Better Government, Not Necessarily Smaller

overnment of the people, by the people and for the people-in Lincoln's ringing phrase-is certainly worth struggling for. Even in the seemingly mundane battle against bureaucracy. But in the current Washington climate, my fear is that we have confused the ends with the means. In the name of the people, government itself has become the enemy. The attitude seems to be the less of it, the better. Reengineering, in this context, becomes synonymous with downsizing. Reinvention means carrying on after drastic budget cuts.

To my mind, the political debate about the size of government is off the mark. Its real focus should be government's purpose. What, for example, is the purpose of our defense establishment in the absence of the Soviet Union? What is the mission of NASA? How can the IRS-saddled with many computer systems installed in 1964-increase tax yields, while better serving our citizens? How should the cleanup of atomic waste be handled most efficiently and inexpensively? How can the FAA modernize its technology and increase airline safety?

In the private sector, someone has coined the wonderfully graphic phrase "anorexic dinosaur" to describe a company that has simply cut costs and laid off workers, without rethinking its intent. I just hope that a descriptor like "plucked Eagle" never has to be dreamed up for some of our federal agencies.

Actually, I am guardedly optimistic about the future of our government services. And if I had to come up with a metaphor, I would use the Phoenix- the mythical bird that arose from the ashes-to illustrate several quite encouraging developments in reinventing government. Let me describe four cases where reinvention, informed by purpose, has worked well. Some are huge undertakings, others much less so. But in all cases of improvement, a byproduct was (not surprisingly) something smaller-whether it was cost, time, number of people or regulatory requirements.

First, as I write these words, NASA has just announced that the first new U.S. rocket designed in 25 years, the reusable X-33, will be developed by Lockheed Martin. In the process, the entire space shuttle program is being outsourced to private industry. NASA will get out of the commercial business of owning and launching rockets. Instead, the agency will devote itself to research and development, its original charter. Expected savings are in the billions of dollars.

One of the principal arguments for the privatization of this part of NASA was the view that America was trailing in the so-called "space-launch market." Demand has been booming for new satellites to serve companies providing mobile telephones and video and data transmission. Foreign rivals, such as Europe's Arianspace, have taken the lead. What we see happening to NASA is an almost classic business example of an organization redefining its purpose, getting back to its core competency and allying itself with outside experts.

Also, like a business struggling in the marketplace, the Internal Revenue Service is under attack for poor "customer" service, as its budget dwindles. Customers in this case include both the U.S. Treasury and American taxpayers. It recently launched a reengineering effort to dramatically improve its ability to increase revenue. As part of this effort, the IRS will redesign both its core business processes and align its modernization investments with the business strategy. In the somewhat contradictory terminology of this strategic initiative, the IRS wants to "institutionalize change." Incidentally, its case for action is mirrored at many shrinking agencies:

• Declining budgets, but pressure to increase productivity;
• Difficulty meeting expanding workloads;
• Intensified external oversight;
• Increasing inability to respond quickly to congressional and executive orders;
• The need to provide constituents with service and technology options provided in the private sector; and
• Outmoded technology.

And the battle goes on. The Nuclear Regulatory Commission, which controls the use of radioactive materials, was facing a crisis over its rising fees. In a business sense, it had priced itself out of the market: It had raised the tab for the licenses it issues by 20 percent since 1989, while seeing the number of license applications drop nearly 19 percent in the same time period. The NRC believes there is a direct correlation between the two events.

The cause? The eight-step process involved had gotten out of hand. The sequential procedure facing an applicant had grown to 72 "handoffs" involving an average of 52 staffers.

Also, because the process was not standardized, the rules for granting licenses varied from one region to another-and even from one reviewer to another. Meanwhile, modern information technology systems couldn't overcome the burden of duplicated data reentered multiple times, which increased the number of errors that occurred.

Happily, a solution was created that will meet anticipated reduced 1998-99 staffing levels. More importantly, it will create a more pleasant and potentially less costly experience for the public. In quantitative terms, the reengineered nuclear materials licensing process is expected to slash the number of days involved from 84 to 4; cut the number of handoffs from 72 to 10; and reduce the average number of staffers involved from 52 to 10.

Nuclear Cleanup

But to get back to the really big numbers, let's take a more in-depth look at the Department of Energy, which has the Herculean job of cleaning up the radioactive waste byproducts left over from nearly 50 years of atomic weapons building. At just one site, the Hanford Nuclear Reservation in the state of Washington, the cost and time involved in the effort has been estimated to total as much as $400 billion and 100 years.

A total of about 18,000 workers from DOE and its contractor, Westinghouse Electric Corp., are employed full time on this effort, where time is of the essence and mistakes could have horrendous consequences. Just the bare facts are scary: plutonium waste so concentrated that exposure to a drop could kill hundreds of people; waste so radioactive that it glows blue; underground tanks, now 50 years old, that were designed to last 20 years. And it all sits along the banks of the Columbia River, filled with throbbing power boats and bordered by grassy parks.

Happily, when I visited Hanford I found a reengineering effort so inspired it might be the most substantial example of reinventing government to date. What was particularly impressive was that the team of the Energy Department, Westinghouse and the local unions learned and selected some of the best practices from corporate America in managing change.

First, they recognized that the effort should not be one of pure downsizing-although the costs would have to be reduced to meet declining federal budgets. The purpose of the reengineering, therefore, was focused on making the cleanup more effective and efficient. The team went to work: Hierarchy, which had grown up over the years, was flattened. Meanwhile, the work done at three nuclear facilities was dramatically redesigned. The result was a four-year reduction in time and a savings of $140 million.

Second, the team focused on administrative costs, which had grown to a shocking one-third of the total budget-and included everything from accounting to maintaining a private fire department. By asking hard questions about whether "administrative" work really added value to the mission Hanford's employees were trying to accomplish, the team was able to eliminate another $128 million annually in these costs. Of greater importance, this money can now be spent on the job that Hanford is supposed to be concentrating on: the cleanup of dangerous and hazardous waste.

Potentially, the DOE-led Hanford team could achieve savings at the Hanford site totaling as much as $10 billion and reduction in time of as much as a decade. Now these are impressive results and numbers. But, again, they begin with a motivating premise about the reason and purpose of the agency involved.

Reengineering the FAA

I want to shift gears slightly, at this point, to explore what might be done, as opposed to what has been accomplished, at a specific government regulatory agency that has been much in the news of late: the Federal Aviation Administration (FAA).

Today, the FAA has two roles: It regulates airline safety and it operates our air traffic control system. FAA controllers decide when we fly and when we land. In traffic control, the FAA is highly dependent on telecommunications, computers and radar. These technologies are rapidly changing. Meanwhile, our airways are becoming increasingly crowded. There is a critical need for the FAA to build better systems. Yet, until recently, government regulations had prevented the FAA from procuring the latest technologies.

Ostensibly to protect the public interest, Congress had enacted a wilderness of laws surrounding the government's purchases of goods and services.

These included the Competition in Contracting Act, the Brooks Act, the Office of Federal Procurement Policy Act, Title 3 of the Federal Property and Administrative Services Act and the Small Business Act.

Passed with good intent, these laws grew like kudzu. They were enacted to assure that competition was open and fair, and that federal contracts would be spread around to many vendors. Unfortunately, many were also were based on the assumption that if Congress and agencies of the government didn't exercise control, something bad would happen: defective products would be purchased, or graft and kickbacks would occur. But in reality, what resulted was a system so complex that the many civil agencies are almost prevented from doing their job well. The FAA experienced this in spades as it has tried to modernize its 30-year-old technologies over nearly a decade.

Perhaps realizing the cumulative foolishness of its separate actions, not too long ago the Congress exempted the FAA from all these previously limiting statutes when it passed the fiscal 1996 Transportation appropriation bill. Nevertheless, Congress will have to do much more to help the FAA get its job done. For example:

• The FAA must be allowed to make changes in its workforce. It will require new people, new jobs and new skills. Much of this will have to come from outside the agency. Fortunately, civil service rules are already changing to allow the agency to remake its personnel system. (See "Up in the Air," June.)
• Reforms to the FAA's budget process are needed to provide flexibility, as well as assurance that enough money will be committed over the years to truly modernize our airway control systems. If Congress continues to focus on downsizing and short-term commitments, how can the FAA map its future?
• Finally, Congress will have to resist passing new regulations, for the sake of regulations, in the aftermath of tragedies that can indirectly be blamed on the FAA. In fact, there is some evidence that the FAA's powers of coercion on commuter airlines are too broad already.

Obviously, the FAA must gain new freedoms, but how? If its purpose is defined as starkly as "assure the maximum safety of air passengers, while increasing air passenger miles" then it might actually make sense to privatize the FAA.

As mentioned, privatization at NASA was undertaken partially for U.S. business market reasons. But another key reason was to quickly gain the most up-to-date technology for the next generation of space shuttles to loft commercial satellites. Just so, the U.S. airline industry is being financially affected by the FAA's outdated traffic control systems. And, with the clogging of airports occurring as passenger miles increase exponentially, commercial businesses are finding ways to circumvent the FAA.

For example, new business jets are being readied by Boeing, Bombardier and Gulfstream Aircraft-so that highly paid executives can get where they want to be, on time. So, as the skies fill up with airplanes, something will have to be done to help the FAA out of its current situation.

If the business case I am describing sounds like a prescription for a modern, nimble high-tech commercial company, it is. And, in fact, most of the FAA-like entities in the rest of the world-including Canada and much of Europe-have already been privatized.

Will this trend fly at the FAA? Or, can an internal reengineering effort provide the better service levels people are demanding? It's almost immaterial which path the agency ultimately decides to take. The end result of the process will be better government, which is what reengineering is all about.

James Champy is co-author of Reengineering the Corporation (HarperCollins, 1993), author of Reengineering Management (HarperCollins, 1995) and co-editor of Fast Forward (Harvard Business School Press, 1996). Champy is chairman and CEO of CSC Index, a Cambridge, Mass.-based firm that specializes in reengineering.