OMB chief presses outsourcing, management cuts

Leaders of federal agencies should plan to cut their management staff, expand outsourcing and advance e-government, Office of Management and Budget Director Mitchell Daniels said in a memorandum to agency chiefs. In the Feb. 14 memo, Daniels asked agency heads to set specific goals for those three areas as part of their fiscal 2002 performance plans, which are due to Congress when President Bush issues a detailed version of his 2002 budget on April 3. The performance plans are required each year by the 1993 Government Performance and Results Act. "The President envisions a government that has a citizen-based focus, and is results-oriented and, where practicable, market-driven," Daniels said. Daniels laid out five major governmentwide management reforms to fulfill that vision.
  1. De-layering management levels to streamline organizations.
  2. Reducing erroneous payments to beneficiaries and other recipients of government funds.
  3. Making greater use of performance-based contracts.
  4. Expanding the application of online procurement and other e-government services and information.
  5. Expanding A-76 competitions and making more accurate FAIR Act inventories.
"You should include a performance goal in your FY 2002 performance plan for every reform that will significantly enhance the administration and operation of your agency," Daniels said, adding that OMB would provide agency leaders with more specific guidance on the governmentwide reforms later. The fifth reform that Daniels listed refers to OMB Circular A-76, which requires a competition between private firms and federal workers before any jobs are outsourced, with the work going to the lowest bidder. Agencies' 2000 Federal Activities Inventory Reform (FAIR) Act inventories listed about 850,000 federal jobs that could be subject to A-76 competitions. During his campaign, Bush suggested that as President he would require A-76 competitions for up to half of those jobs. During the campaign, Bush pledged to reduce the government's management ranks by 40,000 positions through attrition and restructuring. He also promised to use the Internet to streamline government procurement and services to citizens. Most agencies submitted rough drafts of their 2002 performance plans to OMB last fall. Daniels instructed agency heads to revise those drafts to reflect the administration's priorities and budget plans. Agencies' plans and budget materials "should reflect the focus on bringing about a better alignment of performance information and budget resources," Daniels said. Daniels also instructed agencies to set goals for eliminating major management problems that plague their programs. The Forest Service and Defense Department, for example, have long struggled to get their financial houses in order. The Clinton administration instructed agencies to set such management reform goals, but a Senate Governmental Affairs Committee review last year found that only five of the 24 major federal agencies had established extensive measures for eliminating major management problems. Committee Chairman Sen. Fred Thompson, R-Tenn., recommended that OMB strongly push agencies to address longstanding problems in their performance plans. By March 2, agency leaders must submit a set of key 2002 goals that OMB will include in the governmentwide performance plan, which will be included in Bush's budget and describe the most important management priorities for the new administration. Agencies must submit advance copies of their 2002 performance plans to OMB by mid-March and then send their final plans to Congress on or after April 3. Virginia Thomas, a Heritage Foundation analyst who has focused on results-oriented management, said she would have preferred to see the governmentwide performance plan as part of the top-line budget preview that Bush will send to Congress next week. "I would like to see a lot of performance-related rhetoric as part of the budget documents," Thomas said. Barry White, director of government performance projects for the Council for Excellence in Government, hailed the Daniels memo as "a signal to people who care about performance-related management that it's going to be important to this administration." White said the memo sends a message to agency officials that performance plans should be an integral tool in managing federal programs, with leaders setting goals, seeing whether the goals are met, and then adjusting programs based on that information. Time will tell if Bush appointees actually use performance information to improve their programs, White said. Daniels also sent a memo to agency heads urging them to comply with the March 1 deadline for completing their fiscal 2000 financial statements. Many federal financial office workers put in long hours each year trying to help their agencies reconcile their accounting books before the deadline. Last year, only 15 of the 24 major federal agencies received clean opinions on their financial statements. Several of those agencies took months after the March 1 deadline to complete their statements and obtain clean audits.
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