     ╖ automatically moved employees with repeated marginal
performance evaluations down to the next pay band; and

     ╖ limited bumping to one career path, and based it primarily
on performance ratings, not seniority.

     Another demonstration at McClellan Air Force Base, in
Sacramento, California, involved "gainsharing"--allowing
employees to pocket some of the savings they achieved through
cooperative labor-management efforts to cut costs. It generated
$5 million in productivity savings in four years and saw improved
employee performance; fewer grievances; less sick leave and
absenteeism; and improved labor-management relations.

     A third demonstration at more than 200 Agriculture
Department sites tested a streamlined, agency-based recruiting
and hiring system that replaced OPM's register process. Under
OPM's system, candidates are arrayed and scored based on OPM's
written tests or other examinations. In USDA's demonstration,
however, the agency grouped candidates by its own criteria, such
as education, experience or ability, then picked from those
candidates. A candidate might qualify for a job, for example,
with a 2.7 college grade point average. Agencies could create
their own recruitment incentives, do their own hiring, and extend
the probationary period for some new hires. Managers were far
more satisfied with this system than the existing one.


Action: Dramatically simplify the current classification system,
to give agencies greater flexibility in how they classify and pay
their employees.27

     We will urge Congress to remove all the 1940s-era
grade-level descriptions from the law and adopt an approach that
is more modern. In addition, Congress should allow agencies to
move from the General Schedule system to a broad-band system. OPM
should develop such standard banding patterns, and agencies
should be free to adopt one without seeking OPM's approval.

     When agency proposals do not fit under a standard pattern,
OPM should approve them as five-year demonstration projects that
would be converted to permanent "alternative systems" if
successful. OPM should establish criteria for broad-banding
demonstration projects, and agencies' projects meeting those
criteria should receive automatic approval.

     These changes would give agencies greater flexibility to
hire, retain, and promote the best people they find. They would
help agencies flatten their hierarchies and promote high
achievers without having to make them supervisors. They would
eliminate much valuable time now lost to battles between managers
seeking to promote or reward employees and personnel specialists
administering a classification system with rigid limits. Finally,
they would remove OPM from its role as "classification police."
To accompany agencies' new flexibility on classification and pay,
they must also be given authority to set standards for their own
workers and to reward those who do well.


Action: Agencies should be allowed to design their own
performance management and reward systems, with the objective of
improving the performance of individuals and organizations. 28

     The current government performance appraisal process is
frequently criticized as a meaningless exercise in which most
federal employees are given above-average ratings. We believe
that agencies will be able to develop performance appraisals that
are more meaningful to their employees. If they succeed, these
new approaches will send a message that job performance is
directly linked to workers' chances for promotion and higher pay.

     Current systems to assess on-the-job performance were
designed to serve multiple purposes: to enhance performance, to
authorize higher pay for high performers, to retain high
performers, and to promote staff development. Not surprisingly,
they serve none of these purposes well.

     Performance management programs should have a single goal:
to improve the performance of individuals and organizations.
Agencies should be allowed to develop programs that meet their
needs and reflect their cultures, including incentive programs,
gainsharing programs, and awards that link pay and performance.
If agencies--in cooperation with employees--design their own
systems, managers and employees alike should feel more ownership
of them.

     Finally, if performance measures are to  be taken seriously,
managers must have authority to fire workers who do not measure
up. It is possible to fire a poor worker in the federal
government, but it takes far too long. We believe this undermines
good management and diminishes workers' incentives to improve.


Action: Reduce by half the time required to terminate federal
managers and employees for cause and improve the system for
dealing with poor performers.29

     Agencies will reduce the time for terminating employees for
cause by half. For example, agencies could halve the length of
time during which managers and employees with unsatisfactory
performance ratings are allowed to demonstrate improved
performance.

     To support this effort, we will ask OPM to draft and
Congress to pass legislation to change the required time for
notice of termination from 30 to 15 days. This legislation should
also require the waiting period for a within-grade increase to be
extended by the amount of time an employee's performance does not
meet expectations. In other words, only the time that an employee
is doing satisfactory work should be credited toward the required
waiting period for a pay raise.



Step 3: Streamlining Procurement

     Every year, Washington spends about $200 billion buying
goods and services. That's $800 per American. With a price tag
like that, taxpayers have a right t Our system relies on rigid
rules and procedures, extensive paperwork, detailed design
specifications, and multiple inspections and audits. It is an
extraordinary example of bureaucratic red tape.ore pages of
agency-specific supplements.

     These numbers document what most federal workers and many
taxpayers already know: Our system relies on rigid rules and
procedures, extensive paperwork, detailed design specifications,
and multiple inspections and audits. It is an extraordinary
example of bureaucratic red tape.

     Like the budget and personnel systems, the procurement
system was designed with the best of intentions. To prevent
profiteering and fraud, it includes rigid safeguards. To take
advantage of bulk purchasing, it is highly centralized. But the
government wrote its procurement rules when retailing was highly
stratified, with many markups by intermediaries. Today the game
has changed considerably. Retail giants like Wal-Mart, Office
Depot and Price Club are vertically integrated, eliminating the
markups of intermediaries. Federal managers can buy 90 percent of
what they need over the phone, from mail-order discounters. Bulk
purchasing still has its advantages, but it is not always
necessary to get the best price.

     Our overly centralized purchasing system takes decisions
away from managers who know what they need, and allows
strangers--often thousands of miles away--to make purchasing
decisions. The frequent result: Procurement officers, who make
their own decisions about what to buy and how soon to buy it,
purchase low-quality items, or even the wrong ones, that arrive
too late.

     This "secondhand" approach to purchasing creates another
problem. When line managers' needs and experiences are not
understood by the procurement officer, the government is unable
to make decisions that reward good vendors and punish bad ones.
As a result, vendors often "game" contracts--exploiting loopholes
to require expensive changes. For example, in a major government
contract for a computerized data network a few years ago, a
vendor used slight underestimates of system demand in the
contract specifications as an excuse to charge exorbitant prices
for system upgrades. In the private sector, a manager could have
used the incentive of future contracts to prevent such gaming; in
the government, there is no such leverage.

     The symptoms of what's wrong are apparent, too, from stories
about small purchases.

     One story that Vice President Gore has repeated in
Washington over the past six months concerns steam traps. Steam
traps remove condensation from steam lines in heating systems.
Each costs about $100. But when one breaks, it leaks as much as
$50 of steam a week. Obviously, a leaking steam trap should be
replaced quickly.

     When plumbers at the Sacramento Army Depot found leaking
traps, however, their manager followed standard operating
procedure. He called the procurement office, where an officer,
who knew nothing about steam traps, followed common practice. He
waited for enough orders to buy in bulk, saving the government
about $10 per trap. There was no rule requiring him to wait--
just a powerful tradition. So the Sacramento Depot didn't get new
steam traps for a year. In the meantime, each of their leaking
traps spewed $2,500 of steam. To save $10, the central
procurement system wasted $2,500.
     As the Vice President visited government agencies, he heard
many more stories of wasteful spending--most of them produced by
the very rules we have designed to prevent it. Take the case of
government travel.

     Because GSA selects a "contract airline" for each route,
federal employees have few choices. If Northwest has the
Washington-Tampa route, for instance, federal employees get
routed through Detroit. If Northwest has the Boston-Washington
route, employees have to use Northwest--even if USAir has more
frequent flights at more convenient times. Workers told the Vice
President of being routed through thousands of miles out of their
way even if it cost them a day's worth of time--and a day's worth
of taxpayers' money. Others told of being unable to take
advantage of cheap "special fares" because they were not
"government fares." And one worker showed the National
Performance Review a memo from the Resolution Trust Corporation
explaining that RTC workers would not be reimbursed for any
travel expenses unless they signed their travel vouchers in blue
ink!

*****************************
"Ash receivers, tobacco  (desk type)..."

Our federal procurement system leaves little to chance.
When the General Services Administration wanted to buy ashtrays,
it has some very specific ideas how those ashtrays--better known
to GSA as "ash receivers, tobacco (desk type)," should be
constructed.
     In March 1993, the GSA outlined, in nine full pages of
specifications and drawings, the precise dimensions, color,
polish and markings required for simple glass ashtrays that would
pass U.S. government standards.
     A Type I, glass, square, 41/2 inch (114.3 mm) ash receiver
must include several features: "A minimum of four cigarette
rests, spaced equidistant around the periphery and aimed at the
center of the receiver, molded into the top. The cigarette rests
shall be sloped toward the center of the ash receiver. The rests
shall be parallel to the outside top edge of the receiver or in
each corner, at the manufacturer's option. All surfaces shall be
smooth."
     Government ashtrays must be sturdy too. To guard against the
purchase of defective ash receivers, the GSA required that all
ashtrays be tested. "The test shall be made by placing the
specimen on its base upon a solid support (a 1 3/4 inch, 44.5mm
maple plank), placing a steel center punch (point ground to a
60-degree included angle) in contact with the center of the
inside surface of the bottom and striking with a hammer in
successive blows of increasing severity until breakage occurs."
  Then, according to paragraph 4.5.2., "The specimen should break
into a small number of irregular shaped pieces not greater in
number than 35, and it must not dice." What does "dice" mean? The
paragraph goes on to explain: "Any piece 1/4 inch (6.4 mm) or
more on any three of its adjacent edges (excluding the thickness
dimension) shall be included in the number counted. Smaller
fragments shall not be counted."

Regulation AA-A-710E, (superseding Regulation AA-A-710D).
******************************

     Beyond travel, at every federal agency the Vice President
visited, employees told stories about not getting supplies and
equipment they needed, getting them late, or watching the
government spend too much for them. At the Department of Health
and Human Services, a worker told the Vice President that no
matter how much his office needed a FAX machine--and how much
time the machine would save workers--the purchase wouldn't be
possible "without the signature of everyone in this room." An
engineer from the National Institutes of Health added that in his
agency, it takes more than a year to buy a computer, not a
mainframe, but a personal computer! At the Transportation
Department, a hearing-impaired employee told the Vice President
of watching with dismay as her agency spent $600 to buy her a
Telephone Device for the Deaf (TDD), when she knew she could buy
one off the shelf for $300.

     Anecdotes like these were documented in January 1993, when
the Office of Federal Procurement Policy and the U.S. Merit
Systems Protection Board collaborated on a survey of the
procurement system's customers: federal managers. More than 1,000
responded. Their message: The system is not achieving what its
customers want. It ignores its customers' needs, pays higher
prices than necessary, is filled with peripheral objectives, and
assumes that line managers cannot be trusted. A study by the
Center for Strategic and International Studies added several
other conclusions. The procurement system adds costs without
adding value; it impedes government's access to state-of-the-art
commercial technology; and its complexity forces businesses to
alter standard procedures and raise prices when dealing with the
government.31

     There is little disagreement that federal procurement must
be reconfigured. We must radically decentralize authority to line
managers, letting them buy much of what they need. We must
radically simplify procurement regulations and processes.  We
must empower the system's customers by ending most government
service monopolies, including those of the General Services
Administration. As we detailed in Chapter 1, we must make the
system competitive by allowing managers to use any procurement
office that meets their needs.

     As we take these actions, we must embrace these fundamental
principles: integrity, accountability, professionalism, openness,
competition--and value.


Action: Simplify the procurement process by rewriting federal
regulations--shifting from rigid rules to guiding principles.32

     The Federal Acquisition Regulation (FAR), the government's
principal set of procurement regulations, contains too many
rules. Rules are changed too often and are so process-oriented
that they minimize discretion and stifle innovation, according to
a Merit Systems Protection Board survey.33 As one frustrated
manager noted, the FAR does not even clearly state the main goal
of procurement policy: "Is it to avoid waste, fraud, and abuse?
Is it to implement a social-economic agenda? Is it to procure the
government's requirements at a fair and reasonable cost?"

     This administration will rewrite the 1,600-page FAR, the
2,900 pages of agency supplements that accompany it, and
Executive Order 12352, which governs federal procurement. The new
regulations will:

     ╖ shift from rigid rules to guiding principles;

     ╖ promote decision making at the lowest possible level;
     ╖ end unnecessary regulatory requirements;

     ╖ foster competitiveness and commercial practices;

     ╖ shift to a new emphasis on choosing "best value" products;

     ╖ facilitate innovative contracting approaches; and

     ╖ recommend acquisition methods that reflect information
technology's short life cycle.

     ╖ develop a more effective process to listen to its
customers: line managers, government procurement officers and
vendors who do business with the government.


Action: The GSA will significantly increase its delegated
authority to federal agencies for the purchase of information
technology, including hardware, software, and services.34
     In 1965, when "automated data processing" meant large,
mainframe computers --often developed specifically for one
customer--Congress passed the Brooks Act. It directed GSA to
purchase, lease, and maintain such equipment for the entire
federal government. The Act also gave GSA authority to delegate
to agencies these same authorities. In 1986, Congress extended
the requirement to software and support services.

     Today, with most computer equipment commercially available
in highly competitive markets, the advantages of centralized
purchasing have faded and the disadvantages grown. The federal
government takes, on average, more than four years to buy major
information technology systems; the private sector takes 13
months. Due to rapidly changing technology, the government often
buys computers that are state-of-the-art when the purchase
process begins and when prices are negotiated, but which are
almost obsolete when computers are delivered. The phenomenon is
what one observer calls "getting a 286 at a 486 price."

     Currently, the GSA authorizes agencies to make individual
purchases up to $2.5 million in equipment and services on their
own. The GSA Administrator will raise authorization levels to $50
million, $20 million and $5 million. These levels will be
calculated according to each agency's size, the size of its
information technology budget, and its management record. In some
cases, GSA may grant an agency greater or unlimited delegation.
     GSA will also waive requirements that agencies justify their
decisions to buy information technology items under $500,000 that
are mass-produced and offered on the open market.



Action: GSA will simplify the procurement process by allowing
agencies to buy where they want, and testing a fully "electronic
marketplace." 35

     The government buys everything from forklifts and snowplows
to flak jackets and test tubes through a system called the
Multiple Award Schedule program, which includes more than one
million separate items.

     Under this program, GSA negotiates and awards contracts to
multiple vendors of comparable products and services, at varying
prices. GSA then creates a "supply schedule" for a particular
good or service, identifying all vendors that have won contracts
as well as the negotiated prices. Of GSA's 154 schedules,
civilian agencies must must buy from 117. In ordering from
schedules, agencies still must comply--in addition- -with the
Federal Acquisition Regulation, Federal Information Resources
Management Regulation, and Federal Property Management
Regulation.

     In most cases, we should not limit managers to items on the
supply schedules. If they can find the same or a comparable
product for less, they should be free to buy it. Mandatory
schedules should apply only when required by law, to ensure
standardization, or when agencies voluntarily create team pools
that buy in bulk for lower prices. In addition, GSA should revise
regulations that currently limit agencies from buying more than
$300,000 of information technology items on supply schedules,
raise them to $500,000 and provide a higher limit for individual
items costing more than $500,000.

     To make supply schedules more user-friendly, GSA should
conduct several pilot tests. One should test an "electronic
marketplace," in which GSA would not negotiate prices. Instead,
suppliers would list products and prices electronically, and
agencies would electronically order the lowest-priced item that
met their needs. Suppliers, at any time, would be able to add new
products and change prices. Such a pilot would test whether
visible price competition will cut prices and give line managers
easier access to rapidly changing products.



Action: Allow agencies to make purchases under $100,000 through
simplified purchase procedures.36

     Under current law, agencies are allowed to make purchases of
less than $25,000 on their own, using simple procurement
procedures. These small purchases, on average, take less than a
month to complete; purchases of more than $25,000 normally take
more than three months. If Congress raised the threshold to
$100,000, agencies could use simplified procedures on another
45,550 procurements--with a total value of $2.5 billion.

     Congress should keep current rules that reserve small
purchases for small businesses and should improve access to
information on procurements of more than $25,000. To ensure that
small business receives adequate notice of possible procurements,
the federal government, with OMB as the lead agency, should adopt
an electronic notification system.



Action: Rely more on the commercial marketplace.37

     The government can save enormous amounts of money by buying
more commercial products instead of requiring products to be
designed to government-unique specifications. Our government buys
such items as integrated circuits, pillows, and oil pans,
designed to government specifications--even when there are
equally good commercial products available.

     We recommend that all agency heads be instructed to review
and revise internal purchasing procedures and rules to allow
their agencies to buy commercial products whenever practical and
to take advantage of market conditions. We will ask the Office of
Management and Budget to draft a new federal commercial code with
commercial-style procedures, and then ask Congress to adopt the
new code and remove impediments to this money-saving approach to
procurement.


Action: Bring federal procurement laws up to date.38

     There are four federal labor laws implemented through the
federal procurement process. Each was passed because of valid and
well founded concerns about the welfare of working Americans. But
as part of our effort to make the government's procurement
process work more efficiently, we must consider whether those
laws are still necessary- -and whether the burdens they impose on
the procurement system are reasonable ones.

     The Davis-Bacon Act of 1931 requires that each repair or
construction contract in excess of $2,000 for work on a public
building specify that the prevailing area minimum wage be paid to
workers on that contract. The law was passed because Congress
feared that without it, federal contracts awarded through a
sealed bid process could undermine local prevailing wages. While
Congress shifted the government's focus to an open bidding
process in 1984, we acknowledge that concerns about the impact of
government contracts on prevailing wages are still valid.

     Recognizing that the original $2,000 threshold in the law
was set more than 60 years ago, we recommend that Congress modify
the Davis-Bacon Act by raising the threshold for compliance to
$100,000, a change similar to that proposed by Senator Kennedy in
March 1993.

     The Service Contract Act of 1965 has purposes similar to
those of the Davis-Bacon Act, and applies to service contracts in
excess of $2,500. It requires contractors to pay the minimum
prevailing wage and specified fringe benefits. To keep
contractors from "locking in" their wage agreements at low
levels, the law imposes a five-year limit on service contracts
and requires new wage determinations every two years.

     We suggest that the five-year limit is inconsistent with the
government's interest in entering into long-range contracts. We
will urge Congress to increase the limit up to 10 years while
retaining the two-year wage adjustment requirement.

     The Copeland Anti-Kickback Act of 1934 regulates payroll
deductions on federal and federally assisted construction. The
law prohibits anyone from inducing employees to give up any part
of their compensation and requires contractors to submit weekly
statements of compliance and detailed weekly payroll reports to
the Labor Department.

     We suggest that such detailed reporting is an unreasonable
burden on federal contractors, and we will urge Congress to
modify the act. We suggest eliminating requirements for weekly
reports and requiring contractors instead to certify with each
payment that they have complied with the law. Contractors would
also be required to keep records to prove their compliance for
three years.

     The Walsh-Healey Public Contracts Act requires contractors
that supply materials to the federal government through contracts
in excess of $10,000 to pay all workers the federal minimum wage,
to agree that no employee is required to work more than 40 hours
a week, and to avoid using convict labor or workers under the age
of 16.

     Over time, each of the requirements of the Walsh-Healey
Act--with the exception of the provision relating to convict
labor--has been superseded by other federal legislation. We
therefore urge Congress to remove the burden of certifying
compliance with redundant laws from federal contractors. Within
30 days of the repeal of that law, the President should amend
Executive Order 11755 to include the convict labor provisions of
the Walsh-Healey Act.



Step 4: --Reorienting The Inspectors  General

     Responding to growing concern about waste, fraud, and abuse
in government, Congress passed the Inspector General Act in 1978.
This act and subsequent amendments created the 60 Inspectors
General offices that today employ 15,000 federal workers,
including postal inspectors.

     The act was broad in scope, requiring IGs to promote the
efficiency, economy and integrity of federal programs with
auditing program expenditures, and investigating possible fraud
and abuse.

     The inspectors general, who are independent of the agencies
in which they operate, report to Congress twice a year. These
reports detail how much money IG audits have recovered or put to
better use and the number of convictions resulting from their
criminal investigations. The IGs also send the audit reports to
the heads of their agencies and forward investigations for
criminal prosecution to the U.S. attorney general. The Inspector
General Act's two central mandates, combined with the last two
administrations' eagerness to highlight "waste, fraud and abuse,"
have shaped the evolution of the IG offices. The standard by
which they are evaluated is finding error or fraud: The more
frequently they find mistakes, the more successful they are
judged to be. As a result, the IG staffs often develop
adversarial relations with agency managers--who, in trying to do
things better, may break rules.

     At virtually every agency he visited, the Vice President
heard federal employees complain that the IGs' basic approach
inhibits innovation and risk taking. Heavy-handed
enforcement--with the IG watchfulness compelling employees to
follow every rule, document every decision, and fill out every
form--has had a negative effect in some agencies.



Action: Broaden the focus of the Inspectors General from strict
compliance auditing to evaluating management control systems.39

    In a government focused on results, the Inspectors General
can play a key role not only in controlling managers' behavior by
monitoring it, but in helping to improve it. Today, they audit
for strict compliance with rules and regulations. In the future,
they should help managers evaluate their management control
systems. Today, they look for "waste, fraud, and abuse." In the
future, they should also help improve systems to prevent waste,
fraud and abuse, and ensure efficient, effective service.

     Many IGs have already begun to help their agencies this way.
At the Justice Department, for example some offices were
inefficient in completing background and security clearances. The
Inspector General's office examined the problem, then recommended
setting up a central database to manage the clearance process and
warn officials automatically when they are about to miss
deadlines for completing investigations. Similarly, the Inspector
General of the Department of Health and Human Services has long
been engaged in program evaluations to help agencies uncover
inefficiencies. While the Inspector General's office retains the
right to conduct formal audits and criminal investigations, it
also uses its role as a neutral observer to collaborate on making
programs work better.

     Congress need pass no legislation to make this happen.
Promoting the efficiency and integrity of government programs was
part of the IGs' original mandate. But such change will require a
cultural revolution within many IG offices, and we recommend two
steps to help guide such a change. First-line managers, who are
the IG front-line customers, should be surveyed periodically to
see whether they believe the IGs are helping them improve
performance. Second, criteria should be established for judging
IG performance.



Step 5: Eliminating Regulatory Overkill

     Reinventing our budget, personnel and procurement systems
will strip away much--but not all--of the red tape that makes our
governing processes so cumbersome. Thousands upon thousands of
outdated, overlapping regulations remain in place. These
regulations affect the people inside government and those who
deal with it from the outside. Inside government, we have no
precise measurement of how much regulation costs or how much time
it steals from productive work. But there's no disagreement that
the costs are enormous. And on the matter of external regulation,
a 1993 study concluded that the cost to the private sector of
complying with regulations is at least $430 billion annually-- 9
percent of our gross domestic product! 40

*********************************
We can lick gravity, but sometimes the paperwork is overwhelming.

Wernher von Braun
*********************************

     We must clear the thicket of regulation by undertaking a
thorough review of the regulations already in place and
redesigning regulatory processes to end the proliferation of
unnecessary and unproductive rules. We have worked closely with
administration officials responsible for developing a new
approach to regulatory review, and incorporated that work into
the following action.



Action: The President should issue a directive requiring all
federal agencies to review internal government regulations over
the next 3 years, with a goal of eliminating 50 percent of those
regulations.41

     Can regulations be eliminated? The answer is yes, as
evidenced by promising experiments in several federal agencies.
In the Management Efficiency Pilot Program (MEPP) in five of the
Department of Veterans' Affairs regional benefits offices, the
offices were encouraged to do away with red tape.42 At several
benefits offices, 895 of 1,969 regulations were dropped, saving
the staff more than 3,000 hours and $640,000 in one year. And
productivity at MEPP centers increased by 35 percent in one year
(1988-89), more than double the increase at other centers. A
similar effort by five VA medical centers redirected $13.1
million to much-needed funding for acute care centers.

     An even more sweeping example of a fresh start in internal
regulations comes from the Air Force, where the chief of staff
has established a servicewide program to streamline the
organization and cut out bureaucracy. Under the Policy Review
Initiative begun in 1992, the Air Force is replacing 1,510
regulations with 165 policy directives and 750 sets of
instructions. This effort will cut 55,000 pages of intermingled
policy and procedure to about 18,000 pages clearly separating
policy from procedure. This deregulation effort, managed by a
staff of 10, is expected to be completed in fiscal year 1994.

     Over the next 3 years, each federal agency will undertake a
thorough and systematic review of its internal regulations.
Agencies may choose their own strategies for reaching the goal of
reducing internal regulations by 50 percent.



Action: Improve inter-agency coordination of regulations to
reduce unnecessary regulation and red tape.43

     In 1981, frustrated at the inconsistencies and duplication
among federal regulatory efforts and their burden on government
and the private sector, President Reagan required the Office of
Management and Budget specifically, the Office of Information and
Regulatory Affairs (OIRA) to review all regulations proposed by
executive agencies.

     With a limited staff, many of whom are also involved with
paperwork reduction issues, the review process for proposed
regulations can be lengthy.  And while a lengthy review process
may be appropriate for significant rules, it is a waste of time
for others. In early 1993, Vice President Gore convened an
informal working group to recommend changes in the regulatory
review process. The working group and the National Performance
Review coordinated their efforts closely.  We endorse the
recommendations of the working group and the President's
executive order, which will implement those changes and
streamline the regulatory review process.

     The order will enhance the planning process and encourage
agencies to consult with the public early in that process.  In
addition, in an effort to coordinate the regulatory actions of
all executive agencies, the Vice President will meet annually
with agency heads, and the Administrator of OIRA will hold
quarterly meetings with representatives of executive agencies and
the administration.

     Improving the regulatory review process also means being
selective in reviewing regulations. Through this order, the
President will instruct OIRA to review only significant
regulations--not, as under the current process, all regulations.
The new review process, which will take into account a broad
range of costs and benefits, will be more useful and realistic.
     To ease the adverse effects of regulation on citizens,
businesses, and the economy as a whole, the executive order also
will require an ongoing review of existing regulations. Agencies
will identify regulations that are cumulative, obsolete, or
inconsistent, and, where appropriate, eliminate or modify them.
They will also identify legislative mandates that require them to
impose unnecessary or outdated regulations.


Action: Establish a process by which agencies can more widely
obtain waivers from regulations.44

     With the advent of the Government Performance and Results
Act, which Congress passed in July 1993, we have begun to
acknowledge the important principle of "flexibility in return for
accountability."

     Under the act, some agencies may apply for waivers from
federal regulations if they meet specific performance targets. In
other words, they will be exempt from some administrative
requirements if they do their jobs better. The law applies only
to internal regulations and government agencies, but it also
urges wider waivers authority to test the potential benefits. In
the spirit of that legislation, we seek to expand the concept of
greater flexibility for greater accountability.

     The President should direct each federal agency to establish
and publish,in a timely manner, an open process through which
other federal agencies can obtain waivers from that agency's
regulations--with an expedited appeals process. Rules adopting
this new waiver process would state that all future agency
regula-tions would be subject to the waiver process unless
explicitly prohibited. We will also ask Congress to specify that
legislation would be subject to waivers unless explicitly
prohibited.



Action: Reduce the burden of congressionally mandated reports.45

     Woodrow Wilson was right. Our country's 28th president once
wrote that "there is no distincter tendency in congressional
history than the tendency to subject even the details of
administration" to constant congressional supervision.  One place
to start in liberating agencies from congressional
micromanagement is the issue of reporting requirements. Over the
past decades, we have thrown layer upon layer of reporting
requirements on federal agencies, creating an almost endless
series of required audits, reports, and exhibits.

     Today the annual calendar is jammed with report deadlines.
On August 31 of each year, the Chief Financial Officers (CFO) Act
requires that agencies file a 5-year financial plan and a CFO
annual report. On September 1, budget exhibits for financial
management activities and high risk areas are due. On November
30, IG reports are expected, along with reports required by the
Prompt Payment Act. On January 31, reports under the Federal
Civil Penalties Inflation Report Adjustment Act of 1990 come due.
On March 31, financial state-ments are due and on May 1 annual
single-audit reports must be filed. On May 31 another round of IG
reports are due. At the end of July and December, "high-risk"
reports are filed. On August 31, it all begins again. And these
are just the major reports!

     In fiscal year 1993, Congress required executive branch
agencies to prepare 5,348 reports.46 Much of this work is
duplicative. And because there are so many different sources of
information, no one gets an integrated view of an agency's
condition--least of all the agency manager who needs accurate and
up to date numbers. Meanwhile, trapped in this blizzard of
paperwork, no one is looking at results.  We propose to
consolidate and simplify reporting requirements, and to redesign
them so that the manager will have a clear picture of the
agency's financial condition, the condition of individual
programs, and the extent to which the agency is meeting its
objectives. We will ask Congress to pass legislation granting OMB
the flexibility to consolidate and simplify statutory reports and
establishing a sunset provision in any reporting requirements
adopted by Congress in the future.


Step 6: --Empower State and  Local Governments

     What we usually call "government" is, in fact, a tangle of
different levels of government agencies--some run from
Washington, some in state capitals, and some by cities and towns.
In the United States, in fact, some 80,000 "governments" run
everything from local schools and water supply systems to the
Defense Department and overseas embassies. Few taxpayers
differentiate among levels of government, however to the average
citizen, a tax is a tax--and a service a service--regardless of
which level of government is responsible. To reinvent government
in the public's eyes, we must address the web of
federal-state-local relations.

     Washington provides about 16 percent of the money that
states and localities spend and shapes a much larger share of
such spending through mandates. Much of Washington's domestic
agenda, $226 billion to be precise, consists of programs actually
run by states, cities, and counties. But the federal government
doesn't always distribute its money--or its mandates--wisely.
      For starters, Washington allocates federal money through an
array of more than 600 different grant programs. Many are small:
445 of them distribute less than $50 million a year nationwide;
some 275 distribute less than $10 million. Through grants,
Congress funds some 150 education and training programs, 100
social service programs, and more than 80 health care programs.
     Considered individually, many categorical grant programs
make sense. But together, they often work against the very
purposes for which they were established. When a department
operates small grant programs, it produces more bureaucracy, not
more services. Thousands of public employees--at all levels of
government--spend millions of hours writing regulations, writing
and reviewing grant applications, filling out forms, checking on
each other, and avoiding oversight. In this way, professionals
and bureaucrats siphon money from the programs' intended
customers: students, the poor urban residents and others. And
states, and local governments find their money fragmented into
hundreds of tiny pots, each with different, often contradictory
rules, procedures, and program requirements.

****************************
Were we directed from Washington when to sow and when to reap, we
should soon want for bread.

Thomas Jefferson
1826
****************************

     Henry Cisneros, Secretary of Housing and Urban Development,
likens federal grants to a system of pipelines spreading out
across the country. The "water," says Cisneros, reaches states
and localities through hundreds of individual pipelines. This
means there is little chance for the water to be mixed, properly
calibrated to local needs, or concentrated to address a specific
problem, geographic area, or population.

     In employment and training, for example, Washington funds
training programs, literacy programs, adult education programs,
tuition grant programs, and vocational education programs.
Different programs are designed for different groups--welfare
recipients, food stamp recipients, displaced homemakers, youth in
school, drop-outs, "dislocated workers," workers displaced by
foreign trade, and on and on.

     At a plant in Pittsfield, Massachusetts, General Electric
recently laid off a large group of workers. Some workers could
get Trade Adjustment Assistance benefits, because their jobs were
lost to foreign competition. Others could not; their jobs fell to
defense cutbacks. Because they have a union, people working in
one area began exercising their seniority rights and bumping
people in other areas. Some workers bumped from trade-affected
jobs to defense contracting jobs, then lost those a few weeks
later. Under federal regulations, they could no longer get Trade
Adjustment Assistance. Thus, friends who had spent years working
side by side found themselves with very different benefits. Some
got the standard 6 months of unemployment checks. Others got 2
years of unemployment checks and extensive retraining support.
Try explaining that to people who have lost the only jobs they've
ever held!

     People who run such programs struggle to knit together funds
from three, four, or five programs, hoping against hope that
workers get enough retraining to land decent new jobs. But the
task is difficult; each program has its own requirements, funding
cycles, eligibility criteria, and the like. One employment center
in Allegheny County, New York, has tried hard to bring several
programs together and make them appear as seamless as possible to
the customers. At the end of the day, to accommodate reporting
requirements, the staff enters information on each customer at
four different computer terminals: one for Job Training
Partnership Act (JTPA) programs, one for the JOBS program, one
for the Employment Service, and one for tracking purposes.

     When Congress enacted JTPA, it sought to avoid such
problems. It let local areas tailor their training programs to
local needs. But federal rules and regulations have gradually
undermined the good intentions. Title III, known as the Economic
Dislocation and Worker Adjustment Assistance Act (EDWAA), helps
states respond immediately to plant closings and large layoffs.
Yet even EDWAA's most flexible money, the "national reserve
fund," has become so tangled in red tape that many states won't
use it. As Congress's Office of Technology Assessment put it,
"the process is simply too obstacle ridden. ... many state EDWAA
managers cannot handle the complexities of the grant application,
and those that do know how are too busy responding to clients'
urgent needs to write demanding, detailed grant proposals."

     When Congress amended JTPA in 1993, targeting more funds to
those with "multiple barriers" to employment, homeless advocates
thought the change would help their clients. After all, who has
more barriers to employment than someone without an address or
phone number? But the new JTPA formula also emphasized training
over job search assistance. So a local program in Washington,
D.C. that had won a Labor Department award for placing 70 percent
of its clients in jobs--many of them service sector jobs paying
more than the minimum wage--lost its JTPA funding. Why? It didn't
offer training. It just helped the homeless find jobs.47

     But federal programs rarely focus on results. As structured
by Congress, they pay more attention to process than outcomes--in
this case, more to training than to jobs. Even in auditing state
and local programs, federal overseers often do little more than
check to see whether proper forms are filed in proper folders.

     The rules and regulations behind federal grant programs were
designed with the best of intentions--to ensure that funds flow
for the purposes Congress intended. Instead, they often ensure
that programs don't work as well as they could--or don't work at
all.

     Virtually every expert with whom we spoke agreed that this
system is fundamentally broken. No one argued for marginal or
incremental change. Everyone wants dramatic change--state and
local officials, federal managers, congressional staff. As in
managing its own affairs, the federal government must shift the
basic paradigm it uses in managing state and local affairs. It
must stop holding programs accountable for process and begin
holding them accountable for results.

     ╖ The task is daunting; it will take years to accomplish. We
propose several significant steps on the journey:

     ╖ Establish a Cabinet-level Enterprise Board to oversee new
initiatives in community empowerment;

     ╖ Cut the number of unfunded mandates that Washington
imposes;

     ╖ Consolidate 55 categorical grants into broader "flexible
grants;"

     ╖ Increase state and local flexibility in using the
remaining categorical grants;

     ╖ Let all agencies waive rules and regulations when they
conflict with results; and

     ╖ Deregulate the public housing program.

     The likely benefits are clear: administrative savings at all
levels; greater flexibility to design solutions; more effective
concentration of limited resources; and programs that work for
their customers.



Action: The President should establish a Cabinet-level Enterprise
Board to oversee new initiatives in community empowerment.48
     The federal government needs to better organize itself to
improve the way it works with states and localities. The
President should immediately establish a working group of
cabinet-level officials, with leadership from the Vice President,
the Domestic Policy Council, and the National Economic Council.
     The Board will look for ways to empower innovative
communities by reducing red tape and regulation on federal
programs. This group will be committed to solutions that respect
"bottom-up" initiatives rather than "top-down" requirements. It
will focus on the administration's community empowerment agenda,
beginning with the 9 Empowerment Zones and 95 Enterprise
Communities that passed Congress as part of the President's
economic plan.

*****************************
Sometimes we need to start out with a blank slate and say, "hey,
we've been doing this for the last 40, 50 years. It doesn't
work." Let's throw out everything, clear out minds...Let's have
as a goal doing the right thing for the right reasons, even if it
entails taking risks.

Vincent Lane,  Chairman, Chicago Housing Authority, Reinventing
Government Summit  Philadelphia, June 25, 1993
******************************

     In participating communities, for example, federal programs
could be consolidated and planning requirements could be
simplified; waivers would be granted to assure maximum
flexibility; federal funding cycles would be synchronized; and
surplus federal properties could be designated for community use.



Action: The President should issue a directive limiting the use
of unfunded mandates by the administration.49

     As the federal deficit mounted in the 1980s, Congress found
it more and more difficult to spend new money. Instead, it often
turned to "unfunded mandates"-- passing laws for the states and
localities to follow, but giving them little or no money to
implement those policies. As of December 1992, there were at
least 172 separate pieces of federal legislation in force that
imposed requirements on state and local governments. Many of
these, such as clean water standards and increased public access
for disabled citizens, are unquestionably noble goals.

     But the question remains: How will state and local
governments pay to meet those goals? We recommend that Congress
refrain from this practice and that the President's directive
establish that the executive branch will similarly limit its use
of unfunded mandates in policies, legislative proposals and
regulations.

     The directive would narrow the circumstances under which
departments and agencies could impose new unfunded burdens on
other governments. It also would direct federal agencies to
review their existing regulations and reduce the number of
mandates that interfere with effective service delivery. OMB's
Office of Information and Regulatory Affairs (OIRA) should review
all major regulations or legislation proposed by the executive
branch for possible adverse impacts on states and localities.
Finally, OIRA's director should create a forum in which federal,
state, and local officials could develop solutions to problems
involving unfunded mandates.



Action: Consolidate 55 categorical grant programs with funding of
$12.9 billion into six broad "flexible grants"--in job training,
education, water quality, defense conversion, environmental
management, and motor carrier safety.50

     This proposal came from the National Governors Association
(NGA) and National Conference of State Legislatures (NCSL), which
describe it as "a first step toward broader, more ambitious
reforms." It would consolidate some 20 education, employment and
training programs, with a combined $5.5 billion in fiscal year
1993 spending; roughly 10 other education programs ($1.6
billion); 10 small environmental programs ($392 million);  six
water quality programs ($2.66 billion); and six defense
conversion programs  ($460 million).

**********************************
How Much Do You Get for a 1983 Toyota?

     What does the price of a used car have to do with the
federal government's family policies?

     More than it should. Caseworkers employed by state and local
government to work with poor families are supposed to help those
families become self-sufficient. Their job is to understand how
federal programs work. But as it turns out, those caseworkers
also have to know something about used cars. Used cars? That's
right. Consider this example, recounted to Vice President Gore at
a July 1993 Progressive Foundation conference on family policy in
Nashville, Tennessee:

     Agencies administering any of the federal government's
programs for the poor must verify many details about people's
lives. For instance, they must verify that a family receiving
funds under Aid to Families with Dependent Children (AFDC) does
not own a car worth more than $1,500 in equity value. To give a
poor family food stamps, it must verify that the family doesn't
own a car worth more than $4,500 in market value. Medicaid
specifies a range that it allows for the value of a recipient's
car, depending on the recipient's Medicaid category. But under
food stamp rules, the car is exempt if it is used for work or
training or transporting a disabled person. And under AFDC, there
is no exemption for the car under any circumstances.
 Recounting that story to a meeting of the nation's governors,
the vice president asked this simple question: "Why can't we talk
about the same car in all three programs?"
***************************


Action: Congress should allow states and localities to
consolidate separate grant programs from the bottom up.51

     Recognizing the political and administrative obstacles to
wholesale reform of more than 600 existing categorical grants in
the short term, the National Performance Review focused on an
innovative solution to provide flexibility and to encourage
result-oriented performance at the state and local levels.

     Our proposal calls for Congress to authorize "bottom-up"
grant consolidation initiatives. Localities would have authority
to mix funding from different programs, with simple notification
to Washington, when combining grants smaller than $10 million
each. For a consolidation involving any program funded at more
than $10 million, the federal awarding office (and state, if
applicable), would have to approve it before implementation. In
return for such consolidation, the state and local governments
will waive all but one of the programs' administrative payments
from the federal government.

     When different grants' regulations conflict, the
consolidating agency would select which to follow. States and
localities that demonstrated effective service integration
through consolidation would receive preference in future grant
awards. Each of the partners in the intergovernmental system must
work collaboratively with others--federal, state, and local--to
refine this recommendation.

     The details of this proposal will be negotiated with
important state and local organizations, such as the NGA, the
NCSL, U.S. Conference of Mayors, and the National League of
Cities, before legislation is drafted. Bottom-up consolidation
will be given a high priority by the administration. It
represents a way to improve state and local performance without
tackling the thorny political problem involved in consolidating
600 grant programs, reconciling thousands of rules and
regulations, and anticipating every possible instance when
flexibility might be necessary. It puts the burden of identifying
obstacles and designing the best solution where it belongs--on
those who must make the programs work.


Action: Give all cabinet secretaries and agency heads authority
to grant states and localities selective waivers from federal
regulations or mandates.52

*********************************
The National Performance Review is not intended to be the final
word on reinventing government but rather a first step. This long
overdue effort will require continuing commitment from the very
top to truly change the way government does business.
U.S. Rep. John Conyers (D. Mich.)
August 28, 1993
*********************************

     For federal grant programs to work, managers must have
flexibility to waive rules that get in the way. Some departments
have this authority; others don't. Federal decisions on most
waivers come very slowly, and states often must apply to a
half-dozen agencies to get the waivers they need. Florida, for
example, has a two-year waiver allowing it to provide hospice
care to AIDS patients under Medicaid. Its renewal takes 18
months. So state officials have to reapply after only six months.
Waiver legislation should grant broad waiver authority, with the
exception of fair housing, non-discrimination, environmental, and
labor standards. We will ask Congress to grant such authority to
Cabinet officers. These waivers, should be granted under limited
circumstances, however. They must be time-limited and designed to
include performance measures. When each experiment is concluded,
the granting agency should decide whether the new way of doing
things should be included in standard practice.


Action: Give control of public housing to local public housing
authorities with histories of excellent management and
substantially deregulate the rest.53

     Public housing is a classic story of good intentions gone
awry. When the program began in the 1930s, it was hailed as an
enlightened response to European immigrants' squalid living
conditions in cities across the country. Through an enormous
bureaucracy stretching from Washington into virtually every city
in America, the public housing program brought clean, safe,
inexpensive living quarters to people who could not afford them
otherwise.

     Now, however, public housing is even more troubled than our
categorical grant programs. With its tight, centralized control,
it epitomizes the industrial-era program: hierarchical,
rule-bound, and bureaucratic. HUD's Washington, regional, and
local offices rigidly control local public housing authorities,
who struggle to help the very poor. Frustrated by the failure of
public housing, innovative state and local governments began to
experiment with new models of developing, designing, financing,
managing, and owning low-income housing. Successful efforts
tailored the housing to the characteristics of the surrounding
community. Local public housing authorities began to work with
local governments and non-profit organizations to create
innovative new models to serve low-income people.

     HUD recognizes that local authorities with proven records of
excellence can serve their customers far better if allowed to
make their own decisions. We and the secretary recommend that
Congress give HUD authority to create demonstration projects in
which local housing authorities would continue to receive
operating subsidies as long as they met a series of performance
targets, but would be free from other HUD control. Individual
demonstrations could vary, but all federal rules would be open
for waivers as long as HUD could measure performance in providing
long-term, affordable housing to those poor enough to be eligible
for public housing.

     In addition, HUD should work closely with local housing
authorities, their national organizations, public housing tenant
organizations, and state and local officials to eliminate
unnecessary rules, requirements, procedures, and regulations. In
particular, HUD should replace its detailed procurement and
operating manuals and design and site selection requirements with
performance measures, using annual ranking of local housing
authorities to encourage better service and greater
accountability. It should eliminate the annual budget review, an
exercise in which HUD field staff spend thousands of hours
reviewing and approving detailed budgets from local housing
authorities --even though the reviews do not influence federal
funding decisions. And it should work with Congress to change
current rent rules, which create strong incentives for people to
move from public housing as soon as they find jobs. Conclusion


Conclusion

     The changes described above are ambitious. They will take
enormous effort and enormous will. It will be many years before
all of them take root. But if they succeed, the American people
will have a government capable of attacking their problems with
far more energy, and far less waste, than they can today imagine.

     We must move quickly because the bureaucracy, by its nature,
resists change. As Tom Peters wrote in Thriving on Chaos, "Good
intentions and brilliant proposals will be dead-ended, delayed,
sabotaged, massaged to death, or reversed beyond recognition or
usefulness by the overlayered structures...."54

     But the changes we propose will produce their own momentum
to overcome bureaucratic resistance. As the red tape is being
cut, federal workers will become more and more impatient with the
red tape that remains. They will resist any reversal of the
process. And they will be strengthened in their resistance by the
steps we propose in the next chapters.