Reinvention's Next Steps:

Governing in a Balanced Budget World

Background Papers

Supporting a Speech by

Vice President Al Gore

March 4, 1996

Reinvention's Next Steps:

Governing in a Balanced Budget World

"The era of big government is over. . . But we have to keep working to give you a government that you feel you can trust and have confidence in."

--President Bill Clinton

Through its reinvention commitment, the Clinton-Gore Administration has taken significant steps towards creating a government that is smaller and more effective in meeting the needs of the American people. A balanced budget provides an opportunity to build on the reinvention successes of the last three years. The Vice President has laid the groundwork for bringing the federal government into this new era and is prepared to lead the way forward.

Vice President Al Gore is announcing a series of initiatives that will continue to reinvent and improve the federal government by creating various partnerships * partnerships with citizens, states and localities, businesses, and federal workers. Each initiative aims to improve service and reduce costs for Americans. Several key themes link these initiatives.

· Customize solutions and services. New information technology allows a shift away from a "one-size-fits-all" approach to a "custom-fit" approach tailored to the missions of individual agencies. Creating performance-based organizations, grant partnerships, and single points of contact, as well as forging regulatory partnerships, reflect this customization.

· Focus on the ends, not the means. For too long, government has been preoccupied with process and hierarchy at the expense of results. Reversing this policy will mean a major delegation of authority to managers on the front line -- but must include a tight focus and clear accountability for achieving organizational goals. Results-oriented efforts include dramatically improving agencies' customer service and making the federal workforce a partner in change.

· Build on success. The National Performance Review's hundreds of reinvention labs, Hammer Awards, and agency initiatives to implement the basic principles of reinvention have demonstrated that government can work better and cost less. These innovations need to be expanded rapidly -- taken to scale -- across the government to maintain, and even improve, service to the public. All of the initiatives presented here are based on past successes.

· Better results don't mean increased costs. The initiatives are not high-flown, high-ticket programs. They are made up of practical, practicable steps that agencies can take to maintain and improve their delivery of services in a time of tightening budgets.

Reinvention's Next Steps:

Governing in a Balanced Budget World

1. Convert to Performance-Based Organizations

Give agencies that deliver measurable services a greater degree of autonomy from governmentwide rules in exchange for greater accountability for achieving results. Convert at least a dozen agencies to this new structure in the coming year.

2. Improve Customer Service Dramatically

Challenge all agencies to set service goals so everyone in America will see that government service is better. The heads of the 11 agencies with the greatest customer contact are making public commitments to improve selected services; they have created World Wide Web home pages as a means for receiving direct input. The U.S. Business Advisor and a redesign of the "blue pages" in phone directories will help people quickly find needed government services.

3. Increase the Use of Regulatory Partnerships

EPA and other agencies have successfully piloted a noncoercive partnership approach that focuses on meeting environmental goals rather than on complying with regulatory red tape. Expand existing pilots in EPA, OSHA, and other regulatory agencies so this partnership approach becomes the mainstream strategy for federal regulatory agencies.

4. Create Performance-Based Partnership Grants

Develop federal-state-local partnerships that are based on results rather than process. Develop goals and objectives for major programmatic areas, allow states and localities to be funded for these goals and objectives, and reduce existing federal red tape. Convert categorical grants to partnerships as they come up for reauthorization.

5. Establish Single Points of Contact for Communities

A major challenge for communities dealing with the federal government is untangling the complexity of its programs to determine who is responsible for what. Establish a single point of contact for the nation's larger communities.

6. Transform the Federal Workforce

The existing civil service system is based on the concept that "one size fits all"; it cannot respond quickly to change or to the varying needs of different organizations. Reform the civil service system, increase investment in the workforce to create "learning organizations," and give senior executives more tools and make them accountable for achieving results.

1. Convert to Performance-Based Organizations


Government agencies need to change their incentives and internal cultures to shift from a focus on process to a focus on customers and achieving results. They need to become more responsive to citizens, yet account for program costs and safeguard broader public interests. This can be done by creating performance-based organizations (PBOs) that set forth clear measures of performance, hold the head of the organization clearly accountable for achieving results, and grant the head of the organization authority to deviate from governmentwide rules if this is needed to achieve agreed-upon results. PBOs involve structural changes as well as changes in incentives affecting federal employees. The following activities would be involved in creating PBOs.

· Separate service operation functions from their policy components and place them in separate organizations reporting to the agency or department head. Policymaking would be in the office of the agency or department head.

· Negotiate a three- to five-year framework document between the PBO and the departmental secretary to set out explicit goals, measures, relationships, flexibilities, and limitations for the organization. Organizations would also be given authority to negotiate alternative approaches for procurement, civil service rules, etc., through their framework documents. This flexibility would be tied to increased accountability for results, the use of unit cost accounting principles, and achieving productivity and customer service goals as well as budgetary savings. Where necessary the framework document will result in new or amended authorizing legislation.

· Create the position of chief executive to head the service operation functions. The chief executive would be appointed or hired on contract through a competitive search, for a fixed term such as five to six years, with a clear agreement on services to be delivered and productivity goals to be achieved. The chief executive would be held personally accountable for delivering agreed-upon services. The compensation for the chief executive could be based on existing pay and award authorities or, if warranted, on legislatively authorized rates with a significant portion of such pay contingent on performance.

The proposal to create performance-based organizations in the federal government is based on an approach used successfully in Great Britain to manage agencies more efficiently and effectively in a period of declining resources. This approach allowed British agencies to reduce their operating costs an average of about 5 percent a year over the past eight years, while continuing to maintain or improve services to the public.

What's Been Done?

Through important advances such as the signing of performance agreements between the President and major agency heads, passage of the Government Performance and Results Act and of the Government Management Reform Act, increased flexibilities through procurement reform, and the impending issuance of financial standards, the groundwork has been laid for creating PBOs.

In September 1995, Vice President Gore announced the Administration's plans to convert the Patent and Trademark Office (PTO) into a PBO. PTO head Bruce Lehman laid out the concepts to his authorizing committee in mid-September. The presentation was followed by draft legislation from PTO, which was introduced in early November (H.R. 2533). PTO is roughly a $600 million operation with a staff of about 5,500. The issuance of patents is a constitutionally authorized function, so this operation is an unlikely candidate for being converted to a free-standing government corporation or for privatization. Under the legislation:

· The "inherently governmental" functions of policymaking and approval of patents and trademark registrations will be separated from the operational functions of patent and trademark searches. The bill creates an undersecretary for intellectual property to handle the inherently governmental functions and a chief executive to lead PTO (renamed the Intellectual Property Organization).

· The chief executive will be hired by the secretary of Commerce on contract through a competitive search for a fixed six-year term, with a clear contract for services to be delivered. Half of his or her pay would be based on performance, to be determined based on an annual performance agreement.

· The secretary of Commerce and the chief executive will be required to set clear, measurable goals and measures of progress and productivity.

· The organization will receive increased flexibility in personnel, procurement, and other administrative functions.

PTO already measures its performance and accounts for the quality of its work as well as its productivity and timeliness. It is now developing cost information.

What's New?

Following the Vice President's September 1995 announcement, the President's Management Council created a working group to begin identifying additional candidates for conversion. To date, it has identified a series of initial candidates and is ready to assist these in negotiating with their departments, the Office of Management and Budget, the Office of Personnel Management, and the General Services Administration for the kinds of goals, standards, measures, and administrative flexibilities the candidates feel are needed to achieve their goals. These negotiations have been completed in the initial pilot (the Patent and Trademark Office) and are under way with the National Technical Information Service at the Department of Commerce. The focus of the conversion process is on functions, not agencies; thus, parts of an agency -- not necessarily an entire agency -- may be converted.

Once structural flexibilities have been identified the potential PBO will begin discussions with its authorizing and appropriating committees in Congress if statutory changes are required.

The President's Management Council is using the following criteria in identifying candidates for PBO conversion.

· Does the organization have a clear mission and provide a service that is measurable? The candidate organization must have a clear mission (and statement) with broad-based support from its key "stakeholders" -- both internal and external to the agency -- regarding its mission. Normally, such organizations will have strategic and implementing plans already in place. The candidate organization must also be able to make a fairly clear distinction among its policymaking, regulatory, and service delivery functions. The service delivery function, which must be measurable, would be the portion targeted for PBO status.

· Does the organization have the capacity to measure progress toward meeting its mission and objectives? The candidate organization should currently have the ability to measure progress toward meeting the objectives and missions of the organization. In particular, the candidate should have a good history of performance management and historical trend data.

· Is there a clear line of accountability to an agency head and does he or she support the transformation of the unit to a PBO? The candidate organization must have strong internal leadership and external management support in terms of both the capacity and motivation to see the PBO process through and to maintain accountability well beyond creation of the PBO.

Not all agencies can be converted to PBO status. A PBO should not have a mix of responsibilities, such as regulatory and service delivery, because these need to be accounted for separately. In addition, PBOs must have measurable results, so a function such as foreign policy development in the State Department or other general policy development in other departments would not be appropriate candidates.

What's Next?

The following candidates will be included in the FY 1997 budget to be presented to Congress in mid-March. These candidates will begin drafting and submitting necessary legislation in the next few weeks. Meanwhile, additional candidates are being identified.

Department or Agency

Candidate Functions/Agencies for Conversion

Agriculture Department

Inspections of international shipments of agricultural products
(Animal and Plant Health Inspection Service)

Commerce Department

Dissemination of technical information (National Technical Information Service)

Intellectual property rights (Patent and Trademark Office)

Defense Department

Defense commissary services (Defense Commissary Agency)

Housing and Urban Development Department

Mortgage insurance services (Federal Housing Administration and Government National Mortgage Association)

Office of Personnel Management

Retirement and benefit management services (Federal Retirement and Insurance Service)

Transportation Department

St. Lawrence Seaway operations (St. Lawrence Seaway Development Corporation)

2. Improve Customer Service Dramatically


Over the past three decades, public confidence in the federal government has plunged. Where the public once trusted the federal government to do the right thing more than three-quarters of the time, today only a quarter trusts the federal government to do the right thing. President Clinton and Vice President Gore are convinced that the public's destiny as a free, self-governing people depends in no small measure on an ability to work together through the instrument of government. As the Vice President has observed, "There is no way to reestablish confidence in government and confidence in ourselves as a free nation unless we can dramatically change the way the federal government works."

The most visible and concrete interaction between the federal government and the American public is the latter's day-to-day dealings with the former. This is the focal point of why the government is being reinvented ¾ to put the American people first. By having federal agencies commit publicly to the standards of service they will provide, Americans obtain a means of more directly holding the federal government accountable for its actions.

What's Been Done?

· The first phase of reinvention. A primary theme of Vice President Gore's first report of the National Performance Review (NPR) in 1993 was "putting customers first."3 Responding to a key recommendation, President Clinton immediately issued an executive order calling for all federal agencies to develop a comprehensive program of customer surveys, training, standard setting, and benchmarking with the goal that government would deliver service "equal to the best in business." A year later, NPR published the government's first comprehensive set of customer service standards, covering 150 agencies and bureaus.4

· The second phase of reinvention. The customer maintained center stage during this phase. In 1995, the Vice President asked all agencies to evaluate the need to continue each of their programs "from the customer's perspective." This customer-driven analysis led to major changes in the Department of Housing and Urban Development's (HUD) public housing programs and other HUD programs. In addition, work on improving service continued in all agencies under the guidance of the original executive order. NPR consequently was able to publish a bigger and better set of service standards, this time covering 214 agencies and bureaus. Evidence of success began to surface. For example, an independent survey rated the Social Security Administration better than any American business at providing 1-800 phone service. Also, the Postal Service scored some well-publicized improvements in on-time delivery.

What's New?

Laying groundwork for a significant improvement in services to the public, the Vice President has asked the heads of the 11 federal agencies that have the most frequent or widespread contact with the public to make significantly visible improvements in some aspect of their customer service. This group is the "President's Vanguard," and each has made specific commitments (see the next page for a list of these commitments).

What's Next?

Improving customer service is critical to efforts to make government work better and cost less. The Vice President is announcing commitments to improved customer service by the heads of all the Vanguard agencies and is publicizing a way for citizens to comment on these through the Internet ( He also recently unveiled the improved U.S. Business Advisor -- the high-tech, customer-designed Web site that gives business owners access to the whole government (http:/ An interagency task force co-chaired by the Department of Commerce and the Small Business Administration continues to develop the U.S. Business Advisor by incorporating the comments and suggestions of businesses around the country.

In addition, the Vice President is announcing a governmentwide initiative to redesign the telephone book "blue pages" so that citizens can efficiently find government services. Finally, Vice President Gore is challenging all agencies by setting a goal for the year that "everyone in America will know" that government service is better.


1. Richard Morin and Dan Balz, "Americans Losing Trust in Each Other and Institutions," The Washington Post, January 28, 1996, p. 1. Trend data based on Washington Post/Kaiser/Harvard survey, General Social Survey, and American National Election studies.

2. In a speech to federal workers at the National Academy of Sciences, August 16, 1994.

3. Al Gore, From Red Tape to Results: Creating a Government that Works Better and Costs Less; Report of the National Performance Review (New York: Plume, September 1993). The topic was expanded upon in an accompanying NPR report, Improving Customer Service (Washington, D.C.: U.S. Government Printing Office, September 1993).

4. National Performance Review, Putting Customers First: Standards for Serving the American People (Washington, D.C.: U.S. Government Printing Office, September 1994).

Commitments by Members of the President's Vanguard

Occupational Safety and Health Administration -- Joe Dear
· Make a visible improvement in recruiting for partnership programs by taking the concepts of Maine 200 program nationwide.

· Overhaul the worker complaint system to cut response time in half by working with employees and employers to immediately correct the hazards.

Internal Revenue Service-- Peggy Richardson
· IRS is making it easier, faster, and more convenient for taxpayers to file their tax returns and to get forms and information through:

- expanded electronic filing;
- telefiling in all 50 states;
- making Form 1040EZ available to more people; and
- electronic services for 24-hour worldwide access to forms, publications, and information.

Environmental Protection Agency -- Carol Browner
· Dramatically increase EPA's partnerships with business to better protect the environment and public health at less cost through such programs as Project XL and the Common Sense Initiative, and through the agency's voluntary pollution prevention programs such as Energy Star, Pesticide Environmental Stewardship, WAVE, Green Lights, Climate Wise, WasteWi$e, and 33/50.

Forest Service and Park Service -- Jack Ward Thomas and Roger Kennedy
· Team up to develop a prototype one-stop information and campground reservation system for public lands.

· Dramatically improve the quality of the recreational experience and the services received by campers and visitors to the forests and parks.

U.S. Customs Service, Immigration and Naturalization Service, and Agriculture Quarantine Inspection Service -- George Weise, Doris Meissner, and Lonnie King
· Use technology to strengthen enforcement by providing more comprehensive and more timely information to front-line inspectors.

· Team up to beat the International Air Transportation Association standard of 45 minutes from block time to exit in every major international airport.

· Develop and meet a similar standard for land border crossings.

Commitments by Members of the President's Vanguard (cont'd)

Veterans Affairs -- Hershel Gober
·Give veterans and their dependents heightened interaction in benefits delivery.

·Make timely access the hallmark of veterans' medical care.

·Maintain cemeteries as befit national shrines.

·Provide the advantages of electronic commerce to veterans and suppliers.

Passport Service -- Mary Ryan
·Slash the lines in passport offices by summer 1996.

·If a customer has a concern regarding service, her or she can speak with a customer service representative.

·Ensure that all telephone inquiries are answered within two to three minutes.

·Partner with the travel industry to give travelers easy access to passport information and forms.

Social Security Administration -- Shirley Chater
·Improve access to Social Security's 1-800 phone line by giving callers nationwide immediate access to automated services and a choice of a live operator.

·Make improvements in callers' ability to reach Social Security during 1996.

3. Increase the Use of Regulatory Partnerships


The vast majority of Americans believe that their government has an important role to play in ensuring their safety and protecting their environment. And the Clinton-Gore Administration has an unwavering commitment to fulfilling those responsibilities. Strong enforcement of environmental statutes such as the Clean Air Act and Clean Water Act have produced tremendous results over the last 20 years, ranging from the restoration of swimmable rivers to the comeback of the American bald eagle. As the federal government continues to change, reinvent itself, and move forward, the challenge is not only to maintain the progress that has been made, but to make these laws actually work better.

To this end, regulatory agencies such as the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) should reorient their efforts to focus on results rather than process. The ultimate objective of an emissions reduction program, for example, should be to ensure that Americans can breathe clean air, not to make sure that companies are filling out certain government forms or following prescribed procedures. Regulatory agencies should move away from their traditional adversarial relationship with the private sector and toward cooperative partnerships to achieve public goals such as compliance with national health and safety standards.

With regard to environmental protection, President Clinton noted in his State of the Union speech: "To businesses this Administration is saying: If you can find a cheaper, more efficient way than government regulations require to meet tough pollution standards, do it -- as long as you do it right."

What's Been Done?

· The first phase of reinvention. Since its inception in 1993, the National Performance Review (NPR) has concentrated on the need to improve the focus and effectiveness of regulatory programs. In the first NPR report, Vice President Gore advocated changes to the way the federal government develops its rules. In September 1993, the President issued an executive order to implement these changes. The Vice President also recommended several specific reforms in the way government protects health, safety, and the natural environment.1

Recommendations targeting environmental regulation, for example, included cross-agency ecosystem planning and management, environmental accounting to improve federal decisionmaking, and a shift in EPA's emphasis toward pollution prevention rather than control and cleanup. Broader recommendations covering all regulatory activity included more emphasis on consensus-based rulemaking and alternative dispute resolution.

Besides making specific recommendations on regulatory policy, NPR also identified several groups of front-line regulators that had achieved substantially better results by forming partnerships with the entities they regulate.2

· The second phase of reinvention. The second round of the National Performance Review in 1995 included a specific initiative on regulatory reform. This was a two-pronged effort: first, to rationalize the huge bulk of federal regulations,3 eliminating the unnecessary, updating the obsolete, and clarifying the confusing. Second -- and, according to business leaders who are subject to regulation, more significantly -- the effort aimed to change the way regulations are enforced; to move away from adversarial enforcement and toward partnership with common goals.4The President called the heads of all regulatory agencies together and told them to make four changes: Cut obsolete regulations; measure and reward results, not the number of infractions and fines; get out of Washington and create grassroots partnerships; and negotiate rather than dictate.

What's New?

Agencies reported to the President last summer that they would eliminate 16,000 pages and streamline another 31,000 pages of the Code of Federal Regulations. Agencies have completed one-third of this commitment thus far. For example, the Small Business Administration has cut its regulations by more than half. Written in plain English, its streamlined regulations are coherent and user friendly. The Department of Commerce has radically revised its export regulations to make them more user friendly.

Much of the federal regulatory strategy of the past was based on considering business an adversary that would do only what was required by law or regulation and, even then, only if tough penalties were enforced. New experiences show that a more productive strategy for many regulatory agencies is to treat business as a partner with common goals. NPR has found many examples where innovative approaches to regulatory dilemmas produced much better results than did the traditional adversarial strategy. These initiatives demonstrate two key factors critical to moving forward with regulatory partnerships:

· The private sector is, in many cases, committed to achieving the goals laid out in environmental and safety laws, and is willing to work cooperatively toward those goals.

· The government can better achieve public goals by being more flexible and results-oriented, and by working with industry.

In Maine, for example, OSHA was setting records for the amounts of fines collected, but was not improving workplace safety. The agency abandoned its old way of doing business and formed alliances with industry and labor to work cooperatively and proactively to achieve the common goal of increased safety and health in the workplace. By giving employers a choice between partnerships and traditional enforcement, OSHA was able to leverage its limited resources to get better results. These new partnerships have identified and corrected 14 times more hazards than before. Of the 200 companies that participated in this program, 65 percent experienced a decrease in their injury and illness rates.

Other good examples exist in the environmental area.

· Many companies today are run by people who know and care about protecting the environment. Business leaders also understand that environmental protection is good for business because their customers want to buy from companies that protect, not pollute, the environment. These leaders are willing to help pull not only their own companies, but also others, in the right direction. Because they know their businesses far better than the government ever could, they also know best how to attack their own pollution problems, using all of the innovation and incentives available to the private sector. Continuing to treat them as adversaries wastes those powerful positive inclinations. Further, it stretches diminishing federal enforcement dollars over an unnecessarily large horizon instead of focusing them on the biggest problems.

· In Seattle, a unique partnership among EPA, the Justice Department, local governments, and the business community turned a regulatory stalemate into a solution resulting in the cleanup of a hazardous waste site and economic growth and jobs for the region. EPA's 33/50 program saw 1,300 companies voluntarily stop dumping a billion pounds of polluting chemicals into the environment. In November 1995, EPA launched its Project XL (for Excellence in Leadership) program, in which new partnerships are being forged with industry to achieve environmental goals. More than 10 companies are now in the program, working with others in their communities to move forward innovative pilot projects to achieve more environmental protection at less cost.

· EPA's new Common Sense Compliance Program of incentives for small businesses allows them to seek help to correct environmental problems without fear of a penalty, providing a six-month grace period to correct problems and waiving fines for first-time violators that make a good-faith effort to comply. EPA has created four compliance assistance centers -- for printing, metal finishing, auto repair, and small farms -- to provide businesses with the information they need about applicable regulations as well as about reducing costs by preventing pollution.

These partnerships work, and offer tremendous promise for achieving regulatory goals if expanded.

What's Next?

The success of the partnership pilots should be expanded into the mainstream of federal regulatory policy. Incentives for joining these partnership programs are compelling. For the regulated entity, a partnership offers a more rational, flexible, and results-oriented relationship with its regulator. For the government agency, partnership focuses efforts on outcome, not process, and allows the agency to target its resources more efficiently. And for the American people, these partnerships offer the opportunity to attain the goals of greater safety and a healthier environment with less economic disruption.

Incorporating the positive inclinations and ingenuity of the vast majority of today's business leaders into the regulatory process will best achieve public goals and can reduce costs for both industry and government. Following are some guidelines that should be considered in developing these new partnerships for all regulatory agencies.

· Enhance enforcement. The partnership strategy provides an opportunity to actually improve enforcement. Partnerships allow the government and private sector to combine their resources and talents in achieving goals. This cooperative approach lets the regulatory agency focus its energy and resources on remaining problem areas rather than impose unnecessary burdens in areas where goals are being met.

Businesses that want to become partners would have to demonstrate, through independent audits or other means, that they are achieving the goals of the partnership. This would give EPA a very low-cost method of getting far more inspection and enforcement -- and results -- than it can with today's workforce and resources. Companies acting in good faith would receive the benefits of the partnership. Should participating companies not live up to their end of the bargain, EPA still has all of its enforcement tools available.

· Tailor plans for each business. Particularly with all of the new tools available in this information age, regulatory strategies should not assume that one size fits all. Regulatory programs should focus on outcomes, not on how they're achieved. Virtually every regulatory situation is unique and may be resolved best by a unique solution. The terms of each partnership should be defined by the partners, as partners.

· Add extras. When offered the incentives and opportunities, companies have shown a willingness to go well beyond the requirements of law in order to get out of an adversarial mode. For example, one company, as part of a broader partnership pilot with the EPA, agreed to establish a recycling facility in a town where none existed. As the result of a more cooperative, results-oriented relationship between EPA and the private sector, the public received not just better focus on the goals of clean air and water laws, but also a jump-start in its efforts to keep recyclables out of its landfill.


1. These recommendations are elaborated on in the following NPR reports: Reinventing Environmental Management, Improving Regulatory Systems, and Environmental Protection Agency. These reports were issued in September 1993 and are available from the U.S. Government Printing Office.

2. The most publicized example was the partnership between the Customs Service and the airline and shipping companies that serve the port of Miami. Led by Miami Customs chief Lynn Gordon, the two-year-old effort has transformed an adversarial, even litigious, relationship into a smooth, working partnership which has both improved drug interdiction and sped the clearance of passengers and cargo.

3. These regulations are codified in the Code of Federal Regulations, which is over 132,000 pages long, and contains such detailed items as instructions on how to smell a fish and specifications for testing the proper size of particles of grits.

4. Other partnership efforts, besides the Miami Customs example described above, are EPA's 33/50 program, OSHA's Maine 200 program, and the Comptroller of the Currency's regulations concerning bank operations. Each of these programs is based on trust, partnership, flexibility, and better results.

4. Create Performance-Based Partnership Grants


A performance-based partnership grant between the federal government and another level of government is an agreement based on goals -- and progress toward meeting those goals -- rather than on regulatory inputs and micromanagement. The objective of such a partnership is to focus on program results and the needs of the program's intended recipients.

Performance-based partnership grants shift the focus from processes and inputs to a system of accountability for performance and results. All organizations in the partnership are accountable, and all work together to achieve the results. In exchange for commitments to specific performance levels, state and local governments receive increased administrative flexibility on how to achieve these levels of performance.

The principles of performance-based partnership grants are as follows:

· Focus on results. Partnerships are negotiated and structured to achieve mutually agreed-upon results oriented to community needs and customer satisfaction.

· Create partnerships.

- Partners share accountability to the public for outcomes and progress toward outcomes.

- Intergovernmental and interagency partners work together toward desired results.

- Partners work together to remove barriers to success.

· Increase flexibility.

- Partnerships reduce red tape and micromanagement at all levels of the service delivery system.

- Partnerships provide greater flexibility at all levels to achieve more effective performance toward results.

- Partnerships create mutual trust and delegate responsibilities as to how services are designed and delivered to front-line, local-level providers.

- This approach is not about more money but about more effective use of funds to better achieve results.

Performance-based partnership grants yield improved results, better use of public resources, and greater confidence in public sector services. They also enable localities to design and implement solutions tailored specifically to their community needs.

What's Been Done?

Several initiatives over the past three years have laid the groundwork for improved partnerships between the federal government and states and localities.

· Performance partnership grants. The President's FY 1996 budget proposed consolidating 271 grant programs into 27 performance partnership grants with state and local governments in the areas of public health, rural development, education and training, housing and urban development, and transportation. For example, the Public Health Service would consolidate over 100 programs into categories of performance partnership grants such as chronic diseases. Small categorical grants would be replaced with larger, flexible pools of funds. Under this proposal, grantees would determine how to use funds but would develop, report on, and show progress toward performance goals (for example, the percentage of women whose breast cancer is detected at an early stage). Legislation for these and a related Environmental Protection Agency (EPA) performance grant are awaiting final congressional approval.

· Government Performance and Results Act (GPRA). This act requires agencies to define their long-term goals, set specific annual performance targets, and report annually on performance compared to targets. GPRA takes effect governmentwide in FY 1999; until then, its requirements apply to various pilot programs. GPRA reporting will undoubtedly be easier for services delivered directly by the federal government than for those delivered through the intergovernmental system. Very few of the early GPRA pilots are intergovernmental programs; however, some-- such as the Child Support Enforcement program -- have been making great progress in identifying goals and performance measures with their intergovernmental partners.

· Community empowerment zones and enterprise communities (EZ/ECs). The Administration has entered into performance partnerships with localities primarily through the Empowerment Zone/Enterprise Community initiative. The 105 designated EZ/ECs have developed comprehensive strategic plans to address the economic, physical, and human needs of their communities, with action plans and benchmarks to measure progress toward community goals. The federal government is providing financial and technical assistance to the EZ/ECs and is eliminating red tape and micromanagement where possible.

· State partnerships. An interagency partnership begun in 1994 with the State of Oregon focuses on specific outcomes -- healthier children, more stable families, and a more developed workforce. Partners work to implement promising practices that will achieve outcomes, break down barriers to achieving outcomes, and measure progress toward those outcomes. The Administration signed an agreement on February 24, 1996, to create a similar partnership with Connecticut to improve that state's poorest communities through economic development and neighborhood revitalization.

· Agency-based partnerships. Individual federal agencies have moved ahead with performance-based intergovernmental partnerships. The Department of Housing and Urban Development, for example, entered into a partnership with Dallas and Texas to work together to revitalize the city; the agreement includes deadlines for accomplishing specific objectives. EPA entered into an agreement with Tulsa to provide that city with sufficient flexibility to try an approach that the city believes will lead to better ambient air quality standards than EPA currently requires. EPA has also launched an initiative called "XL for Communities" that offers -- to local entities that can demonstrate excellence and leadership -- assistance and flexibility to implement community-designed strategies to achieve greater environmental quality.

What's New?

States and localities are developing more sophisticated means of budgeting and wiser ways of using their resources. As they begin to develop broad strategic approaches to solving the problems they confront, they need the federal government to be a partner, not an impediment. States such as Connecticut, Indiana, Oregon, and West Virginia have approached the federal government seeking partnerships in solving diverse problems, including children and family needs, economic development, and health care. Cities, too, are approaching the federal government with similar requests. The Administration has granted hundreds of waivers to its rules, but a more comprehensive approach is warranted.

What's Next?

Building on GPRA and other initiatives, the federal government can begin to turn every interaction it has with another level of government into a performance-based approach. Partnerships with individual states or in individual programs are a start, but they make only a small dent in the more than 600 separate federal categorical grant programs administered through the intergovernmental system. Of these 600 programs, some 450 ¾ or 75 percent ¾ are grants of $50 million or less. In FY 1995, total discretionary federal funds for state and local grants was over $125 billion.

As individual programs come up for reauthorization, agencies and Congress should review them in the context of other programs with related objectives. For example:

· Agencies should -- in conjunction with state and local partners -- develop and submit to Congress national program goals and objectives consistent with their strategic plans.

· Based on these goals, Congress should develop legislation authorizing performance partnerships that would give state and local governments greater flexibility as to how to achieve agreed-upon levels of performance (for example, encourage funding flexibility, provide waiver authority to enable compliance or achievement of agreed-upon goals, reduce micromanagement and paperwork for programs that work, create funding incentives to reward desirable results).

· Agencies should identify corresponding reductions in federal regulations and administrative procedures.

Finally, Congress should remove statutory barriers or provide statutory ability for federal agencies to provide greater flexibility to state and local governments regarding how programs are administered. Congress should also adopt an acceptable version of the proposed Local Empowerment and Flexibility Act to give states and localities a chance to propose plans for better coordination of federal, state, local, and nonprofit funds and services, and to request waivers from federal laws and regulations that hinder a locality's ability to achieve agreed-upon results. Under S.88, proposed by Senator Mark Hatfield (and its companion House bill, H.R. 2086, sponsored by Representative Christopher Shays), a team of cabinet-level officials would review local plans to integrate federal funds, and federal agencies could grant waivers to provide more flexibility to achieve results.

5. Establish Single Points of Contact for Communities


Vice President Gore challenged federal agencies three years ago to change the way they interact with Americans at all levels -- not by reorganizing the agencies, but by restructuring how they work. His vision of a "virtual government" that is straightforward in its delivery of services is being realized in several areas. For example:

· The U.S. Business Advisor is an Internet-based system that allows access to over 30 federal agencies in one place ( It provides a "one-stop" electronic shop for information and services that the government offers to help businesses grow and prosper.

· In Houston, the pilot U.S. General Store lets businesses receive integrated services from more than a dozen federal agencies at one location.

· Public assistance recipients are having their aid integrated across programs with increased security and reduced fraud through electronic benefit cards, which are similar to bank cards.

The federal government is now ready to pilot more difficult forms of service integration with large communities around the country.

Over 600 federal programs are administered through state and local governments. These programs often serve similar populations. However, the local community has no authority to integrate these for their customers. The federal government should help by designating a federal contact point to work across these programs to meet the needs of the people in individual communities.

Establishing a single point of contact for each of America's larger communities would completely restructure the way the federal government does business with these communities. At the local level, federal employees would work directly with the priorities, opportunities, and problems the communities themselves identify -- not those defined by the federal government. In this way, federal and local public employees would become partners working together to achieve measurable results rather than one level of government micromanaging another.

Under this scheme, cities over a certain size would have a single federal point of contact. This person would be trained to:

· troubleshoot,

· respond to community complaints,

· help communities identify and overcome federal and other impediments to achieving local priorities and results, and

· help communities navigate through the maze of federal programs and processes.

What's Been Done?

Over the past three years, a dramatic reinvention of the federal relationship with communities has begun ¾ particularly through the Department of Housing and Urban Development's (HUD's) reinvention activities under the leadership of President Clinton, Vice President Gore, and Secretary Cisneros. Empowerment zones and enterprise communities are using flexible federal resources to create jobs and businesses and leverage private sector investment; they are also working with federal partners to break down barriers and achieve real results for the residents in their communities. For example, the Small Business Administration has joined with other federal, state, local, and private sector partners to establish One-Stop Capital Shops that help small firms get in business, stay in business, and grow.

Several performance partnerships have been established with individual cities and states. These efforts focus on measurable results and on breaking down local, state, and federal barriers to achieving those results. For example, the Environmental Protection Agency has been working closely with communities on the Brownfields Initiative to reclaim abandoned hazardous waste sites, and with other federal and state agencies on community advisory groups.

In 1994, the Vice President and seven cabinet secretaries signed an agreement with the governor and local officials in Oregon to test a new service delivery system that aims at, and holds all partners accountable for, achieving measurable results. Interagency and intergovernmental partners of "the Oregon Option" are working together toward agreed-upon results involving healthy children, a developed and well-prepared workforce, and stable families. They are trying to determine promising strategies to achieve results, eliminate barriers to those strategies and results, and measure progress toward results. A similar agreement was signed with officials in Connecticut in February 1996.

What's New?

Together with states and localities, the federal government faces funding constraints that compel it to seek joint solutions to commonly recognized problems. The new fiscal realities call into question the usefulness of many small, narrowly targeted federal grant programs. Hence, agencies are more willing to address the existing barriers in the federal grant system.

What's Next?

Considerable progress has been made in streamlining and consolidating programs and requirements and entering into performance partnerships over the last three years. Still, most federal programs offer a very limited ability for localities to use funds creatively to meet their unique needs. Community problems and opportunities do not fit neatly into the organizational and programmatic framework the federal government currently uses.

In general, the federal government is not organized in a way that allows attention to be focused on the overall effects of federal actions on a city. And yet its actions -- undertaken not unilaterally, but as extensions of individual offices and agencies -- can have unintended consequences. For example, communities face daunting federal rules when they attempt to integrate services to poor families. When they try to do so, federal rules often prevent common sense solutions -- such as prohibiting part-time workers for two different programs funded by two different federal agencies from using the same desk. The federal government must integrate its approach and resources to deliver services in a common sense way from the point of view of the customer, starting in larger communities.

HUD has already begun this integration with its own programs. It is moving away from
"faceless bureaucrats" toward individual accountability in the field. Starting with a complete transformation of HUD, the federal government -- where appropriate -- can begin to change its relationship with communities. The HUD vision for broader federal action will encompass the following activities:

· HUD will invert its organizational structure so that federal representatives who meet with the public are on the highest level, and every other function supports a highly competent front-line staff. HUD will also give its field offices and field office directors more power to solve problems, cross agency lines, and meet customer needs. HUD's headquarters staff should be reduced as program delivery functions are moved to the front-line field offices. Remaining Washington-based staff should focus on policy development, budgeting, and congressional relations.

· Over the next year, the President will begin designating a single point of contact for localities; initially, this will be through HUD, and eventually, through other agencies such as the Department of Health and Human Services or the Environmental Protection Agency, depending on the prevalent issues and topics. This process will likely begin with the approximately 183 jurisdictions that have populations over 150,000 or are the largest city in each state, and with counties whose populations exceed 700,000. While these contact persons will not have decisionmaking authority over other federal departments, they will be charged with convening other federal officials to resolve problems identified by localities. These staff and their partners will receive training to ensure that they have the expertise to help communities achieve their visions. The first of such contacts, Ray Jordan, was designated to coordinate interagency efforts in Connecticut on February 24, 1996.

· These actions will complement HUD's proposal to consolidate its 60 programs into a core of three to four programs that give communities more power and flexibility in return for results.

6. Transform the Federal Workforce


Congress laid the foundation of the current Civil Service system in 1883. It has modified the basic Civil Service legislation many times since then in order to create uniform job classifications, standardized efficiency ratings, and benefit programs. The 1978 Civil Service Reform Act created the Senior Executive Service (SES) and instituted performance management features such as merit pay. Other recent changes have included locality pay, a new retirement system, and reform of the Hatch Act.

The system in place was characterized by the National Performance Review (NPR) as an elaborate, complex, and overregulated one that prevents agencies and their managers, employees, and unions from designing effective and mission-supporting human resource management programs. As the General Accounting Office points out, the private sector and other government entities are moving in a quite different direction:

. . . It is clear that today's leading private sector employers ¾ as well as some government entities both here and abroad ¾ are creating personnel systems that diverge sharply from the federal government's traditional approach. The new model is more decentralized, focused more directly on mission accomplishment, and set up more to establish guiding principles than to prescribe detailed rules and procedures.1 Making government work better and cost less means giving its workforce greater accountability and focusing more on results. But several factors challenge this goal, not least of which are that the federal workforce today faces less stability, tighter resources, and greater uncertainty about its future than it has at perhaps any other time. To move forward, the federal workforce will need new tools, a flexible human resource management system, effective training, and a creative and empowered senior executive leadership.

What's Been Done?

In 1993, NPR examined workforce issues in the federal government. It found that a highly centralized, outmoded human resource management system formed a major barrier to innovation in the government:

Today, the system's functional operating components present a burdensome array of barriers and obstacles to effective human resource management. Hiring is complex and rule-bound . . . The classification and pay systems are inflexible. The performance management system is not adequately linked to the organization's mission and goals . . . Agencies see little value in the efforts of central guidance agencies to monitor and control their activities.2 NPR made a series of recommendations designed to improve human resource management throughout government. Many of these are in progress or have been implemented. For example, the Office of Personnel Management (OPM) abolished the Federal Personnel Manual in January 1994, thereby giving agencies greater flexibility in designing their personnel systems. It has redesigned and simplified performance management and family-friendly leave policies. Many other initiatives are also under way across the government to improve the human resource management process, strengthen training programs, and enhance senior executive performance. In addition, Congress recently granted departments and agencies the authority to conduct their own recruiting and examining for all positions.

Two particularly important NPR recommendations addressed streamlining, decentralizing, and deregulating the human resource management system:

· Dramatically simplify the current job classification system, and give agencies greater flexibility in how they classify and pay their employees.

· Agencies should be allowed to design their own performance management and reward systems, with the objective of improving the performance of individuals and organizations.3

These recommendations essentially called for major reform of the existing Civil Service system. The Administration has drafted legislation that would implement reform by greatly expanding the demonstration authority currently in law.

What's New?

This reform initiative is just beginning. Although OPM has simplified or abolished its own regulations and a number of agencies have put in place better systems, statutory impediments remain. Transforming the workforce to make it effective in a balanced budget environment will involve several key elements.

· Reform the Civil Service system to:

- Expand agencies' capability to initiate demonstration projects to explore and test new human resource management concepts. This would include streamlining the current hiring, classification, and performance management processes; expanding the numbers and types of projects; and allowing successful projects to become permanent.

- Increase the authority and accountability of line managers over personnel decisions.

- Strengthen labor-management partnerships that let agencies and their workers and unions work together to increase their organization's performance.

· Invest in the workforce. In high-performing organizations, training constitutes an investment in a strategic resource and is funded accordingly as a means of achieving organizational mission. These "learning organizations" recognize that the ability to change successfully in an extremely dynamic environment is directly linked to the tools with which the workforce has been equipped.

· Broaden senior executives' leadership perspectives and re-energize their leadership role. A balanced budget environment demands leadership willing to take risks and encourage new, innovative ideas. Because today's senior executive cadre was trained in an environment of growing budgets and resources, they now need a program to help them develop new perspectives. This should include training for building expertise and skills in "start-ups," "turnarounds," process reengineering, downsizing, customer service and interaction, and other capabilities that will be crucial for successful executives in a new government era. The program should also encourage executives to get out of their offices and into experiences that put them in touch with the public, give them a better understanding of state and local needs, or work in other federal positions outside their own organizations.

What's Next?

· In the near term, the Administration will submit Civil Service reform legislation to Congress that will enhance demonstration project authority by allowing agencies to improve their ability to hire, manage performance, classify jobs, and strengthen labor-management partnerships.

· Agencies will be encouraged to invest in training their workforce. They will be required to integrate individual and organizational learning in their strategic plans, which are submitted under the Government Performance and Results Act, as recognition that a continuously learning workforce is a vital investment for achieving strategic goals and objectives. Agencies designated as performance-based organizations should be granted the authority to earmark up to 50 percent of their savings in operating accounts to be used for training.

· To enhance the effectiveness of the senior executive corps in a rapidly changing environment, the Administration will consider options that broaden SES experience and expertise. These would include training to broaden leadership perspectives and increasing voluntary senior executive mobility. An enhanced mobility program might, for example, include positions in state and local government or private industry, or might provide incentives to transfer.


1. U.S. General Accounting Office, Civil Service Reform: Changing Times Demand New Approaches (GAO/T-GGD-96-31) October 12, 1995.

2. National Performance Review, Creating a Government that Works Better and Costs Less: Reinventing Human Resource Management (Washington, D.C., September 1993) pp. 2-3.

3. Al Gore, From Red Tape to Results: Creating a Government that Works Better and Costs Less; Report of the National Performance Review (New York: Plume, September 1993) pp. 21-25.

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