Cutting Waste and Red Tape
Making taxpayers' money go further

Contrary to rumor, the government doesn't actually have a form for requesting a drink of water. Never did. But there were forms and rules and procedures for everything else, or so it seemed to most everyone -- inside or outside the federal government. Government has most of the same management problems as the rest of society, but it downright invented red tape:

red tape n. Official forms and procedures, especially when oppressively complex and time consuming. [From its former use in tying British official documents]

- American Heritage Dictionary, Third Edition,
Houghton Mifflin, 1992

Government employees filled out forms constantly. There were forms for getting permission to use a can of spray paint that had passed its shelf-life expiration date. Forms for reporting what subway stop you got off at. And forms for getting a day of vacation.

The same was true for people who had to deal with the government. The Internal Revenue Service alone had more than 600 forms and sets of instructions for its customers. Before the Small Business Administration reinvented its processes, it used to take 100 pages of paperwork to apply for a loan that now requires a single piece of paper.

Every Problem Started as a Solution

The red tape had a certain logic. Government bought a lot, and it was difficult to make sure every business had a fair chance to bid for contracts. And government spent tax dollars. It had to be sure that incompetent workers didn't waste them or dishonest workers didn't steal them.

But the red tape hasn't worked out quite the way it was meant to.

Efforts to protect the taxpayers against incompetents or crooks wound up wasting money, not saving it.

Red Tape Was Everywhere

Government may have invented red tape, but its exclusive patent ran out long ago. Corporations added rules, procedures, and checkers as they grew. Private-sector workers have felt the same kinds of distrust and bureaucracy as government workers. Dilbert could have worked for the government, but he doesn't. He works for corporate America.

But corporate America started to change. The shock of losing great chunks of market share in autos -- the symbol of American industrial supremacy -- to the Japanese woke the private sector up.

Giant corporations saw they were wasting a large part of their human potential and their cash through red tape and distrust. By the mid-1980s, many Fortune 500 companies had started trusting workers and cutting the red tape that bound them.

Listening to Business

Many companies were very generous in explaining to government how they had cut waste and red tape. They helped to devise a three-point strategy to fight waste and red tape in government:

  • Change from headquarters: cutting and simplifying rules that require extra steps or that force delays.
  • Change from the front line: giving people the freedom to come forward with new ideas -- and to try them -- while rewarding workers for successful innovation instead of penalizing them for making mistakes.
  • Change from the outside: bringing in outside expertise in streamlining, reengineering, and changing workplace culture.

There have been some major successes. Besides reducing the workforce by 309,000 as of January 1997 and scrapping more than 640,000 pages of internal rules and regulations, the most notable success has been reform of the greatest red tape factory of them all: government procurement.

The entire system is being overhauled, with huge help from Congress in the form of the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996. The Pentagon has gone to multi-year contracts and is using more commercial parts. That is saving $2.7 billion on the new C-17 cargo plane and $2.9 billion on new smart munitions. Smaller purchases count, too. For example, the Army now buys duffel bags for $2.29 each instead of $6.75. It all adds up.

The government used to make small purchases -- a stapler, a book, a piece of software -- just like it made big ones: with paperwork costing $50 or more. The cost to the government was ridiculous -- a $4 stapler wound up costing $54, and it could take months for the forms to be filled out before the stapler got to the person who needed it. The vendors weren't very happy either, waiting two to three months to get their Treasury check for four dollars.

Way back in 1985, five Department of Commerce employees were working on how to streamline small purchases. They came up with an overpoweringly common-sensical idea from the private sector: a credit card. In a pilot program with Rocky Mountain BankCard System, Visa cards were issued to 500 employees. It was, not surprisingly, a success, and in 1993 the National Performance Review recommended that the program be greatly expanded. To date the government has used the cards over 10 million times to buy goods and services worth $20 billion -- saving over $700 million so far and speeding delivery of needed tools to workers.

All told, reform has saved the taxpayers over $12 billion to date.

Reinvention Zone Interview

Commercial Space

Consider the case of Donna Shirley, the Earthling in charge of exploring Mars. She manages the Mars exploration program at the Jet Propulsion Laboratory (JPL).

Q: These must be exciting times for NASA and JPL, just like the old days.
A: Right. Things are exciting the way they used to be. But science is no longer king. It's money -- period.

Q: Is that a complaint about budget cuts?
A: No, no, I'm not complaining. The budgets per mission are small, but we have an ongoing program of missions every 26 months. It's great -- just like 1970, when I worked on Mariner 10. Back then, we had an immovable spending cap, and our contractor, Boeing, knew there wasn't any more money -- no matter what. We had a small, young, tight-knit team; you couldn't tell who worked for Boeing or who worked for JPL. And we had a tight schedule, too: three years to build and launch. That all makes for creativity. That's the way things are again with Lockheed Martin and our mission to Mars.

Q: But don't tight budgets compromise the mission?
A: No. Because we don't have to do everything with a single mission, every mission can be cheaper. We put Sojourner up there and drove her around gathering data for the same money Hollywood spent making Waterworld. And we got better reviews. Next year, we're having a 2-for-1 sale. Two Martian missions for the price of one Pathfinder. Engineers are smart people, and they thrive on challenge. Just tell them what the parameters are, including the budget, and they'll do it for you.

Q: So balancing the federal budget should spark creativity all over the government?
A: There's more to it than that. To get that kind of creativity from a team, you can't have hierarchy; you have to have a kind of intimacy -- a partnership -- or the team just won't spark. And that means the whole team, private contractors included. I've written a book about it; you can find it on the World Wide Web at

Q: Nice plug. What private contractors are on your team?
A: IBM, for example, came to us with a very fast, low-cost, commercial computer that uses regular software. Its speed let us do a lot of stuff in space without fancy programming. And then we could design the ground station around commercial-type software and hardware, too. That alone saved us about $25 million. And now IBM has a space-certified computer that it can sell to future space missions.

Motorola's a partner too, although it was leery at first. We needed a modem for Sojourner to talk to the lander. To design and build one would have cost millions that we didn't have. We thought Motorola's $300 commercial modem might work if we spent a few hundred thousand dollars adapting it for space. Motorola wasn't so sure it wanted to risk its good name like that. Essentially, it said that if we took the modem to Mars, it was out of warranty.

Q: Any other companies help you get to Mars?
A: Our main partner is Lockheed Martin. Our partnership's most recent success is the spacecraft that just entered Mars orbit. It will circle Mars for two years, making a detailed map of the surface, tracking Martian weather, and gathering other information that we need. And then comes Stardust, a probe to gather particles from a comet and bring them back to Earth. You see, we plan on having a long-term partnership with Lockheed Martin. That way, it can set up a production line and invest in research. And there's no game playing, no overruns and bailouts, like there used to be. The company is a full partner in the risks and a full partner in the rewards.

Treating Travelers Like Honest People

Reform at the Defense Department is saving taxpayers $400 million a year.

Not too long ago, the Defense Department's travel process was like a bad dream. With 230 pages of travel regulations and multiple "sign-off" signatures, the 7 million trips that Defense Department travelers took were paper nightmares. The cost of Defense's travel system administration was triple that of private-sector corporations.

But that's all changing. The Department of Defense will soon have a travel system that will be the model for corporate travel management. The 230 pages of regulations have been reduced to 17 pages of plain English. Once the new system is in place, it will be completely paperless -- and it will save more than $400 million annually, about two-thirds of the current cost of administration.

"We want to ride the travel industry's bow wave, not steer the ship," says Colonel Al Arnold, Project Manager of the Defense Travel System. Defense decided to partner with industry, using the best it had to offer. Now AT&T, American Express, EDS Corp., IBM, Carlson Wagonlit Travel, and a host of other large and small travel and information technology companies are sharing their best practices with Defense.

Just like in industry, two basic principles have guided the Defense Department's efforts -- government travelers are honest, and their supervisors are responsible but busy people. Instead of wading through travel regulations, they can use software that pops up "policy exceptions" for approval. The whole system has been reengineered from the moment travelers decide to go somewhere until they come back. Even the reimbursement of travelers' expenses is electronic -- right to their bank accounts or to their charge card vendor.

The Defense Department will contract with one or a team of companies to provide the "how" of its new travel system. It has told the private sector what its performance requirements are, and now the private sector will tell Defense how to accomplish it. And the Defense Department has introduced a new idea -- digital signatures on computerized travel forms. People won't even have to pick up a pen.

Citicorp and Country Homes

Citicorp has taught the U.S. Department of Agriculture (USDA) how to run a big-volume home mortgage operation.

USDA's Rural Development team has helped some 700,000 low-income families purchase homes. USDA's $18 billion portfolio is made up of home loans to families who cannot obtain mortgages from commercial banks. Until 1992, this vast program was administered at 2,000 field offices around the country, using a cumbersome system of card files and typewritten forms.

USDA asked for help from Citicorp, one of the country's largest commercial mortgage companies. "They asked if they could send a team to learn how we service mortgages," says Kim Gentile, former Assistant Vice President of Customer Service at Citicorp. "We liked the idea. They sent four USDA accountants to Citicorp for three months, where they helped to flow-chart our organization. It was a win-win situation. We received the flow charts, and they learned a lot about how to manage volume."

USDA learned how the day-to-day process of centralized loan servicing worked in the private sector and also what kind of equipment was available in a centralized environment. In 1993, USDA set up a team of 25 employees who began to centralize and automate USDA's Rural Development process, modeling the new design on Citicorp.

Gentile left Citicorp to help reinvent the USDA program, so she has a unique perspective on the public and private sectors. "There is no question that there are excellent people in both the government and the private mortgage companies," she says. "Employees at Rural Development work extremely hard, and they really try to help the low-income families who are our customers. However, until recently this program just lacked the equipment and know-how to be able to manage its volume efficiently. The partnership between USDA and Citicorp helped the government employees acquire this know-how."

The results are an impressive victory over red tape. USDA's Rural Development Division has consolidated its loan servicing activities from 2,000 field offices into one central unit in St. Louis, and has cut out or consolidated 90 percent of the regulations on federal rural housing. The new loan system processes applications faster, and overall, USDA will cut the cost of servicing the portfolio by $250 million over five years.

Cutting to the Point

The Securities and Exchange Commission is getting companies to write prospectuses in language that is easy for the investor to understand.

Poor use of the English language leads to confusion, duplication, and error. Many businesses are discovering the benefits of writing in plain English. Ford Motor Company saw its leasing business skyrocket after it rewrote its lease documents so people could understand them.

A key principle of reinvention is to rewrite all complicated government information into plain English. The Securities and Exchange Commission is one of a number of federal agencies that is trying to do this by putting its own regulations in clear language. SEC is also working with companies to help them write their prospectuses and other disclosure documents in plain English. Anyone who has ever tried to read the fine print in these documents will see that this reform is long overdue.

Arthur Levitt, Chairman of the SEC, has spearheaded the effort. "Even with a lifetime of work in the securities industry, I can't understand some of these prospectuses, so how can anyone else? People put their life savings into these securities. There is no reason why companies shouldn't use everyday language so that the ordinary person -- myself included -- can understand what we're buying."

At Levitt's request, several companies volunteered to develop a new way of writing up the information. Bell Atlantic/NYNEX wrote the first prototype of a plain English prospectus. Others, like Baltimore Gas and Electric, followed. Together, the SEC and business have come up with a new way of communicating financial information. There is now a handbook to help companies write clearly, located on the World Wide Web at The SEC will shortly begin requiring that all prospectuses use plain English in the cover page, summary, and description of risk factors.

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