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IX. Government Reform

To meet the challenges and opportunities of a global marketplace, American businesses have had to radically restructure. Corporations have moved from centralized organizations to decentralized ones, from made-to-stock production to made-to-order, from mass standardization to mass customization.

Many State and local governments have also changed, but the Federal Government needs to increase the pace of change as well. The structure of the Federal Government was in large part developed more than 50 years ago and no longer meets the needs of today's citizens. This structure was designed so that stock solutions would flow from Washington along carefully established bureaucratic hierarchies. The result is a Federal Government today that is both insensitive and expensive.

True Government reform must be based on a reexamination of the role of the Federal Government. The President has called for "active, but limited" Government: one that empowers States, cities, and citizens to make decisions; ensures results through accountability; and promotes innovation through competition. Thus, if reform is to help the Federal Government adapt to a rapidly changing world, its primary objectives must be a Government that is:

Making Government Citizen-Centered

Flatten the Federal Hierarchy: The first priority of the President's Government reform initiatives is to make Government citizen-centered. This means ensuring that there is as little distance as possible between citizens and decision-makers. In an effort to get closer to the customer, American businesses have increasingly replaced old, hierarchical organizations with flatter, more entrepreneurial ones. To shrink the distance between citizens and Cabinet members, the Administration will flatten the Federal hierarchy, reduce the number of layers in the upper echelon of Government, and use work force planning to help agencies redistribute higher-level positions to front-line, service delivery positions that interact with citizens. These actions should make the Federal Government more nimble and responsive.

Use the Internet to Create a Citizen-Centric Government: The explosive growth of the Internet has transformed the relationship between customers and businesses. It is also transforming the relationship between citizens and Government. By enabling individuals to penetrate the Federal bureaucracy to access information and transact business, the Internet promises to shift power from a handful of leaders in Washington to individual citizens. The President believes that providing access to information and services is only the first step in e-Government. In order to make Government truly "citizen-centered," agencies will have to work together to consolidate similar functions around the needs of citizens and businesses. Citizen-centered Government will use the Internet to bring about transformational change: agencies will conduct transactions with the public along secure web-enabled systems that use portals to link common applications and protect privacy, which will give citizens the ability to go online and interact with their Government—and with their State and local governments that provide similar information and services—around citizen preferences and not agency boundaries.

Create an E-Government Fund: The budget provides $10 million in 2002 as the first installment of a fund that will grow to a total of $100 million over three years to support interagency electronic Government (e-gov) initiatives. OMB would control the allocation of the fund to support information technology (IT) projects in the e-gov arena.

Projects that operate across agency boundaries will build off the foundation of essential building blocks, including:, the online information portal that provides 24 hours a day/seven days a week access to all Government online information, searchable by topic rather than by agency; and the development of a Public Key Infrastructure to implement digital signatures that are accepted across agencies for secure online communications.

The fund would also further the Administration's ability to implement the Government Paperwork Elimination Act of 1998, which calls upon agencies to provide the public with optional use and acceptance of electronic information, services and signatures, when practicable, by October 2003. In recent years, funding for interagency e-gov initiatives has been obtained, as authorized by law, by passing the hat among agencies to support activities of interagency councils. The e-gov fund would supplement the "pass the hat" funds and accelerate the improvements this Administration will make on IT spending within agencies through capital planning, to provide for interagency e-gov innovation.

Making Government Results-Oriented

Link Budget and Management Decisions to Performance: In addition to making Government more citizen-centered, reform must also make it more results-oriented. This requires establishing accountability systems that allow citizens to judge whether effective performance is taking place. It also is time that funds flow to programs that work—not those that are ineffective or have completed their mission. Government must be results-oriented—guided not by process, but by performance. There comes a time when programs must be judged by how well they achieve their purpose. Where we find success, we should reward it, and make it the standard. Government action that fails in its purpose must be reformed or ended. Congress created a good framework with the Government Performance and Results Act and the Chief Financial Officers Act, which can help us determine program success. The Results Act requires agencies to set performance goals and measure their actual results—a way for the public to determine whether they are accomplishing their stated missions. But setting goals and measuring their achievement is only a start. As stewards of the public purse, we must do more to show how funding levels relate to performance levels.

To date, the Government's progress in linking budgets and performance has been slow. Bringing about a much better linkage will be a priority of this Administration. As a first step, department and agency heads have been directed to ensure that their 2002 performance plans, which will be submitted to Congress in April, also include performance goals for Presidential initiatives and for Government-wide and agency-specific reform proposals. Making good on those promises—not just making those promises—will be the standard of this Administration.

Ensure Financial Accountability: The President believes that Government must ensure a basic level of financial accountability that is expected of any company in the private sector. He is holding agency heads accountable for obtaining and maintaining unqualified or "clean" opinions on their agencies' annual financial statement audits. More than 60 percent of agencies currently receive "clean" opinions; heads of the agencies without clean opinions are expected to attack vigorously the long-standing difficulties and record-keeping deficiencies that prevent clean opinions.

Reduce Erroneous Payments to Beneficiaries and Other Recipients of Government Funds: Financial accountability also requires assurance that Federal funds are being used for their intended purpose and not being distributed due to error. The General Accounting Office identified $19.1 billion in erroneous payments made last year, and noted that the amount could be considerably larger. The President will direct agency heads to develop more rigorous controls to ensure that Federal funds reach their intended recipients at the correct time and in the proper amount. Further, he will promote the use of recovery audits and other steps to ensure that overpayments are avoided or returned to the Government.

Use Capital Planning to Improve Performance: In addition, agencies invest more than $40 billion in IT to support some 26,000 information systems. Technology now affects virtually every aspect of the way the Government operates, and IT investments are extremely important to the success of e-Government and transforming the delivery of information and services. Agencies will use capital planning and investment control to promote security and privacy in the use of technology and guide the results of this investment, and ultimately for ensuring results from other capital assets as well. The Government can thus achieve outcomes from IT investments that match agency strategic priorities and provide real benefits for the American people.

Eliminate Duplicative and Ineffective Programs: The Federal Government spends billions of dollars on programs that are obsolete, ineffective, or better performed by the private sector. In addition to obsolete programs, there are many overlapping or duplicative programs and agencies. The Administration will seek to redeploy resources from old priorities to make room for new Administration priorities by reducing or eliminating funding for programs that have completed their mission or that are redundant, ineffective, or obsolete.

Expand the Use of Performance-Based Contracts: Because of expanding missions and declining staff, agencies are increasingly relying on outside contractors. The Federal Government spends roughly $110 billion a year in service contracts. The increase in the amount and type of contracting creates the opportunity and the necessity to move toward performance-based contracting—where the focus is on the results to be achieved, rather than the manner in which the work is performed or the "effort" involved. Agencies will convert Federal service contracts to performance-based contracts wherever possible, saving an estimated $8.3 billion over five years.

Incorporate Successful Private Sector Reforms Throughout the Federal Workforce: The current civil service system does not do all it should to reward achievement and encourage excellence. It also limits the ability of agency heads to compete successfully for high-skilled senior talent. The Administration will look for opportunities to incorporate successful private sector reforms throughout the Federal work force.

Making Government Market-Based

Make e-Procurement the Government-Wide Standard: Businesses are experiencing significant cost savings by shifting their procurement to the Internet. Savings are derived from reduced transaction-processing costs, more efficient inventory management, and greater competition from vendors lowering prices. In an effort to lower costs and utilize market-based solutions wherever possible, agencies will move to paperless contracting processes in which information from one step of the process is automatically fed to the next step in the process, eliminating the need to re-enter data. Procurement data will be linked to financial systems, making the payment process both faster and more accurate; disposal of excess Government property will become more effective. Agencies will also expand use of "share-in-savings" approaches, in which market incentives reward contractors who can retain a portion of any savings that result from innovation.

Open Government Activities to Competition: Opening Government functions to competition to the fullest extent possible is the best way to ensure market-based pricing and encourage innovation, while saving the taxpayers an estimate $14 billion over five years. Since 1998, agencies have been required to inventory their activities that are commercial in nature—that is functions that are not "so intimately related to the public interest as to require performance by Federal Government employees." In the past, agencies have found that when competitive bidding is employed, they experience average savings of 30 percent when a private contractor wins, and 20 percent when the pubic sector wins. Consequently, for these activities, agencies will use an open, competitive process (considering both public and private bidders) to choose the providers. The competitive process will be studied so that it can be streamlined.

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