Stacking Up

alaurent@govexec.com

If it's true that what gets measured gets done, then the Government Performance Project should prod top government officials to do more to improve management in federal agencies. The Alan K. Campbell Public Affairs Institute of Syracuse University's Maxwell School of Citizenship and Public Affairs and Government Executive undertook this first-ever attempt to systematically measure federal management performance with the goal of prompting agencies to manage better. The hope is that this will help them achieve the results Americans so clearly crave from government. The project seeks to educate citizens about the not uncommon examples of good management in government as well as to arm them with information so they can more effectively hold poorly managed agencies to account. In addition, we want to help agencies learn from the management successes and failures of their brethren.

Our underlying thesis is that management plays a central role in overall government performance and that improved performance will help win back Americans' trust in government. Indeed, a poll released by the Pew Research Center for the People & the Press in March suggests just such a correlation between trust and performance. The survey showed that three-fourths of the people who believe the federal government performs well also trust government to do the right thing always or most of the time. Meanwhile, 91 percent of those who say government does a poor job managing its programs think Washington will never or only some of the time do the right thing.

Beginning in 1996, under a grant from The Pew Charitable Trusts, the project sought the advice of more than 100 academic experts and government practitioners to develop working criteria for effective government management. We tested the criteria in a 1997 survey administered to four federal agencies--the Coast Guard, the Food and Drug Administration, the Defense Logistics Agency and the Veterans Health Administration--as well as four state and four local governments. Governing magazine, another project partner, this month is publishing management grades for the 50 states.

Applying the lessons of the pilot year, we began a comprehensive review of the inner workings of 15 federal agencies that have extensive interactions with American citizens. A year ago, we sent a 93-question survey to the 15 agencies to collect information on 34 criteria in five crosscutting areas--financial management, capital management, human resources, information technology and managing for results.

As the agencies completed the questionnaires, Government Executive began systematic reporting on all 15 of them. We sought to discover how they are viewed by their own managers and employees, as well as by the outsiders who follow them most closely. Writers reviewed documents and conducted hundreds of interviews with staffers from congressional oversight and appropriations committees, the General Accounting Office, the Office of Management and Budget, think tanks, the press, clients and advocacy groups, vendors, consultants, unions, professional organizations, interagency groups, academic institutions and government commissions. In the stories that follow, our writers have sought to cast the light of political, budget, economic, social, demographic and historical trends on the survey findings.

Considering information from all sources, the project team developed grades for each agency in each of the five crosscutting areas. Then the team assigned an overall agency grade based on the average of the grades in the five areas. Two agencies, the Customs Service and the Food Safety and Inspection Service, declined to complete the survey, so we evaluated them using the information we gleaned through interviews, published reports and other documents. We spent many hours deliberating over each grade to ensure the process was consistent and fair. We took great pains to consider the reasons for an agency's poor performance in one or another issue area and which areas were most important for each agency. Agencies received credit for significant, credible efforts to resolve problems even if their current performance was lacking.

Despite our painstaking deliberations, some grades probably are too high and others too low. Nevertheless, we're convinced the project is a solid and significant contribution to the ongoing national debate about how well government performs and how to make it work better. The project confirmed our suspicions about barriers to effective management in federal agencies. It also raised questions about some of the latest efforts of agencies to streamline operations and become more businesslike. But in every case, our deep examination of the challenges agencies face reaffirmed our fundamental respect for the managers and employees who must overcome confounding difficulties in conducting the nation's business.

Turf and Stovepipes

Managing in government is as different from managing in the private sector as it is similar, we found. No surprise in that, of course, but there's nothing like close study of almost any agency's management to pound home the message. As hard as an agency may try to adopt business tools and techniques, political realities sometimes block the results of improved management.

For an example, look to the Veterans Health Administration. VHA has made notable progress restructuring itself to serve a population of veterans that has grown older, moved south and west, and has health problems more likely to be caused by poverty than combat. The agency determined that veterans need clinic-based care and nursing homes, not long inpatient stays in large hospitals, so it reallocated resources. But closing hospitals and replacing them with outpatient clinics displaces workers and removes from communities some of the most venerable symbols of government beneficence. It angers constituents and therefore members of Congress, who have fought VHA's decisions in the press and via the appropriations process.

Or consider the Immigration and Naturalization Service, forever caught on the horns of a highly political debate about how vigorously to control illegal immigration. When INS mounts a campaign of surprise work site inspections--one of its most effective tools for thwarting employers who exploit cheap illegal immigrants--it gets slammed by immigrant groups, and its agents' conduct is investigated under pressure from lawmakers. Similarly, the Internal Revenue Service was soundly spanked on Capitol Hill in late 1997 for its efforts to use performance measures to pump up tax collections. Never mind that the IRS was acting at Congress' behest to close the gap between what taxpayers owe and what is collected and that the measures were in line with the 1993 Government Performance and Results Act (GPRA). Neither fact stopped lawmakers from capitalizing on the agency's unpopularity and whipping up resentment against it as congressional elections approached.

When lawmakers divide up agencies and their missions like turf, they cause structural hurdles to effective management. For example, Environmental Protection Agency management is hampered by a rigid stovepipe structure dictated by myriad environmental laws creating separate program offices for air, water, toxic waste and other environmental categories. Experts say the problem would be solved by a single generic law giving the agency administrative flexibility, but legislators on the more than 40 committees and subcommittees overseeing EPA aren't likely to give up their turf to pass such a law.

INS is cursed with a budget structure agency officials admit does not sufficiently support its mission, but they have yet to persuade lawmakers to change it. INS' nine funding sources are scattered among appropriations, trust fund accounts, and fee and fine accounts. Each account has 13 decision-making units grouped across nearly 100 different agency organizations. As a result, INS divides its appropriations among 900 distinct funding "pots."

Conflicting Missions

Politics also results in competing missions. The Customs Service, for example, is responsible both for speeding trade and preventing the entry of undesirable goods into the United States. But thoroughly inspecting goods coming into the country takes time and the resulting shipping delays cost importers money. Conversely, moving goods quickly reduces the ability to aggressively inspect them for contraband. Hence, those who favor law enforcement see Customs as inadequately aggressive and those who want faster movement of people and goods view the agency as a bureaucratic impediment. The mission clash dooms Customs to constantly shift resources between conflicting priorities, a recipe for management inefficiency.

The Food and Nutrition Service finds itself similarly stretched as it tries to meet its top priority of feeding poor Americans while simultaneously devoting a larger portion of its dwindling resources to a more recent political imperative: fighting fraud. The INS is legally bound to keep illegal immigrants out of the United States while at the same time helping legal immigrants become citizens and receive federal benefits. Its split personality has prevented the agency from succeeding at either mission. Both illegal immigration and citizenship application backlogs are at record levels, despite the fact that INS' budget has doubled and its staff has ballooned in the past five years.

Double-Edged Fees

The project examined a number of agencies that are collecting fees in addition to, or instead of, the funds traditionally provided by Congress. Fees are a boon in that they can be used to replace declining appropriations. Agencies are happy to create new funding streams less likely to be tinkered with during the annual appropriations process. Consequently, collections have grown steadily across government--to $196.4 billion, 12 percent of all federal revenues in fiscal 1996, according to a 1997 GAO report (AIMD-98-11).

Most agencies that collect user fees find they have another felicitous effect: They focus more attention on accounting for and controlling the direct and indirect costs of activities. The Patent and Trademark Office is fully funded by user fees, a condition agency officials say accounts for the agency's effective financial management. PTO has received clean audit opinions every year since 1993, while other agencies still are struggling to pass a single audit. Like PTO, the Customs Service and INS--which collect fees as well as receive appropriated monies--are early adopters of activity-based costing as a way of pricing out all the direct and indirect inputs into fee-based services.

But some agencies are finding fees come at a cost. The Food and Drug Administration began collecting fees in 1992 from the pharmaceutical industry it regulates. The law creating the fees has focused the agency on streamlining and speeding the approval process--indeed, approval times have been cut in half since 1992--but GPRA would have FDA focus on improved health resulting from FDA-approved drugs. While the two priorities need not be in conflict, FDA's reliance on the regulated industry for an increasing percentage of basic resources does raise public policy questions.

The Customs Service collects a $5 fee from air and sea passengers entering or leaving the country. The agency would like to use some of that money for pressing needs, such as improving air cargo inspections likely to turn up contraband. But by law, the fee is restricted to funding critical equipment and personnel involved in processing passengers. About 1,200 staff positions funded by the fees are off limits for use in other pursuits, limiting Customs from adequately matching employees and workload.

Technology Trumps All

Customs, like all the GPP agencies, is trying to surmount management barriers by expanding its use of information technology. For example, Customs' Automated Export System, winner of a 1998 Government Executive Government Technology Leadership Award, should help reduce workload, cut costs and speed the processing of shipping documents by letting exporters file their declarations electronically. But, like most agencies, Customs also has technology troubles: Its primary computer system is overloaded and balky and the replacement is six years behind schedule.

"Information systems are now integral to nearly every aspect of over $1.5 trillion in annual federal government operations and spending--from national defense and air traffic control to revenue collection and benefits payments," GAO declared in 1997 (HR-97-9). From 1991 to 1997, agencies obligated more than $145 billion to build up and maintain IT infrastructure. Federal information technology spending currently totals about $30 billion a year.

It is nearly axiomatic that agencies cannot make great strides in management or overall performance without first solving their technology problems. This is clearest where the IT backbone is most important--at the Social Security Administration and the IRS, for example.

The two agencies are a study in IT contrasts. SSA is replacing all its "dumb" terminals with modern PC networks, a $1 billion project to speed data retrieval and processing of the 860 million payments it makes each year. The installation is proceeding smoothly in its final stages. In addition, SSA began working in 1989 to solve IT problems created by the transition to the year 2000. That gave SSA an eight-year head start on most departments. As a result, on Dec. 29, SSA pronounced its Y2K problem solved.

The IRS, in contrast, has been struggling for nearly 10 years to modernize the computer and communications systems it uses to process the hundreds of millions of tax returns it receives each year. The most recent modernization scheme was scrapped after the IRS had spent $3.4 billion on the project. In December, Computer Sciences Corp. won a 15-year contract likely to be worth more than $2 billion to try again. IRS keeps information in 59 different databases using computer systems comprising 62 million lines of code, making its year 2000 challenge almost overwhelming, though the agency is making progress. IRS is responsible for 95 percent of federal revenues, so failure to make Y2K fixes is not an option.

The year 2000 threat could swamp other technology-dependent agencies as well. With 50 million lines of computer code, 900 million Medicare and Medicaid claims a year to process, and heavy reliance on state governments and a web of 22,000 contractor employees to run its programs, the Health Care Financing Administration has a whopping Y2K headache. The pain is so great HCFA can focus on little else. The agency has postponed a vitally needed computer modernization, a project already set back by cancellation in 1997 of the Medicare Transaction System more than three years and $80 million after it had begun. HCFA's technology troubles are a drag on the agency's ability to manage in almost every other area.

Clear Vision

While technology fumbles can stall an agency's drive for management improvement, a single-minded quarterback with a well-crafted game plan can pull an organization out of a dismal slump, we found.

Before Kenneth Kizer, former head of health services for California, became VHA administrator, it wasn't uncommon for a veteran to travel for hours and wait a whole day to see a doctor at a VA hospital. Patients sometimes disappeared, got lost on hospital grounds or died after unexplained lapses in care. Kizer's simple focus on what's good for veterans helped remake VHA. The new focus affected everything from the agency's structure to its care model. Kizer's emphasis on accountability begins with his personal performance contracts with directors of regional networks of hospitals and clinics and filters throughout the entire VHA staff.

A doctor and former health care chief for one of the largest states might seem the obvious choice for transforming VHA, but the lesson of experience hasn't always been easily learned in government. For example, Federal Emergency Management Agency Administrator James Lee Witt is the first FEMA chief with any emergency management experience. As former director of Arkansas' emergency services office, Witt not only knew how to handle storm damage, he also had felt firsthand the crippling effects of FEMA's slow, bureaucratic and unprofessional response to disasters.

It was no surprise, then, when Witt worked a 180-degree turnaround at what had been one of the most disliked agencies in government.

Witt, too, made agency customers his focus, driving home the point by visiting disaster sites and intervening quickly and personally when he discovered victims being put off or assistance delayed. His "bureaucracy be damned" message underlies the agency's new esprit de corps, which is all the more impressive considering Witt's administration has brought considerable streamlining and change in how FEMA employees work.

Culture Cuts Both Ways

Culture change is both a common denominator and chief challenge at many of the GPP agencies. Where it's working, as at FEMA, dynamic leaders have rolled up their sleeves, set simple goals and worked hard to free employees to become creative and customer-focused. It also helps to have a clear, positive and helping mission, such as FEMA's or VHA's, that inspires can-do spirit among employees. Culture change can turn to clash, however, where leaders are less open and employees more suspicious. For example, at the Food Safety and Inspection Service, no amount of reassurance from top officials has been able to counter meat inspectors' concerns that a new, more scientifically based inspection system ultimately will eliminate their jobs. Hence the inspectors have gone to court to fend off the system, even though it is championed by consumer advocates, scientists and GAO, as well as FSIS management.

Underlying the cultural dissonance at FSIS is a trend we found at a number of regulatory and enforcement agencies: the transition from oversight to insight. FSIS is moving from a hands-on method of "poke and sniff" inspections of meat and poultry carcasses to a system based on monitoring improved processing by meat companies and spot-testing of the firms' scientific methods. FSIS meat inspectors not only fear for their jobs under the new more hands-off system, but also argue it violates statutes calling for continuous meat inspection by federal employees.

Both the Occupational Safety and Health Administration and EPA have backed away from oversight and into cooperative compliance efforts involving closer working relationships with the industries they regulate. OSHA's program targets employers with high injury and illness rates, offering them a choice of allowing OSHA to point out and help them fix hazards or being put on a priority inspection list. But a year ago the National Association of Manufacturers criticized the program as coercive and won a court order temporarily halting it.

EPA is partnering with the industries it regulates and other stakeholders on a number of fronts. The agency's Project XL offers companies the chance to propose better ways to manage pollution, improve environmental performance and cut costs in exchange for greater flexibility in meeting standards, consolidated report requirements and the ability to modify processes with less agency oversight.

EPA's Common Sense Initiative regulates industries by sector rather than making all facilities meet one standard and includes community representatives as full partners with government and industry in the rule-making process. In addition, environmental regulators are using negotiated rule-making, bringing diverse interests together to reach consensus on new rules rather than using the more adversarial publication-comment-lawsuit approach.

The insight-vs.-oversight trend reflects the realities of tighter budgets, more complicated regulatory challenges and a less regulator-friendly Congress. Agencies are recognizing the need to tap all sources and stakeholders for creative, cost-conscious solutions to increasingly knotty and contentious problems.

At the same time, labor unions, environmentalists, meat inspectors and others already are questioning whether insight and cooperation are rendering regulatory and enforcement agencies toothless watchdogs of public safety.

The Government Performance Project agencies are riddled with the kinds of management complexity the insight-oversight debate exemplifies. The causes of low agency grades come from outside as well as inside and almost invariably include unresolved political dilemmas. In most cases, problems are long-standing and will take time to solve.

Whatever its causes, mismanagement clearly cannot be sustained at a time when budgets are dwindling and public expectations are rising. We hope one of the results of the Government Performance Project is that this truth filters up into the political leadership as well as down into the agency management and employee ranks. Equally important are the examples of good management we discovered throughout the agencies we studied.

We will have succeeded beyond our wildest dreams if our efforts make it even just a little bit harder to point fingers of blame in only one direction and a tad easier for Americans to differentiate between well and poorly managed government agencies. Finally, we hope agencies across government will learn from and emulate the positive management approaches described in the stories that follow.GPP report card

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GOVERNMENT PERFORMANCE
PROJECT TEAM
Government Executive: Timothy Clark, editor; Anne Laurent, project editor; Nancy Ferris; Susannah Zak Figura; Brian Friel; Jerry Hagstrom; David Hornestay; Alison Maxwell; Katherine McIntire Peters; Katy Saldarini

Syracuse University, Maxwell School of Citizenship and Public Affairs, Alan K. Campbell Public Affairs Institute: Patricia Ingraham, director; Megan Carroll; Philip Joyce; Amy Kneedler; Amy Schmit; Susan Sieg; Eric Welch; Amy Westphal

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