[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE IMPLEMENTATION OF THE FEDERAL ACTIVITIES INVENTORY REFORM ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
OCTOBER 28, 1999
__________
Serial No. 106-122
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
64-652 CC WASHINGTON : 2000
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Director of Communications/Professional Staff Member
Chip Ahlswede, Clerk
Trey Henderson, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on October 28, 1999................................. 1
Statement of:
Duncan, Hon. John J., Jr., a Representative in Congress from
the State of Tennessee..................................... 16
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio.......................................... 22
Mihm, Christopher, Associate Director, Federal Management
Work Force Issues, General Accounting Office; Deidre Lee,
Acting Deputy Director for Management, Office of Management
and Budget; Sallyanne Harper, Chief Financial Officer,
Environmental Protection Agency; William Early, Chief
Financial Officer, General Services Administration; and
Linda Bilmes, Acting Assistant Secretary for
Administration, Acting Chief Financial Officer, Department
of Commerce................................................ 77
Sessions, Hon. Pete, a Representative in Congress from the
State of Texas............................................. 11
Thomas, Hon. Craig, a U.S. Senator from the State of Wyoming. 7
Letters, statements, et cetera, submitted for the record by:
Bilmes, Linda, Acting Assistant Secretary for Administration,
Acting Chief Financial Officer, Department of Commerce,
prepared statement of...................................... 148
Duncan, Hon. John J., Jr., a Representative in Congress from
the State of Tennessee, prepared statement of.............. 18
Early, William, Chief Financial Officer, General Services
Administration, prepared statement of...................... 141
Harper, Sallyanne, Chief Financial Officer, Environmental
Protection Agency, prepared statement of................... 134
Horn, Hon. Stephen, a Representative in Congress from the
State of California:
OMB proposal to amend the Federal Acquisition Regulation. 159
Prepared statement of.................................... 3
Prepared statements of the Contract Services Association
of America, the American Federation of Government
Employees, the National Treasury Employees, and the
1999 FAIR Act Inventory of the General Services
Administration......................................... 24
Questions and responses of Linda J. Bilmes............... 164
Lee, Deidre, Acting Deputy Director for Management, Office of
Management and Budget:
Budget procedures memorandum No. 829..................... 108
Prepared statement of.................................... 93
Mihm, Christopher, Associate Director, Federal Management
Work Force Issues, General Accounting Office, prepared
statement of............................................... 80
Sessions, Hon. Pete, a Representative in Congress from the
State of Texas, prepared statement of...................... 13
Thomas, Hon. Craig, a U.S. Senator from the State of Wyoming,
prepared statement of...................................... 9
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 5
THE IMPLEMENTATION OF THE FEDERAL ACTIVITIES INVENTORY REFORM ACT
----------
THURSDAY, OCTOBER 28, 1999
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 p.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Walden, and Ose.
Staff present: J. Russell George, staff director and chief
counsel; Randy Kaplan, counsel; Bonnie Heald, director of
communications and professional staff member; Chip Ahlswede,
clerk; Rob Singer, staff assistant; P.J. Caceres and Deborah
Oppenheim, interns; Trey Henderson, minority professional staff
member; and Jean Gosa, minority staff assistant.
Mr. Horn. The Subcommittee on Government Management,
Information, and Technology will come to order. The Federal
Activities Inventory Reform Act called the FAIR Act was signed
into law on October 19, 1998. The law requires that each year
executive branch agencies compile a list of the commercial
activities they perform and make the list available to the
public.
Agencies are required to submit their lists to the Office
of Management and Budget for review and then make them
available to Congress and the public. Interested parties such
as private companies, trade associations, and employee unions
can challenge the inclusion or exclusion of the activities on
the list.
The FAIR Act represents the first time that the Federal
departments and agencies have been statutorily required to
develop and publish lists of the commercial activities they
perform. One of the main purposes of the FAIR Act is to make
agencies account for the commercial activities they perform.
Once these activities are identified, agencies can then decide
whether to make these positions available to the private sector
through a competitive bidding process. Opening these commercial
activities to competition could reduce the cost of government
by as much as 35 percent according to the General Accounting
Office.
The FAIR Act does not demand that Federal agencies
outsource these commercial activities. When agencies do
outsource, however, the law requires them do so through a
competitive bidding process. In this case, they must follow the
guidance contained in OMB Circular A-76.
The A-76 administrative policy, which dates back more than
40 years to the Eisenhower administration in which I happened
to serve, states that Federal departments and agencies should
rely on private sector sources for commercial goods and
services. In addition, the policy states that agencies should
not begin new commercial activities if they can get a
contractor to perform these activities.
The question before us today: Is the FAIR Act working? On
September 30, 1999, 52 Federal departments and agencies
released their FAIR Act lists. According to the Office of
Management and Budget, Federal civilian agencies identified
120,000 of their 1.1 million jobs as commercial in nature that
could be outsourced.
Among the agencies that are represented before us today,
the Department of Commerce listed 8,529 jobs as commercial in
nature but indicated that only about 936 of them would be open
to competition. The Environmental Protection Agency labeled
about 830 positions as commercial in nature, but only 30 could
be put up for competition. The General Services Administration
listed 7,249 activities or individuals in the activities as
commercial, of which 4,556 could be put up for competition. The
subcommittee would like to learn more about these numbers and
these categories.
The FAIR Act was broadly drafted to give agencies some
flexibility in developing their inventory lists. Consequently,
there is little uniformity in either format or method of
publication of these lists. Ready access to these lists in a
user-friendly format which is essential for those who want to
challenge the inclusion or omission of a commercial activity.
Today we will examine how well the FAIR Act is or is not
working.
We are pleased to have with us some of the key sponsors of
this legislation and active enthusiasts, Senator Craig Thomas
of Wyoming who sponsored the FAIR Act legislation in the
Senate, Representative John Jimmy Duncan who sponsored the
legislation in the House. Joining them will be Representative
Pete Sessions, former vice chairman of this subcommittee, and
Representative Dennis Kucinich, the subcommittee's former
ranking member. We welcome all of our witnesses today, and we
look forward to their testimony. And we are always glad to see
you. And you may start.
[The prepared statements of Hon. Stephen Horn and Hon. Jim
Turner follows:]
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STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM THE STATE
OF WYOMING
Senator Thomas. Thank you, Mr. Chairman. I appreciate you
holding this hearing today. I think it's important that we talk
about this issue. As an alumnus of this committee it is a
pleasure to be here, along with my friend, Jimmy Duncan. We
were the primary sponsors of this legislation along with
Congressman Sessions who played a crucial role in getting the
bill signed into law.
The FAIR Act was a result of significant compromise during
the negotiations between the Congress and the Office of
Management and Budget. I think that's an important point that
we started a little differently than where we came out on the
basis that OMB thought they could do much of this
administratively, and we were going to come together and work
together that way.
As you've pointed out, the law requires a submission of an
inventory on those activities which are non-inherently
governmental by the end of third quarter, June 30th to make
those available to the public and Congress. You have 30 days
then to challenge the content of the agency's list and finally
after an appeal have a chance to review whether or not
outsourcing would be more cost efficient.
Mr. Chairman, unfortunately it's my belief the executive
branch has not been consistent with either the spirit or the
letter of the law. The FAIR Act was signed on October 18, 1998;
OMB did not issue the final guidance for implementation until
June 14, 1999, just 16 days before the inventories were due.
Consequently, the inventories were not publicly released until
September 30th.
However, even now a substantial number are still not
available. Aside from the long delay, the guidance, I think,
was inadequate to the task. We've heard that from various
agencies and employees that it was not clear exactly what we
were doing and that the guidance was inconsistent with the
intent of Congress.
For example, Congress clearly intended that OMB Circular A-
76 be replaced. Consequently, I have strong reservations about
the implementation of the FAIR Act because of the modest
changes that were made to the supplemental handbook. Further,
the method in which the inventories were released was not
adequate. No central point of contact was provided. As
designated FAIR officers vary from agency to agency,
potentially interested parties have had difficult times having
access to the inventory. I think there ought to be a more
effective means of doing that.
Further, the quality of the inventories is not good.
They're ambiguous and do not identify the functions in a
reasonable manner for interpretation by the agency management
or outside parties. Functions are categorized in a rather
confusing fashion I think. Similar functions appear multiple
times; extremely difficult to identify the functions. For
example, EPA's inventory identifies financial and payroll
processing functions at both headquarters and regional offices.
But nowhere does the agency list the function of payroll
processing.
So, I think it makes it very difficult to implement this
bill. I realize this is the first time for implementation. I
recognize it is not going to be perfect. I recognize that it is
something new, almost developing a new culture within a
bureaucracy which isn't easy to do. So I think all of us have
to have some patience with this process. I am hopeful, as
promised, OMB will work with us to improve implementation of
the FAIR Act.
I am still dedicated to the notion that there are many
instances in which the private sector could better do these
functions and should have an opportunity at least to show which
is the most economic and efficient way.
Mr. Chairman, I hope we can continue to monitor and
continue to work to implement what I think is something that
would be very good for government, good for the American
people.
Mr. Horn. Do you have any language you think that might
tighten it up given this first round really?
Senator Thomas. I guess, Mr. Chairman, my concern is more
adhering to the language that we already have, then if we find
having done that, that language needs to be changed, certainly
we ought to do that. But I believe, as I mentioned I think,
some of the current guidance is not consistent with the intent
of the statute.
Mr. Horn. Thank you.
[The prepared statement of Hon. Craig Thomas follows:]
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Mr. Horn. The gentleman from Texas is next.
Mr. Sessions. Thank you, Mr. Chairman. I appreciate being
here before this subcommittee again, a subcommittee which I
have previously served as vice chairman in the 105th Congress,
and I would like to ask unanimous consent that my written
statement be included in the record in addition to those
comments which I intend to make.
Mr. Horn. It's automatic that the minute we introduce the
speaker the complete statement is in the record at that point.
We would love to have you sort of just summarize it.
STATEMENT OF HON. PETE SESSIONS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS
Mr. Sessions. Good. Thank you, Mr. Chairman. I would be
very pleased to do that. First of all, I would like to be
associated with the comments from Senator Thomas. I believe
that his careful evaluation exactly mirrors comments that I
would make probably.
To summarize very quickly, the day that the initial
reports, the FAIR reports, the documentation came out from the
agencies, we went about the manner of trying to get a copy of
all those that would be available. And I would say that we
found it, from our perspective, frustrating to find a point of
contact within the agencies and then when we did receive the
information, we were disappointed in some of the presentations
that were made.
With that said, I believe Senator Thomas has adequately
stated this was the first time, this was the first opportunity
on behalf of OMB and the administration to do this, and that I
believe that they recognize that they can, should, and must do
a better job. With that in mind, I sent OMB Director, Mr. Lew,
a letter that same day indicating that I felt like that a
meeting with him would be something that I felt like could iron
out some of the differences that I, in my own mind, had.
As a matter of fact, that meeting took place yesterday with
Dee Lee from the OMB. And I found her presentation, her
demeanor, and her willingness to work with us and to accept
feedback admirable. And the feedback that I provided her was
that I felt like that Federal employees, Federal agencies, I
felt like had employees that could do a better job than what
they did, that they would need to get some feedback based upon
the information that they provided, that they should be more
instructive to provide narratives about what they were
providing and summarizing the information about why it was
important and the conclusions that they were drawing even if
they were--it was preliminary information.
I also further stated to her that I felt like that at some
time next year knowing that the next two or three rounds of
release by the administration is probably too far along that I
felt like that next year's releases, the people should receive
information about the administration's view about what lessons
they have learned about the earlier releases. In other words,
that they should advise people who are going to release
information next year that there could be more information, a
better format and to be more forthcoming in a lot of
information.
And I believe that OMB will accept those recommendations
and will try and make not only the formatting but the
information more user friendly. And I believe that if we allow
them the opportunity to provide feedback, they would be the
first ones to say that they have learned a lot in this process
and intend to get better. I received a sense of willingness and
openness on their part; and I believe that we can work
together, that your subcommittee can work with them; and I will
be very interested finding out their testimony before you today
about their ideas on making this better. Thank you.
Mr. Horn. Well, we thank you very much. You've had a major
role in this as chairman of the sort of responsibility and
performance caucus. And I congratulate you for that.
[The prepared statement of Hon. Pete Sessions follows:]
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Mr. Horn. the gentleman from Tennessee, Mr. Duncan.
STATEMENT OF HON. JOHN J. DUNCAN, JR., A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mr. Duncan. Thank you, Mr. Chairman. And I would like to
thank you for your interest in this legislation and for taking
the time to schedule and hold this oversight hearing on the
implementation of the Federal Activities Inventory Reform Act
or the FAIR Act as we're calling it.
I would also like to thank my good friend, Senator Thomas,
who sponsored the Senate version of this bill for all of his
hard work on this legislation. Certainly we couldn't have done
it without him. And finally, I want to thank Representative
Sessions for his great leadership not only on the floor but
since then even up until yesterday working on this. As you
know, I sponsored the original House version of the FAIR Act.
The purpose of this law is to show how many commercial
activities Federal agencies are now performing and to see if
any of these activities could be more economically and
efficiently carried out by the private sector.
Mr. Chairman, since the Eisenhower administration in 1955,
it has been official U.S. policy and was stated at that time
that ``the Federal Government will not start or carry on any
commercial activity to provide a service or product for its own
use if such a product or service can be procured from private
enterprize through ordinary business channels.'' This has
been--in fact I think at one of the most recent White House
conferences on small business, this was listed as their No. 1
concern, what they felt like was competition from government
agencies. The legislation we passed in the last Congress will
help the Federal Government to adhere to this policy that has
been the policy, supposedly, since the Eisenhower
administration as you noted in your opening statement.
The FAIR Act requires Federal agencies to submit a list of
commercial activities in which they are involved to the OMB
and, in addition, the law requires OMB to release a list of
these activities known as inventories to Congress and the
public.
Now, however, we are running into some road blocks in the
early stages of attempting to make this law work for our--the
citizens of this great country. First, these inventories are
not being released to the public in an efficient manner. When
we passed this legislation, most of us believed that these
inventories would be readily available to all interested
parties and, more importantly, would be easily accessible.
However, instead of publishing a list of the activities
that Federal agencies were performing that could be carried out
by the private sector only contacts, names, and phone numbers
were printed in the Federal Register. It was necessary for
interested parties to call these contact numbers in order to
obtain a copy of the inventories for each agency. I have been
told that when some of these phone numbers were called the
individuals at the agencies were not familiar with the FAIR Act
or its requirements. And in some cases, these phone numbers
were cell phones that were not even answered at all.
This, of course, obviously creates a problem. Once these
inventories are released, a member of the public only has 30
days to appeal any inventory which does not list a specific
activity that could be considered commercial in nature. In
addition, these inventories were not compiled in any uniform
manner. Thus they varied from agency to agency making it
difficult to interpret their contents.
I do not know if we have any copies of those inventories
here today, but if we do not, I would encourage members of the
subcommittee to take a quick glance at a couple of them to see
how user unfriendly they are.
I also think it is very important that the OMB create some
type of one stop shopping where the public can easily access
the inventories submitted by any agency. I believe it would be
easy to post these lists on OMB's website or at least provide
links to the agency's websites where the inventories could be
viewed.
The purpose of this act is not to serve as a witch hunt for
jobs to privatize within agencies. However, if certain
functions performed by agencies can be more economically
carried out by the private sector, we need to look at those
situations. This would then free up finances and manpower so
that Federal agencies can better focus on their core missions.
I hope the OMB will reinforce this point to Federal
agencies so that they will provide us with clear inventories,
and we can have a more effective government.
Finally, Mr. Chairman, when we were working on this
legislation during the 105th Congress, the Heritage Foundation
released a report which found that we could easily save at
least $9 billion a year by contracting out certain commercial
activities performed by Federal agencies. You mentioned, Mr.
Chairman, in your opening statement that GAO had estimated the
cost of government to be reduced by 35 percent by outsourcing
many activities.
I have seen estimates which say we could save billions and
billions and really tremendous amounts. We need to make sure
that this act is carried out in a manner that will help us
achieve these savings. Our Founding Fathers felt that most
problems could be solved by the private sector and government
should do only those things which people cannot do for
themselves; and I think that if we could enforce the FAIR Act,
we could come closer to the vision of this government that the
Founding Fathers gave to us. And so I yield back the balance of
any time that I might have left. Thank you very much.
[The prepared statement of Hon. John J. Duncan, Jr.,
follows:]
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Mr. Horn. Well, thank you. You've had a lot to do with this
and the progress that's been made. I might add if you have any
exchange of letters with OMB, we would be glad to put them in
the record at this point. And without objection they will go in
the record.
This was strictly a Federal panel from the legislative
branch, panel one, and the panel two is essentially the
executive branch. We do have a lot of very fine statements
submitted by management and labor and without objection we will
put those in at the end of Mr. Kucinich's testimony.
And some of the ones here are the American Council of
Independent Laboratories, the American Electronics Association,
the Contract Services Association, the Management Association
for Private Photogrammetric Surveyors, the National Division
Industrial Association, the Small Business Legislative Council,
the Contract Services Association of America, and also the
American Federation of Government Employees, AFL-CIO. And
that's a very thorough document. And we also have similar
thorough document from the National Treasury Employees Union.
And let's see. That's some information from the General
Services Administration. Anyhow, they will go at the end really
of the testimony here on panel one.
So we now have the gentleman from Ohio, the former ranking
member of this subcommittee, a very constructive person, the
Honorable Dennis Kucinich from Ohio.
STATEMENT OF HON. DENNIS J. KUCINICH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Kucinich. Thank you, Mr. Chairman. And I want to say
what a privilege it was to work with you in the last Congress
on the committee. And I stress the word work with because we
had a constructive debate, and I know my friend, Mr. Sessions,
and I actually had a chance to debate this particular act
thoroughly.
Mr. Sessions. And form a friendship.
Mr. Kucinich. Absolutely. And I understand the spirit in
which Congressman Duncan and Congressman Sessions have advanced
this. And I think they're to be commended for their interest in
trying to get government to function more effectively and more
efficiently. And I certainly understand that the people of this
country want that to happen.
Now, as you know, Mr. Chairman, I was skeptical when the
bill was debated last year. And now that the bill has become
law, and I still want to indicate it's my belief the skepticism
is in order. The purpose of the law is to direct the Federal
Government to identify likely targets for privatization or
contracting out.
The underlying assumption is that small business faces a
big problem from the public provision of services. I thought
the assumption was incorrect last year, and I think it's still
incorrect even though I have and I share the sympathy which my
esteemed colleagues have for small business. For all the
problems that small businesses face, I wonder how significant
is the provision. If there is a problem that's created by the
public provision of services, I'm not sure that despite the
spirited debate that we had in the last Congress that the case
was made before the bill was passed.
While the bill concerned contracting out to private
companies, it did not exist--it did not address the existing
problems afflicting contracting. According to both the Office
of Management and Budget and the General Accounting Office,
contract administration remains one of the highest risk
activities which the government engages in. And examples
abound. Senate hearings uncovered $27 billion a year in health
care fraud. In 1995, $25 billion in payments to defense
contractors could not be matched to invoices. And in many cases
the Department of Defense relies on contractors themselves to
identify overpayments.
Nevertheless, the Federal Government reduced its contract
oversight personnel by over 12 percent between 1992 and 1997.
Without adequate personnel to oversee contractors and discover
fraud and abuse, the costly problems associated by contracting
out cannot be systematically prevented. But in passing the
bill, Congress expanded contracting out and it would be logical
to conclude expanded the cost of contractings problems.
Last year's bill could have been dramatically improved had
it squarely confronted the modern realities of contracted
services. Today's hearing concerns the implementation and
compliance with the law. And I want to say as a Member of this
Congress, you know when we pass a law whether or not I agree
with the law, I mean the law is to be obeyed. That's something
that I support, and I hope all of my colleagues would. I may
not agree with it, but it's the law.
So I look forward to learning about the agency's experience
with the law and what analysis has been conducted to determine
the effect of the law on fraud and abuse perpetrated on
taxpayers by unscrupulous contractors.
So again, I thank the Chair for his ongoing interest in
this, and it's an honor to be here with Mr. Duncan and Mr.
Sessions.
[The prepared statements of the Contract Services
Association of America, the American Federation of Government
Employees, the National Treasury Employees, and the 1999 FAIR
Act Inventory of the General Services Administration follow:]
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Mr. Horn. I thank the gentleman. I'm going to have
questioning done by two of your colleagues and we can start
with the gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman, and yes
we're delighted to have you here. I want to thank you as
someone who has come late to this process having had this past
last session, we appreciate what you're trying to accomplish.
Do you think that there are some specific legislative changes
that should be made to make this a more user friendly document?
I mean, I was glancing through some of what we have here and
it's--and as a small business person in real life, I'm not sure
I would be any better off looking at this than not knowing.
Mr. Sessions. Perhaps there would be some disagreement that
we have here, but I believe that we should work further with
the process that OMB did not provide a one-size-fits-all
package to tell people how to do their job but rather left it
up to the agencies to do their own determination, their own
fact finding, their own evaluation. And somehow I believe that
even though the end product the first time was not exactly what
I would have wanted, I believe that they recognize the
importance of following the law and that they see where
providing--learning from their--what they have first done and
providing more information will be very valuable internally,
most of all to their own employees. Because once these
documents are presented, they don't answer questions that
employees would have, they don't provide information to
employees or to the vendor community; and they need to go a
little bit further. And I think the internal working would
allow them that opportunity to get closer.
And at this point, it would be my recommendation not to
offer advice but rather to ask them what do you think needs to
be changed. I think they should be asked here today, what with
the realistic expectation that not the next time and not the
next time because the Department of Defense will be released in
December, I understand, but early next year up on the releases
that they would have had a chance to provide information and to
get better at it. And then that would be a chance if we did
not--if we had disagreement then to go in and tinker with our
reporting process.
But I'm happy with the outline we've given them and believe
they are prepared even perhaps today to admit that themselves.
Mr. Duncan. I agree with that. We ought to be able to work
with the agencies; and if over this next year, we keep running
into these problems in spite of guidance being given to the
different agencies, then that--then we could consider some
changes.
Mr. Horn. Any comments from the gentleman from Ohio?
Mr. Kucinich. Again I think to hear the agencies'
experience with this is really going to be essential. And I
will repeat that you know, Congress passed this law, agencies
are going to have to abide by it. But it's important to see
what the fit is between the conceptual framework of the law and
the practical experience in the administration of it. So and I
think that's--that's the whole process here in Congress: We
keep learning; we pass the law, then we see how it works.
Mr. Walden. There's been some concern voiced about the
impact of the FAIR Act inventories on Federal employees. Do you
have any concerns or----
Mr. Kucinich. Well, I would say to the gentleman that you
know I'm generally philosophically opposed to privatization.
I'll just put my cards on the table there. I think that
government does have a role to play in our society and
certainly this committee in particular has the ability to make
the government work better through providing some guidance.
I do understand the concerns which my good friend, Mr.
Sessions, advanced throughout the debate over this about how
there are certain areas that there's a question as to whether
government should be in it or not. I don't think there's
anything wrong with reviewing those. But just as a matter of
course you know, I am not for dismantling the government. At
least not while I'm a Member of Congress.
Mr. Sessions. My feedback, if I could add on with Mr.
Kucinich, would be this, that I believe that the information
that is provided by agencies is being followed very closely by
employee groups and that they should receive every bit of
information and be told is this preliminary, is this final, how
is this going to be used, that they should know what's at risk,
that they should be able to plan themselves.
And if you just look at the substance that's been provided,
it makes it seem like that your job is gone. It's far from
that. There's a lot of information that is still yet to be
gleaned and this is the--really, the first shot or first
evaluation that has been made about determining, I think,
whether something is inherently governmental or whether it's
competitive. So there's a whole lot of things that we need to
learn and get more information and employees would be one of
those groups of people that needed just as much as the
community that might wish to participate in being a part of it.
Mr. Walden. Two other issue areas that I might just float
out there. One is does this act cover the Postal Service as
well as they get into look--at getting into different private
sector activities.
Mr. Sessions. I would have to defer to somebody that knows
what they're talking about. But in my opinion, no. Well, a year
ago--there's bound to be somebody that knows about it; but in
my opinion, no. I didn't get sworn in, did I? In my opinion,
no.
Mr. Horn. We do not swear in Members I'm told by Chairman
Clinger after I was swearing them in all the time. And we do
have a little code here that if anybody lies to us it's the
last time we speak to them.
Mr. Sessions. Does that apply to Russell too or just the
Members? I think not to answer your question.
Mr. Walden. What I'm hearing may be unclear, so we'll ask
the second panel.
Mr. Sessions. In my opinion, that was specifically a part
of a discussion that we had; and, in my opinion, they were not
included because of their statutory--where they fit in the
scope.
Mr. Kucinich. If I may, I think one of the aspects of that
is self-evident is that if the Postal Service had been included
in that, they would have to hold this hearing in a field house
because there's such strong feelings about that particular
issue. So I'm----
Mr. Walden. I've run into that. That's why I wondered.
The second question I have which may be totally off the
wall, but in terms of prison labor and competition there, does
this act get into that at all? I'll tell you from a State
perspective, we had a ballot measure passed in Oregon that said
we're going to put all prisoners to work 40 hours a week.
The upshot of that is they are mandated to go do jobs now
and are literally taking jobs away not only from the private
sector but from the nonprofit sector. My own little community
there was an organization that dealt with mentally handicapped
people who were doing piecework, and the prison laborers could
do it cheaper, and they lost their contracts. That's going on
in the recycling industry and elsewhere. So actually, I think,
we're modifying that change in the law in Oregon. But I wonder
at the Federal level.
Mr. Sessions. To answer that question, as I recall the
Department of Justice is included and every one of its
employees would be included but not----
Mr. Walden. Prison programs. OK.
Mr. Sessions [continuing]. Those people who were engaged as
prisoners any sort of activities.
Mr. Kucinich. I would say, however, at a future date it
would be interesting to see where prison labor might be
replacing jobs in the private sector. I would be interested in
that as well.
Mr. Walden. I heard another one, this is all, you know,
those little stories you pick up at town meetings and all about
a fellow, a college kid who was no longer out fighting fires
because they were using prison laborers to come in and fight
forest fires. I haven't run that one down. But there is some of
that going on out that there where we're displacing law abiding
citizens.
Mr. Kucinich. Wonder if they had anybody convicted of arson
doing that.
Mr. Walden. How do you start a fire?
Thank you, Mr. Chairman.
Mr. Horn. The gentleman from California, Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman. My questions really are
very specific and that is how do we get from the position where
we're at right now relative to these reports to a position
where the report is standardized so that anybody in 10 minutes
time can understand what's possible and what's not. I think
that's the objective. Obviously we started somewhere. OK. Well,
this doesn't work. I mean it's just--well, I'm not a rocket
scientist.
Mr. Sessions. I'll give a stab at it. I think that's what
we've been talking about. And I believe in continuous
improvement, and I believe that the OMB does also, that they
want to have an opportunity to learn from what the exercise
that they've been through. And that I think they call it
gymnastics as opposed to just regular floor exercise, that this
was a tough thing. We were dealing with people that aren't as
familiar with this. But I think that's their goal.
I would just once again state they've got two more releases
that are already in print, don't look at the next one or the
next one, say by golly they didn't hear us. In fact they do
hear us, they've got great ears, they were listening. And I'll
be very much listening today to hear how open they are because
they've had at least 15 or 20 hours since my meeting to think
about it. And so we'll see what they come back with.
Mr. Ose. One of the things I did do, and this follows up on
one of Mr. Kucinich's concerns, is I read the testimony from
the Treasury Employees Union. And there is a provision--I'm
still not--it's still not on, Mr. Chairman. Can you hear me?
The act itself includes a provision for costing an in-house
proposal. I think it's section 2 subparagraph E, realistic and
fair cost comparisons. And I would hope that as we look
specifically at that, as we are refining these reports, we can
also give some thought as to how to get a fair costing
algorithm, for instance, for current Federal agency employees
to bid on this work. I think that's the height of fairness and
would serve us all well. I think that would address much of the
concern that you have.
Mr. Kucinich. I think the gentleman's point is well taken.
You know, when you consider the cost of employees you also have
to include not just their wages but their benefits as well. And
in the private sector, from the experience that I've seen, is
that let's say on a municipal level, contracting out, the
contractor may not offer the same wages, the same level of
benefits. That's why this privatization issue is so powerful in
some places in the country because people feel that their
ability to make a decent wage with benefits is under attack.
That's like another area of concern.
So I would suggest that your point is well taken in terms
of trying to get a fair-cost comparison. I would like to see
that the benefits and as well as wages added. Because my guess
is that most privatization would--most of the contractors would
not want to pay the same wages and same benefit levels because
where they're making the money I would respectly suggest often
is in reduction of wages and benefits. That's why this can be
such a very vexing issue because what we want, while we want
government to be efficient, at the same time we should be
concerned that we're not engaging in the construction of public
policies that would undermine the very constituencies that
we're here to serve.
Mr. Ose. I would echo your remarks, and I think you covered
a couple of things in section 2 E. But I would also make sure
that we cover the either real or imputed overhead costs that
might come from office space, utilities, phones, supplies, and
whatever and price that not at the margin, but at the core
costs.
My other question, Mr. Chairman, and I appreciate any
senior input on this is how do we accurately define what is a
core activity as opposed to a non-core activity? I understand
exempt versus non-exempt, but how do we define core versus non
core?
Mr. Horn. Well, I think we're going to ask that question of
Ms. Lee and the various orders that OMB has put out in guidance
because you're absolutely right that we've got to get a little
firm definition. And I would hope this round has just as you
did in lifting that report that we would get some clarification
as to how you can deal with it. And when you do something like
this, obviously a lot of people in agencies, not just in
government, but large human organizations just sort of throw up
their hands and say what are these people really trying to ask
us. So we need to clarify that with panel two since we'll have
the working people that put it all together.
Mr. Ose. Thank you, Mr. Chairman.
Mr. Horn. OK. No more questions? Well, we thank you very
much, and you're welcome to stay since you're both government
groupees. You're certainly welcome if you like. Thank you very
much for coming.
We now will swear in panel two. And it will be the
Honorable Deidre Lee, Acting Deputy Director for Management,
Office of Management and Budget; Mr. Christopher Mihm,
Associate Director, Federal Management Work Force Issues,
General Accounting Office; and the Honorable Sallyanne Harper
Chief Financial Officer of the Environmental Protection Agency;
Mr. William Early, the Chief Financial Officer, General
Services Administration; Ms. Linda Bilmes, Acting Assistant
Secretary for Administration, Acting Chief Financial Officer,
Department of Commerce.
So if you have staff with you that might be also saying
things let's get them all sworn in at once behind you, if you
have any. Anybody have them here. OK. We're now talking with
essentially five witnesses then. Please raise your right hands.
[Witnesses sworn.]
Mr. Horn. The clerk will note all five witnesses affirmed.
And I'm going to switch a minute. On this agenda it wasn't
quite put together right. I want the GAO first, and then we
will go to the members of the administration. So, Mr. Mihm, you
can begin as usually we have the GAO first.
And we welcome you.
STATEMENTS OF CHRISTOPHER MIHM, ASSOCIATE DIRECTOR, FEDERAL
MANAGEMENT WORK FORCE ISSUES, GENERAL ACCOUNTING OFFICE; DEIDRE
LEE, ACTING DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE OF
MANAGEMENT AND BUDGET; SALLYANNE HARPER, CHIEF FINANCIAL
OFFICER, ENVIRONMENTAL PROTECTION AGENCY; WILLIAM EARLY, CHIEF
FINANCIAL OFFICER, GENERAL SERVICES ADMINISTRATION; AND LINDA
BILMES, ACTING ASSISTANT SECRETARY FOR ADMINISTRATION, ACTING
CHIEF FINANCIAL OFFICER, DEPARTMENT OF COMMERCE
Mr. Mihm. Thank you, Mr. Chairman. And again it's a
pleasure and and honor to appear before you today to discuss
the implementation of the FAIR Act. As you mentioned in your
opening statement, the act requires executive agencies to list
their activities that are not inherently governmental.
The implementation of the FAIR Act, as we heard from the
first panel, is in its very early stages. Many agencies have
only recently released the inventories of activities, and many
other agency inventories have not yet been made available to
the public including 14 of the 24 CFO Act agencies, the largest
agencies in the Federal Government.
At the request of this subcommittee, we are beginning a
body of work to assess agencies' efforts under the FAIR Act.
This afternoon, I'll briefly describe the status of initial
steps taken to implement the act, then I will highlight some of
the questions that are being raised by our examination of the
FAIR Act inventories from the Department of Commerce,
Environmental Protection Agency, and the General Services
Administration. We will be following up to get answers to these
questions at those agencies and other CFO Act agencies as other
inventories are released.
In regards to my first point on the status of FAIR Act
implementation, as you pointed out in your opening statement,
the act requires executive agencies to submit each year to OMB
inventories of activities that are not inherently governmental.
In addition to listing the activities, the inventories are to
include information about: First, the fiscal year an activity
first appeared on an inventory; second, the number of full-
time-equivalent, that is FTE, staff years to do the activity;
and then, third, a contact point for additional information.
As was mentioned, inventories from 52 agencies have been
made available. Of these 52 inventories, 10 were from CFO Act
agencies including five cabinet departments, Agriculture,
Commerce, Education, Health and Human Services, and HUD. The
remaining 42 inventories were from smaller agencies.
Clearly then the agencies and OMB still have plenty of work
ahead to implement even the first step of the FAIR Act, and
that is the issuing of the inventories. Nevertheless, our
initial review of the selected inventories that have been
released raise a number of important questions that we plan to
pursue at the request of this subcommittee. These questions
include: First, what decisions did agencies make about whether
or not activities were eligible for competition and what were
the reasons for those decisions.
Second, what processes did agencies use to develop their
inventories.
Third, how useful were the inventories--and we heard quite
a bit of commentary on that from the first panel.
And finally, what supplemental information can be included
in the inventories to increase their usefulness. This is
information over and above what is required by the FAIR Act.
As I mentioned, we'll be seeking answers to these and other
questions over the coming months in order to assess agency
efforts and to develop a body of best practices as efforts
under the FAIR Act move forward. In doing so, we hope to
contribute to the oversight of this subcommittee and others in
Congress.
Each of these questions is discussed in some detail in my
written statement, so in the interest of brevity I'll discuss
on just the first and the fourth of these questions this
afternoon.
First then, what decisions did agencies make about whether
or not activities were eligible for competition and what were
the reasons for those decisions. Our initial review of the
inventory suggests that questions can be raised about how
agencies decided whether or not a commercial activity could be
subject for competition. This is not the distinction between an
inherently governmental activity, but once we've decided an
activity is commercial, whether or not it should be competed.
This particularly is an issue when an agency reports that
relatively few of its commercial activities should be competed.
For example, the Environmental Protection Agency's
inventory shows that EPA has decided that most of its
commercial activities are exempt from competition. This
includes about 775 FTEs or over 93 percent of the total number
of full-time equivalents performing commercial activities at
EPA. According to EPA, these activities are exempted from
competition because EPA needs to retain a core staff
capability. For example, EPA told us that the exempted
positions were selected positions requiring scientific
expertise in its Research and Development Office that oversee
the work done in laboratories by other contractors.
The second question is what supplemental information can be
included to increase the usefulness of the inventories. We are
seeing that beyond the requirements of the FAIR Act, some
agencies are including information with their inventories that
provides additional very helpful perspective on the contracting
and management issues confronting that agency. Specifically,
some of the agencies are listing inherently governmental
activities which are not required by the act.
Second, they're also describing the scope of activities
currently under contract to provide a sense of the overall
level of contract support within that agency.
And third, they're discussing how listed activities
contribute to the agency's strategic and annual performance. In
that regard, the inventory for the Environmental Protection
Agency was particularly helpful in showing how commercial
activities were aligned with the strategic goals of the agency.
For example, including information about inherently
governmental functions as GSA did helps provide perspective
about all of the agency's activities not just those that the
agency considers commercial and the relationships between
commerical and inherently governmental activities.
In summary, Mr. Chairman the agencies and OMB still have
plenty of work ahead to implement the FAIR Act. By enacting
FAIR, Congress has increased the visibility of agencies'
commercial oversight activities. Oversight hearings such as
today's and, I should add, the statements from the Members of
Congress that we heard on the first panel, send clear messages
to agencies that Congress is serious about improving the
efficiency and effectiveness of government operations and the
effective implementation of the FAIR Act.
We look forward to continuing to work with you and other
Members of Congress as your oversight efforts continue. That
concludes my statement. I would be happy to take any questions
that you or other members of the subcommittee may have.
[The prepared statement of Mr. Mihm follows:]
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Mr. Horn. Well, thank you very much. As you know, we wait
until the full panel has presented their particular arguments.
I appreciate that study that you're doing, and we've got about
four more studies in mind. So I don't want to wear you all out.
But we have a long series of spring hearings coming up.
Mr. Mihm. Thank you. Looking forward to it.
Mr. Horn. Thank you. That's the spirit. There's the Hill,
and Lieutenant Mihm and the squad charge it.
We now go to Ms. Deidre Lee, the Acting Deputy Director for
Management, Office of Management and Budget.
Ms. Lee. Mr. Chairman, good to see you. Mr. Chairman,
members of the committee, I had a schedule conflict so that's
probably how this got confused. We were able to make some
adjustments, so thank you for understanding.
Mr. Chairman, members of the committee, I'm here to discuss
with you today the implementation of the Federal Activities
Inventory Reform Act, we all call it the FAIR Act. Today we
face the challenge of managing in the new balanced budget
environment. That challenge is to provide a government that,
through empowered employees, adopts better business practices,
provides better service, and costs less.
Over the last several years, the Congress and the
administration have developed a range of management tools and
strategies that have encouraged us to save, redirect, and
extend limited resources. Like the Government Performance and
Results Act of 1993, the FAIR Act was designed to focus
government attention on what we are getting for the money we're
spending.
The Federal Government seeks to achieve economy, enhance
productivity, improve the quality of services, and obtain the
best service at least cost to the taxpayer through competition.
This policy has been provided by OMB Circular A-76, the
Performance of Commercial Activities. And the FAIR Act codified
some of this guidance in law. In particular, the act codified
the definition of inherently governmental function and required
agencies to inventory their activities and make these
inventories public.
This inventory process has proven to be both a significant
administrative effort and a massive data collection effort. The
FAIR Act inventory is the first inventory of commercial
activities that has been required by law, and it is the first
that has ever been prepared for release to the Congress or the
public. It is also the first inventory where agency decisions
about what are inherently governmental activities are subject
to administrative challenge and appeal by outside parties. Not
surprisingly, the initial inventory submissions have taken
longer to prepare and have required more analysis on the part
of agencies and OMB than previous A-76 activities.
As a matter of policy and now as a matter of law, an
inherently governmental function is one that is so intimately
related to the exercise of the public interest as to mandate
performance by Federal employees. We've been working with the
agencies to help them apply this guidance. Not all functions
may be performed by contractors. Just as it is clear that
certain functions such as the negotiation of foreign policy
should not be contracted, it is also clear that other functions
such as building maintenance or food services may be
contracted. The OFPP policy letter, which is a precursor to
this, actually provides other examples of inherently
governmental and governmental functions and activities. The
difficulty is in applying the general test to activities that
fall between these extremes.
That said, we must balance the emphasis on the business
opportunities identified by the FAIR Act and the need to
maintain core agency functions, such as the right level of
skilled people to manage our business relationships, something
that Mr. Kucinich talked about, and also the management of
financial expenditures. We also need to provide smart buyers.
We'll see of that in EPA's testimony that we need a level of
technical expertise to make sure that what we're outsourcing or
spending our money on we're doing correctly and right. So
there's a balance between that need for internal knowledge and
the outsourcing or the management of those contracts.
Agencies also have to be prepared to meet research and
development needs, emergency capabilities, and related work
loads. So we're trying to find and strike that balance.
A great deal of work and debate has gone into these
inventories both on the part of OMB and each agency. As with
any new program, there continues to be some difficulties in
gaining complete agency understanding of the specific
requirement of the FAIR Act; and, in some cases, there were
questions as to whether the FAIR Act even applied to an agency.
In those cases, determinations have been made on a case by
case basis. By tomorrow, OMB will have released two groups of
agency inventories prepared under the FAIR Act. The initial
group covered about 320,000 Federal employees working in 52
agencies, and over 120,000 were listed as potentially
commercial in nature. The second group which is scheduled for
release tomorrow covered 120,000 Federal employees working in
approximately 42 agencies with an additional 35,000 employees
listed as potentially commercial.
Mr. Horn. Just to interrupt for a minute to make sure I
understand those, and there's no use waiting until the end on
this, that adds up to 475,000 or is there overlap?
Ms. Lee. That's a cumulative number, you add them together.
We still have more to go. We still have approximately 25 more
releases to go.
Mr. Horn. So roughly half a million. OK. Thank you.
Ms. Lee. We will continue the process and, Mr. Sessions
said, we anticipate probably one or two more releases, and hope
to get them all out by December. There are additional 25
releases including some independently submitted IG offices.
Major agencies yet to be released include Justice,
Transportation, State, Treasury, Veterans Affairs and the
Department of Defense which you can imagine is quite large.
As Mr. Sessions noted, and as clearly discussed here
previously there's some work to be done. I don't in any way
shape or form say this process was perfect the first go round.
We recognize the need to do some more work. We are actually
anxious to get the first group of inventories out and then
immediately begin having meetings with the Congress, the staff,
the GAO, the Federal employee groups themselves and to say how
can we do this better next time and what issues do we need to
approach. So we are absolutely open to that, and what we're
looking for now is to try to get ourselves through this and
learn from that. It's already time to start queing up because
the next inventories are due next June.
One piece that OMB has done is to require for next year
when the agencies do their inventories due in June to also have
something we've kind of added in the spirit of the law. They
need to tell us what actions have been taken against the
previous inventory. So we will begin to see a record of what we
released in these inventories, and here's what we've done with
them.
Mr. Chairman, I will reiterate we are open to working with
folks. We know we need to continue to work this process and try
to make these inventories quickly available and absolutely
usable and user friendly, and we've got a ways to go on that.
Thank you.
[The prepared statement of Ms. Lee follows:]
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Mr. Horn. Before I call on Mr. Ose to begin the questioning
this one, I want--one little thing here on page 6, you say,
``On July 12, 1999, OMB issued Budget Procedures Memorandum No.
829. This memorandum, which went to all OMB staff, outlined the
responsibilities of OMB's Resource Management Offices and OMB's
Budget Review Division which is responsible for implementing
the FAIR Act and OMB Circular A-76.'' if you wouldn't mind I
would like in the record at this point to have Budget
Procedures Memorandum 829 just so we have----
Ms. Lee. We'll provide it for the record.
[The information referred to follows:]
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Mr. Horn. And also there's been no change in Circular A-76,
I take it.
Ms. Lee. There have been changes over the years but not as
of this event.
Mr. Horn. So what we have in the record already, we don't
have to worry about. The gentleman from California, Mr. Ose.
Mr. Ose. Mr. Chairman, are we going to hear from the other
three witnesses first?
Mr. Horn. Sorry on that. You're able to stay; right?
Ms. Lee. Yes, sir.
Mr. Horn. I thought you had a problem there. But Ms. Harper
then is next with the Environmental Protection Agency, CFO.
Ms. Harper. Thank you, Mr. Chairman. Mr. Chairman and
members of the subcommittee, as Chief Financial Officer of the
Environmental Protection Agency, my office is responsible for
EPA's implementation of the Federal Activities Inventory Reform
Act, the FAIR Act. Let me begin by thanking you for this
opportunity to discuss our work in connection with the FAIR
Act. I share your commitment to effective and efficient
government service and I will pleased to be able to describe
for you EPA's approach to the FAIR Act compliance. OMB's early
guidance and support helped us to make a quick, informed start
on an inventory of functions characterized as commercial under
the FAIR Act. To satisfy the spirit and intent of the act, we
set out to produce a comprehensive inventory of all commercial
functions and activities and the full-time equivalents or FTE
performing them.
We decided that ``at bottom-up approach'' would yield more
accurate information. So we assigned responsibility for the
inventory to EPA's 22 major organizational units or national
program offices at headquarters and our regional offices. We
convened an agency-wide work group with representatives from
each of the organizational units as well as from our unions.
Our purpose was to reinforce a common understanding of the
criteria outlined in FAIR and in OMB Circular A-76 and to
emphasize the importance of linking the inventory and activity
function codes to EPA's strategic goals. This work group
approach, along with staff oversight and review of the draft
inventories, further assured the quality and consistency of the
information we gathered.
EPA's inventory, completed on June 30, 1999, showed that
approximately 5 percent of the agency's work force or 829 FTE
are involved primarily with activities characterized as
commercial under FAIR. Most functions identified in EPA's
inventory represent, in our judgment, core capabilities that
should be retained in house. In our evaluation, we considered
several factors including the nature and the function, the
degree of discretion exercised in performing that function, the
sensitivity and the confidentiality of information required to
perform the function, and the significance to the core agency
activities. EPA's regulatory role is unique and important. To
meet our statutory mandates and emergency requirements, we must
maintain the in-house expertise and staff capabilities we need
to effectively apply and enforce the Nation's environmental
laws.
Although a FAIR ``commercial'' characterization of 5
percent of EPA's work force may, at first glance, appear low;
it is important to understand the context in which it is based.
Historically, EPA's dependency on contractors has raised some
special concerns. During the decade preceding 1995, the
Agency's contract resources increased at 10 times the rate of
EPA's staff. You may recall that the agency was severely
criticized by the Congress, the GAO, and our own Inspector
General for an overreliance on contractor support. Over time,
we lost critical in-house scientific expertise and, in some
cases, improperly contracted functions that are inherently
governmental.
In 1995, Congress approved the Agency's request to realign
resources and convert 900 work years of contractor support to
Federal work years. Currently, about 75 percent of EPA's budget
or $5.7 billion supports extramural work, work performed
outside of the Agency by contractors, States, universities,
outside researchers and others. It was against this backdrop
that the EPA inventory was performed.
I submitted our inventory to OMB on July 1, 1999. OMB
subsequently completed their review and consultation on our
inventory and the availability of the inventory was published
in the Federal Register on September 30, 1999. This started the
30-day clock running for interested parties to submit their
challenges. To date, we have received 22 requests for the
inventory and one challenge.
I should also add that the General Accounting Office which
is represented here today is reviewing our inventory process.
My understanding is, as Chris has testified, that they will be
performing a thorough analysis of the similarities and
differences among the several agency inventories. I welcome
this effort and think it will improve our future inventories at
EPA.
I would like to take a moment to emphasize how useful we
found it at EPA to link our FAIR inventories with structures we
have put in place under the Government Performance and Results
Act. We associated each FTE identified as ``commercial'' with
one of the agency's strategic goals. This can contribute to
more informed work force planning and budgeting by highlighting
among each goal activity any opportunities for cost effective
public private partnership.
I want to thank the subcommittee for this opportunity to
testify on our implementation of FAIR. We appreciate your
interest in EPA's work and count on your continued support. I
would be happy to respond to any questions that the chairman
and subcommittee may have.
[The prepared statement of Ms. Harper follows:]
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Mr. Horn. Thank you. We'll proceed with Mr. William Early,
the Chief Financial Officer of the General Services
Adiminstration.
Mr. Early. Thank you, Mr. Chairman, I'm pleased to be here
today to share the experiences and perspectives of the GSA with
regard to the development of our 1999 FAIR Act inventory. GSA
is unique among Federal agencies in that it is our mission to
provide commerical goods and services to the Federal community.
GSA has a long and continuing history of successfully using
various management tools to reduce its size and cost while
continuing to meet its mission requirements. In 1989, GSA's
employment was 19,000. Today it's 14,000, a 27 percent
reduction.
GSA has used OMB's Circular A-76, delegations of authority
to our customers, GSA's Federal Operations Review Model [FORM],
process reengineering and other reinvention initiatives
stemming from the national performance review. We are
continually reviewing and improving our operations,
implementing the best delivery method for our customers and the
taxpayer. We are nonmandatory and customer funded. Therefore,
we are controlled by the marketplace and must be aware of
commercial prices for our products.
In the spring of 1998, OMB issued a data call for a
complete functional inventory. We took that requirement very
seriously. We were aware of pending legislation--the FAIR Act--
and developed an inventory using the full GSA management team.
The inventory we released on September 30 under the FAIR Act
requirements is the result of those efforts. Our basic set of
principles was to one, develop an accurate inventory of all our
functions; two, review and reflect an accurate assessment of
each function without any preconceived notion about its
nature--such as inherently governmental or commercial--and,
three, support each assessment with factual information.
We took the following steps to develop the inventory: We
used a core team with representation from each of our services.
This organizational approach led to the comprehensive organized
involvement of the entire agency. We recognized that to produce
the inventory, we needed an updated working knowledge of the
pending legislation--the FAIR Act--and the latest issuance of
OMB's Circular A-76 and its supplemental handbook. To acquire
that knowledge, training was identified, tailored to meet GSA's
specific needs, and conducted onsite exclusively for GSA
personnel.
After achieving a working knowledge of the requirement, the
core team developed agency guidelines and further refined our
training to emphasize the inventory requirement. GSA then
trained hundreds of GSA personnel, representing all levels and
organizations within the agency. In concert with our Office of
Communications, we conducted a campaign to keep everyone
informed. This included letters from the administrator as well
as establishment of an Internet site that made available all
pertinent documents available to all employees.
Union representatives participated in our training and were
included as potential team members within the various
organizations. We conducted briefings of union representatives,
and they received a copy of the final draft of the inventory
before it was released to all GSA employees or to OMB. Even
though heads of services and staff offices were involved from
the outset in developing their respective inventories, an
agency-wide inventory still needed to be created. Therefore, we
contracted for professional facilitation services at an offsite
location and convened a meeting consisting of leadership and
management representatives from all areas, including our chief
of staff and general counsel. We desired an open and frank
dialog to surface, evaluate, and incorporate suggested
alterations to our plan while ensuring that we were producing
an inventory that was consistent, accurate, and responsive to
the requirement.
On September 30, 1999, GSA posted its entire inventory on
its CFO Internet site, and used it as the inventory's primary
method of distribution. Inquiries on inventory content were
coordinated centrally. GSA has a single point of contact for
inquiries, challenges and appeals which are logged and routed
to all members of our core team for research and comment. I, as
the Chief Financial Officer, will be issuing replies to
challenges, and the Administrator will issue replies to any
subsequent appeals.
This process, in conjunction with performance measures, can
lead agencies to improving the effectiveness of in-house
functions or to contracting out those functions that can be
performed more efficiently by the private sector. GSA has
already achieved many such efficiencies through process
reenginering, A-76 competitions, and bench marking. These
efforts have improved the productivity of our in-house work
force as we strive to ensure that GSA operations meet or exceed
commercial standards.
At GSA, we have always found that self-knowledge has value,
and have shown a historical commitment to, and success with,
the A-76, FORM, and FAIR Act processes. GSA has undertaken many
initiatives to either improve the way we conduct business or to
find better alternatives to meet government needs. We look for
both low cost and best value. Our diligence and our review of
the GSA's FAIR Act inventory will be guided by those same
values. This completes my prepared testimony, and I look
forward to answering your questions.
[The prepared statement of Mr. Early follows:]
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Mr. Horn. Thank you very much. Our last witness is Ms.
Linda Bilmes, the Acting Assistant Secretary for Administration
and the Acting Chief Financial Officer, Department of Commerce.
Ms. Bilmes. I thank you. Good afternoon, Mr. Chariman and
members of the subcommittee. I appreciate the opportunity to
appear before you today to discuss private sector contracting
with the Department of Commerce and, more specifically, the
Department's implementation of the FAIR Act.
Secretary Daley and the Department of Commerce are
committed to the principles embodied by the FAIR Act; that is,
we believe as a Department covering a great deal of the
Nation's business that private sector firms should, to the
greatest extent possible, have the opportunity to compete with
Federal entities to carry out commercial activities.
As the acting CFASA, as we call the Chief Financial Officer
and Assistant Secretary for Administration, I am responsible
for policymaking and oversight for a broad range of
administrative functions. I consider the FAIR Act to be an
important tool in our management portfolio available to help us
serve the American public.
We are also improving our performance by vigorously
implementing the CFO Act, the Clinger-Cohen Act, the Federal
Acquisition Streamlining Act, and, in particular, the
Government Performance and Results Act. In fact, in the past
year, we have expended a great deal of effort to increase the
effectiveness and use within our agency of GPRA, in particular
in the Annual Performance Plan, which this year received a
score of 86 from Congress, the highest in government.
Commerce also has an aggressive and innovative acquisition
program. Over the past 11 years, the funds expended on
contracts has more than doubled from just over $500 million in
1987 to more than $1.1 billion in 1998. Our use of A-76 has
been helpful in this regard with contract wins in many areas.
Three examples include: PTO's work in providing copies of
patents, which had cost the Department $1.5 million annually
and required 78 FTE; NOAA's library and information services,
which had cost the Department $722,000 annually and required 28
FTE; and the Office of the Secretary's activity in providing
mail and messenger service, which had cost the Department
400,000 annually and required 8 FTE.
The decennial census accounts for another billion plus
dollars in procurements. We estimate that contracts in our core
programs save the Department from directly employing somewhere
between 5,000 and 7,000 FTEs.
As part of our procurement innovations, we established the
Commerce Information Technology Solutions, COMMITS, which is
the first ever GWAC, Government-Wide Acquisition Contract,
reserved exclusively for small, minority and women-owned firms.
Over the next 5 years, this unique initiative is expected to
make up $1.5 billion in Federal technology contracts available
to the 29 participants.
In the past 6 years, Commerce has increased its service
contracting by approximately 15 percent and reduced its FTE by
roughly 7 percent. During this time, we also reduced the number
of managers and supervisors, placed greater staff on the front
lines, and improved service delivery to our customers. Under
Secretary Daley's leadership, we continued to explore
opportunities for streamlining and improving Commerce
management.
Now, I'd like to discuss the process that we used to
classify our activities and develop our A-76 inventory in 1998.
We used a similar process this year to develop our FAIR
inventory. First, we used the OMB-provided definitions and
template; and we requested each bureau to develop and submit an
inventory of all their activities. We met with bureau
representatives and worked closely with them to ensure
adherence to OMB guidance. We identified cross-functional
activities, such as the classification of FTE assigned to human
resource management and procurement, to develop and ensure
consensus and a consistent approach throughout the Department.
When we reviewed the bureaus' information, we met with them
and clarified through dialog with our bureau contacts inventory
where we had questions.
Finally, we reconciled the Democrat's data with the
official payroll information maintained by the National Finance
Center.
As a result of this process, we were happy to meet OMB's
October 31, 1998, deadline; and to be the first department in
government to submit its A-76 inventory to OMB under the Raines
guidelines.
Since the passage of the FAIR Act, we used essentially the
same model to develop our inventory this year. Using OMB-
provided advice and formatting guidelines, we tasked the
bureaus to review and update their portions of the inventory.
We reviewed their input with the bureaus and used the same
methods to reconcile the cross-cutting areas.
Following this process, we were again among the first to
transmit the Department's submission, delivering it to OMB on
July 9th of this year. On September 30th of this year, OMB
published a notice in the Federal Register that our inventory,
along with 51 other agencies, was available to the public.
Since then, we've received 34 requests for copies of the
inventory and one challenge received just this morning having
to do with coding.
As reflected in the current inventory, 27 percent of our
work force is involved in commercial activities. Of this, 13
percent has been classified as exempt, 11 percent has been
classified in core activities not open to competition, leaving
3 percent in commercial competitive activities.
We have reviewed this 3 percent in detail, and we believe
it is reasonable because of the factors mentioned earlier:
Extensive A-76 activity during the 1980's, the restructuring
and 7 percent downsizing of the Commerce Department during the
1990's, and an aggressive contracting program. All of which
have contributed significantly to reducing that portion of the
Department's activity that remains available for contracting.
During fiscal year 1998 the last year for which we have
complete data, the Department expended 28 percent of its
discretionary funding on procurements. This is an increase over
the past 15 years of 11 percent. In addition, we spent $1.1
billion in direct grants. This limits the universe for
additional contracting opportunities to 44 percent of our
discretionary budget authority.
Over the past 2\1/2\ years since Secretary Daley took
office, the Department has used A-76 and the FAIR Act to
provide valuable baseline data. We are currently assessing
several new opportunities for outsourcing. These include
substantial aspects of our information technology management
and the administration of the Workers' Compensation program.
During the last year, we have redirected staff resources
and continued to build on our existing in-house expertise to
implement the FAIR Act. We have also, just this summer, added
an additional person to work full time on FAIR Act
implementation.
We will continue to review the Department's inventory in
detail and to work closely with our bureaus to ensure that
private sector firms have every opportunity to compete with
Federal agencies.
Let me just add that this is a new program. I believe that
the feedback we have received and will continue to receive from
GAO, OMB, and from you will prove helpful in this effort. I
certainly look forward to receiving GAO's report on its
findings as well as hearing how my colleagues in other
departments are implementing the FAIR Act. Thank you again for
the opportunity to appear before you today.
[The prepared statement of Ms. Bilmes follows:]
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Mr. Horn. It is difficult to get it nicely timed in the 5-
minute modules. We appreciate every one of your statements.
They have given us perspective on this. Now Mr. Ose, the
gentleman from California, will begin the questioning.
Mr. Ose. Thank you, Mr. Chairman. I think the first
question I would have is perhaps to ask for a little guidance
from you. If I understand the purpose of the FAIR Act, it was
to identify those folks within government currently, the tasks
of which might be convertible to a private contractor basis? I
mean this was the first step, identifying what we could do and
then there would be general legislation. Am I--I'm serious. I'm
asking for guidance here. Is that what----
Mr. Horn. This was tried in the Eisenhower administration.
I was then Assistant to the Secretary of Labor, and I remember
he griped about the contract employees all the time. He said,
``They aren't like the civil service employees. This place is
still dusty.'' So it didn't go too far then with some of the
cabinet to say the least. And what we're trying to do here is
in this round see first, how the agencies respond in terms of
that commercial governmental bit. And then it's just an
experiment. You've got to try it; people can challenge it if
they don't like it. And we'll get into union participation and
so forth on that.
Mr. Ose. Do I----
Mr. Horn. In other words, if you see a big gap in the
existing law, please feel free to fill it.
Mr. Ose. I'm trying to get to what the intent starting this
process was. And if I understand correctly, it is to try and
find those functions that could, for instance, be bid on by
private contractors.
Mr. Horn. That's correct.
Mr. Ose. First step being identifying and then
subsequently----
Mr. Horn. Right.
Mr. Ose. That does bring me to just a quandry that I have
and that is that having started down this process through the
legislative channels, the other branches of the government
might be working in a different direction. And I bring that up
because I have serious concerns about the implementation
through our efforts to open up these job opportunities or what
have you to private bidding if the administration is pursuing a
different tact, in effect changing the FAR regs such as to make
it far more difficult for companies not only to bid but to
retain the jobs that they otherwise might successfully be
awarded. I specifically--I'm sorry, I don't have the----
Mr. Horn. Well I think Mrs. Lee can answer what the plan is
down the line. We're just, at this point, identifying the ones
that would be eligible. And then what kind of administrative
guidance do you have next?
Mr. Ose. That does bring me to my question. Because Ms. Lee
and I have had a meeting previously. We had the benefit of
having Mr. Davis and Mr. Moran join us regarding the proposed
regulations to the FAR. And I don't want to see these proposed
regulations which can be adopted from a regulatory standpoint
completely obviate our ability legislatively to pursue this
track that was clear in Congress's intent. I want to explore
that a little bit if with Ms. Lee, if I may.
Mr. Horn. Right. In other words, administrative regulations
are supposed to carry out the will of Congress. But
administrations, regardless of party, if they didn't like
something, tried to work their way around it. Or if we put
something in and we had a euphemism because maybe the Senate
didn't agree to it and we put the euphemism in and nobody knows
quite which direction that goes, and they tear their hair out
in good faith saying, hey what do these people mean? So that's
what you are fishing for.
Mr. Ose. Correct. And the euphemism I'm referring to is the
issue of black listing. You knew I was going to get to it.
Ms. Lee. Yes, sir one way or another.
Mr. Ose. The question I have and you were very kind, I mean
someone, I think Ms. Gore, responded to our questions in the
meeting in the Capitol about the statutory authority under
which the regs were being promulgated and the case law has been
cited dating from 1928, 1934 and 1940, but the question arises
subsequent to those, to that case law there have been instances
where Congress has expressed a clear intent, in particular, as
it relates to this. And the net result of which is a
determination that an agency cannot promulgate regulations
which conflict with a clear expression of congressional intent.
And that's why I asked the chairman the questions about
this FAIR Act and what the intent was. And if I heard him
correctly, it was to establish a process whereby certain jobs
that currently exist in the Federal agencies could be bid out
whether in house or otherwise for private contracting. And yet
I see the standards that are currently out for comment closing
a door that we're trying to open because of the full, nebulous
nature of the criteria, that being worker training or worker
retention, standards that really don't have much to do with
what our challenge is right now.
And specifically, I want to just get into the record a
couple things. Congress has in fact--in line with what some
call the black listing proposals, Congress has, in fact, twice
considered and rejected efforts to add a provision to the
National Labor Relations Act, first being in 1977 and the
second in 1997, both of which were ultimately rejected. That
would prohibit the award of a Federal contract to any entity
that was found to have committed a willful violation of the
act.
In other words, Congress considered that as a piece of
legislation and rejected its application. That was in 1977. In
1997, Senator Simon sponsored an amendment to amend the
National Labor Relations Act to include a debarment remedy
based, in part, on the results of the 1995 GAO study, and again
Congress rejected that amendment. So I have great trouble with
the various criteria that are proposed for amendment within the
FAR as currently defined especially as they relate to nebulous
things. I'm scrambling here--oh, here we are. Never mind.
Ms. Lee. Substantial noncompliance.
Mr. Ose. Yeah, as to the definition of substantial
noncompliance. Thank you. She knows where I'm going. I could be
in deep trouble here.
Mr. Horn. Now you know who runs the government.
Mr. Ose. So I would appreciate any input you have. Because
I am not yet comfortable with the proposed changes to the
regulations. So if you would care to offer any comment, I would
be happy to entertain it.
Ms. Lee. That's a long one, Mr. Ose. I will try to make it
very succinct for this group. We obviously are working on some
issues regarding a proposed amendment. A proposed rule to the
FAR is out for public comment. We're expecting public comments.
It would be an understatement to say this is an issue of great
interest, and we've got some issues to work on that.
If I could jump over here for the FAIR Act for a minute,
that the FAIR Act inventories are really the first step: Where
agencies look and say why do I exist, what do I do, and then
they look and say basically what are my people doing. And of
those people, how many are doing commercial-like activities.
They then look at the commercial-like activities and take the
next management decision. And it truly is a management decision
because I think we all agree, people say oh, engineers, you
know certainly the commercial activity agency can do
engineering. But we say we still need some expertise in the
agency so you can't totally declare a type or a function to be
outsourced. So there's some management decisions that must go
on, and the agency must decide how to best conduct their
business and how to do that balance.
Once that decision is made, then we go into looking at a
public-private competition process whereby we start to go into
the procurement arena and we run an A-76 competition which is a
private competition. Based on that you select a winner. Based
on that you move over here to the most efficient organization
whereby the government folks who now do that work are able to
business reengineer or whatever, and then you then have a
competition among those two.
Wearing my Acting Deputy Director for Management hat in
talking about the FAIR Act is one thing. When I really take
that off and put on my OFPP hat, the FAIR activity, is of
interest to us in the contracting community because that's one
community where outsourcing and downsizing truly is an
oxymoron. Because the more you downsize your people the fewer
there are. But the more you outsource, the more and the more
complex business arrangements we have. So there's a need for
smart buyers, smart managers so we can spend this money wisely.
So there certainly is a tension there. That's that process.
The issue you're talking about does absolutely kick in to when
we get into the procurement process; and we are running a
private competition, how do we determine who should be
considered and their eligibility requirements. And, yes, we are
talking about responsibility in trying to further hone that
rule, and that's where that fits into this piece here.
Mr. Horn. If I might at this point, so some future Ph.D.
Student who studies this will have all the documents in one
place, the OMB proposal to amend the Federal Acquisition
Regulation beginning with contractors' responsibility. And we
will put that in the record at this point without objection.
[The information referred to follows:]
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Mr. Ose. Thank you, Mr. Chairman. As always, you're very
thorough. What I'm trying to avoid is again have we opened the
door for us to, if you will, run the government more efficient.
I don't want us to close the door by virtue of these proposed
regulations and place us back into this purgatory where we
don't know whether we can or we can't. The standards under
which or the standards that are under consideration right now,
in my mind, will serve to frustrate and prevent our ability to
pursue Congress's intent starting in the last session of
Congress. And I think if I could just reenforce one thing to
Ms. Lee, it would just be that that will not make some of us
very happy. Because----
Mr. Horn. Well, the question certainly is is it in the law
or isn't it?
Mr. Ose. Correct. And it's clear here from our discussion
alone that it's the intent of Congress to examine whether or
not we can privitize or run the government more efficiently.
And yet the net result of this, Mr. Chairman, with the nebulous
nature of these standards is that we will have achieved with
one hand an objective that is taken away from the other. That
is a serious, serious concern. Whether you talk about IT or
real estate or mere supplies or what have you, it is an
evisceration of our ability to achieve our goal. With that I
yield back.
Mr. Horn. Well, you have a very pertinent point there. And
I think it should be taken into account. If it is specifically
said in the law somewhere, that's one thing in the regulation.
If it isn't, it shouldn't be an undercutting of the basic law
that is trying to get government to be more efficient.
And if we take Mayor Goldsmith's view of how he turned
Indianapolis around, he had not only the workers but unions
also participating in that. And we don't have a lot of--as I
understand it, we don't have a lot of criticism on that because
he kept--got everybody involved. And I think that's basically
what the Congress and, I think, the administration, certainly
some of the things the President said before he was President
as well as when he has been President, that efficiency and
effectiveness are very important.
So I would hope that the two branches of government can
agree on that. And then the question is the procedures. And
you've made a very good point. Does one set of procedures
countermand the overall attempt here to have effectiveness,
financial savings, so forth. But what Mr. Kucinich brought up
is certainly a realistic question in terms of look at the
benefits. And that's what a lot of people would say. Wait a
minute, you know, all you're gaining is taking benefits away.
So that comes into play.
Mr. Ose. If the proposed changes to the FAR were to come
forward legislatively that's a different question, again. But I
keep going back to what the intent of Congress was. And that's
the thing that I find so frustrating. It's clear to me that the
intent of Congress is to move further in the direction as
outlined by the FAIR Act from the last session. And yet my
antenna, however poorly refined, tell me that this other action
will serve to frustrate that. I don't want to lose regulatorily
what we achieve legislatively.
Mr. Horn. Well put. And that's the relationship and a
question that we could apply to almost every agency where an
authorizing committee might do this, the appropriations
subcommittee which isn't supposed to legislate on an
appropriations bill, strong rule of the House, but it's waived
on every appropriations bill. So pretty soon, you have the
appropriations people giving the signals, and the authorization
people giving them. And when you've got two bodies, you've got
four entities some of which are undercutting the other. So what
else is new in 200 years of democracy and efficiency and
effectiveness? So Mr. Walden didn't have any questions.
Mr. Ose. I think I drove him out of the room.
Mr. Horn. No, you've got a very pertinent point. Does staff
feel we should ask one or two questions, or should we just send
it to them and have them file it for the record? Staff feels
one question is worth asking.
So the FAIR Act authorizes OMB to review each agency's
commercial activities inventory and consult with the agency
regarding its content. Describe the guidance and feedback each
of you receive from OMB in the development of your inventories.
You want to start with the Department of Commerce then go to
GSA then go to EPA. You're a cross section of the American
executive branch.
Ms. Bilmes. We worked closely with OMB on this as with all
issues, but basically they send out their instructions in the
form of memos. And we supplied our inventory. They subsequently
sent us questions.
Which we are in the process of answering at the moment,
including questions about our coding and other particular
issues. For example, they've asked us about the National
Logistics Supply Center which was listed as exempt. There was a
question as to why it was listed as exempt. The situation with
this one was that it had been through an A-76 process and was
contracted out. There was a problem with the contractor, and
the activity come back in house, but with the result that we
went from originally--pre-FAIR Act--doing this function in
house, with 72 people to contraction out, then to it being done
once again in the Commerce Department with only 26 people.
I think the question from OMB was basically to explain the
situation; the background with this particular entity. I think
it was a worthwhile question because the issue was unclear.
Then there is a question about one of our codes, R-600, applied
research that we have added for NOAA. Obviously this is a new
program. There's some teething pain with the coding. One size
did not fit all in terms of how you code what every agency
does. We didn't feel there was a code that was appropriate for
some of the NOAA functions. So, we requested the R-600 series.
They've asked us about that. I think you could summarize by
saying that we've had a constructive engagement with OMB to try
and refine the process. I discussed with Dee that should she
convene any kind of interagency group to work on this and
refine it further, we would be happy to participate.
Mr. Horn. Let me ask you, the word participation is what I
have not asked about. But did you have an opportunity to go and
participate at a lower level of the particular civil service
group, let's say with GS-5's down so forth, how did that work
in Commerce? Did you get them involved in the participation of
this process or was it simply trickling down to the management-
side of Commerce? Because when you're into a reform thing like
this, having been a chief executive that's reform oriented, you
got to make sure that the people at the grass roots understand
what's going on. Because there's a lot of fear that's going to
come, the rumor mill, the water coolers, and all the rest. And
sometimes the water-cooler gossip is right and way ahead of
management. But what did you do on that front?
Ms. Bilmes. I think that's a very good question, and I take
your point exactly in terms of what you're saying. At the
Commerce Department as you know, we have numerous bureaus with
different tasks. We had decentralized this to each bureau. I am
not familiar with what exactly each bureau did. I will submit
back to the record the answer on that.
Mr. Horn. The question is did the Commissioner or the
Administrator or the Director consult with other people.
Ms. Bilmes. No, I understand your question very well.
Mr. Horn. And that includes the employee unions. I mean
granted they can represent sometimes, but sometimes it's just
worthwhile to get them all in a room and say here's--Congress
did this or didn't do this and OMB is doing it now. And here's
what this all means.
Ms. Bilmes. I would suspect that some bureaus did and some
bureaus did not. But I will go back and ask each bureau how
exactly they put together the categories.
Mr. Horn. We'll save a place in the record, and without
objection it will be put in the record at this point.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T4652.130
Mr. Horn. How about GSA, Mr. Early?
Mr. Early. We opened communication with OMB at the
beginning of this activity in the spring of 1998, and
maintained a dialog with them through the conclusion of the
process. Throughout, we kept OMB apprised of our approach. When
we had questions, we discussed them with OMB, and factored
their input into our action plans. Once we submitted our
inventory to OMB, the only feedback we received was a request
for additional detail and a few technical questions. We
provided the detail requested and answers to their questions,
and that concluded our review and consultation process. OMB did
not question the identification of our functions.
Mr. Horn. Within GSA, are you aware how far down into the
hierarchy the discussion and ideas percolated? GS-5s, for
example, did they get talked to and exposed to and had a chance
to ask questions?
Mr. Early. We did a top-down approach, but when we
conducted training, we involved the union with that. We
included our regions. We had numerous communication pieces that
went out to all employees by letter and by web to keep all
employees at all grade levels current with what we were doing,
what our approaches were and the processes that we were
undertaking. In the political discussions and decisionmaking, I
do not believe we had the grade 5 levels involved. We certainly
did have 11's, 12's, and 13's, participating in the
identification of functional areas and classifications.
Mr. Horn. Having, in a previous incarnation, taken it down
right to the groundwork--the janitors, the Secretaries, the
Assistants, so forth--I found you got some terrific ideas
there. And all I'm saying is I think--don't underestimate what
your people know. Because often they say, why doesn't the boss
just think of this? And yet they're too shy to go in and say it
because they're afraid somebody will put something in some file
or something they'll never get promoted.
Mr. Early. We thought about that. And when we looked at the
assignment of addressing the classification of inventories, we
did not go to that level. The discussion that we had during our
training was that when we addressed how to do the business, how
to contract it out, how to evaluate the cost, the best way of
addressing the delivery of services and such organizations, at
that time we would include all those people because that's when
those ideas are most helpful and would affect the outcome.
Mr. Horn. Well, thank you.
Ms. Harper, how about the EPA?
Ms. Harper. Mr. Chairman, we also had had extensive
consultation with OMB from the prior--A-76 prior year exercise
and continued that as we formulated our inventory. We did a
bottom-up inventory. We went out to each of the regional
locations and each of the national program managers.
On our central work group, a group looking at consistency
and defining issues, we did not go down to the GS-5 level. That
was usually a management side representative and union
representative. At the EPA, the representative function for our
workforce belong to the unions; the labor-management
partnership, makes it more challenging to reach far down into
the organization without full involvement of the unions.
That said in the individual entities, for instance, in a
region, they did have to do a bottom-up. So although it was not
a centrally managed involvement, there were entities, I
believe, that did get that far down, although I wouldn't be
able to tell you right now which those were.
The one thing I would say about our OMB consultation and
review, it was an interesting and I think very fruitful dialog
between the management side of OMB and our budget examiner side
of OMB. I think that was one of the benefits of their review
and consultation because we were able to have it put in the
context of how much we already contract out and give out grants
and cooperative agreements. So that was a very helpful thing
that OMB did.
Mr. Horn. Director Lee, what do you think on this? Does OMB
ever go down and get the grass-roots feeling on what could be
improving the government's efficiency and effectiveness?
Ms. Lee. Mr. Chairman, as you know, OMB is a relatively
small organization, some 500 people, and----
Mr. Horn. That is not small to most Americans.
Ms. Lee. OMB itself is a very collegial group. People work
together, side by side, hand in hand. We certainly have Mr.
Childs, who is the A-76 and the FAIR Act expert, but he worked
through the resource management offices, the budget examiners,
who in turn worked with each of the agencies. So I would say
there is a great deal of knowledge and awareness of what we're
trying to do, a recognition that this is the first step of an
inventory, those tough management decisions, and how do we and
when do we outsource? If that's the right answer, what are the
next steps?
Mr. Horn. How many people do you have in OMB that are
dealing with management, by the way?
Ms. Lee. All the people at OMB deal with management.
Mr. Horn. You must have been here when Mr. Koskinen gave me
the same silly answer, because if 540 people are devoting their
efforts to management, it means nobody is devoting their
efforts to management. He gave me that at his last appearance
here before retirement and before reincarnation as the czar of
Y2K.
But no, how many seriously spend a lot of time on
management? I'm just curious.
Ms. Lee. Seriously, a lot of people, because we've tried to
integrate management and the budget better. So the budget
people who used to just focus on the budget, they actually do
more. In fact, they're doing Director's reviews as we speak
here.
The Director's review packages, actually they address GPRA,
how did your agency address GPRA? If there were specific
management issues identified, and in fact, there were a couple
of agencies where we have some issues with the area acquisition
system, you actually have the people who are considered the
resource management officers, who used to be considered the
budget people, have those things in their review package with
the Director and the statutory offices participate in those
reviews.
Mr. Horn. Well, I'm glad in the annual budget review that
management questions come up. That had been my hope. But I've
had so many tell me that it hasn't worked for the last 10
years, that we just aren't getting anywhere on major--well, Y2K
is a good example--should have been done years before, took a
lot of work to get them to even do it. And they should have
been doing it when the Social Security Administration started.
Ms. Lee. I was supposed to be in a review this afternoon,
but I told them I would rather spend the afternoon with you.
Mr. Horn. I knew. I'll forget the oath I've administered to
you. I wonder if we have a U.S. attorney that can deal with
that response. But OK. I know we don't.
So anyhow did the EPA--let me ask you, did EPA and the
Department of Commerce go through a similar process to develop
a lot of their inventory basically? Has there been
comparability between agencies in terms of the use of the
inventory, the categories and the inventory, this kind of
thing?
Ms. Harper. Mr. Chairman, we did not--given that this was
our first time through the inventory, we did not do broad
consultation with the other agencies and departments. We did
have, it sounds like, a very similar process to the Department
of Commerce; and in terms of the categorizations that we used,
we stuck with the A-76 definitions and we stayed very close, as
did the Department of Commerce, with the OMB guidance. Although
there was a lot of flexibility, we followed the ``let's try and
keep it as simple and straightforward as possible'' rule.
Ms. Bilmes. I think we did follow a fairly similar process,
although we did not link our inventory into our GPRA and our
strategic plan. But I think that is an excellent idea. As we
are redoing our strategic plan, we'll certainly consider doing
that this year. I think that's a great idea.
Mr. Horn. You are becoming a professional congressional
witness when you say words like that. We are very pleased with
that. So thank you.
Let me ask you, Mr. Mihm--I don't want to leave you out
here this afternoon, and you looked at the analysis, very
thoroughly as usual by the General Accounting Office, how would
you rate Federal department and agency compliance with the
requirements of the FAIR Act? Did you get a nice little matrix
somewhere along the line that checked them off?
Mr. Mihm. That's still work to be done, because we're still
at such an early stage with many of the agencies. As I
mentioned, some of our largest agencies haven't released their
inventories to the public.
We still have the challenge process. As Mr. Ose was
mentioning, even beyond the challenge process, we have to start
getting into the substantive use of these inventories and
decide whether or not we're going to contract out or whether or
not, if we do go through a competitive process, the Federal
Government wins that competitive process.
It is certainly clear that the FAIR Act has moved
competition and competitive contracting much higher on
agencies' agendas than I think it was under A-76. A-76,
especially in civilian agencies, had been relatively dormant.
When OMB requested inventories of commercial activities a
couple of years ago, those that they got in some cases were a
number of years old. There wasn't a lot of effort to update bid
inventories. So unquestionably the current effort to develop
inventories effort, because of FAIR, knowing that there would
be hearings such as this has certainly moved contracting to a
much higher level on the agencies' agendas. Now, of course, as
I mentioned, the next step is to keep carrying through to get
better in the inventories next time around and to actually
start using those inventories substantively to start making
decisions.
Mr. Horn. Well, well said. When do you think some of that
will be completed?
Mr. Mihm. Well, one important indicator will be the results
of the challenges that interested parties are now eligible to
make. We'll be looking very closely at the reports that
agencies are required--or that OMB is requiring that they
submit. And I think that Ms. Lee's decision to require that
agencies in their next round of submissions talk about how
they're using these inventories, I think is a wonderful idea
and an important achievement. So I think all of that will begin
to start giving a very rich body of information as to how these
inventories are being used.
Mr. Horn. Are there some models, Ms. Lee, that are
acceptable across the executive branch? Is there a possibility
here to get a uniform type of appeal system? What's the
thinking on this?
Ms. Lee. The uniformity right now is the timeframe. In each
agency they were to designate someone to handle the initial
appeal, and the Secretary is the final appeal. There has been,
I know, some cross-agency discussion about how to answer those.
But we are saying, address each individual issue and respond to
that challenge as appropriate.
Mr. Horn. Now, is OMB leaving that to the agency and is
there an appeal beyond the agency to OMB?
Ms. Lee. No, sir. The FAIR Act specifically says initial
appeal must be filed within 30 days to whoever is designated in
the agency. And I know the agencies have all designated
someone.
The agency has 28 days to respond. Then there's 10 more
days if the person receiving the response wants to appeal the
challenge. They appeal to the Secretary and the Secretary must
respond.
Mr. Horn. Is there guidance one way or the other in terms
of who does this in an agency? Is it a member of management? Is
it a member of the area that is perhaps being contracted out,
outsourced, whatever you want to call it; or is it through the
administrative law judge approach? What's the thinking on that?
Ms. Lee. It's left up to the agency to designate the
appropriate appeal point.
Mr. Horn. OK. So you could have 14 different ways to solve
this?
Ms. Lee. Yes, sir.
Mr. Horn. That's fair enough. Maybe we'll learn something
from it. And then go and do it another way the next year or
something.
I understand, Ms. Lee, some of the interested parties that
have had difficulty obtaining the inventories, some inventories
were published on agency websites while others were made
available in hard copy. For those that wish to challenge the
inclusion or exclusion of an activity on the inventories, it is
important that they be readily available. So how would OMB
suggest making future inventories more accessible? Do you feel
there's a need for that?
Ms. Lee. I feel there's a need to make them readily
accessible and as user friendly as we can. As Congressman
Sessions noted, we plan to go through and get them all out
there so people can see the first round and then get together.
And I had committed to his staff or anyone else that's
interested that we would work together on that.
It is interesting to note that as we talk about commercial
endeavors, as you know, there is a commercial entity that very
quickly picked them up and did consolidate the inventories. So
it's an interesting question there of government presentation
and commercial value added to this process.
Mr. Horn. This might sound like a silly question, but
sometimes people worry about words like this: Many of the
inventories used the term ``exempt'' or ``competitive'' and
``core'' to classify the commercial activities. Could you give
us a definition for these terms or do you leave that to the
agencies?
Ms. Lee. No, sir. We actually have some codes that specify.
When I did a cursory review myself, I said, if we were looking
at these, I would be looking for Bs and Fs because it clearly
tells you that the B code says that it's being looked at and
the F code indicates that they have to do some further
restructuring or decisionmaking process.
There are reason codes in the A-76 itself.
Mr. Horn. Now, does that go into a computer program at most
of the agencies, or is there a common program that they can
plug into that when they're totaling it all up as to is this
position exempt or competitive or core, as the case may be, I
mean, how do we keep reports on that? Or are we not keeping
records on that?
Ms. Lee. We haven't provided them a template. They have
determined how to do it themselves, and as we move down this
path, we'll figure out if those are going to merge or whether
there's some common points that we need to deal with.
Mr. Horn. On page 1, Ms. Bilmes, of the Department of
Commerce's inventory, you list a number of activities as core
and exempt yet you provide a reason code B for these
activities. And reason code B, we believe, says that the
activity is subject to a cost comparison.
Could you describe how an activity can be listed as core or
exempt yet be subject to cost comparisons?
Ms. Bilmes. I can't answer that question off the top of my
head.
Mr. Horn. Why don't you answer it for the record?
Ms. Bilmes. I will answer it for the record.
I would note that we have questioned a number of things
that look like apparent discrepancies. For example, we have 177
FTEs in our aeronautical mapping and charting, which were
listed as competitive, but then coded with a G which said
``prohibited by legislation from being competitive,'' so that
didn't seem to be reconcilable.
When we actually looked back, and I'm familiar with this
particular division because they are one of our last to be Y2K
compliant, it developed that the reason is they are being
transferred. In fact, the money has already been transferred to
the Department of Transportation, but the FTE have not been
transferred yet, pending the Y2K compliance effort. We didn't
have a specific code in which to capture this situation.
When NOAA did the coding, they basically said this group is
competitive but were prohibited by legislation from being
competed.
Mr. Horn. Which legislation was that, by the way?
Ms. Bilmes. It would be the legislation that was
transferring them to the Department of Transportation.
Mr. Horn. I see.
Ms. Bilmes. Legislation that is completely unrelated to the
FAIR Act legislation.
Mr. Horn. You rang a bell way in the back of my head that
in the 1950's I remember the fight between the private
enterprise on mapping versus the Department of Commerce on
mapping. And that was a long night up here of letters back and
forth and all the rest of it. So I guess that's still--that
little battle is still around. You're saying somebody, some
friendly member, put legislation in on that.
Ms. Bilmes. It's nice to know--I just came back from
maternity leave--that after 12 weeks some things are still
around. It must be nice to know after 30 years some things are
still around.
Mr. Horn. Same old thing, right.
And, Ms. Lee, there are only about one or two questions
more. As I indicated in the opening statement and as GAO
testified, the vast majority of activities have been classified
as exempt from the A-76 cost comparison process.
What steps has the OMB taken to ensure the thoroughness and
accuracy of the FAIR Act inventories?
Ms. Lee. I think Ms. Bilmes actually addressed what's
happening as we go through these; we are asking questions,
we're dealing with the agencies. Are we going to catch them all
first round? No. But as we do the next inventory--and they
actually have to say, here's what I reported last year, here's
what has been accomplished on that--we'll just continue to work
through it.
Mr. Horn. OK. We might send you a few questions for the
record and they would be put in the record at this place. And,
sorry, I didn't mean to take all that time.
I didn't see you come back into the room.
Mr. Ose. I have been sitting here listening. I'm sitting
here listening to your questions.
When you talked about how many folks are at OMB, it spurred
a question in my mind and, Ms. Lee, I want to come back to you
on this: These proposed regulations that we were talking about
earlier, who's preparing them? Who prepared them? Who's in
charge of them?
Ms. Lee. The proposed regulation is to--the proposed
regulation of the Federal Acquisition Regulation, it is
prepared by the FAR Council. The council is made up of--the
principals on the council are representatives from the General
Services Administration, which is currently Ms. Ida Usted.
Mr. Ose. Would you spell that please?
Ms. Lee. I-d-a U-s-t-e-d. She has been ill. And there is
someone acting in her stead. The Deputy--the Administrator for
Procurement at NASA, and that is Mr. Tom Luedtke and----
Mr. Ose. Would you spell that. I know how to spell Tom.
Ms. Lee. L-u-e-d-t-k-e, I believe.
Mr. Ose. L-u-e-d-t-k-e.
Ms. Lee. A good Wisconsin man.
And Ms. Eleanor Spectre, who is, you probably know, from
the Department of Defense. The makeup of the council is like
that because they basically--DOD Title 10, GSA Title 41
represents civilian agencies, and NASA is sometimes Title 10
and sometimes 41. And that's how that council is made up. Below
them, of course, they have a subcouncil made up of working
folks who--and I actually have a review with this group
probably every other month of all the cases and all the rules
that they are promulgating, most of them generating from
various pieces of legislation or changes in our system,
clarifications that are requested. The FAR, as you know, is
actually kind of the working book for the many, many
contracting officers out there.
Mr. Ose. Could you tell us the legislation under which Ms.
Usted, Mr. Luedtke, and Ms. Spectre are proposing these changes
to the FAR? I mean, not the authority, but the--because I got
the authority cited, but the legislation driving the change?
Ms. Lee. There is not a specific legislation that I--on
this particular activity. As you know, we're proposing to
clarify or add a parenthetical under some policy that is
already in the FAR. There is a statement currently, right now--
I wish I could give you the cite, 9105.4(d) maybe--that says
that every offer, before you can do business with the
government, you must have--one of the many conditions, you must
have a satisfactory record of business ethics and integrity.
That is currently in the Federal regulation based on the Office
of Federal Procurement Policy regulation, which I couldn't
provide you the cite of, but there is a legislative, statutory
basis for that.
We're proposing to add the parenthetical under there that
further describes what a satisfactory record of business ethics
and integrity is.
Mr. Ose. I think that is where the discussion is based.
Ms. Lee. Yes, sir, I think it is.
Mr. Ose. Thank you, Mr. Chairman.
Mr. Horn. Thank you very much.
I guess we could say in summary here that the Federal
agencies' Office of Management and Budget still have a lot of
work ahead to fully implement the FAIR Act, and that would
include the public release of more inventories and the
resolution of challenges.
What would be the other big categories that your own
feeling is?
Ms. Lee. You clearly articulated the next releases of
inventories that everyone is probably familiar with; DOD is a
large one. I owe an answer to Congressman Sessions about how we
are going to make this some 2,000-page inventory easily and
readily available. And that's something we're working on.
After we get those all out--the goal is to get all the
inventories out by December--we need to get back together and
say what did we learn, what did we learn in the challenge
process, what did we learn in the preparation process and what
direction and information do we need to get out better
information, because it's already almost time to start for next
inventories next year. June 30th, they're due.
Mr. Horn. Yeah. Does OMB anticipate making any changes in
its guidance for the remaining inventories that are already due
out?
Ms. Lee. No, sir. The inventories with three exceptions are
in the consultation and review process. The one significant
change we have made. Mr. Childs and another person in our
office have called every single number and said, are you ready,
do you understand what you're supposed to do when it comes out
tomorrow? Because we did have two erroneous phone numbers the
last time. So they've been on the phone, making 42 phone calls,
checking and double-checking.
Mr. Horn. Well, beyond the ones we've had in this exchange
and what you said in your testimony and what you said just now
and tomorrow, how do you plan to improve the process for the
future? Any other particular plans that we haven't discussed?
Ms. Lee. I don't have the specifics--certainly we are
concerned about the timely accessibility because of the short
challenge period. And I think we'll need to discuss among the
agencies, abd certainly with you and your staffs, any
recommendations for that. I've had everything from people who
say, put it on a disc and distribute the disc, to put it on the
Internet, to make sure we have a method of distribution. And
there has been some comment perhaps about more commonality
among the inventories themselves.
The other quite valuable comment that I've heard is, to
provide more of an explanation on the front of the inventories.
We probably missed that because we saw it as a big picture, but
yet if you just pull one agency's inventory without the big
picture to support it, it can be quite confusing. So maybe we
need an instruction to the reader that says, here's what you're
seeing, here's what that all means. And that's a possible part
of the new package.
Mr. Horn. Well, I think that's a very good idea. I
certainly think using the Internet is very good idea. I think
we've got to use it a lot more throughout government in just
this type of situation. It could save everybody a lot of time
once you get the thing working in some sensible way.
And I think we'll be asking the General Accounting Office
their thoughts on that. But that's another meeting, shall we
say.
And I guess in terms of the other things we might think
about is the degree--you mentioned FAR, and the degree to which
the Clinger-Cohen Act has made a difference. And you've got
obviously a very fine set of people on there that deal with
those. And you dealt with those as a member in NASA, didn't
you?
Ms. Lee. Yes, sir.
Mr. Horn. So we'll be holding a hearing in a few months on
the Clinger-Cohen thing and streamlining the acquisition
process, if it's happening. If it isn't, why, then why not--
that sort of thing.
So thank you all for coming. I am now going to thank the
staff for its work in putting this together. And most of you
know the staff director, J. Russell George, chief counsel;
Randy Kaplan is on my left, your right, who set up the
immediate hearing; Bonnie Heald is director of communications
down there at the end, professional staff member; Chip
Ahlswede, clerk for the subcommittee. And then we've got Rob
Singer, a staff assistant; P.J. Caceres, an Intern; and Deborah
Oppenheim, an intern--they're both giving all of us great help.
Minority Staff: Trey Henderson, professional staff member;
and Jean Gosa, minority staff assistant.
And Julia Thomas has been today's court reporter.
Thank you very much, all. And with that, we're adjourned.
[Whereupon, at 4:45 p.m., the subcommittee was adjourned.]
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