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Office of the Press Secretary

For Immediate Release October 7, 1998

"We're going to dramatically change the way many agencies provide their services. Today, I'm proposing to create within existing departments something we call "Performance-based Organizations." . . . These PBOs would be run by chief executives who sign contracts and will be personally accountable for delivering results. . . Their pay and job security will be tied directly to performance."

--Vice President Gore, National Press Club, March 4, 1996

The Higher Education Amendments of 1998 establish a performance-based organization (PBO) to modernize the delivery of student financial aid. This is an historic milestone in the Administration's efforts to improve services to millions of students and the postsecondary institutions they attend. The PBO will make it possible to meet these challenges and to keep pace with the rapid rate of technological change in the financial services industry. Customer service will improve, and the public's confidence in the administration of student aid programs will grow.

Context for Change. Under the leadership of Vice President Gore, the National Partnership for Reinventing Government developed model legislation for establishing PBOs in federal offices. The new HEA law is the first legislation to formally establish a PBO in the federal government. During the past 15 years, numerous state, local and foreign governments have implemented similar performance-based models to improve services and reduce costs.

Reinventing for Results. A PBO -- a results-driven organization created to deliver the best possible services -- is a new way of getting things done in the public sector. It establishes incentives for high performance and accountability for results, while allowing more flexibility to promote innovation and increased efficiency.

Specifically, the PBO will be held accountable for performance objectives that include: improving customer satisfaction; providing high quality, cost-effective services; enhancing the ability to respond to the rapid rate of technological change; implementing a common, open, integrated system for student financial aid delivery; and providing complete, accurate and timely data to ensure program integrity.

Establishing New Flexibility and Accountability. The new HEA law that creates the PBO includes the following major provisions:

Leadership. The PBO will be led by a chief operating officer (COO) with a strong background in information technology and management, who is employed through a performance-based contract and reports directly to the Secretary of Education.

Procurement flexibility. The PBO will have increased flexibility in procurement, with an emphasis on performance-based contracting.

Management and personnel flexibility. The PBO will have new flexibility in personnel management, including hiring and evaluating senior managers, and recruiting technical personnel.

Accountability for results. The COO and employees of the PBO will have specific, measurable performance goals, ensuring accountability for defined results.

The Secretary of Education will continue to be responsible for setting federal student aid policy.

The PBO will complement and strengthen reinvention initiatives already underway within the Department of Education, including Project EASI (Easy Access for Students and Institutions). Modernization is aimed at reducing student loan defaults, increasing use of the Internet and electronic applications for student aid, and better integrating computer systems to administer student aid.