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Office of the Press Secretary

For Immediate Release October 13, 1994
                         BACKGROUND BRIEFING

The Briefing Room

12:08 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL: (IN PROGRESS) and then government systems reforms of systems that crossed all branches, all agencies of the government. So today we celebrate the first signing of systemic reform.

I will open it up to questions, and I have my colleagues from OMB and from the Defense Department.

Q Did you say exactly how those small purchases -- walk us through the steps -- the $2,500 K-Mart purchases, I call them, and so forth?

SENIOR ADMINISTRATION OFFICIAL: The intention is that a lot of those purchases will be delegated -- right now, they have to go through a requisition process and then through the procurement bureaucracy -- in other words, a program office says we want to buy X -- to go through the procurement bureaucracy. We want to take that step out of the loop so that the program people, within their budgets, can buy these things directly and the law takes away some of the statutory impediments that make it so complicated to do that that no program office is willing to do it, or it's harder to make program offices willing to do it.

Q If you buy it directly, does that mean there will be no bidding?

SENIOR ADMINISTRATION OFFICIAL: On under $2,500 purchases, the previous law already says if it's under $2,500, as long as the price is fair and reasonable, you don't need to get competitive bids. These program offices are working within very tight budgets because of the tight budget ceilings.

We assume that they will work to go to places like Office Depot, Staples, the inexpensive places to make their budgets go as far as they can.

Q I understand -- I work for talk radio. This came up as a question this morning. They want to know, like, what happens -- Joe or Sally procurement person wants to buy a $2,000 something or other, where they want to go to Staples and buy 40 office pads. How does that work? I want to know the steps.

SENIOR ADMINISTRATION OFFICIAL: Under the new system -- under the new system they would have budget authority from their budget office, they have a budget limitation in their program. It's not a procurement person, it's the people who are actually doing the line work. Let's say a forest ranger's out in the national forest. That forest ranger station would have a budget for getting small things for the office or for the station. And they would simply decide within our budget, this is what we want to get, or this is what we need for the office. And somebody in the office with approval from one step above -- you know, a higher manager within the office -- would go out and get those things.

Generally using a commercially-available procurement card or purchase card, which saves additional red tape and additional administrative expenses.

Q Would the government get a discount with the card?

SENIOR ADMINISTRATION OFFICIAL: Yes, government gets a rebate on theses cards, on the Visa.

SENIOR ADMINISTRATION OFFICIAL: And there's no charge for the individual cards. The contract has gone -- has improved over the years, so that right now, the individual card costs the government nothing. There's not like an annual $50 fee or anything. And we're now in the new contract getting a small rebate on purchases.

Q Is there a reasonable -- the employee?

SENIOR ADMINISTRATION OFFICIAL: There are a lot of different mechanisms and ways of doing business once we start to implement this that we haven't even begun to think about. For example, right now in the Department of Defense, every office has their own administrative supply organization.

Q Every office?

SENIOR ADMINISTRATION OFFICIAL: Every organization, internally, that has their own budget has their own supply organization. Now, we will have instead, the opportunity to abolish the supply organizations and remove all that overhead, all of those personnels. This just opens up so many opportunities for us to rethink the way we do business that we haven't even begun to imagine yet how far we can take this. But it reduces inventory.

The government's not going to go out and buy supplies. We can simply order it. As my colleague mentioned, we can perhaps execute several contracts with the biggest supply depots in the country and then require 24-hour response time; whereas, right now, we in DOD -- I can't even make slides today because our supply organizations are out of mylar film, and the funding hasn't been given out yet for this fiscal year. So we have no option other than to pay for it out of our own pocket in order to make briefing charts.

Q Ma'am, what would we do if we were out at a base out here, many miles from Washington, and we go and buy from the local small businesspeople or --



SENIOR ADMINISTRATION OFFICIAL: That would be the intention and -- well, go ahead.

SENIOR ADMINISTRATION OFFICIAL: No, I was just going to say that what's going on here is very similar to what's going on when private corporations re-engineer themselves. I read recently, for example, that Intel, the big computer company, microprocessor company, was finding that they were spending $70 and $80 per transaction in internal bureaucratic expenses within Intel, often to do with transaction of $10 or $15 or $20. We found the same thing in the federal government and we're trying to remove the bureaucracy in the same way that's being done as private corporations re-engineer themselves.

Q plan to have in the hands of the federal employees?

SENIOR ADMINISTRATION OFFICIAL: I don't think we have any numbers now. Right now, we are running about 2 million transactions a year running a year out of the 12 million purchases under $2,500 using these cards. I think the intention is that an appropriate manager or designated official in program offices will be empowered as a representative for the office to make those purchases. Again, every purchase would have to be approved by one level up within the organization.

Q there's already visas being used?


Q You have no idea, though, how much more widespread this is going to be?

SENIOR ADMINISTRATION OFFICIAL: We suspect -- I mean, I think probably a good guess is, within two or three years we'll be doing maybe 50 percent of the transactions under $2,500 using this way.

Q Have you looked at other government bodies, like other states, including states as small as Arkansas that have used these credit cards that have run into widespread problems with abuse, and actually taking credit cards out of hands -- a large number --

SENIOR ADMINISTRATION OFFICIAL: We have experience within the federal government using these cards. They've been out since 1988, and the evidence is that -- when you have 2 million transactions, obviously you're going to have some isolated cases of abuse and, certainly, if somebody abuses the card, not only will the card be taken away from them, they're likely to be disciplined or to lose their job.

But the big picture is that every time we make a transaction in this way, for each transaction, we're saving about $54 on average in the government. So that's the big picture. We have the possibility on these 12 million under-$2,500 purchases to be saving $50 per transaction; that's the big picture here.

Q So, getting the big picture, wasn't this whole bureaucracy put in place over a series of years in part to cut down on fraud and abuse? Doesn't this -- in a way, this seems just so simple, such an easy fix that we're going to end up five years from now looking back and saying, my God, they've been stealing us blind?

SENIOR ADMINISTRATION OFFICIAL: No, there is definitely -- there are actually two different parts of the process. One is the part of the process to ensure that when you make a purchase or you order something that you are ordering something that is appropriate and appropriately priced. Then the other half of the process is, how do you go about purchasing once you've decided how to do that. And as I've said, what we've done is we've created our own supply organizations within the agencies; and what we're saying is that, let's cut out the middle man. We're not going to get rid of the oversight and review; there's no reason to unless we can figure out a better way to do it. But what we're trying to is cut out the middle men in between. And just as we now do a paper transaction and justify every purchase in terms of substance, we would continue to do that.

SENIOR ADMINISTRATION OFFICIAL: Listen, I mean, when you move from a paper process to an electronic process, you don't sacrifice any accountability. You still have a complete record of what was bought, when it was bought, how much it cost, who bought it, et cetera. So if somebody is trying to -- in other words, this doesn't make it any easier to -- for people to abuse the system. You've got exactly -- you've got a very, very good record. It makes it cheaper. And the majority of the people in the system, okay, are, in fact, honest, hard-working people; they're not stealing the government and were spending too much on the old system. But you still have -- I mean, you still have in place everything you need to catch somebody who's doing something wrong.

Q What's going to be in the new system to give incentive or require these front-line managers with these cards to buy the cheapest and most effective hammer or the cheapest toilet seat, instead of just running out and buying whatever easiest to get a hold of? Is that system still --

SENIOR ADMINISTRATION OFFICIAL: Yes, I mean, look, they have a limited budget. They have very, very -- I mean, look, everybody in the government has very limited budgets, particularly for things like this. The operating budgets in the government are generally distinct from the program budgets and they're very limited. Employees are under the obligation to go get the best price for whatever they're buying. Your budget basically is your limit on, you know, will keep people from behaving outrageously. And if people do, you'll be able to find out who they are, when they did it, etc., and take appropriate steps.

Q Does this just apply for purchasing goods or is it purchasing goods and services?

SENIOR ADMINISTRATION OFFICIAL: It's goods and services under --

Q services under $2,500, but --

SENIOR ADMINISTRATION OFFICIAL: Yes, it's mostly goods. You know --

Q This bill doesn't just apply for things that -- the whole bill, I mean --

SENIOR ADMINISTRATION OFFICIAL: No. The whole thing, the whole bill applies to services as well as goods.

Q How much money is the Defense Department going to save out of this bill, overall?

SENIOR ADMINISTRATION OFFICIAL: We have not done a calculation of how much we're going to save overall. We have attempted to avoid doing that until we're able to re-engineer our business processes, and we can ascertain for certain how much we're going to save. There are people who have speculated as to how much we might save.

Q Is there a ballpark figure?

SENIOR ADMINISTRATION OFFICIAL: I don't remember any off the top of my head.

SENIOR ADMINISTRATION OFFICIAL: One of the problems with trying to come up with procurement savings is that the total procurement dollars are falling at a faster rate than people anticipated because of the downsizing of the government. So, we made an estimate in last year's report, but that was based on the $200 billion a year in procurement, which, even in 1993, came down, I think, to $188 billion, to a lot of people's surprise, and is dropping. So, we think in any event it's significant, but the base is also dropping.

Q I want to make sure I wrote it down right. Did you say government-wide, we now make 12 million purchases of under $2,500?

SENIOR ADMINISTRATION OFFICIAL: That's a ballpark number. That's correct.

Q You estimate, then, those are the purchases that could be made with the Visa card?


Q Is there anything we need to know about the Executive Order the President signed this morning?


Q I haven't seen it yet.

SENIOR ADMINISTRATION OFFICIAL: Haven't seen it yet. It basically replaces an earlier Executive Order of -- sort of overall mission statement for the procurement system and sets a mission -- procurement system in terms of improving the value of the procurement system delivers the taxpayer and more program customers who in turn are doing the taxpayers' work. So it tries to orient the procurement system towards the needs of the program customers and the taxpayers whom they serve.

I was going to say, just following this event over in the Old Executive Office Building 450, there's going to be -- 26 agencies and four industry associations will be signing a voluntary pledge -- you mentioned services before -- piloting a new, improved method for service contracting in the federal government that's an example of Executive Branch, nonlegislative initiatives that are going on in procurement reform, and anyone from the media who would like to join us over there, I'm headed over there when we leave.

THE PRESS: Thank you.

END12:24 P.M. EDT