OMBlog

Pay for Success - An Innovative Approach to Improve Results and Save Money

This week, the President met with his Cabinet and other senior officials to lay out his vision for building a smarter, more effective government. The President challenged his Administration to build on the progress made over the first term and improve government even further.

To help meet that challenge, the White House gathered a diverse array of leaders from the private sector, nonprofits, philanthropy, academia, and federal, state and local government to advance one of the ways that this Administration is thinking outside the box – “Pay for Success.”

Pay for Success offers innovative ways for the government to partner with philanthropic and private investors to fund proven and promising practices, significantly enhancing the return on taxpayer investments. Under this model, these organizations provide the up-front capital for social services with a strong evidence base that, when successful, achieve measurable outcomes that improve the lives of families and individuals and reduce their need for future services. Government pays when these measurable results are achieved.

For example, the Department of Labor has launched a Pay for Success competition through the Workforce Innovation Fund designed to model new and more effective strategies for delivering workforce development and preventive social services that cut across existing program siloes, increase job placement and improve job retention.

A Smarter, More Innovative Government for the American People

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One of the President’s first priorities after taking office in 2009 was to bring a government built for the 20th century into the 21st century. Over the last four years, we’ve made great progress to advance this goal, thanks in large part to the integration of new technologies and innovations across the Administration.

This morning, the President held a meeting with his Cabinet and senior officials to lay out his vision for building a better, smarter, faster government over the course of his second term. During the meeting, the President directed Cabinet members and key officials in his Administration to build on the progress made over the first term, and he challenged us to improve government even further.

To help members of the Cabinet and Administration officials find more innovative ways to deliver better results, the Administration recently welcomed a second class of Presidential Innovation Fellows – 43 highly talented and motivated individuals chosen out of more than 2,000 applicants. The first class of 18 Presidential Innovation Fellows worked hand-in-hand with top government innovators to develop solutions that are delivering smart-government solutions to taxpayers at a lower cost.

Stopping Excessive Payments for Contractor Compensation

Next week, the Administration will be transmitting to Congress a legislative proposal to stop excessive payments to Federal contractors. The proposal builds on previous Administration proposals and language included in the President’s Budget, and marks another important step in our ongoing effort to buy smarter and end wasteful, fiscally imprudent contract spending.

Under current law, contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives. This taxpayer reimbursement level has skyrocketed by more than 300 percent since the law was enacted in the mid-1990s. Taxpayers have been required, by law, to foot this unaffordable expense, despite the fact that this rapidly increasing cost has had little bearing on the value agencies receive under their government contracts. 

Building a 21st Century Infrastructure: Better Outcomes, Faster Timelines, and Less Red Tape

President Obama today signed a Presidential Memorandum that will shave months, and even years, off the time it takes to review and approve major infrastructure projects. This means that states, local governments, and private developers will be able to start construction sooner, create jobs earlier, and fix our nation’s infrastructure faster.

On March 22, 2012, the President issued an Executive Order launching a government-wide initiative to improve the efficiency of federal review and permitting of infrastructure projects. Since then, agencies have expedited the review and permitting of 50 major projects, including bridges, transit , railways, waterways, roads, and renewable energy projects.  

Federal agencies have also identified a set of best practices for efficient review and permitting. Those range from expanding information technology (IT) tools to strategies - like simultaneous review - for improving collaboration. Today’s Presidential Memorandum directs all relevant agencies to put these best practices into effect.

Cutting red tape and streamlining the process for making permitting decisions will help us meet the President’s goal of cutting in half the timelines for major infrastructure projects, while creating better outcomes for our communities and for the environment.

The President’s initiative is already showing real results. For example, this afternoon, President Obama and Deputy Transportation Secretary John Porcari will visit Baltimore, where we sped up the approval process for the city’s Red Line rail transit corridor by six months.

We also recently expedited Federal approval for the Tappan Zee Bridge replacement project in New York. By speeding up the approval process, Federal agencies trimmed up to three years off the timeline for this multi-billion dollar project that will help put Americans back to work.

Building a 21st Century Government by Cutting Duplication, Fragmentation, and Waste

Today, the Government Accountability Office (GAO) issued a report identifying areas where there are opportunities to reduce fragmentation, overlap, and duplication, or achieve cost savings.  In addition, the report provides an update on actions being taken by Congress and the Administration to address the recommendations identified by GAO over the last two years.

We appreciate GAO’s work in these important areas. The Administration is strongly committed to reducing duplication and fragmentation and has worked hard over the last four years to make that happen. 

From day one, the President has made rooting out waste and improving the way government works a top priority. 

In June 2011, the President and Vice President launched the Campaign to Cut Waste, aimed at identifying and eliminating wasteful, inefficient or duplicative spending wherever it may exist in government.  This initiative has already saved taxpayers billions of dollars. And, in February 2012 the President submitted a proposal to Congress to reinstate Presidential authority to reorganize Federal agencies to reduce the number of overlapping government programs, all with an eye towards eliminating duplication and making government more efficient.  In addition, each year the President’s Budget has included hundreds of proposals for ways to cut, consolidate or save money on programs that are inefficient, duplicative, or simply no longer needed, translating into hundreds of billions of dollars in savings. 

The Budget that the President will release tomorrow goes even further, including 215 cuts, consolidations, and savings proposals, which are projected to save more than $25 billion in 2014.

We have examined the report GAO released today, and highlighted some of our efforts here.

GAO’s findings recognize the progress the Administration is making:

• GAO found that the Executive Branch and Congress, together, have made progress on 104 of the broad areas out of the 131 GAO has identified over the past two years.
• In terms of the specific recommended actions within these broad areas, the Executive Branch has made progress on over 75% percent of the recommendations, with more than 20% fully addressed and at least another 55% percent partially addressed.  The Executive Branch has fully addressed more than 50 actions and partially addressed more than 140 actions since 2011.
• The GAO report also recognizes that there are many areas where additional action by Congress is needed.   GAO found that Congress has fully addressed about 20% of the recommendations for Congressional action since early 2011, and made progress on another 11%. 

By identifying specific actions which may help reduce duplication, achieve cost savings, or improve coordination across programs, GAO is helping to further these efforts to make government more effective and efficient. Many of the GAO recommendations deal with some of the most complex and challenging areas across the Federal government.  Fully addressing them is a long-term process that in many cases will take many years to implement– a fact that GAO recognizes.  Progress in other areas requires Congressional action.

Building on proposals in previous budgets, many of which were adopted by Congress, the President’s 2014 budget offers several proposals to address some of the areas of duplication and overlap.  For example, the budget will include proposals to:

• Streamline Science, Technology, Engineering, and Math (STEM) programs through a bold reorganization of STEM education programs into four key areas:  K-12 instruction; undergraduate education; graduate fellowships; and informal education activities that typically take place outside the classroom.  Currently, there are more than 220 STEM education programs spread across 13 agencies. The proposed reorganization would consolidate or restructure more than half of these programs and streamline functions across the agencies to improve the delivery and impact of STEM education.
• Modernize, Streamline, and Strengthen the Delivery of Training and Employment Services.  Today more than 40 Federal programs deliver job training and employment services. The Administration is exploring opportunities to make these programs even more effective, including by reorganizing some of the existing training programs to make it easier for Americans to find a job or build their skills for a better one, and for employers to find well-qualified workers.  For example, the 2014 Budget proposes a universal displaced worker program that will reach more than a million workers a year with a set of core services, combining the best elements of two more narrowly-targeted programs.

We encourage Congress to take quick action on these and other proposals included in the Budget. 

As the President has said, to support an economy that is built to last, we need a government that’s built for the 21st Century. We have made real progress toward that end and we look forward to working with Congress to enact the reforms proposed by the President to make our government work more effectively and efficiently for the American people.

Danny Werfel is Controller of the Office of Federal Financial Management

Freezing the Footprint

The Administration has made it a priority for Federal agencies to dispose of unneeded properties and make more efficient use of the Government’s real estate assets. As the next step in this effort, today, OMB is issuing guidance to direct agencies to implement a “Freeze the Footprint” policy for Federal real estate.

Under today’s new guidance, all CFO-act agencies are required to develop plans that will serve as the basis for agency actions to restrict the growth in their office and warehouse inventories. Agencies will also be required to develop internal controls related to square footage growth and facilitate increased communication between agency Chief Financial Officer and Real Property Management offices. These changes will further improve the management of the Federal Government’s real property assets.

This effort builds upon on the Administration’s ongoing work to sell unneeded Federal properties. For example, in October 2012, GSA sold the Naval Weapons Industrial Reserve Plant in Dallas for $357,500 and the Government was able to realize over $27 million in savings by requiring the new owner to complete the necessary environmental remediation. And in November 2012, GSA sold a 1.39 acre Norfolk, VA, multi-building property, that had been declared excess by the Department of Defense (DOD), to the City of Norfolk for $1.1 million to become administrative and training offices for the Norfolk Sheriff's Department. More information on these and other Federal properties that have been sold can be viewed on the White House Excess Assets page.

Today’s guidance also expands on the President’s 2010 directive to agencies to identify cost savings through better real estate management. In the directive, the President set an ambitious goal of eliminating $8 billion in real estate costs by 2012: $5 billion in savings through DOD’s Base Realignment and Closure Commission (BRAC) process and $3 billion in non-BRAC savings. By the end of FY 2012 Federal agencies identified over $3.5 billion in non-BRAC real estate savings through disposals, space management, and sustainable energy and innovative real property management practices. In addition, DOD identified $5.1 billion in real-estate savings related to BRAC. An update on agency efforts to achieve the President’s $8 billion goal is available on Performance.gov.

Agencies have made tremendous progress in making their real estate inventories more efficient, however, we know there is still more work to be done. As we develop new initiatives to spur progress in managing Federal real estate, we will be incorporating “lessons learned” from the implementation of the President’s goals to date. We look forward to further reducing the size and cost of the Government’s real estate inventory in the years ahead.

Danny Werfel is Controller of the Office of Management and Budget

Launch of the Administration’s Strategy to Mitigate the Theft of U.S. Trade Secrets

Today, I am pleased to announce the Administration’s Strategy on Mitigating the Theft of U.S. Trade Secrets. Trade secret theft can cripple a company’s competitive advantage in foreign markets, diminish export prospects around the globe, and put American jobs in jeopardy. The President is committed to preventing the theft of corporate trade secrets. As he clearly expressed in his State of the Union Speech, “we cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.”

The Strategy that we are releasing today coordinates and improves U.S. Government efforts to protect the innovation that drives the American economy and supports jobs in the United States. As the Strategy lays out, we are taking a whole of government approach to stop the theft of trade secrets by foreign competitors or foreign governments by any means – cyber or otherwise.

• First, we will increase our diplomatic engagement. Specifically, we will convey our concerns to countries where there are high incidents of trade secret theft with coordinated and sustained messages from the most senior levels of the Administration. We will build coalitions with countries that share our concerns to support our efforts. We will urge foreign law enforcement to do more. And we will use our trade policy tools to press other governments for better protection and enforcement.
• Second, we will support industry-led efforts to develop best practices to protect trade secrets and encourage companies to share with each other best practices that can mitigate the risk of trade secret theft.
• Third, DOJ will continue to make the investigation and prosecution of trade secret theft by foreign competitors and foreign governments a top priority. Additionally, the FBI and the intelligence community will provide warnings and threat assessments to the private sector on information and technology that are being targeted for theft by foreign competitors and foreign governments.
• Fourth, President Obama recently signed two pieces of legislation that will improve enforcement against trade secret theft. But we need to continue to make sure our laws are as effective as possible. So, moving forward, we will conduct a review of our laws to determine if further changes are needed to enhance enforcement. If changes are necessary, we will work with Congress to make those changes lasting and comprehensive.
• Lastly, we will increase public awareness of the threats and risks to the U.S. economy posed by trade secret theft.

We know that trade secrets play a crucial role in America’s global competitiveness. As the Strategy makes clear, the Administration will continue to act vigorously to combat the theft of American trade secrets that could be used by foreign companies or foreign governments to gain an unfair commercial advantage over U.S. companies. In order to continue to lead, succeed, and prosper in the 21st Century global economy, we will use this Strategy to put in place an effective and coordinated approach to protect American trade secrets.

The launch event described below will being streaming on WhiteHouse.gov/live at 3:15pm today.

American Taxpayer Relief Act Reduces Deficits by $737 Billion

Earlier today, the Congressional Budget Office (CBO) released its score of H.R. 8, the “American Taxpayer Relief Act of 2012.”  By convention, the score measured the effects of this legislation relative to “current law,” which assumes the expiration of all of the 2001/2003 tax cuts, cuts to Medicare physicians of almost 27 percent, and allowing the across the board cuts from sequestration to take effect.  But that does not provide a realistic perspective on the impact of H.R. 8.  The relevant point of comparison isn't current law, it is “current policy” – those policies that were in place on December 31^st, the day before all of these changes were scheduled to take effect. Different organizations, ranging from the Bowles-Simpson Fiscal Commission to the House Budget Committee, have considered this current policy baseline to be the appropriate reference point, since it measures changes relative to the status quo, rather than the mix of expiring provisions and policy changes that would likely never be implemented.

CBO also recognizes the value in this “current policy” view and routinely publishes their interpretation, known as the Alternative Fiscal Scenario (AFS), which is regularly cited by lawmakers from both parties, including House Budget Committee Chairman Paul Ryan. The CBO current policy baseline assumes that the Bush tax cuts, the AMT patch, and expiring business tax provisions will be extended; that the Sustainable Growth Rate (SGR) cuts in payments to Medicare physicians will not take effect; and that the sequestration will be turned off. 

Compared to “current policy” and based on estimates from the CBO and the Joint Committee on Taxation – Congress’s official score-keeping bodies – we can see that H.R. 8 would reduce the deficit by $737 billion. Within that, it would reduce spending by $107 billion. The deficit reduction is comprised of:

• $618 billion due to higher taxes on the highest-income Americans and the wealthiest estates.
• $22 billion due to reductions in discretionary spending and a change to tax-preferred savings accounts that pay for turning off sequestration for two months.
• $24 billion in various health measures that pay for turning off the SGR for one year.  (Because sequestration and the SGR are turned off in the CBO current policy baseline, these pay-fors reduce deficits relative to that baseline.)
• The above provisions more than offset the $30 billion cost of the measure’s one-year extension of emergency unemployment insurance benefits, resulting in $630 billion of net non-interest deficit reduction.
• Another $104 billion of deficit reduction results from lower interest payments on the federal debt, for a total of $737 billion in deficit reduction.

See this table for a more detailed breakdown.

So H.R. 8 not only keeps taxes low for the middle class, asks the wealthiest to pay their fair share, and helps the economy continue to grow, it also reduces the deficit by $737 billion under this more realistic scenario.

Jeff Zients is the Deputy Director for Management.

The 2012 SAVE Award Final Four

Since its creation in 2009, President Obama’s SAVE Award [Securing Americans Value and Efficiency] has served as a vehicle for Federal employees to offer firsthand their ideas on how to improve performance and ensure taxpayer dollars are spent wisely. 

Over the last four years, Federal workers have submitted tens of thousands of ideas to curb unnecessary spending, both in their own agencies and across the government – covering everything from implementing new measures to conserve energy use to cutting back on paper copies of publications already available online like the Federal Register.  These ideas alone won’t solve the Nation’s long-term fiscal challenges, but they are saving hundreds of millions of dollars and represent common-sense steps to improve the efficiency and effectiveness of government and provide a better value to the American people.

Last year’s winning idea came from Matthew Ritsko of NASA’s Goddard Space Flight Center, who suggested the creation of a “lending library” that would store used space flight project tools so that employees would not have to reorder tools already available within the agency.  Matt’s idea, along with 26 other SAVE proposals, were included in the President’s FY 2013 Budget.

Today, we are announcing the four finalists for the 2012 SAVE Award.  Keeping with tradition, the winner will present his or her idea to the President in the Oval Office, and other proposals will be directed to agencies for potential action or inclusion in the President’s Budget.

With today’s announcement, public voting also begins to select this year’s winner.  Voting can be done through the White House website at: www.whitehouse.gov//save-award.

Here are the 2012 finalists:

Frederick Winter, Shift to Senior Transit Fares.  Frederick Winter of the Department of Education proposes that all Federal employees who receive public transit benefits shift from regular transit fare to the reduced senior fare as soon as they are eligible.  In the D.C. area, this change would lower the cost of the employee’s travel by 50 percent, with no loss in the effective benefits for the employee.

Angela Leroux, Reduce Employee Shuttle Buses.  Many Federal agencies maintain buses to shuttle employees from one government office to another for work purposes.  Too often these vehicles sit idle or travel their routes with just a few passengers.  Angela Leroux at the Internal Revenue Service recommends that agencies eliminate or consolidate the bus service and encourage the use of conference and video calls, or provide metro cards to those with a need to travel.

James Szender, Use Digital Transcription.  A written transcript of Federal meetings or hearings is often required.  James Szender of the Department of Interior proposes, whenever possible, using digital equipment for transcripts instead of hiring a court reporter, since using digital transcription is significantly less expensive than contracting with a certified court reporter to attend, record, and transcribe the proceedings.

Laurie Dempsey, Post Customs Inspection Information Online.  Customs and Border Protection is required to post a bulletin weekly that lists all imported items that have completed the customs inspection process.  Currently, Customs ports across the country print this bulletin, which can be hundreds of pages long, and post it in the customs house.  Laurie Dempsey from the Department of Homeland Security suggests instead posting the bulletin electronically on CBP.gov.  This change would save paper, reduce costs, and make it easier for the public to find out what items have been inspected without having to visit the facility in person. 

I encourage Federal employees and the public to vote now for your favorite SAVE Award idea.  You can help us cut waste and make your government more efficient and effective.  We’ll be announcing this year’s winner soon.  Stay tuned.

Jeff Zients is the Deputy Director for Management.