Red Light District

hey use the 'M' word a lot these days at the White House. Career staffers in the executive branch's budget shop say they can't get through a meeting without hearing a senior political appointee refer to it. Even President Bush uses it regularly in meetings with Cabinet secretaries. He was said to refer to the 'M' word quite often when finalizing his 2003 federal budget proposal, released in early February.

In fact, the administration says "management" is what makes this budget the first of its kind-one that truly takes a hard look at the day-to-day operations of the federal government and exposes weaknesses. It won't be the last of its kind, either. Departments are required to develop action plans and submit quarterly status reports on their efforts to address management flaws. Administration officials have promised to hold departments accountable for improving their deficiencies through the use of a scorecard rating progress using red, yellow and green light symbols. Future budget decisions will be tied to these status reports.

Skeptics question whether the administration is fully committed to focusing on management. They note that the Office of Management and Budget has been unable to find a deputy director for management and that the agency's point person on such issues for most of last year, Sean O'Keefe, left his post as deputy director to head NASA. Some career civil servants doubt there will be a sustained push for management reform from the White House, even while acknowledging that the administration has made an effort to better link management to the budget, an official at the Department of Health and Human Services says. But it's mostly seen as a way to drive down costs, not improve performance.

Some believe that looming budget deficits, the war on terrorism and the sluggish economy will push management issues to the background. Further, congressional oversight committees are unlikely to hold many hearings on such topics, instead opting to make political hay out of homeland security, the Enron debacle and the state of the economy.

But Mark Everson, OMB's controller, says the administration will stay the course. Everson took over as the de facto head of the administration's management efforts when O'Keefe left last December. "Management has been a central part of every meeting. If you are going to change the agencies, you have to strengthen the focus on management within OMB, and we are doing that," he says. "In order to sustain performance, you have to sustain management. Whether we are focusing on the war abroad or at home or the deficit, we have to attack these long-term management issues."

Everson and other OMB officials discount the notion that the vacancy left by O'Keefe's departure creates a vacuum. In fact, officials say OMB Director Mitch Daniels has made management a priority. From the beginning of the Bush administration, officials say, Daniels made it clear that leaders of agencies across government would be held accountable for improving their operations. Programs not meeting performance standards could find themselves on the chopping block. In a radio address last August, Bush declared that management was at the top of his agenda.

"Americans demand top-quality service from the private sector," Bush said. "They should get the same top-quality service from their government. I've asked Cabinet secretaries and agency heads to name a chief operating officer, who will be held accountable for the performance of that agency."

At the time of his address, the President also released a 71-page management agenda that, he said, would create a more responsive government, one that meets the public's needs and is more responsible in the way it spends taxpayer dollars. Like the initial report of the Clinton administration's National Partnership for Reinventing Government, the agenda sets a baseline for improving the way departments and agencies operate on a day-to-day basis. The agenda focuses on five cross-cutting areas: human capital, competitive sourcing, financial management, electronic government, and linking performance to budgets.

The Bush administration is hardly the first to try its hand at putting the 'M' back in OMB. "During the past 50 years, a number of presidential advisory groups have recommended changes designed to strengthen the office's central management leadership," the General Accounting Office noted in 1995. "In response to the recommendations of one of these groups, the Bureau of the Budget was reorganized in 1970 and renamed OMB, thereby signaling the intent to heighten the management focus in the agency. However, the creation of OMB did not produce an institutionalized capacity for government- wide management leadership."

That's because management is not front-page news and often takes a back seat to more immediate budgetary needs, says Everson. "There is always so much happening on the budget side-legislation, new programs, appropriations. It is so easy to get sucked into that," he says. "It is harder to get into the more entrenched issues that require follow-through and management. Newspapers are writing about and TV is reporting about what is happening on the budget. That is why in administrations-Republican and Democrat-the management side tends to recede. There is a tendency to say, 'Yes, we agree that is important and we'll get to it.'"

From Red to Green

OMB's biggest challenge is getting agencies and its own budget examiners to buy into the management agenda and make it a part of their everyday thinking. To do so, OMB created its scorecard, released with the 2003 budget. Using a series of red, yellow and green lights, OMB rated agencies on how well they are meeting the President's management agenda. A green light indicates that the department has met all of the President's goals. If one agency within a department fails the test, the entire department gets a red light. A yellow light indicates the department has no major failings, but has yet to meet all the standards. In the first scorecard, 85 percent of the lights were red.

"The initial scorecard shows a lot of poor scores, reflecting the state of government this administration inherited," OMB officials noted in the budget. They added, however, that the administration had deliberately chosen to evaluate areas with the most obvious deficiencies across the government.

The scorecard has received mixed reviews. Critics such as Paul Light, director of governmental studies at the Brookings Institution, call it a joke. "What kind of sophisticated OMB rolls out an agenda with red lights and green lights? It's not taken seriously," he says. "Agencies have been through far more sophisticated reviews than that. It won't get agencies motivated." The scorecard could backfire on OMB, says Anthony McCann, former clerk for the House Appropriations Subcommittee on Labor, Health and Human Services, and Education. Speaking at a January roundtable discussion in Washington on management issues, McCann said the system could drive a deeper wedge between agencies and OMB.

On the other hand, one expert argues that the scorecard creates a framework for discussing complex management issues. John Kamensky, former deputy director of the National Partnership for Reinventing Government, notes that the reinvention office proposed a similar scorecard during the Clinton administration, but OMB staffers rejected the notion. There was a fear of shining too much light on the government's deficiencies, says Kamensky, who now directs the managing for results practice at PricewaterhouseCoopers. OMB's job is to protect the President, and bad grades would reflect poorly on him, the staffers argued.

So why is OMB going along with scorecards now? Because top administration officials, from the President to Daniels, have made it clear they like the approach, Kamensky says. The Clinton administration's reinventing team recommended nearly 80 percent of the ideas that the Bush regime is now pushing, he says. But the reinvention team was not institutionalized within OMB. Also, the Bush administration has narrowed its focus to a few key items.

In the Clinton administration, "there were so many different initiatives," Kamensky says. "Agencies would get varying signals-one day it's customer service, the next day it is human resources. This administration hasn't changed. They are pushing the same agenda items day in and day out. This initiative has a clearly defined box."

Roadblocks

Staying on message is one thing. Staying on course is entirely different. The administration has already hit a couple of bumps in the road. Take its drive to require agencies to put more of the work they do up for competition with the private sector. The Bush administration says nearly half of federal employees provide services that could be handled by commercial firms. The administration argues that opening these tasks-which include data collection, administrative support and payroll services-to competitive bidding could save the government between 20 percent and 50 percent of their cost.

Last spring, OMB ordered agencies to directly outsource or hold public-private competitions on 15 percent of federal jobs deemed commercial in nature by the end of fiscal 2003. In October, OMB officials said they would eventually require agencies to hold competitions for 50 percent of commercial jobs. Implementing that strict requirement will be difficult. In a Dec. 26 memorandum, Pete Aldridge, undersecretary of Defense for acquisition, technology and logistics, said the Pentagon could not be confined by OMB's "narrowly defined" targets. Aldridge said Defense would consider competitive sourcing but would also look at a host of other options, including reengineering, divestiture and public-private partnerships.

On Jan. 31, Angela Styles, administrator of OMB's Office of Federal Procurement Policy, said the Bush team had met with Defense officials and won their commitment to meet the competitive sourcing target. Nevertheless, the memo showed that agencies are concerned about OMB's approach. "DoD did the right thing" in questioning the competitive sourcing effort, says Light. "It was stupid to set policy targets for competitions. What you will find is a lot of agencies saying they will wait OMB out."

Other parts of the President's agenda are likely to face a challenge of a different sort on Capitol Hill. In October, the administration sent a legislative package to Congress aimed at releasing agencies from some of the statutory shackles that prevent them from improving their management. The initiative, known as "Freedom to Manage," focuses on personnel issues, seeking to give managers more tools to hire, fire, promote and keep employees. Another component of the legislation (S 1613), introduced in November by Sen. Fred Thompson, R-Tenn., creates a procedure for agencies to identify statutory barriers to good management. The bill would require Congress to act quickly on any legislation the administration offers to remove those barriers.

However, a Republican staffer for the Senate Governmental Affairs Committee says the legislative package is unlikely to get much attention. He notes that Congress has been focused on homeland security for the past several months. More recently, the committee has launched an investigation into Enron's operations. Another staffer for the committee says limited reforms addressing human capital issues could see some action.

Culture Change

In the end, the President's management agenda will succeed or fail based on how well agencies measure their performance. The scorecard is a first attempt to push them to do that. But much more will be expected. Eventually, they'll be asked to develop "high-quality outcome measures, accurately monitor the performance of programs, and begin integrating this presentation with costs," according to the President's management agenda. OMB officials say they will use the data to make budgeting decisions. Poor performing programs could lose money while those meeting their goals could benefit significantly.

Agencies are already making strides to improve the link between their performance and their budgets. In late January, the General Accounting Office reported that 75 percent of agencies were able to show a direct link between their budget requests and their performance plans in fiscal 2002, up from only 40 percent in 1999.

Yet OMB officials acknowledge that they are struggling to strike the right balance between performance measures and funding decisions. Marcus Peacock, associate program director for natural resources at OMB-and the point person for this part of the management agenda-acknowledges the current criteria used to grade agencies are too vague. "There's nothing concrete in there that says if I do X, Y or Z, then I know I'll get a green rating. It is too subjective right now. You read through it and it doesn't stick in your brain." OMB staffers know there have to be incentives for managers to implement the agenda. It's a matter of driving home the message that management matters. Everson says the scorecard is a first step in that direction. "Over time, the consequences will start to vary depending on how agencies correct their deficiencies," he says. "You start rewarding and funding those trying to correct things."