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Office of the Vice President

For Immediate Release September 7, 1993

Chapter 1

Cutting Red Tape

About 10 years ago, two foresters returned from a hard day in the

field to make plans for the coming week. Searching for a detail

of agency policy, they found themselves overwhelmed by

voluminous editions of policy manuals, reports, and binders

filled with thousands of directives. One forester recalled the

very first Forest Service manual- -small enough to fit into

every ranger's shirt pocket, yet containing everything foresters

needed to know to do their jobs.

"Why is it that when we have a problem," the other forester

asked, "the solution is always to add something--a report, a

system, a policy--but never take something away?"

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

The federal government does at least one thing well: It

generates red tape. But not one inch of that red tape appears by

accident. In fact, the government creates it all with the best of

intentions. It is time now to put aside our reverence for those

good intentions and examine what they have created--a system that

makes it hard for our civil servants to do what we pay them for,

and frustrates taxpayers who rightfully expect their money's


Because we don't want politicians' families, friends, and

supporters placed in "no-show" jobs, we have more than 100,000

pages of personnel rules and regulations defining in exquisite

detail how to hire, promote, or fire federal employees.2 Because

we don't want employees or private companies profiteering from

federal contracts, we create procurement processes that require

endless signatures and long months to buy almost anything.

Because we don't want agencies using tax dollars for any

unapproved purpose, we dictate precisely how much they can spend

on everything from staff to telephones to travel.

And because we don't want state and local governments using

federal funds for purposes that Congress did not intend, we write

regulations telling them exactly how to run most programs that

receive federal funds. We call for their partnership in dealing

with our country's most urgent domestic problems, yet we do not

treat them as equal partners.

Consider some examples from the daily lives of federal

workers, people for whom red tape means being unable to do their

jobs as well as they can--or as well as we deserve. The district

managers of Oregon's million-acre Ochoco National Forest have 53

separate budgets--one for fence maintenance, one for fence

construction, one for brush burning- -divided into 557 management

codes and 1,769 accounting lines. To transfer money between

accounts, they need approval from headquarters. They estimate the

task of tracking spending in each account consumes at least 30

days of their time every year, days they could spend doing their

real jobs.3 It also sends a message: You are not trusted with

even the simplest responsibilities.

Or consider the federal employees who repair cars and trucks

at naval bases. Each time they need a spare part, they order it

through a central purchasing office--a procedure that can keep

vehicles in the shop for a month. This keeps one-tenth of the

fleet out of commission, so the Navy buys 10 percent more

vehicles than it needs.4 Or how about the new Energy Department

petroleum engineer who requested a specific kind of calculator to

do her job? Three months later, she received an adding machine.

Six months after that, the procurement office got her a

calculator--a tiny, hand-held model that could not perform the

complex calculations her work required. Disgusted, she bought her


Federal managers read the same books and attend the same

conferences as private sector managers. They know what good

management looks like. They just can't put it into

practice--because they face constraints few managers in the

private sector could imagine.

Hamstrung by rules and regulations, federal managers simply

do not have the power to shape their organizations enjoyed by

private sector managers. Their job is to make sure that every

dollar is spent in the budget category and the year for which it

was appropriated, that every promotion is consistent with central

guidelines, and that every piece of equipment is bought through

competitive bidding. In an age of personal computers, they are

asked to write with quill pens.

Never tell people how to do things. Tell them what you want to

achieve, and they will surprise you with their ingenuity.

General George S. Patton


This thicket of rules and regulations has layer upon layer

of additional oversight. Each new procedure necessitates

someone's approval. The result is fewer people doing real work,

more people getting in their way. As management sage Peter

Drucker once said, "So much of what we call management consists

of making it difficult for people to work."6

As Robert Tobias, president of the National Treasury

Employees Union, told participants at the Philadelphia Summit on

Reinventing Government, "The regulations and statutes that bind

federal employees from exercising discretion available in the

private sector all come about as a response to the humiliations,

mistakes, embarrassments of the past." Even though, as Tobias

noted, "those problems are 15, 20, 30 years old," and "the

regulations and the statutes don't change." The need to enforce

the regulations and statutes, in turn, creates needless layers of


The layers begin with "staff" agencies, such as the General

Services Administration (GSA) and the Office of Personnel

Management (OPM). These staff agencies were designed originally

to provide specialized support for "line" agencies, such as the

Interior and Commerce departments, that do government's real

work. But as rules and regulations began to proliferate, support

turned into control. The Office of Management and Budget (OMB)

which serves the President in the budget process, runs more than

50 compliance, clearance, and review processes. Some of this

review is necessary to ensure budget control and consistency of

agency actions--with each other and with the President's

program--but much of it is overkill.

Line agencies then wrap themselves in even more red tape by

creating their own budget offices, personnel offices, and

procurement offices. Largely in response to appropriations

committees, budget offices divide congressional budgets into

increasingly tiny line items. A few years ago, for example, base

managers in one branch of the military had 26 line items for

housing repairs alone.7 Personnel offices tell managers when they

can and cannot promote, reward, or move employees. And

procurement offices force managers to buy through a central

monopoly, precluding agencies from getting what they need, when

they need it.

What the staff agencies don't control, Congress does.

Congressional appropriations often come with hundreds of strings

attached. The Interior Department found that language in its 1992

House, Senate, and conference committee reports included some

2,150 directives, earmarks, instructions, and prohibitions.8 As

the federal budget tightens, lawmakers request increasingly

specific report language to protect activities in their

districts. Indeed, 1993 was a record year for such requests. In

one appropriations bill alone, senators required the U.S. Customs

Service to add new employees to its Honolulu office, prohibited

closing any small or rural post office or U.S. Forest Service

offices; and forbade the U.S. Mint and the Bureau of Engraving

and Printing from even studying the idea of contracting out guard


Even worse, Congress often gives a single agency multiple

missions, some of which are contradictory. The Agency for

International Development has more than 40 different objectives,

disposing of American farm surpluses, building democratic

institutions, and even strengthening the American land grant

college system.9 No wonder it has trouble accomplishing its real

mission--promoting international development.

In Washington, we must work together to untangle the knots

of red tape that prevent government from serving the American

people well. We must give cabinet secretaries, program directors

and line managers much greater authority to pursue their real


As Theodore Roosevelt said: "The best executive is the one

who has the sense to pick good men to do what he wants done, and

self-restraint enough to keep from meddling with them while they

do it."

Our path is clear: We must shift from systems that hold

people accountable for process to systems that hold them

accountable for results. We discuss accountability for results in

chapter 3. In this chapter, we focus on six steps necessary to

strip away the red tape that so engulfs our federal employees and

frustrates the American people.

First, we will streamline the budget process, to remove the

manifold restrictions that consume managers' time and literally

force them to waste money.

Second, we will decentralize personnel policy, to give

managers the tools they need to manage effectively--the authority

to hire, promote, reward, and fire.

Third, we will streamline procurement, to reduce the

enormous waste built into the process we use to buy $200 billion

a year in goods and services.

Fourth, we will reorient the inspectors general, to shift

their focus from punishing those who violate rules and

regulations to helping agencies learn to perform better.

Fifth, we will eliminate thousands of other regulations that

hamstring federal employees, to cut the final Lilliputian ropes

on the federal giant.

Finally, we will deregulate state and local governments, to

empower them to spend more time meeting customer

needs--particularly with their 600 federal grant programs--and

less time jumping through bureaucratic hoops.

As we pare down the systems of over-control and

micromanagement in government, we must also pare down the

structures that go with them: the oversized headquarters,

multiple layers of supervisors and auditors, and offices

specializing in the arcane rules of budgeting, personnel,

procurement, and finance. We cannot entirely do without

headquarters, supervisors, auditors, or specialists, but these

structures have grown twice as large as they should be.

Counting all personnel, budget, procurement, accounting,

auditing, and headquarters staff, plus supervisory personnel in

field offices, there are roughly 700,000 federal employees whose

job it is to manage, control, check up on or audit others.10 This

is one third of all federal civilian employees.

Not counting the suffocating impact these management control

structures have on line managers and workers, they consume $35

billion a year in salary and benefits alone.11 If Congress enacts

the management reforms outlined in this report, we will

dramatically cut the cost of these structures. We will reinvest

some of the savings in the new management tools we need,

including performance measurement, quality management, and

training. Overall, these reforms will result in the net

elimination of approximately 252,000 positions. (This will

include the 100,000 position reduction the President has already

set in motion.)

A reduction of 252,000 positions will reduce the civilian,

non-postal work force by almost 12 percent--bringing it below two

million for the first time since the 1966.12

This reduction, targeted at the structures of control and

micromanagement, is designed to improve working conditions for

the average federal employee. We cannot empower employees to give

us their best work unless we eliminate much of the red tape that

now prevents it. We will do everything in the government's power

to ease the transition for workers, whether they choose to stay

with government, retire, or move to the private sector.

Our commitment is this: If an employee whose job is

eliminated cannot retire through our early retirement program,

and does not elect to take a cash incentive to leave government

service, we will help that employee find another job offer,

either with government or in the private sector.

Normal attrition will contribute to the reduction. In

addition, we will introduce legislation to permit all agencies to

offer cash payments to those who leave federal service

voluntarily, whether by retirement or resignation. The Department

of Defense (DOD) and intelligence community already have this

"buy-out" authority; we will ask Congress to extend it to all

agencies. We will also give agencies broad authority to offer

early retirement and to expand their retraining, out-placement

efforts, and other tools as necessary to accomplish the 12%

reduction. Agencies will be able to use these tools as long as

they meet their cost reduction targets.

These options will give federal managers the same tools

commonly used to downsize private businesses. Even with these

investments, the downsizing we propose will save the taxpayer

billions over the next 5 years.

None of this will be easy. Downsizing never is. But the

result will not only be a smaller workforce, it will also be a

more empowered, more inspired, and more productive workforce.

As one federal employee told Vice President Gore at one of

his many town meetings, "If you always do what you've always

done, you'll always get what you always got." We can no longer

afford to get what we've always got.

Step 1: Streamlining The Budget Process

Most people can't get excited about the federal budget

process, with its green-eyeshade analysts, complicated

procedures, byzantine language, and reams of minutiae. Beyond

such elements, however, lies a basic, unalterable reality. For

organizations of all kinds, nothing is more important than the

process of resource allocation: what goal is sought, how much

money they have, what strings are attached to it, and what

hurdles are placedble reality. For organizations of all kinds,

nothing is more important than the process of resource

allocation: what goal is sought, how much money they have, what

strings are attached to it, and what hurdles are placed before

managers who must spend it.

In government, budgeting is never easy. After all, the

budget is the most political of documents. If, as the political

scientist Harold D. Lasswell once said, politics is "who gets

what, when, how," the budget answers that question.13 By crafting

a budget, public officials decide who pays what taxes and who

receives what benefits. The public's largesse to children, the

elderly, the poor, the middle class, and others is shaped by the

budgets that support cities, states, and the federal government.

But if budgeting is inherently messy, such messiness is

costly. Optimally, the budget would be more than the product of

struggles among competing interests. It also would reflect the

thoughtful planning of our public leaders. No one can improve

quality and cut costs without planning to do so.

Unfortunately, the most deliberate planning is often

subordinated to politics, and is perhaps the last thing we do in

constructing a budget. Consider our process. Early in the year,

each agency estimates what it will need to run its programs in

the fiscal year that begins almost 2 years later. This is like

asking someone to figure out not only what they will be doing,

but how much it will cost 3 years later--since that's when the

money will be spent. Bureau and program managers typically

examine the previous year's activity data and project the figures

3 years out, with no word from top political leaders on their

priorities, or even on the total amount that they want to spend.

In other words, planning budgets is like playing "pin the tail on

the donkey." Blindfolded managers are asked to hit an unknown


OMB, acting for the President, then crafts a proposed budget

through back-and forth negotiations with departments and

agencies, still a year before the fiscal year it will govern.

Decisions are struck on dollars--dollars that, to agencies, mean

people, equipment, and everything else they need for their jobs.

OMB's examiners may question agency staff as they develop options

papers, OMB's director considers the options during his

Director's Review meetings, OMB "passes back" recommended funding

levels for the agencies, and final figures are worked out during

a final appeals process.

Early the next year, the President presents a budget

proposal to Congress for the fiscal year beginning the following

October 1. Lawmakers, the media, and interest groups pore over

the document, searching for winners and losers, new spending

proposals, and changes in tax laws. In the ensuing months,

Congress puts its own stamp on the plan. Although House and

Senate budget committees, guide Congress' action, every committee

plays a role.

Authorizing committees debate the merits of existing

programs and the President's proposals for changes within their

subject areas. While they decide which programs should continue

and recommend funding levels, separate appropriations committees

draft the 13 annual spending bills that actually comprise the


Congressional debates over a budget resolution,

authorization bills, and appropriations drag on, often into the

fall. Frequently the President and Congress don't finish by

October 1, so Congress passes one or more "continuing

resolutions" to keep the money flowing, often at the previous

year's level. Until the end, agency officials troop back and

forth to OMB and to the Hill to make their case. States and

localities, organizations and advocates seek time to argue their

cause. Budget staffs work non-stop, preparing estimates and

projections on how this or that change will affect revenues or

spending. All this work is focused on making a budget--not

planning or delivering programs.

Ironies riddle the process.

ù Uncertainty reigns: Although they begin calculating their

budget 2 years ahead, agency officials do not always know by

October 1 how much they will have to spend and frequently don't

even receive their money until well into the fiscal year.

ù OMB is especially prone to question unspent funds--and

reduce the ensuing year's budget by that amount. Agency officials

inflate their estimates, driving budget numbers higher and

higher. One bureau budget director claims that many regularly ask

for 90 percent more than they eventually receive.

ù Despite months of debate, Congress compresses its actual

decision-making on the budget into such a short time frame that

many of the public's highest priorities--what to do about drug

addiction, for example, or how to prepare workers for jobs in the

21st century--are discussed only briefly, if at all.

ù The process is devoid of the most useful information. We

do not know what last year's money, or that of the year before,

actually accomplished. Agency officials devise their funding

requests based on what they got before, not whether it produced


There are two ways to reduce expenditures. There is the

intelligent way...going through each department and questioning

each program. Then there is the stupid way: announcing how much

you will cut and getting each department to cut that amount. I

favor the stupid way.

Michel Belanger Chairman, Quebec National Bank May 7, 1992

In sum, the budget process is characterized by fictional

requests and promises, an obsession with inputs rather than

outcomes, and a shortage of debate about critical national needs.

We must start to plan strategically--linking our spending with

priorities and performance. First, we must create a rational

budgeting system.

Action: The President should begin the budget process with an

executive budget resolution, setting broad policy priorities and

allocating funds by function for each agency.14

Federal managers should focus primarily on the content of

the budget, not on the process. A new executive budget resolution

will help them do that. The President should issue a directive in

early 1994 to mandate the use of such a resolution in developing

his fiscal year 1996 budget. It will turn the executive budget

process upside down.

To develop the resolution, officials from the White House

policy councils will meet with OMB and agency officials. In those

sessions, the administration's policy leadership will make

decisions on overall spending and revenue levels, deficit

reduction targets, and funding allocations for major inter-agency

policy initiatives. The product of these meetings--a resolution

completed by August--will provide agencies with funding ceilings

and allocations for major policy missions. Then, bureaus will

generate their own budget estimates, now knowing their agency's

priorities and fiscal limits.

Our own Environmental Protection Agency (EPA) tried a

similar approach in the 1970s as part of a zero-based budgeting

trial run. Although zero-based budgeting fell short, participants

said, two important advantages emerged: a new responsiveness to

internal customer needs and a commitment to final decisions. When

participants voted to cut research and development funds because

they felt researchers ignored program needs, researchers began

asking programs managers what kind of research would support

their efforts. EPA also found that, after its leaders had

agonized over funding, they remained committed to common


Critics may view the executive budget resolution process as

a top-down tool that will stifle creative, bottom-up suggestions

for funding options. We think otherwise. The resolution will

render top officials responsible for budget totals and policy

decisions, but will encourage lower-level ingenuity to devise

funding options within those guidelines. By adopting this plan,

we will help discourage non-productive micro-management by senior

department and agency officials.

Action: Institute biennial budgets and appropriations.15

We should not have to enact a budget every year. Twenty

states adopt budgets for 2 years. (They retain the power to make

small adjustments in off years if revenues or expenditures

deviate widely from forecasts). As a result, their governors and

legislatures have much more time to evaluate programs and develop

longer-term plans.

Annual budgets consume an enormous amount of management

time--time not spent serving customers. With biennial budgets,

rather than losing months to a frantic "last-year's

budget-plus-X-percent" exercise, we might spend more time

examining which programs actually work.

The idea of biennial budgeting has been around for some

time. Congressman Leon Panetta, now OMB director, introduced the

first biennial budgeting bill in 1977, and dozens have been

offered since. Although none have passed, the government has some

experience with budget plans that cover 2 years or more. In 1987,

the President and Congress drafted a budget plan for fiscal years

1988 and 1989 that set spending levels for major categories,

enabling Congress to enact all 13 appropriations bills on time

for the first time since 1977.

In addition, Congress directed the Defense Department to

submit a biennial budget for fiscal 1988 and 1989 to give

Congress more time for broad policy oversight. At the time,

Congress asserted that a biennial budget would "substantially

improve DOD management and congressional oversight," and that a

two-year DOD budget was an important step toward across-the-board

biennial budgeting. Administrations have continued to submit

biennial budgets for DOD.

The 1990 Budget Enforcement Act and the 1993 Omnibus Budget

Reconciliation Act set 5-year spending limits for discretionary

spending and pay-as-you-go requirements for mandatory programs.

With these multi-year caps in place, neither the President nor

Congress has to decide the total level of discretionary spending

each year. These caps provide even more reason for biennial

budgets and appropriations. In Congress, 7 out of 10 members

favor a biennial process with a 2-year budget resolution and

multi-year authorizations. The time is ripe.

We recommend that Congress establish biennial budget

resolutions and appropriations and multi-year authorizations. The

first biennium should begin October 1, 1996, to cover fiscal

years 1997 and 1998. After that, bienniums would begin October 1

of each even-numbered year. Such timing would allow President

Clinton to develop the first comprehensive biennial federal

budget, built on the new executive budget resolution. In off

years, the President would submit only amendments for exceptional

areas of concern, emergencies, or other unforeseen circumstances.

Biennial budgeting will not make our budget decisions

easier, for they are shaped by competing interests and

priorities. But it will eliminate an enormous amount of busy work

that keeps us from evaluating programs and meeting customer


Action: OMB, departments, and agencies will minimize budget

restrictions such as apportionments and allotments.16

Congress typically divides its appropriations into more than

1,000 accounts. Committee reports specify thousands of other

restrictions on using money. OMB apportions each account by

quarter or year, and sometimes divides it into sub-accounts by

line-item or object class--all to control over-spending.

Departmental budget offices further divide the money into


Thus, many managers find their money fenced into hundreds of

separate accounts. In some agencies, they can move funds among

accounts. In others, Congress or the agency limits the transfer

of funds, trapping the money. When that happens, managers must

spend money where they have it, not where they need it. On one

military base, for example, managers had no line item to purchase

snowplow equipment, but they did have a maintenance account. When

the snowplow broke down they leased one, using the maintenance

account. Unfortunately, the 1-year lease cost $100,000--the same

as the full purchase price.

Such stories are a dime a dozen within the federal

bureaucracy. (They may be the only government cost that is coming

down.) Good managers struggle to make things work, but, trapped

by absurd constraints, they are driven to waste billions of

dollars every year.

Stories about the legendary end-of-the-year spending rush

also abound. Managers who don't exhaust each line item at year's

end usually are told to return the excess. Typically, they get

less the next time around. The result: the well-known spending

frenzy. The National Performance Review received more examples of

this source of waste--in letters, in calls, and at town

meetings--than any other.

Most managers know how to save 5 or 10 percent of what they

spend. But knowing they will get less money next year, they have

little reason to save. Instead, smart managers spend every penny

of every line item. Edwin G. Fleming, chief of the Resources

Management Division of the Internal Revenue Service's Cleveland

District, put it well in a letter to the Treasury Department's

Reinvention Team:

Every manager has saved money, only to have his allocation

reduced in the subsequent year. This usually happens only

once, then the manager becomes a spender rather than a

planner. Managing becomes watching after little pots of

money that can't be put where it makes business sense

because of reprogramming restrictions. So managers, who are

monitors of these little pots of money, are rewarded for the

ability to maneuver, however limitedly, through the baroque

and bizarre world of federal finance and procurement.

Solutions to these problems exist. They have been tested in

local governments, in state governments, even in the federal

government. Essentially, they involve budget systems with fewer

line items, more authority for managers to move money among line

items, and freedom for agencies to keep some or all of what they

save--thus minimizing the incentive for year-end spending sprees.

Typically, federal organizations experimenting with such

budgets have found that they can achieve better productivity,

sometimes with less money.

During an experiment at Oregon's Ochoco National Forest in

the 1980s, when dozens of accounts were reduced to six,

productivity jumped 25 percent the first year and 35 percent more

the second. A 1991 Forest Service study indicated that the

experiment had succeeded in bringing gains in efficiency,

productivity, and morale, but had failed to provide the Forest

Service region with a mechanism for complying with congressional

intent. After 3 years of negotiations, Washington and Region 6,

where the Ochoco Forest is located, couldn't agree. The region

wanted to retain the initial emphasis on performance goals and

targets so forest managers could shift money from one account to

another if they met performance goals and targets. Washington

argued that Congress would not regard such targets as a serious

measure of congressional intent. The experiment ended in March


When the Defense Department allowed several military bases

to experiment with what was called the Unified Budget Test, base

commanders estimated that they could accomplish their missions

with up to 10 percent less money. If this experience could be

applied to the entire government, it could mean huge savings.

Beginning with their fiscal year 1995 submissions to OMB,

departments and agencies will begin consolidating accounts to

minimize restrictions and manage more effectively. They will

radically cut the number of allotments used to subdivide

accounts. In addition, they will consider using the Defense

Department's Unified Budget plan, which permits shifts in funds

between allotments and cost categories to help accomplish


OMB will simplify the apportionment process, which

hamstrings agencies by dividing their funding into amounts that

are available, bit by bit, according to specified time periods,

activities, or projects. Agencies often don't get their funding

on time and, after they do, must fill out reams of paperwork to

show that they adhered to apportionment guidelines. OMB will also

expedite the "reprogramming" process, by which agencies can move

funds within congressionally appropriated accounts. Currently,

OMB and congressional subcommittees approve all such

reprogrammings. OMB should automatically approve reprogramming

unless it objects within a set period, such as five days.

While understandable in some cases, such earmarks hamper

agencies that seek to manage programs efficiently. Agencies

should work with appropriations subcommittees on this problem.

Action: OMB and agencies will stop using full-time equivalent

ceilings, managing and budgeting instead with ceilings on

operating costs to control spending.18

In another effort to control spending, both the executive

and legislative branches often limit the number of each agency's

employees by using full-time equivalent (FTE) limits. When

agencies prepare their budget estimates, they must state how many

FTEs they need in addition to how many dollars. Then, each

department or agency divides that number into a ceiling for each

bureau, division, branch, or other unit. Congress occasionally

complicates the situation by legislating FTE floors.

Federal managers often cite FTE controls as the single most

oppressive restriction on their ability to manage. Under the

existing system, FTE controls are the only way to make good on

the President's commitment to reduce the federal bureaucracy by

100,000 positions through attrition. But as we redesign the

government for greater accountability, we need to use budgets,

rather than FTE controls, to drive our downsizing. FTE ceilings

are usually imposed independently of--and often conflict

with--budget allocations. They are frequently arbitrary, rarely

account for changing circumstances, and are normally imposed as

across-the-board percentage cuts in FTEs for all of an agency's

units- -regardless of changing circumstances. Organizations that

face new regulations or a greater workload don't get new FTE

ceilings. Consequently, they must contract out work that could be

done better and cheaper in-house. One manager at Vice President

Gore's meeting with foreign affairs community employees at the

State Department in May 1993 offered an example: his FTE limit

had forced him to contract out for a junior programmer for the

Foreign Service Institute. As it turned out, the programmer's

hourly rate equaled the Institute Director's, so the move cost

money instead of saving it.

The President should direct OMB and agency heads to stop

setting FTE ceilings in fiscal year 1995.

For this transition, the agencies' accounting systems will

have to separate true operating costs from program and other

costs. Some agencies already have such systems in place; others

must develop financial management systems to allow them to

calculate these costs. We address this issue in a separate

recommendation in chapter 3.

This recommendation fully supports the President's

commitment to maintain a reduced federal workforce. Instead of

controlling the size of the federal workforce by employment

ceilings--which cause inefficiencies and distortions in managers'

personnel and resource allocation decisions--this new system will

control the federal workforce by dollars available in operating


Action: Minimize congressional restrictions such as line items,

earmarks, and eliminate FTE floors.19

Congress should also minimize the restrictions and earmarks

that it imposes on agencies. With virtually all federal spending

under scrutiny for future cuts, Congress is increasingly applying

earmarks to ensure that funding flows to favored programs and

hometown projects.

Imagine the surprise of Interior Secretary Bruce Babbitt,

who a few months after taking office discovered that he was under

orders from Congress to maintain 23 positions in the

Wilkes-Barre, Pennsylvania, field office of his department's

anthracite reclamation program. Or that his department was

required to spend $100,000 to train beagles in Hawaii to sniff

out brown tree snakes. Edward Derwinski, former secretary of

Veteran Affairs, was once summoned before the Texas congressional

delegation to explain his plan to eliminate 38 jobs in that


Action: Allow agencies to roll over 50 percent of what they do

not spend on internal operations during a fiscal year.21

As part of its 13 fiscal year 1995 appropriations bills,

Congress should permanently allow agencies to roll over 50

percent of unobligated year-end balances in all appropriations

for operations. It should allow agencies to use up to 2 percent

of rolled-over funds to finance bonuses for employees involved.

This approach, which the Defense Department and Forest Service

have used successfully, would reward employees for finding more

productive ways to work. Moreover, it would create incentives to

save the taxpayers' money.

Shared savings incentives work. In 1989, the General

Accounting Office (GAO) discovered that the Veterans

Administration had not recovered $223 million in health payments

from third parties, such as insurers. Congress then changed the

rules, allowing the VA to hire more staff to keep up with the

paperwork and also to keep a portion of recovered third-party

payments for administrative costs. VA recoveries soared from $24

million to $530 million.22

If incentives to save are to be real, Congress and OMB will

have to refrain from automatically cutting agencies' budgets by

the amount they have saved when they next budget is prepared.

Policy decisions to cut spending are one thing; automatic cuts to

take back savings are quite another. They simply confirm

managers' fears that they will be penalized for saving money.

Agencies' chief financial officers should intervene in the budget

process to ensure that this does not happen.

Step 2: Decentralizing Personnel Policy

Our federal personnel system has been evolving for more than

100 years--ever since the 1881 assassination of President James

  1. Garfield by a disappointed job seeker. And during that time,

according to a 1988 Office of Personnel Management publication:

...anecdotal mistakes prompted additional rules. When the

rules led to new inequities, even more rules were added.

Over time...a maze of regulations and requirements was

created, hamstringing managers...often impeding federal

managers and employees from achieving their missions and

from giving the public a high quality of service.

Year after year, layer after layer, the rules have piled up.

The U.S. Merit Systems Protection Board reports there are now 850

pages of federal personnel law--augmented by 1,300 pages of OPM

regulations on how to implement those laws and another 10,000

pages of guidelines from the Federal Personnel Manual.


Our federal personnel system ought to place a value on

experience. That's not always the case. Consider the story of

Rosalie Tapia. Ten years ago, fresh from high school, she joined

the Army and was assigned to Germany as a clerk. She served out

her enlistment with an excellent record, landed a job in Germany

as a civilian secretary for the Army, and worked her way up to

assistant to the division chief. When the Cold War ended, Tapia

wanted to return to the U.S. and transfer to a government job

here. Unfortunately, one of the dictates contained in the

government's 10,000 pages of personnel rules says that an

employee hired as a civil servant overseas is not considered a

government employee once on home soil. Any smart employer would

prefer to hire an experienced worker with an excellent service

record over an unknown. But our government's policy doesn't make

it easy. Ironically, Tapia landed a job with a government

contractor, making more money-- and probably costing taxpayers

more-- than a job in the bureaucracy would have paid.

On one topic alone--how to complete a standard form for a

notice of a personnel action- -the Federal Personnel Manual

contains 900 pages of instructions. The full stack of personnel

laws, regulations, directives, case law and departmental guidance

that the Agriculture Department uses weighs 1,088 pounds.

Thousands of pages of personnel rules prompt thousands of

pages of personnel forms. In 1991, for example, the Navy's Human

Resources Office processed enough forms to create a "monument"

3,100 feet tall--six times the height of the Washington monument.

Costs to the taxpayer for this personnel quagmire are enormous.

In total, 54,000 personnel work in federal personnel positions.23

We spend billions of dollars for these staff to classify each

employee within a highly complex system of some 459 job series,

15 grades and 10 steps within each grade.

Does this elaborate system work? No.

After surveying managers, supervisors and personnel officers

in a number of federal agencies, the U.S. Merit Systems

Protection Board recently concluded that federal personnel rules

are too complex, too prescriptive, and often counterproductive.

Talk to a federal manager for 10 minutes: You likely will

hear at least one personnel horror story. The system is so

complex and rule-bound that most managers cannot even advise an

applicant how to get a federal job. "Even when the public sector

finds outstanding candidates," In 1989, Paul Volcker's National

Commission on the Public Service explained, "the complexity of

the hiring process often drives all but the most dedicated away."

Managers who find it nearly impossible to hire the people they

need sometimes flaunt the system by hiring people as consultants

at higher rates than those same people would earn as federal

employees. The average manager needs a year to fire an

incompetent employee, even with solid proof. During layoffs,

employees slated to be laid off can "bump" employees with less

seniority, regardless of their abilities or performance--putting

people in jobs they don't understand and never wanted.

Vice President Gore heard many stories of dissatisfaction as

he listened to federal workers at meetings in their agencies. A

supervisor at the Centers for Disease Control complained that it

can take six to eight months and as many as 15 revisions to a job

description in order to get approval for a position he needs to

fill. A secretary from the Justice Department told the Vice

President she was discouraged and overworked in an office where

some secretaries were slacking off--with no system in place to

reward the hard workers and take action against the slackers.

A worker from the Agency for International Development

expressed her frustration at being so narrowly "slotted" in a

particular GS series that she wasn't allowed to apply for a job

in a slightly different GS series --even though she was qualified

for the job. An Air Force lieutenant colonel told the vice

president that her secretary was abandoning government for the

private sector because she was blocked from any more promotions

in her current job series. The loss would be enormous, the

colonel told Gore, because her secretary was her "right-hand

person". One of the Labor Department's regional directors for

unemployment insurance complained that even though he is charged

with running a multimillion a year program, he isn't allowed to

hire a $45,000-a-year program specialist without getting approval

from Washington.

To create an effective federal government, we must reform

virtually the entire personnel system: recruitment, hiring,

classification, promotion, pay, and reward systems. We must make

it easier for federal managers to hire the workers they need, to

reward those who do good work, and to fire those who do not. As

the National Academy of Public Administration concluded in 1993,

"It is not a question of whether the federal government should

change how it manages its human resources. It must change."

Action: OPM will deregulate personnel policy by phasing out the

10,000-page Federal Personnel Manual and all agency implementing


We must enable all managers to pursue their missions, freed

from the cumbersome red tape of current personnel rules. The

President should issue a directive phasing out the Federal

Personnel Manual and all agency implementing directives. The

order will require that most personnel management authority be

delegated to agencies' line managers at the lowest level

practical in each agency. It will direct OPM to work with

agencies to determine which FPM chapters, provisions, or

supplements are essential, which are useful, and which are

unnecessary. OPM will then replace the FPM and agency directives

with manuals tailored to user needs, automated personnel

processes, and electronic decision support systems.

Once some of the paperwork burden is eased, our next

priority must be to give agency managers more control over who

comes to work for them. To accomplish this, we propose to

radically decentralize the government's hiring process.

Action: Give all departments and agencies authority to conduct

their own recruiting and examining for all positions, and abolish

all central registers and standard application forms.25

We will ask Congress to pass legislation decentralizing

authority over recruitment, hiring, and promotion. Under the

present system, OPM controls the examination system for external

candidates and recruits and screens candidates for positions that

are common to all agencies, with agencies then hiring from among

candidates presented by OPM. Under the new system, OPM could

offer to screen candidates for agencies, but agencies need not

accept OPM's offer.

Under this decentralized system, agencies will also be

allowed to make their own decisions about when to hire candidates

directly--without examinations or rankings - -under guidelines to

be drafted by OPM. Agencies able to do so should also be

permitted to conduct their own background investigations of

potential candidates. We will make sure the system is fair and

easy for job applicants to use, however, by making information

about federal job openings available in one place. In place of a

central register, OPM will create a government-wide, employment

information system that allows the public to go to one place for

information about all job opportunities in the federal


First, we must cut the waste and make government operations more

responsive to the American people. It is time to shift from

top-down bureaucracy to entrepreneurial government that generates

change from the bottom up. We must reward the people and ideas

that work and get rid of those that don't.

President Bill Clinton

February 17, 1993

Next, we must change the classification system, introduced

in 1949 to create fairness across agencies but now widely

regarded as time-consuming, expensive, cumbersome, and intensely

frustrating--for both workers and managers.

After an exhaustive 1991 study of the system, the National

Academy of Public Administration recommended a complete overhaul

of the system. Classification standards, NAPA argued, are "too

complex, inflexible, out-of-date, and inaccurate," creating

"rigid job hierarchies that cannot change with organizational

structure." They drive some of the best employees out of their

fields of expertise and into management positions, for higher

pay. And managers seeking to create new positions often fight the

system for months to get them classified and filled.26

There is strong evidence that agencies given authority to do

these things themselves can do better. Using demonstration

authority under the 1978 Civil Service Reform Act, several

agencies have experimented with simpler systems. In one

experiment, at the Naval Weapons Center in China Lake,

California, and the Naval Oceans Systems Center, in San Diego,

the system was simplified to a few career paths and only

four-to-six broad pay bands within each path. Known as the "China

Lake Experiment," it solved many of the problems faced by the two

naval facilities. It:

ù classified all jobs in just five career

paths--professional, technical, specialist, administrative and


ù folded all GS (General Schedule) grades into four, five,

or six pay bands within each career path;

ù allowed managers to pay market salaries to recruit people,

to increase the pay of outstanding employees without having to

reclassify them, and to give performance-based bonuses and salary


ù automatically moved employees with repeated marginal

performance evaluations down to the next pay band; and

ù limited bumping to one career path, and based it primarily

on performance ratings, not seniority.

Another demonstration at McClellan Air Force Base, in

Sacramento, California, involved "gainsharing"--allowing

employees to pocket some of the savings they achieved through

cooperative labor-management efforts to cut costs. It generated

$5 million in productivity savings in four years and saw improved

employee performance; fewer grievances; less sick leave and

absenteeism; and improved labor-management relations.

A third demonstration at more than 200 Agriculture

Department sites tested a streamlined, agency-based recruiting

and hiring system that replaced OPM's register process. Under

OPM's system, candidates are arrayed and scored based on OPM's

written tests or other examinations. In USDA's demonstration,

however, the agency grouped candidates by its own criteria, such

as education, experience or ability, then picked from those

candidates. A candidate might qualify for a job, for example,

with a 2.7 college grade point average. Agencies could create

their own recruitment incentives, do their own hiring, and extend

the probationary period for some new hires. Managers were far

more satisfied with this system than the existing one.

Action: Dramatically simplify the current classification system,

to give agencies greater flexibility in how they classify and pay

their employees.27

We will urge Congress to remove all the 1940s-era

grade-level descriptions from the law and adopt an approach that

is more modern. In addition, Congress should allow agencies to

move from the General Schedule system to a broad-band system. OPM

should develop such standard banding patterns, and agencies

should be free to adopt one without seeking OPM's approval.

When agency proposals do not fit under a standard pattern,

OPM should approve them as five-year demonstration projects that

would be converted to permanent "alternative systems" if

successful. OPM should establish criteria for broad-banding

demonstration projects, and agencies' projects meeting those

criteria should receive automatic approval.

These changes would give agencies greater flexibility to

hire, retain, and promote the best people they find. They would

help agencies flatten their hierarchies and promote high

achievers without having to make them supervisors. They would

eliminate much valuable time now lost to battles between managers

seeking to promote or reward employees and personnel specialists

administering a classification system with rigid limits. Finally,

they would remove OPM from its role as "classification police."

To accompany agencies' new flexibility on classification and pay,

they must also be given authority to set standards for their own

workers and to reward those who do well.

Action: Agencies should be allowed to design their own

performance management and reward systems, with the objective of

improving the performance of individuals and organizations. 28

The current government performance appraisal process is

frequently criticized as a meaningless exercise in which most

federal employees are given above-average ratings. We believe

that agencies will be able to develop performance appraisals that

are more meaningful to their employees. If they succeed, these

new approaches will send a message that job performance is

directly linked to workers' chances for promotion and higher pay.

Current systems to assess on-the-job performance were

designed to serve multiple purposes: to enhance performance, to

authorize higher pay for high performers, to retain high

performers, and to promote staff development. Not surprisingly,

they serve none of these purposes well.

Performance management programs should have a single goal:

to improve the performance of individuals and organizations.

Agencies should be allowed to develop programs that meet their

needs and reflect their cultures, including incentive programs,

gainsharing programs, and awards that link pay and performance.

If agencies--in cooperation with employees--design their own

systems, managers and employees alike should feel more ownership

of them.

Finally, if performance measures are to be taken seriously,

managers must have authority to fire workers who do not measure

up. It is possible to fire a poor worker in the federal

government, but it takes far too long. We believe this undermines

good management and diminishes workers' incentives to improve.

Action: Reduce by half the time required to terminate federal

managers and employees for cause and improve the system for

dealing with poor performers.29

Agencies will reduce the time for terminating employees for

cause by half. For example, agencies could halve the length of

time during which managers and employees with unsatisfactory

performance ratings are allowed to demonstrate improved


To support this effort, we will ask OPM to draft and

Congress to pass legislation to change the required time for

notice of termination from 30 to 15 days. This legislation should

also require the waiting period for a within-grade increase to be

extended by the amount of time an employee's performance does not

meet expectations. In other words, only the time that an employee

is doing satisfactory work should be credited toward the required

waiting period for a pay raise.

Step 3: Streamlining Procurement

Every year, Washington spends about $200 billion buying

goods and services. That's $800 per American. With a price tag

like that, taxpayers have a right t Our system relies on rigid

rules and procedures, extensive paperwork, detailed design

specifications, and multiple inspections and audits. It is an

extraordinary example of bureaucratic red tape.ore pages of

agency-specific supplements.

These numbers document what most federal workers and many

taxpayers already know: Our system relies on rigid rules and

procedures, extensive paperwork, detailed design specifications,

and multiple inspections and audits. It is an extraordinary

example of bureaucratic red tape.

Like the budget and personnel systems, the procurement

system was designed with the best of intentions. To prevent

profiteering and fraud, it includes rigid safeguards. To take

advantage of bulk purchasing, it is highly centralized. But the

government wrote its procurement rules when retailing was highly

stratified, with many markups by intermediaries. Today the game

has changed considerably. Retail giants like Wal-Mart, Office

Depot and Price Club are vertically integrated, eliminating the

markups of intermediaries. Federal managers can buy 90 percent of

what they need over the phone, from mail-order discounters. Bulk

purchasing still has its advantages, but it is not always

necessary to get the best price.

Our overly centralized purchasing system takes decisions

away from managers who know what they need, and allows

strangers--often thousands of miles away--to make purchasing

decisions. The frequent result: Procurement officers, who make

their own decisions about what to buy and how soon to buy it,

purchase low-quality items, or even the wrong ones, that arrive

too late.

This "secondhand" approach to purchasing creates another

problem. When line managers' needs and experiences are not

understood by the procurement officer, the government is unable

to make decisions that reward good vendors and punish bad ones.

As a result, vendors often "game" contracts--exploiting loopholes

to require expensive changes. For example, in a major government

contract for a computerized data network a few years ago, a

vendor used slight underestimates of system demand in the

contract specifications as an excuse to charge exorbitant prices

for system upgrades. In the private sector, a manager could have

used the incentive of future contracts to prevent such gaming; in

the government, there is no such leverage.

The symptoms of what's wrong are apparent, too, from stories

about small purchases.

One story that Vice President Gore has repeated in

Washington over the past six months concerns steam traps. Steam

traps remove condensation from steam lines in heating systems.

Each costs about $100. But when one breaks, it leaks as much as

$50 of steam a week. Obviously, a leaking steam trap should be

replaced quickly.

When plumbers at the Sacramento Army Depot found leaking

traps, however, their manager followed standard operating

procedure. He called the procurement office, where an officer,

who knew nothing about steam traps, followed common practice. He

waited for enough orders to buy in bulk, saving the government

about $10 per trap. There was no rule requiring him to wait--

just a powerful tradition. So the Sacramento Depot didn't get new

steam traps for a year. In the meantime, each of their leaking

traps spewed $2,500 of steam. To save $10, the central

procurement system wasted $2,500.

As the Vice President visited government agencies, he heard

many more stories of wasteful spending--most of them produced by

the very rules we have designed to prevent it. Take the case of

government travel.

Because GSA selects a "contract airline" for each route,

federal employees have few choices. If Northwest has the

Washington-Tampa route, for instance, federal employees get

routed through Detroit. If Northwest has the Boston-Washington

route, employees have to use Northwest--even if USAir has more

frequent flights at more convenient times. Workers told the Vice

President of being routed through thousands of miles out of their

way even if it cost them a day's worth of time--and a day's worth

of taxpayers' money. Others told of being unable to take

advantage of cheap "special fares" because they were not

"government fares." And one worker showed the National

Performance Review a memo from the Resolution Trust Corporation

explaining that RTC workers would not be reimbursed for any

travel expenses unless they signed their travel vouchers in blue


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

Our federal procurement system leaves little to chance.

When the General Services Administration wanted to buy ashtrays,

it has some very specific ideas how those ashtrays--better known

to GSA as "ash receivers, tobacco (desk type)," should be


In March 1993, the GSA outlined, in nine full pages of

specifications and drawings, the precise dimensions, color,

polish and markings required for simple glass ashtrays that would

pass U.S. government standards.

A Type I, glass, square, 41/2 inch (114.3 mm) ash receiver

must include several features: "A minimum of four cigarette

rests, spaced equidistant around the periphery and aimed at the

center of the receiver, molded into the top. The cigarette rests

shall be sloped toward the center of the ash receiver. The rests

shall be parallel to the outside top edge of the receiver or in

each corner, at the manufacturer's option. All surfaces shall be


Government ashtrays must be sturdy too. To guard against the

purchase of defective ash receivers, the GSA required that all

ashtrays be tested. "The test shall be made by placing the

specimen on its base upon a solid support (a 1 3/4 inch, 44.5mm

maple plank), placing a steel center punch (point ground to a

60-degree included angle) in contact with the center of the

inside surface of the bottom and striking with a hammer in

successive blows of increasing severity until breakage occurs."

Then, according to paragraph 4.5.2., "The specimen should break

into a small number of irregular shaped pieces not greater in

number than 35, and it must not dice." What does "dice" mean? The

paragraph goes on to explain: "Any piece 1/4 inch (6.4 mm) or

more on any three of its adjacent edges (excluding the thickness

dimension) shall be included in the number counted. Smaller

fragments shall not be counted."

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

Beyond travel, at every federal agency the Vice President

visited, employees told stories about not getting supplies and

equipment they needed, getting them late, or watching the

government spend too much for them. At the Department of Health

and Human Services, a worker told the Vice President that no

matter how much his office needed a FAX machine--and how much

time the machine would save workers--the purchase wouldn't be

possible "without the signature of everyone in this room." An

engineer from the National Institutes of Health added that in his

agency, it takes more than a year to buy a computer, not a

mainframe, but a personal computer! At the Transportation

Department, a hearing-impaired employee told the Vice President

of watching with dismay as her agency spent $600 to buy her a

Telephone Device for the Deaf (TDD), when she knew she could buy

one off the shelf for $300.

Anecdotes like these were documented in January 1993, when

the Office of Federal Procurement Policy and the U.S. Merit

Systems Protection Board collaborated on a survey of the

procurement system's customers: federal managers. More than 1,000

responded. Their message: The system is not achieving what its

customers want. It ignores its customers' needs, pays higher

prices than necessary, is filled with peripheral objectives, and

assumes that line managers cannot be trusted. A study by the

Center for Strategic and International Studies added several

other conclusions. The procurement system adds costs without

adding value; it impedes government's access to state-of-the-art

commercial technology; and its complexity forces businesses to

alter standard procedures and raise prices when dealing with the


There is little disagreement that federal procurement must

be reconfigured. We must radically decentralize authority to line

managers, letting them buy much of what they need. We must

radically simplify procurement regulations and processes. We

must empower the system's customers by ending most government

service monopolies, including those of the General Services

Administration. As we detailed in Chapter 1, we must make the

system competitive by allowing managers to use any procurement

office that meets their needs.

As we take these actions, we must embrace these fundamental

principles: integrity, accountability, professionalism, openness,

competition--and value.

Action: Simplify the procurement process by rewriting federal

regulations--shifting from rigid rules to guiding principles.32

The Federal Acquisition Regulation (FAR), the government's

principal set of procurement regulations, contains too many

rules. Rules are changed too often and are so process-oriented

that they minimize discretion and stifle innovation, according to

a Merit Systems Protection Board survey.33 As one frustrated

manager noted, the FAR does not even clearly state the main goal

of procurement policy: "Is it to avoid waste, fraud, and abuse?

Is it to implement a social-economic agenda? Is it to procure the

government's requirements at a fair and reasonable cost?"

This administration will rewrite the 1,600-page FAR, the

2,900 pages of agency supplements that accompany it, and

Executive Order 12352, which governs federal procurement. The new

regulations will:

ù shift from rigid rules to guiding principles;

ù promote decision making at the lowest possible level;

ù end unnecessary regulatory requirements;

ù foster competitiveness and commercial practices;

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

ù facilitate innovative contracting approaches; and

ù recommend acquisition methods that reflect information

technology's short life cycle.

ù develop a more effective process to listen to its

customers: line managers, government procurement officers and

vendors who do business with the government.

Action: The GSA will significantly increase its delegated

authority to federal agencies for the purchase of information

technology, including hardware, software, and services.34

In 1965, when "automated data processing" meant large,

mainframe computers --often developed specifically for one

customer--Congress passed the Brooks Act. It directed GSA to

purchase, lease, and maintain such equipment for the entire

federal government. The Act also gave GSA authority to delegate

to agencies these same authorities. In 1986, Congress extended

the requirement to software and support services.

Today, with most computer equipment commercially available

in highly competitive markets, the advantages of centralized

purchasing have faded and the disadvantages grown. The federal

government takes, on average, more than four years to buy major

information technology systems; the private sector takes 13

months. Due to rapidly changing technology, the government often

buys computers that are state-of-the-art when the purchase

process begins and when prices are negotiated, but which are

almost obsolete when computers are delivered. The phenomenon is

what one observer calls "getting a 286 at a 486 price."

Currently, the GSA authorizes agencies to make individual

purchases up to $2.5 million in equipment and services on their

own. The GSA Administrator will raise authorization levels to $50

million, $20 million and $5 million. These levels will be

calculated according to each agency's size, the size of its

information technology budget, and its management record. In some

cases, GSA may grant an agency greater or unlimited delegation.

GSA will also waive requirements that agencies justify their

decisions to buy information technology items under $500,000 that

are mass-produced and offered on the open market.

Action: GSA will simplify the procurement process by allowing

agencies to buy where they want, and testing a fully "electronic

marketplace." 35

The government buys everything from forklifts and snowplows

to flak jackets and test tubes through a system called the

Multiple Award Schedule program, which includes more than one

million separate items.

Under this program, GSA negotiates and awards contracts to

multiple vendors of comparable products and services, at varying

prices. GSA then creates a "supply schedule" for a particular

good or service, identifying all vendors that have won contracts

as well as the negotiated prices. Of GSA's 154 schedules,

civilian agencies must must buy from 117. In ordering from

schedules, agencies still must comply--in addition- -with the

Federal Acquisition Regulation, Federal Information Resources

Management Regulation, and Federal Property Management


In most cases, we should not limit managers to items on the

supply schedules. If they can find the same or a comparable

product for less, they should be free to buy it. Mandatory

schedules should apply only when required by law, to ensure

standardization, or when agencies voluntarily create team pools

that buy in bulk for lower prices. In addition, GSA should revise

regulations that currently limit agencies from buying more than

$300,000 of information technology items on supply schedules,

raise them to $500,000 and provide a higher limit for individual

items costing more than $500,000.

To make supply schedules more user-friendly, GSA should

conduct several pilot tests. One should test an "electronic

marketplace," in which GSA would not negotiate prices. Instead,

suppliers would list products and prices electronically, and

agencies would electronically order the lowest-priced item that

met their needs. Suppliers, at any time, would be able to add new

products and change prices. Such a pilot would test whether

visible price competition will cut prices and give line managers

easier access to rapidly changing products.

Action: Allow agencies to make purchases under $100,000 through

simplified purchase procedures.36

Under current law, agencies are allowed to make purchases of

less than $25,000 on their own, using simple procurement

procedures. These small purchases, on average, take less than a

month to complete; purchases of more than $25,000 normally take

more than three months. If Congress raised the threshold to

$100,000, agencies could use simplified procedures on another

45,550 procurements--with a total value of $2.5 billion.

Congress should keep current rules that reserve small

purchases for small businesses and should improve access to

information on procurements of more than $25,000. To ensure that

small business receives adequate notice of possible procurements,

the federal government, with OMB as the lead agency, should adopt

an electronic notification system.

Action: Rely more on the commercial marketplace.37

The government can save enormous amounts of money by buying

more commercial products instead of requiring products to be

designed to government-unique specifications. Our government buys

such items as integrated circuits, pillows, and oil pans,

designed to government specifications--even when there are

equally good commercial products available.

We recommend that all agency heads be instructed to review

and revise internal purchasing procedures and rules to allow

their agencies to buy commercial products whenever practical and

to take advantage of market conditions. We will ask the Office of

Management and Budget to draft a new federal commercial code with

commercial-style procedures, and then ask Congress to adopt the

new code and remove impediments to this money-saving approach to


Action: Bring federal procurement laws up to date.38

There are four federal labor laws implemented through the

federal procurement process. Each was passed because of valid and

well founded concerns about the welfare of working Americans. But

as part of our effort to make the government's procurement

process work more efficiently, we must consider whether those

laws are still necessary- -and whether the burdens they impose on

the procurement system are reasonable ones.

The Davis-Bacon Act of 1931 requires that each repair or

construction contract in excess of $2,000 for work on a public

building specify that the prevailing area minimum wage be paid to

workers on that contract. The law was passed because Congress

feared that without it, federal contracts awarded through a

sealed bid process could undermine local prevailing wages. While

Congress shifted the government's focus to an open bidding

process in 1984, we acknowledge that concerns about the impact of

government contracts on prevailing wages are still valid.

Recognizing that the original $2,000 threshold in the law

was set more than 60 years ago, we recommend that Congress modify

the Davis-Bacon Act by raising the threshold for compliance to

$100,000, a change similar to that proposed by Senator Kennedy in

March 1993.

The Service Contract Act of 1965 has purposes similar to

those of the Davis-Bacon Act, and applies to service contracts in

excess of $2,500. It requires contractors to pay the minimum

prevailing wage and specified fringe benefits. To keep

contractors from "locking in" their wage agreements at low

levels, the law imposes a five-year limit on service contracts

and requires new wage determinations every two years.

We suggest that the five-year limit is inconsistent with the

government's interest in entering into long-range contracts. We

will urge Congress to increase the limit up to 10 years while

retaining the two-year wage adjustment requirement.

The Copeland Anti-Kickback Act of 1934 regulates payroll

deductions on federal and federally assisted construction. The

law prohibits anyone from inducing employees to give up any part

of their compensation and requires contractors to submit weekly

statements of compliance and detailed weekly payroll reports to

the Labor Department.

We suggest that such detailed reporting is an unreasonable

burden on federal contractors, and we will urge Congress to

modify the act. We suggest eliminating requirements for weekly

reports and requiring contractors instead to certify with each

payment that they have complied with the law. Contractors would

also be required to keep records to prove their compliance for

three years.

The Walsh-Healey Public Contracts Act requires contractors

that supply materials to the federal government through contracts

in excess of $10,000 to pay all workers the federal minimum wage,

to agree that no employee is required to work more than 40 hours

a week, and to avoid using convict labor or workers under the age

of 16.

Over time, each of the requirements of the Walsh-Healey

Act--with the exception of the provision relating to convict

labor--has been superseded by other federal legislation. We

therefore urge Congress to remove the burden of certifying

compliance with redundant laws from federal contractors. Within

30 days of the repeal of that law, the President should amend

Executive Order 11755 to include the convict labor provisions of

the Walsh-Healey Act.

Step 4: --Reorienting The Inspectors General

Responding to growing concern about waste, fraud, and abuse

in government, Congress passed the Inspector General Act in 1978.

This act and subsequent amendments created the 60 Inspectors

General offices that today employ 15,000 federal workers,

including postal inspectors.

The act was broad in scope, requiring IGs to promote the

efficiency, economy and integrity of federal programs with

auditing program expenditures, and investigating possible fraud

and abuse.

The inspectors general, who are independent of the agencies

in which they operate, report to Congress twice a year. These

reports detail how much money IG audits have recovered or put to

better use and the number of convictions resulting from their

criminal investigations. The IGs also send the audit reports to

the heads of their agencies and forward investigations for

criminal prosecution to the U.S. attorney general. The Inspector

General Act's two central mandates, combined with the last two

administrations' eagerness to highlight "waste, fraud and abuse,"

have shaped the evolution of the IG offices. The standard by

which they are evaluated is finding error or fraud: The more

frequently they find mistakes, the more successful they are

judged to be. As a result, the IG staffs often develop

adversarial relations with agency managers--who, in trying to do

things better, may break rules.

At virtually every agency he visited, the Vice President

heard federal employees complain that the IGs' basic approach

inhibits innovation and risk taking. Heavy-handed

enforcement--with the IG watchfulness compelling employees to

follow every rule, document every decision, and fill out every

form--has had a negative effect in some agencies.

Action: Broaden the focus of the Inspectors General from strict

compliance auditing to evaluating management control systems.39

In a government focused on results, the Inspectors General

can play a key role not only in controlling managers' behavior by

monitoring it, but in helping to improve it. Today, they audit

for strict compliance with rules and regulations. In the future,

they should help managers evaluate their management control

systems. Today, they look for "waste, fraud, and abuse." In the

future, they should also help improve systems to prevent waste,

fraud and abuse, and ensure efficient, effective service.

Many IGs have already begun to help their agencies this way.

At the Justice Department, for example some offices were

inefficient in completing background and security clearances. The

Inspector General's office examined the problem, then recommended

setting up a central database to manage the clearance process and

warn officials automatically when they are about to miss

deadlines for completing investigations. Similarly, the Inspector

General of the Department of Health and Human Services has long

been engaged in program evaluations to help agencies uncover

inefficiencies. While the Inspector General's office retains the

right to conduct formal audits and criminal investigations, it

also uses its role as a neutral observer to collaborate on making

programs work better.

Congress need pass no legislation to make this happen.

Promoting the efficiency and integrity of government programs was

part of the IGs' original mandate. But such change will require a

cultural revolution within many IG offices, and we recommend two

steps to help guide such a change. First-line managers, who are

the IG front-line customers, should be surveyed periodically to

see whether they believe the IGs are helping them improve

performance. Second, criteria should be established for judging

IG performance.

Step 5: Eliminating Regulatory Overkill

Reinventing our budget, personnel and procurement systems

will strip away much--but not all--of the red tape that makes our

governing processes so cumbersome. Thousands upon thousands of

outdated, overlapping regulations remain in place. These

regulations affect the people inside government and those who

deal with it from the outside. Inside government, we have no

precise measurement of how much regulation costs or how much time

it steals from productive work. But there's no disagreement that

the costs are enormous. And on the matter of external regulation,

a 1993 study concluded that the cost to the private sector of

complying with regulations is at least $430 billion annually-- 9

percent of our gross domestic product! 40

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

Wernher von Braun

We must clear the thicket of regulation by undertaking a

thorough review of the regulations already in place and

redesigning regulatory processes to end the proliferation of

unnecessary and unproductive rules. We have worked closely with

administration officials responsible for developing a new

approach to regulatory review, and incorporated that work into

the following action.

Action: The President should issue a directive requiring all

federal agencies to review internal government regulations over

the next 3 years, with a goal of eliminating 50 percent of those


Can regulations be eliminated? The answer is yes, as

evidenced by promising experiments in several federal agencies.

In the Management Efficiency Pilot Program (MEPP) in five of the

Department of Veterans' Affairs regional benefits offices, the

offices were encouraged to do away with red tape.42 At several

benefits offices, 895 of 1,969 regulations were dropped, saving

the staff more than 3,000 hours and $640,000 in one year. And

productivity at MEPP centers increased by 35 percent in one year

(1988-89), more than double the increase at other centers. A

similar effort by five VA medical centers redirected $13.1

million to much-needed funding for acute care centers.

An even more sweeping example of a fresh start in internal

regulations comes from the Air Force, where the chief of staff

has established a servicewide program to streamline the

organization and cut out bureaucracy. Under the Policy Review

Initiative begun in 1992, the Air Force is replacing 1,510

regulations with 165 policy directives and 750 sets of

instructions. This effort will cut 55,000 pages of intermingled

policy and procedure to about 18,000 pages clearly separating

policy from procedure. This deregulation effort, managed by a

staff of 10, is expected to be completed in fiscal year 1994.

Over the next 3 years, each federal agency will undertake a

thorough and systematic review of its internal regulations.

Agencies may choose their own strategies for reaching the goal of

reducing internal regulations by 50 percent.

Action: Improve inter-agency coordination of regulations to

reduce unnecessary regulation and red tape.43

In 1981, frustrated at the inconsistencies and duplication

among federal regulatory efforts and their burden on government

and the private sector, President Reagan required the Office of

Management and Budget specifically, the Office of Information and

Regulatory Affairs (OIRA) to review all regulations proposed by

executive agencies.

With a limited staff, many of whom are also involved with

paperwork reduction issues, the review process for proposed

regulations can be lengthy. And while a lengthy review process

may be appropriate for significant rules, it is a waste of time

for others. In early 1993, Vice President Gore convened an

informal working group to recommend changes in the regulatory

review process. The working group and the National Performance

Review coordinated their efforts closely. We endorse the

recommendations of the working group and the President's

executive order, which will implement those changes and

streamline the regulatory review process.

The order will enhance the planning process and encourage

agencies to consult with the public early in that process. In

addition, in an effort to coordinate the regulatory actions of

all executive agencies, the Vice President will meet annually

with agency heads, and the Administrator of OIRA will hold

quarterly meetings with representatives of executive agencies and

the administration.

Improving the regulatory review process also means being

selective in reviewing regulations. Through this order, the

President will instruct OIRA to review only significant

regulations--not, as under the current process, all regulations.

The new review process, which will take into account a broad

range of costs and benefits, will be more useful and realistic.

To ease the adverse effects of regulation on citizens,

businesses, and the economy as a whole, the executive order also

will require an ongoing review of existing regulations. Agencies

will identify regulations that are cumulative, obsolete, or

inconsistent, and, where appropriate, eliminate or modify them.

They will also identify legislative mandates that require them to

impose unnecessary or outdated regulations.

Action: Establish a process by which agencies can more widely

obtain waivers from regulations.44

With the advent of the Government Performance and Results

Act, which Congress passed in July 1993, we have begun to

acknowledge the important principle of "flexibility in return for


Under the act, some agencies may apply for waivers from

federal regulations if they meet specific performance targets. In

other words, they will be exempt from some administrative

requirements if they do their jobs better. The law applies only

to internal regulations and government agencies, but it also

urges wider waivers authority to test the potential benefits. In

the spirit of that legislation, we seek to expand the concept of

greater flexibility for greater accountability.

The President should direct each federal agency to establish

and publish,in a timely manner, an open process through which

other federal agencies can obtain waivers from that agency's

regulations--with an expedited appeals process. Rules adopting

this new waiver process would state that all future agency

regula-tions would be subject to the waiver process unless

explicitly prohibited. We will also ask Congress to specify that

legislation would be subject to waivers unless explicitly


Action: Reduce the burden of congressionally mandated reports.45

Woodrow Wilson was right. Our country's 28th president once

wrote that "there is no distincter tendency in congressional

history than the tendency to subject even the details of

administration" to constant congressional supervision. One place

to start in liberating agencies from congressional

micromanagement is the issue of reporting requirements. Over the

past decades, we have thrown layer upon layer of reporting

requirements on federal agencies, creating an almost endless

series of required audits, reports, and exhibits.

Today the annual calendar is jammed with report deadlines.

On August 31 of each year, the Chief Financial Officers (CFO) Act

requires that agencies file a 5-year financial plan and a CFO

annual report. On September 1, budget exhibits for financial

management activities and high risk areas are due. On November

30, IG reports are expected, along with reports required by the

Prompt Payment Act. On January 31, reports under the Federal

Civil Penalties Inflation Report Adjustment Act of 1990 come due.

On March 31, financial state-ments are due and on May 1 annual

single-audit reports must be filed. On May 31 another round of IG

reports are due. At the end of July and December, "high-risk"

reports are filed. On August 31, it all begins again. And these

are just the major reports!

In fiscal year 1993, Congress required executive branch

agencies to prepare 5,348 reports.46 Much of this work is

duplicative. And because there are so many different sources of

information, no one gets an integrated view of an agency's

condition--least of all the agency manager who needs accurate and

up to date numbers. Meanwhile, trapped in this blizzard of

paperwork, no one is looking at results. We propose to

consolidate and simplify reporting requirements, and to redesign

them so that the manager will have a clear picture of the

agency's financial condition, the condition of individual

programs, and the extent to which the agency is meeting its

objectives. We will ask Congress to pass legislation granting OMB

the flexibility to consolidate and simplify statutory reports and

establishing a sunset provision in any reporting requirements

adopted by Congress in the future.

Step 6: --Empower State and Local Governments

What we usually call "government" is, in fact, a tangle of

different levels of government agencies--some run from

Washington, some in state capitals, and some by cities and towns.

In the United States, in fact, some 80,000 "governments" run

everything from local schools and water supply systems to the

Defense Department and overseas embassies. Few taxpayers

differentiate among levels of government, however to the average

citizen, a tax is a tax--and a service a service--regardless of

which level of government is responsible. To reinvent government

in the public's eyes, we must address the web of

federal-state-local relations.

Washington provides about 16 percent of the money that

states and localities spend and shapes a much larger share of

such spending through mandates. Much of Washington's domestic

agenda, $226 billion to be precise, consists of programs actually

run by states, cities, and counties. But the federal government

doesn't always distribute its money--or its mandates--wisely.

For starters, Washington allocates federal money through an

array of more than 600 different grant programs. Many are small:

445 of them distribute less than $50 million a year nationwide;

some 275 distribute less than $10 million. Through grants,

Congress funds some 150 education and training programs, 100

social service programs, and more than 80 health care programs.

Considered individually, many categorical grant programs

make sense. But together, they often work against the very

purposes for which they were established. When a department

operates small grant programs, it produces more bureaucracy, not

more services. Thousands of public employees--at all levels of

government--spend millions of hours writing regulations, writing

and reviewing grant applications, filling out forms, checking on

each other, and avoiding oversight. In this way, professionals

and bureaucrats siphon money from the programs' intended

customers: students, the poor urban residents and others. And

states, and local governments find their money fragmented into

hundreds of tiny pots, each with different, often contradictory

rules, procedures, and program requirements.

Were we directed from Washington when to sow and when to reap, we

should soon want for bread.

Thomas Jefferson


Henry Cisneros, Secretary of Housing and Urban Development,

likens federal grants to a system of pipelines spreading out

across the country. The "water," says Cisneros, reaches states

and localities through hundreds of individual pipelines. This

means there is little chance for the water to be mixed, properly

calibrated to local needs, or concentrated to address a specific

problem, geographic area, or population.

In employment and training, for example, Washington funds

training programs, literacy programs, adult education programs,

tuition grant programs, and vocational education programs.

Different programs are designed for different groups--welfare

recipients, food stamp recipients, displaced homemakers, youth in

school, drop-outs, "dislocated workers," workers displaced by

foreign trade, and on and on.

At a plant in Pittsfield, Massachusetts, General Electric

recently laid off a large group of workers. Some workers could

get Trade Adjustment Assistance benefits, because their jobs were

lost to foreign competition. Others could not; their jobs fell to

defense cutbacks. Because they have a union, people working in

one area began exercising their seniority rights and bumping

people in other areas. Some workers bumped from trade-affected

jobs to defense contracting jobs, then lost those a few weeks

later. Under federal regulations, they could no longer get Trade

Adjustment Assistance. Thus, friends who had spent years working

side by side found themselves with very different benefits. Some

got the standard 6 months of unemployment checks. Others got 2

years of unemployment checks and extensive retraining support.

Try explaining that to people who have lost the only jobs they've

ever held!

People who run such programs struggle to knit together funds

from three, four, or five programs, hoping against hope that

workers get enough retraining to land decent new jobs. But the

task is difficult; each program has its own requirements, funding

cycles, eligibility criteria, and the like. One employment center

in Allegheny County, New York, has tried hard to bring several

programs together and make them appear as seamless as possible to

the customers. At the end of the day, to accommodate reporting

requirements, the staff enters information on each customer at

four different computer terminals: one for Job Training

Partnership Act (JTPA) programs, one for the JOBS program, one

for the Employment Service, and one for tracking purposes.

When Congress enacted JTPA, it sought to avoid such

problems. It let local areas tailor their training programs to

local needs. But federal rules and regulations have gradually

undermined the good intentions. Title III, known as the Economic

Dislocation and Worker Adjustment Assistance Act (EDWAA), helps

states respond immediately to plant closings and large layoffs.

Yet even EDWAA's most flexible money, the "national reserve

fund," has become so tangled in red tape that many states won't

use it. As Congress's Office of Technology Assessment put it,

"the process is simply too obstacle ridden. ... many state EDWAA

managers cannot handle the complexities of the grant application,

and those that do know how are too busy responding to clients'

urgent needs to write demanding, detailed grant proposals."

When Congress amended JTPA in 1993, targeting more funds to

those with "multiple barriers" to employment, homeless advocates

thought the change would help their clients. After all, who has

more barriers to employment than someone without an address or

phone number? But the new JTPA formula also emphasized training

over job search assistance. So a local program in Washington,

D.C. that had won a Labor Department award for placing 70 percent

of its clients in jobs--many of them service sector jobs paying

more than the minimum wage--lost its JTPA funding. Why? It didn't

offer training. It just helped the homeless find jobs.47

But federal programs rarely focus on results. As structured

by Congress, they pay more attention to process than outcomes--in

this case, more to training than to jobs. Even in auditing state

and local programs, federal overseers often do little more than

check to see whether proper forms are filed in proper folders.

The rules and regulations behind federal grant programs were

designed with the best of intentions--to ensure that funds flow

for the purposes Congress intended. Instead, they often ensure

that programs don't work as well as they could--or don't work at


Virtually every expert with whom we spoke agreed that this

system is fundamentally broken. No one argued for marginal or

incremental change. Everyone wants dramatic change--state and

local officials, federal managers, congressional staff. As in

managing its own affairs, the federal government must shift the

basic paradigm it uses in managing state and local affairs. It

must stop holding programs accountable for process and begin

holding them accountable for results.

ù The task is daunting; it will take years to accomplish. We

propose several significant steps on the journey:

ù Establish a Cabinet-level Enterprise Board to oversee new

initiatives in community empowerment;

ù Cut the number of unfunded mandates that Washington


ù Consolidate 55 categorical grants into broader "flexible


ù Increase state and local flexibility in using the

remaining categorical grants;

ù Let all agencies waive rules and regulations when they

conflict with results; and

ù Deregulate the public housing program.

The likely benefits are clear: administrative savings at all

levels; greater flexibility to design solutions; more effective

concentration of limited resources; and programs that work for

their customers.

Action: The President should establish a Cabinet-level Enterprise

Board to oversee new initiatives in community empowerment.48

The federal government needs to better organize itself to

improve the way it works with states and localities. The

President should immediately establish a working group of

cabinet-level officials, with leadership from the Vice President,

the Domestic Policy Council, and the National Economic Council.

The Board will look for ways to empower innovative

communities by reducing red tape and regulation on federal

programs. This group will be committed to solutions that respect

"bottom-up" initiatives rather than "top-down" requirements. It

will focus on the administration's community empowerment agenda,

beginning with the 9 Empowerment Zones and 95 Enterprise

Communities that passed Congress as part of the President's

economic plan.

Sometimes we need to start out with a blank slate and say, "hey,

we've been doing this for the last 40, 50 years. It doesn't

work." Let's throw out everything, clear out minds...Let's have

as a goal doing the right thing for the right reasons, even if it

entails taking risks.

Vincent Lane, Chairman, Chicago Housing Authority, Reinventing

Government Summit Philadelphia, June 25, 1993

In participating communities, for example, federal programs

could be consolidated and planning requirements could be

simplified; waivers would be granted to assure maximum

flexibility; federal funding cycles would be synchronized; and

surplus federal properties could be designated for community use.

Action: The President should issue a directive limiting the use

of unfunded mandates by the administration.49

As the federal deficit mounted in the 1980s, Congress found

it more and more difficult to spend new money. Instead, it often

turned to "unfunded mandates"-- passing laws for the states and

localities to follow, but giving them little or no money to

implement those policies. As of December 1992, there were at

least 172 separate pieces of federal legislation in force that

imposed requirements on state and local governments. Many of

these, such as clean water standards and increased public access

for disabled citizens, are unquestionably noble goals.

But the question remains: How will state and local

governments pay to meet those goals? We recommend that Congress

refrain from this practice and that the President's directive

establish that the executive branch will similarly limit its use

of unfunded mandates in policies, legislative proposals and


The directive would narrow the circumstances under which

departments and agencies could impose new unfunded burdens on

other governments. It also would direct federal agencies to

review their existing regulations and reduce the number of

mandates that interfere with effective service delivery. OMB's

Office of Information and Regulatory Affairs (OIRA) should review

all major regulations or legislation proposed by the executive

branch for possible adverse impacts on states and localities.

Finally, OIRA's director should create a forum in which federal,

state, and local officials could develop solutions to problems

involving unfunded mandates.

Action: Consolidate 55 categorical grant programs with funding of

$12.9 billion into six broad "flexible grants"--in job training,

education, water quality, defense conversion, environmental

management, and motor carrier safety.50

This proposal came from the National Governors Association

(NGA) and National Conference of State Legislatures (NCSL), which

describe it as "a first step toward broader, more ambitious

reforms." It would consolidate some 20 education, employment and

training programs, with a combined $5.5 billion in fiscal year

1993 spending; roughly 10 other education programs ($1.6

billion); 10 small environmental programs ($392 million); six

water quality programs ($2.66 billion); and six defense

conversion programs ($460 million).

How Much Do You Get for a 1983 Toyota?

What does the price of a used car have to do with the

federal government's family policies?

More than it should. Caseworkers employed by state and local

government to work with poor families are supposed to help those

families become self-sufficient. Their job is to understand how

federal programs work. But as it turns out, those caseworkers

also have to know something about used cars. Used cars? That's

right. Consider this example, recounted to Vice President Gore at

a July 1993 Progressive Foundation conference on family policy in

Nashville, Tennessee:

Agencies administering any of the federal government's

programs for the poor must verify many details about people's

lives. For instance, they must verify that a family receiving

funds under Aid to Families with Dependent Children (AFDC) does

not own a car worth more than $1,500 in equity value. To give a

poor family food stamps, it must verify that the family doesn't

own a car worth more than $4,500 in market value. Medicaid

specifies a range that it allows for the value of a recipient's

car, depending on the recipient's Medicaid category. But under

food stamp rules, the car is exempt if it is used for work or

training or transporting a disabled person. And under AFDC, there

is no exemption for the car under any circumstances.

Recounting that story to a meeting of the nation's governors,

the vice president asked this simple question: "Why can't we talk

about the same car in all three programs?"

Action: Congress should allow states and localities to

consolidate separate grant programs from the bottom up.51

Recognizing the political and administrative obstacles to

wholesale reform of more than 600 existing categorical grants in

the short term, the National Performance Review focused on an

innovative solution to provide flexibility and to encourage

result-oriented performance at the state and local levels.

Our proposal calls for Congress to authorize "bottom-up"

grant consolidation initiatives. Localities would have authority

to mix funding from different programs, with simple notification

to Washington, when combining grants smaller than $10 million

each. For a consolidation involving any program funded at more

than $10 million, the federal awarding office (and state, if

applicable), would have to approve it before implementation. In

return for such consolidation, the state and local governments

will waive all but one of the programs' administrative payments

from the federal government.

When different grants' regulations conflict, the

consolidating agency would select which to follow. States and

localities that demonstrated effective service integration

through consolidation would receive preference in future grant

awards. Each of the partners in the intergovernmental system must

work collaboratively with others--federal, state, and local--to

refine this recommendation.

The details of this proposal will be negotiated with

important state and local organizations, such as the NGA, the

NCSL, U.S. Conference of Mayors, and the National League of

Cities, before legislation is drafted. Bottom-up consolidation

will be given a high priority by the administration. It

represents a way to improve state and local performance without

tackling the thorny political problem involved in consolidating

600 grant programs, reconciling thousands of rules and

regulations, and anticipating every possible instance when

flexibility might be necessary. It puts the burden of identifying

obstacles and designing the best solution where it belongs--on

those who must make the programs work.

Action: Give all cabinet secretaries and agency heads authority

to grant states and localities selective waivers from federal

regulations or mandates.52

The National Performance Review is not intended to be the final

word on reinventing government but rather a first step. This long

overdue effort will require continuing commitment from the very

top to truly change the way government does business.

U.S. Rep. John Conyers (D. Mich.)

August 28, 1993

For federal grant programs to work, managers must have

flexibility to waive rules that get in the way. Some departments

have this authority; others don't. Federal decisions on most

waivers come very slowly, and states often must apply to a

half-dozen agencies to get the waivers they need. Florida, for

example, has a two-year waiver allowing it to provide hospice

care to AIDS patients under Medicaid. Its renewal takes 18

months. So state officials have to reapply after only six months.

Waiver legislation should grant broad waiver authority, with the

exception of fair housing, non-discrimination, environmental, and

labor standards. We will ask Congress to grant such authority to

Cabinet officers. These waivers, should be granted under limited

circumstances, however. They must be time-limited and designed to

include performance measures. When each experiment is concluded,

the granting agency should decide whether the new way of doing

things should be included in standard practice.

Action: Give control of public housing to local public housing

authorities with histories of excellent management and

substantially deregulate the rest.53

Public housing is a classic story of good intentions gone

awry. When the program began in the 1930s, it was hailed as an

enlightened response to European immigrants' squalid living

conditions in cities across the country. Through an enormous

bureaucracy stretching from Washington into virtually every city

in America, the public housing program brought clean, safe,

inexpensive living quarters to people who could not afford them


Now, however, public housing is even more troubled than our

categorical grant programs. With its tight, centralized control,

it epitomizes the industrial-era program: hierarchical,

rule-bound, and bureaucratic. HUD's Washington, regional, and

local offices rigidly control local public housing authorities,

who struggle to help the very poor. Frustrated by the failure of

public housing, innovative state and local governments began to

experiment with new models of developing, designing, financing,

managing, and owning low-income housing. Successful efforts

tailored the housing to the characteristics of the surrounding

community. Local public housing authorities began to work with

local governments and non-profit organizations to create

innovative new models to serve low-income people.

HUD recognizes that local authorities with proven records of

excellence can serve their customers far better if allowed to

make their own decisions. We and the secretary recommend that

Congress give HUD authority to create demonstration projects in

which local housing authorities would continue to receive

operating subsidies as long as they met a series of performance

targets, but would be free from other HUD control. Individual

demonstrations could vary, but all federal rules would be open

for waivers as long as HUD could measure performance in providing

long-term, affordable housing to those poor enough to be eligible

for public housing.

In addition, HUD should work closely with local housing

authorities, their national organizations, public housing tenant

organizations, and state and local officials to eliminate

unnecessary rules, requirements, procedures, and regulations. In

particular, HUD should replace its detailed procurement and

operating manuals and design and site selection requirements with

performance measures, using annual ranking of local housing

authorities to encourage better service and greater

accountability. It should eliminate the annual budget review, an

exercise in which HUD field staff spend thousands of hours

reviewing and approving detailed budgets from local housing

authorities --even though the reviews do not influence federal

funding decisions. And it should work with Congress to change

current rent rules, which create strong incentives for people to

move from public housing as soon as they find jobs. Conclusion


The changes described above are ambitious. They will take

enormous effort and enormous will. It will be many years before

all of them take root. But if they succeed, the American people

will have a government capable of attacking their problems with

far more energy, and far less waste, than they can today imagine.

We must move quickly because the bureaucracy, by its nature,

resists change. As Tom Peters wrote in Thriving on Chaos, "Good

intentions and brilliant proposals will be dead-ended, delayed,

sabotaged, massaged to death, or reversed beyond recognition or

usefulness by the overlayered structures...."54

But the changes we propose will produce their own momentum

to overcome bureaucratic resistance. As the red tape is being

cut, federal workers will become more and more impatient with the

red tape that remains. They will resist any reversal of the

process. And they will be strengthened in their resistance by the

steps we propose in the next chapters.