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February 4, 1999

Chairman Horn and Members of the Subcommittee: I appreciate the invitation to appear today before the House Management, Information and Technology Subcommittee to discuss the creation of a separate Office of Federal Management (OFM).

The prospects for improving government management have been strengthened substantially by three initiatives. First, balancing the budget has forced us to look at how, and how well, programs are operating. As the President has explained:
"We made a decision that was profoundly important, that the way Government works matters, that we could not maintain the confidence of the American people and we could not have ideas that delivered unless the Government was functioning in a sensible, modern, and prudent way."

To enable programs to continue to operate at current levels and to have a surplus that is available to fix Social Security, it is necessary to exert tight fiscal discipline which requires even better management. It is interesting to note that the focus on improved management in the private sector has been spurred, to a large extent, by similar external pressures - in that case, competition both domestic and foreign.

Second, the implementation of the Government Performance and Results Act (GPRA) has given us a process for introducing and expanding the use of performance information into the decision-making process, particularly the resource allocation process in the preparation and execution of the Budget. One of my highest priorities as Deputy Director for Management is to make the resource allocation process more performance and less input driven. The GPRA, an initiative of this Committee, has given us the tools for connecting resources to results in resource allocation and management. At OMB Director's Review this year, each presentation incorporated key measures from agency plans and analysts used these measures in describing the effect of a proposed budget level.

Finally, the reorganization we call OMB2000, instituted in 1993 to integrate OMB's budget analysis, management review and policy development roles, gave us an organizational framework for making real management change happen. One example of this is the preparation by the President's Management Council's Electronic Processes Initiative's Committee of the "Electronic Commerce for Buyers and Sellers: A Strategic Plan for Electronic Federal Purchasing and Payment." In trying to advance this plan for electronic commerce, the Office of Federal Financial Management (OFFM) and the Office of Federal Procurement Policy (OFPP) enlisted a virtual staff from all of the Resource Management Offices (RMOs). Additionally, for some functions, like human resources, the lead for a government-wide policy area is now vested in an RMO. As a result our capacity in these areas has been enhanced as well.

In short, I simply cannot imagine a bifurcated Office of Management and Budget trying to deal with agency streamlining, improving customer service or implementing the GPRA. Let me explain why, in a bit more detail.

Resource allocation and management are fundamentally interdependent.

Management cannot somehow be divorced from budget issues. In the real world, resource allocation and management are synonymous. Given the complex systems that are necessary to address public problems, we must operate with considerations of management and budget together, not apart. This reflects the realization that these two sets of concerns are in fact intertwined in actual operation. And as we continue to operate in a balanced budget environment where fiscal discipline is linked to programmatic performance, the twin concerns of "management" and "budget" will become even more intertwined.

Lessons from OECD Countries

Lessons from the 29 largest democratic, market economies which comprise the Organization for Economic Cooperation and Development (OECD) confirm this approach. Their experience suggests that improved integration of budget and management decision making is the most productive and effective approach to realizing a better understanding of the relationship between investments and outcomes.

At a March 1996 Ministerial symposium, OECD Ministers responsible for public management met to identify common features of successful governance. What became apparent was that efforts to improve public management are likely to fail if management considerations are seen as distinct from (or worse, in opposition to) fiscal and budgetary policies. Successful countries have built alliances between these efforts and see them as inherently budgetary in nature. These include:
  • controlling the costs of direct government operations;
  • providing financial flexibility to permit resources to be used more effectively;
  • financing essential training;
  • reallocating tasks to the private or public sectors; and
  • assessing performance.

Rather than being an end in and of itself, improved public management is seen as fundamental to pursuing a government strategy that is designed to:
  • support sound fiscal policy;
  • improve service to the public;
  • rationalize the distribution of tasks between the private and public sectors; and
  • lower the cost of government.

As you can see, the scope of public sector reform goes well beyond the traditional concern over organization and management. Countries that have had success in carrying out reforms have lodged responsibility in two central locations: "centers of government" offices such as the Prime Ministry (or in the case of the U.S., the Executive Office of the President or the White House), and "central management" bodies such as Finance Ministries.

Thus, elsewhere in the OECD countries, there is a strong sense that they need an integrated, rather than fragmented, approach to central budgeting and management.

All of OMB's resources are available to the DDM

OMB 2000 expanded the focus of the "budget side" to more formally and aggressively recognize "management issues." The Deputy Director for Management's role is to act as a coordinator of all such management activity within OMB and to assure the active participation of all parts of OMB in dealing with management problems. Consistent with the principles underlying the Results act, we feel "management" is about enabling and ensuring program results. It cannot succeed if seen as being conducted for its own sake.

A good example of this involvement has been the development of the Administration's list of Priority Management Objectives which was published for the first time in the President's Fiscal Year 1999 Budget and which has been updated in the FY 2000 Budget. This list contains both crosscutting goals (e.g., manage implementation of the Year 2000 Conversion) and agency-specific goals. Each of these goals reflects the desire of the Administration to seek accomplishment of specific results during the remaining two years of this Administration. The goals were developed by the RMOs and Statutory offices in concert. The process for developing them, reviewing them and monitoring them is coordinated by the DDM with assistance from the Budget Review Division. The National Partnership for Reinventing Government has been a third part of this team and its High Impact Agency commitments for improved results that Americans' care about were coordinated in each agency by the RMOs and in general by the DDM.

As Deputy Director for Management, I have at my disposal the capacity of all of OMB, rather than being the head of the management-side alone. For example, rapid internal and external review and clearance of work products by the Budget Review Division and the Legislative Review Division is tremendous resource for the DDM staff. Further Economic Policy provides institutional knowledge for many initiatives particularly in the financial management area. Communication with Congress is coordinated by Legislative Affairs. In sum, the entire organization works to support the DDM. This support is crucial to the effective execution of the DDM's responsibilities and the Administration's priorities.

Another view

Two General Accounting Office (GAO) reports support this view. In May 1998, GAO concluded a comprehensive "general management review" of OMB's functions and operations. Significantly, the report, "Managing the Government," did not recommend separating the "M" and "B" or creating a new office of federal management. Quite the contrary, GAO urged OMB to take steps to further integrate its functions. That is, of course, what occurred in the OMB2000 reorganization. In a follow up report, "Changes Resulting From the OMB2000 Reorganization" (December 29, 1995), GAO described changes that occurred as a result:
"there was greater attention to agency management issues in the fiscal year 1996 budget process (after OMB 2000 was implemented) than in the fiscal year 1995 process. A greater variety of management issues were presented in more depth in the fiscal year 1996 documents than in previous years' documents. These results reflected the clear commitment of OMB's top official's to ensure the treatment of management issues in the budget cycle."

OMB's system-wide perspective

Major policy issues with which a modern president must deal seldom fit into the confines of a single department. Revitalizing the economy, controlling drugs, protecting the environment, reforming education, restructuring welfare, or creating jobs: each of these issue-areas and dozens of others require coordinated analysis and action across many executive branch agencies.

OMB's strength is its unique system-wide perspective: its staff draws on experience in many areas of government to challenge the thinking of other agencies, which often cannot see beyond their own programs.

OMB's activities are part of a comprehensive whole -- from policy development through program implementation and evaluation. These important responsibilities should be carried out in an integrated a manner, not through fragmented organizations. Management reform is not an end in itself, but rather one aspect of government strategy that is designed to support sound fiscal policy, improve service to the public, rationalize the distribution of tasks between the private and public sectors, and lower the cost of government.


Only through an integrated approach can we best serve the President and assist Federal agencies in grappling with the complex issues raised by an era of fiscal discipline, downsizing, restructuring and other management challenges as they attempt to produce a government that "works better and costs less."

I would be pleased to answer any questions that you have.