First performance-based organization created

Out of the frenzied final weeks of the 105th Congress has emerged the federal government's first performance-based organization.

Tucked into a sweeping education law President Clinton signed last week is a provision that turns the Education Department's student financial aid office into the first congressionally created performance-based organization, or PBO. In a PBO--a management concept envisioned by Vice President Al Gore's National Partnership for Reinventing Government three years ago--government executives are given broad exemptions from federal procurement and personnel rules in exchange for tough performance standards. The idea is that some federal programs can perform better if they are run more like private companies.

"It's a very exciting opportunity to be named the first PBO in the federal government," said Diane Rogers, acting deputy assistant secretary for student financial assistance programs at Education. "We want a student aid delivery system that is student-focused and seamless to customers. Hopefully the PBO can help us get there."

While Gore's office created the PBO concept, it was House Republicans on the Education and Workforce Committee that decided to apply it to the financial aid office. The committee included the PBO provision in the Higher Education Reauthorization Act. Chairman Bill Goodling, R-Penn., hailed the PBO measure.

"For the first time, the department's student financial aid systems will be run like a business and will focus on bottom-line results," Goodling said.

Under the legislation, in return for a shot at substantial bonuses, senior executives in charge of student aid will commit to annual performance goals. The executives will also be given wide-ranging management flexibilities. The top executive--the chief operating officer--will be eligible for an annual bonus of up to 50 percent of his or her salary. Salaries and bonuses for other top executives will be limited to 125 percent of the maximum Senior Executive Service pay rate.

Rogers said the student financial aid office has been preparing to become a PBO for the last year. The department conducted a nationwide search for a chief operating officer and has narrowed the field to a small group of top candidates. The PBO legislation calls for a leader with "demonstrated ability in management and experience in information technology or financial services."

The legislation also instructs the department to select a chief operating officer without regard to political affiliation. In a statement on the legislation, President Clinton said he has "constitutional concerns" with that language and does not consider it binding.

The student aid office's managers have been meeting with the office's 1,200 employees to prepare them for PBO status. Strong internal communication will be essential to the PBO's success, said Rogers, who will leave the organization once a chief operating officer is appointed.

The PBO will help the student aid office modernize its aging computer systems by changing the procurement system and allowing managers to hire information technology specialists at higher pay rates.

Several other agencies have asked Congress for PBO status, including the U.S. Mint, the Federal Aviation Administration, the Defense Commissary Agency, the Patent and Trademark Office and the St. Lawrence Seaway Development Corporation. But Congress has not approved PBO plans for any of those agencies.