oversight

NPR's Savings: Claimed Agency Savings Cannot All Be Attributed to NPR

Published by the Government Accountability Office on 1999-07-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to the Chairman, Committee on
                 Government Reform
                 House of Representatives


July 1999
                 NPR’s SAVINGS
                 Claimed Agency
                 Savings Cannot All Be
                 Attributed to NPR




GAO/GGD-99-120
United States General Accounting Office                                          General Government Division
Washington, D.C. 20548




                                    B-282850
                                    July 23, 1999

                                    The Honorable Dan Burton
                                    Chairman, Committee on Government Reform
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    As you requested, this report discusses savings claims from the National
                                    Performance Review, which has been renamed the National Partnership
                                    for Reinventing Government (for both of which we use the acronym NPR)
                                    and the methodologies that the Office of Management and Budget (OMB)
                                    used in estimating these claims. NPR claimed that about $137 billion in
                                    savings has resulted from its efforts to reinvent the federal government,
                                    including about $34.3 billion in savings that is not expected to be realized
                                    until fiscal years 1999 and 2000. Of the $137 billion in estimated savings,
                                    about $44.3 billion was claimed from recommendations that were targeted
                                    toward individual agencies. About $67.5 billion was claimed from
                                    recommendations designed to be implemented governmentwide, and
                                    another $24.9 billion was claimed from items not originated by NPR but,
                                    according to NPR, were consistent with the principles of reinventing
                                    government.

                                    Our objective was to describe and assess how OMB estimated savings
                                    from selected NPR recommendations targeted toward individual agencies.
                                    We reviewed recommendations representing over two-thirds of the $44.3
                                    billion in savings that NPR claimed had been achieved from its
                                    recommendations to individual federal agencies. Specifically, we
                                    examined the savings estimates for two recommendations each from three
                                    agencies: the U.S. Department of Agriculture (USDA), the Department of
                                    Energy (DOE), and the National Aeronautics and Space Administration
                                    (NASA). (Appendixes I through VI contain detailed information on the six
                                    recommendations.) The claims we reviewed at these three agencies
                                    constituted about 22 percent of the total estimated savings from NPR. As
                                    agreed with your office, we did not determine the amount of savings NPR
                                    should have claimed but rather focused on describing how OMB estimated
                                    savings from agency-specific recommendations, specifically these six
                                    recommendations.

                                    NPR claimed savings from agency-specific recommendations that could
Results in Brief                    not be fully attributed to its efforts. OMB generally did not distinguish



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NPR’s contributions from other initiatives or factors that influenced
budget reductions at the agencies we reviewed. Therefore, the relationship
between the recommended action and the savings claimed from the
recommendations we reviewed was not clear. For example, OMB
attributed all $8.5 billion of expected reductions to NASA’s budget for
fiscal years 1996 through 2000 directly to NPR’s recommendation to
reinvent NASA but did not account for other factors that influenced
NASA’s budget during this period. Such factors included ongoing NASA
management reform initiatives undertaken separately from the NPR and
budgetary spending caps.

To estimate the savings from the agency-specific recommendations, OMB
said it used the same types of procedures and analytic techniques that
have long been used in developing the President’s budget. These
procedures and techniques are intended to support point-in-time budget
estimates that are based on policies and economic forecasts in effect at a
given time. As our previous reviews of budget estimates have shown, it is
difficult to reconstruct the specific assumptions used and track savings for
                                        1
estimates produced several years ago. Moreover, we have reported that it
is often impossible to isolate the impacts of particular proposals or
recommendations on actual savings achieved due to the multiple factors
involved. OMB relied on these point-in-time estimates rather than
attempting to measure actual savings. OMB last updated its estimates in
1997, so any changes that have occurred since then are not reflected in
NPR’s claimed savings.

We identified two instances where OMB counted at least part of the
estimated savings twice. OMB counted the same $770 million in estimated
savings for two different NPR initiatives—once for agency-specific
changes (from reorganizing USDA) and again as part of a NPR
governmentwide initiative to reduce the size of the federal workforce.
OMB also counted some savings twice—potentially up to $1.4 billion in
estimated savings—for two NPR recommendations we reviewed, one
made in 1993 to strengthen and restructure NASA management and
another made in 1995 to reinvent NASA. Therefore, the total estimated
savings from the USDA and NASA recommendations were overstated.

For one recommendation where OMB and the Congressional Budget Office
(CBO) both estimated savings, we found that offsetting program costs may
not have been fully included in OMB’s estimates. In estimating savings that

1
 NPR Savings Estimates (GAO/GGD/AIMD-96-149R, July 24, 1996) and Budget Process: Issues
Concerning the 1990 Reconciliation Act (GAO/AIMD-95-3, Oct. 7, 1994).




Page 2                                                        GAO/GGD-99-120 NPR’s Savings
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             resulted from personnel reductions at USDA (part of the NPR
             recommendation to reorganize USDA), OMB and CBO considered different
             offsetting costs and arrived at different estimates, with CBO’s estimate
             being $324 million less than OMB’s $770 million estimate. According to
             CBO, it assumed that severance benefits and relocation costs would
             reduce the potential savings, while OMB assumed that the agency could
             absorb those costs.

             Consistent with OMB’s normal budget practices, OMB examiners generally
             did not retain documentation when estimating NPR savings. The program
             examiners were unable to document estimates for four of the six
             recommendations we reviewed, constituting $21.8 billion in savings claims.
             Instead, the OMB examiners attempted to reconstruct how they thought
             the savings had been estimated through approximating rather than
             replicating savings estimates. OMB had documentation for two of the
             recommendations we reviewed. However, we found that the savings were
             reported incorrectly, understating NPR’s estimated savings for those two
             recommendations by about $1.9 billion.

             The administration launched NPR in March 1993, when President Clinton
Background   announced a 6-month review of the federal government to be led by Vice
             President Gore. The first NPR report was released in September 1993 and
             made recommendations intended to make the government “work better
                            2
             and cost less.” The first NPR phase, called NPR I, included
             recommendations to reinvent individual agencies’ programs and
             organizations. It also included governmentwide recommendations for (1)
             reducing the size of the federal bureaucracy, (2) reducing procurement
             costs through streamlining, (3) reengineering processes through the better
             use of information technology, and (4) reducing administrative costs. The
             estimates for NPR I savings covered fiscal years 1994 through 1999.

             Vice President Gore launched the second NPR phase (called NPR II) in
             December 1994 and reported on this phase’s savings estimates in
                              3
             September 1995. According to NPR, this second phase expanded the
             agenda for governmental reform. NPR II efforts focused on identifying
             additional programs that could be reinvented, terminated, or privatized, as
             well as on reinventing the federal regulatory process. The estimates for
             NPR II savings covered fiscal years 1996 through 2000.

             2
              From Red Tape to Results: Creating a Government That Works Better and Costs Less, report of the
             National Performance Review, Vice President Al Gore, September 7, 1993.
             3
             Common Sense Government: Works Better and Costs Less, third report of the National Performance
             Review, Vice President Al Gore, September 7, 1995.




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                                     As shown in table I, NPR claimed estimated savings of $82.2 billion from
                                     NPR I recommendations. NPR similarly reported that $29.6 billion had
                                     been “locked into place” from program changes in individual agencies
                                     under NPR II.

Table 1: Estimated Savings Claimed
from NPR Recommendations             Source of estimated savings                        Amount of estimated savings claimed
                                                                                                      a
                                                                                        (in billions)
                                     NPR I
                                     Reducing the size of the bureaucracy                                                        $54.8
                                     Reducing procurement costs and                                                               12.7
                                     reengineering information technology
                                     Program and organizational changes in
                                     individual agencies                                                                          14.7
                                      Subtotal of estimated savings from NPR I                                                    82.2
                                     NPR II
                                     Program changes in individual agencies                                                       29.6
                                     Total estimated savings claimed from                                                       $111.8
                                     NPR I and II recommendations
                                     a
                                     OMB estimated savings for NPR I in 1993 and for NPR II in 1995. It updated its savings database in
                                     1996 and again in 1997.
                                     Sources: NPR’s web page (www.npr.gov), as of October 15, 1997, and OMB data.


                                     In addition to the $111.8 billion NPR claimed from the NPR I and II
                                     recommendations, NPR claimed $24.9 billion in estimated savings based
                                     on reinvention principles. These additional claimed savings included, for
                                     example, $23.1 billion from the Federal Communications Commission’s
                                     auctions of wireless licenses. This $24.9 billion brings the total amount of
                                     reinvention savings claimed by NPR to about $137 billion. This $137 billion
                                     savings figure is the one NPR most commonly cites as the savings it has
                                     achieved.

                                     NPR relied on OMB to estimate the savings it claimed from its NPR I and II
                                     recommendations. OMB’s program examiners were responsible for
                                     developing the estimates in their role as focal points for all matters
                                     pertaining to their specific assignment area. One of the examiners’ major
                                     duties is to oversee the formulation and execution of the budget process.
                                     They are also expected to perform legislative, economic, policy, program,
                                     organizational, and management analyses. OMB made the initial estimates
                                     for the 1993 and 1995 NPR reports and updated its database on the savings
                                     claimed in the summers of 1996 and 1997. These updates, according to an
                                     OMB official, were primarily to ensure that all the estimates for
                                     recommendations that NPR considered implemented were included in the
                                     total amount of savings claimed.




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                To describe and assess how OMB estimated the savings from NPR, we
Scope and       focused on three agencies (USDA, DOE, and NASA), where relatively large
Methodology     savings were claimed and that provided a variety of types of actions taken.
                At each agency, we selected two recommendations with claims of at least
                $700 million in savings each. The six recommendations we reviewed
                accounted for $10.45 billion of the $14.7 billion claimed from changes in
                individual agencies under NPR I and $19.17 billion of the $29.6 billion
                claimed from NPR II savings. Overall, the claimed savings from the
                recommendations we reviewed accounted for over two-thirds of the $44.3
                billion in savings claimed from NPR’s recommendations to individual
                agencies and 22 percent of the total amount of NPR’s savings claims.

                Following is a listing of the six recommendations we reviewed and the
                estimated savings, in millions of dollars, that NPR claimed for each of
                those recommendations. (See apps. I through VI for detailed information
                on each of the recommendations.)

              • reorganize USDA to better accomplish its mission, streamline its field
                structure, and improve service to its customers ($770 million);
              • end USDA’s wool and mohair subsidy ($702 million);
              • redirect DOE laboratories to post-Cold War priorities ($6,996 million);
              • realign DOE, including terminating the Clean Coal Technology Program;
                privatizing the naval petroleum reserves in Elk Hills, CA; selling uranium
                no longer needed for national defense purposes; reducing costs in DOE’s
                applied research programs; improving program effectiveness and
                efficiencies in environmental management of nuclear waste cleanups; and
                strategically aligning headquarters and field operations ($10,649 million);
              • strengthen and restructure NASA management, both overall management
                and management of the space station program ($1,982 million); and
              • reinvent NASA, including eliminating duplication and overlap between
                NASA centers, transferring functions to universities or the private sector,
                reducing civil service involvement with and expecting more accountability
                from NASA contractors, emphasizing objective contracting, using private
                sector capabilities, changing NASA regulations, and returning NASA to its
                status as a research and development center ($8,519 million).

                Since these recommendations are not representative of all NPR
                recommendations, our findings cannot be generalized to apply to other
                savings claimed by NPR. As agreed with your office, we did not
                independently estimate the actual amount of savings achieved from these
                six recommendations.




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                        We interviewed NPR and OMB officials about how they estimated and
                        claimed savings and also requested relevant documentation. We also
                        examined a database OMB maintained showing the amount of savings
                        achieved from the recommendations. The NPR I data covered fiscal years
                        1994 through 1999, and the NPR II data covered fiscal years 1996 through
                        2000. Both sets of data were most recently updated in the summer of 1997.
                        We reviewed NPR data, including a description of the status of the
                        recommendations and reports containing background information, on the
                        three agencies and the relevant recommendations where available. We also
                        interviewed officials from these agencies about the savings OMB estimated
                        for the recommendations we reviewed.

                        We conducted our review in Washington, D.C., from April 1998 through
                        February 1999 in accordance with generally accepted government auditing
                        standards. We requested comments on a draft of this report from OMB, the
                        Departments of Agriculture and Energy, and NASA. These comments are
                        discussed at the end of this letter.

                        OMB generally did not distinguish between NPR’s and other contributions
The Relationship        for the agency-specific recommendations we reviewed. NPR attempted to
Between NPR             build on prior management reforms and operated in an atmosphere where
Recommendations and     other factors, such as agencies’ ongoing reforms as well as the political
                        environment, also influenced actions taken to address NPR’s
Agency Savings Claims   recommendations. The relationship between the recommendations we
Was Not Clear           reviewed and the savings claimed was not clear because OMB attributed a
                        broad range of changes to NPR.

                        Savings estimated from the recommendation to reinvent NASA illustrate
                        how OMB attributed a broad range of changes to NPR and did not
                        distinguish NPR’s contribution from other factors. To estimate savings for
                        that recommendation, OMB consolidated seven somewhat related
                        recommendations into one savings estimate of $8.519 billion. OMB
                        estimated savings by totaling expected reductions to NASA’s entire budget
                        for fiscal years 1996 through 2000. According to a NASA official, NASA’s
                        funding during this period was limited as the result of several initiatives,
                        including direction from the NASA administrator that began before NPR
                        was initiated and congressionally imposed spending caps. Nevertheless,
                        OMB attributed all of the $8.519 billion in savings from estimated
                        reductions in the entire NASA budget to NPR.

                        OMB followed similar procedures in estimating savings from the other
                        NPR recommendation concerning NASA that we reviewed—the
                        recommendation to strengthen and restructure NASA management. The



                        Page 6                                            GAO/GGD-99-120 NPR’s Savings
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examiner estimated savings of $1.982 billion on the basis of expected
reductions in funding levels for one of NASA’s three budget accounts for
fiscal years 1994 through 1999. The estimated savings were based on
expectations for lower levels of budget authority due to the combined
effects of several factors, such as budgetary spending caps and ongoing
NASA management reform efforts.

In the case of the NPR recommendation for DOE to shift its laboratory
facilities’ priorities in response to conditions that accompanied the end of
the Cold War, NPR recognized that changes were already under way. For
example, as part of this recommendation, NPR called for DOE to
“continue” the reduction of funding for nuclear weapons production,
research, testing programs, and infrastructure. Considering the
comprehensive nuclear test ban treaty agreements and other factors, it
was apparent that the DOE laboratories’ priorities would have changed
regardless of whether NPR had made the recommendation. However, as
figure 1 shows, when OMB estimated savings from this recommendation, it
credited all savings from estimated reductions in the weapons activity
budget account ($6.996 billion) to NPR.




Page 7                                           GAO/GGD-99-120 NPR’s Savings
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Figure 1: Savings OMB Estimated From
NPR’s Recommendation to Redirect
DOE Laboratories’ Priorities




                                       Note: OMB used budget data based on actual numbers through fiscal year 1997 and budget
                                       estimates for fiscal years 1998 and 1999.
                                       Source: GAO analysis of OMB data.


                                       Similarly, efforts related to NPR’s recommendation to reorganize USDA
                                       were under way prior to or simultaneously with the NPR recommendation.
                                       These efforts included USDA reorganization plans and the introduction of
                                       legislation to streamline USDA. For example, the Federal Crop Insurance
                                       Reform and Department of Agriculture Reorganization Act of 1994 (P.L.
                                       103-354, Oct. 13, 1994), required USDA to reduce the number of federal
                                       staff years by at least 7,500 by the end of fiscal year 1999. Therefore,
                                       USDA’s reorganization could be viewed as part of a continuous
                                       management improvement effort. OMB attributed the entire $770 million in
                                       estimated savings it reported from USDA’s staffing reductions to NPR.

                                       In contrast, the relationship between the recommended action and the
                                       estimated savings was relatively straightforward for the NPR
                                       recommendation to end USDA’s wool and mohair subsidy program. In that



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                         case, program costs, primarily subsidy amounts that were reduced by
                         phasing out the program and subsequently eliminated by ending the
                         program, were counted as savings.

                         According to OMB, the procedures and techniques it used to estimate NPR
OMB Used Standard        savings were those that it commonly follows in developing the President’s
Budget Estimating        budget. Therefore the NPR savings estimates were to provide a “snapshot”
Techniques to Estimate   showing the amount of savings OMB expected would result from the
                         recommendations. For example, in 1993, OMB projected savings from the
Savings                  NPR recommendation to strengthen and restructure NASA management
                         covering fiscal years 1994 through 1999. OMB characterized these
                         estimated savings as achieved in 1996, and NPR has continued to report
                         these estimated savings (based on the 1993 estimate) as achieved. More
                         generally, OMB’s savings estimates for agency-specific recommendations
                         included about $34.3 billion in savings that were not expected to be
                         realized until fiscal years 1999 and 2000. OMB last updated its estimates in
                         1997, so any changes that have occurred since then are not reflected in
                         NPR’s claimed savings.

                         OMB’s budget estimating procedures and techniques use policies and
                         economic forecasts in effect at a given time. The estimates OMB prepared
                         for NPR initiatives involved projecting changes from a given baseline and
                         identifying the difference as savings. OMB said that it generally used a
                         fiscal year 1994 current services baseline for the NPR I agency-specific
                         recommendations and a fiscal year 1996 Omnibus Budget Reconciliation
                         Act baseline for the NPR II recommendations. OMB said, however, that in
                         both cases, program examiners could use other savings baselines where
                         the examiners believed it made better sense for a particular program or
                         NPR recommendation. The OMB examiners also had latitude in
                         determining the most appropriate analytical approach to use, based on
                         their knowledge of the agency and the specific characteristics of the
                         individual NPR recommendation.

                         Our prior reviews of budget estimates have shown that it is difficult to
                         reconstruct the specific assumptions used or to track savings for estimates
                         produced several years ago. As we reported in 1996, once an estimate is
                         prepared and time passes, it becomes difficult to retrace the original steps
                                                                                               4
                         and reconstruct events in order to replicate the original estimate.
                         Moreover, it is often difficult to isolate the impacts of particular proposals
                         on actual savings achieved due to the multiple factors involved. In our 1994
                         report on issues concerning the 1990 Reconciliation Act, we found that it is
                         4
                             GAO/GGD/AIMD-96-149R, July 24, 1996.




                         Page 9                                            GAO/GGD-99-120 NPR’s Savings
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                       generally not possible to identify or track precise savings by isolating the
                       budgetary effects of individual provisions from the effects of other factors
                                                                               5
                       such as intervening actions or subsequent legislation.

                       In two instances, OMB counted some of the estimated savings NPR
Some Estimated NPR     claimed twice. In the first instance, OMB counted the same estimated
Savings Were Claimed   savings on two different NPR I initiatives—once for agency-specific
Twice                  changes (from reorganizing USDA) and again as part of a NPR
                       governmentwide initiative to reduce the bureaucracy. In the second
                       instance, OMB appears to have counted the same savings twice when
                       separately estimating savings from the two NASA recommendations we
                       reviewed. Therefore, the total estimated savings NPR claimed in both of
                       these instances were overstated.

                       OMB estimated that $770 million in cost savings resulted from NPR’s
                       recommendation to reorganize USDA on the basis of workforce
                       reductions. OMB also counted these workforce reductions when
                       estimating the total of $54.8 billion in savings NPR claimed from its
                       governmentwide initiative to reduce the size of the bureaucracy. While
                       acknowledging that this occurred, OMB officials stated that the level of
                       double counting appeared to be quite small in relation to total NPR
                       savings—less than 1 percent of the total savings claimed from NPR
                       recommendations. They said that the double counting was small because
                       the recommendation to reorganize USDA was the only agency-specific
                       recommendation with a significant staffing effect.

                       However, OMB officials told us that they had not established a mechanism
                       to prevent double counting from savings claimed for the agency-specific
                       recommendations and from the governmentwide initiative. Officials from
                       the other two agencies we reviewed—DOE and NASA—said that their staff
                       also had been reduced and counted as part of the savings claimed for the
                       agency-specific recommendations to streamline DOE and strengthen
                       NASA management. Therefore, in the absence of OMB processes to guard
                       against including savings from personnel reductions in both agency-
                       specific and governmentwide savings claims, additional double counting of
                       workforce reductions could have occurred.

                       In the second instance, a portion of the estimated savings appears to have
                       been counted twice for two NASA recommendations we reviewed, one
                       from NPR I (to strengthen and restructure NASA management) and the
                       other from NPR II (to reinvent NASA). Some of the actions NPR
                       5
                           GAO/AIMD-95-3, Oct. 7, 1994.




                       Page 10                                           GAO/GGD-99-120 NPR’s Savings
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recommended, such as restructuring NASA centers, were components of
both the NPR I and NPR II recommendations. The OMB examiner
acknowledged that some of the savings could have been counted twice and
that there was no mechanism to distinguish the sweeping changes that
were occurring at NASA. She said that the NPR II recommendation built on
the NPR I recommendation. NASA officials also said that they were not
able to assign savings precisely to one recommendation or the other
because the recommendations were similar and there was no clear
demarcation where one ended and the other began.

OMB estimated savings from the NPR I recommendation for fiscal years
1994 through 1999 and from the NPR II recommendation for fiscal years
1996 through 2000. Estimated savings from both recommendations were
included when OMB aggregated total NPR-estimated savings. As figure 2
shows, a portion of the savings claimed from these two recommendations
overlapped during fiscal years 1996 through 1999. For those years, claimed
savings totaled about $7 billion (about $1.6 billion from the NPR I
recommendation and about $5.4 billion from the NPR II recommendation).
OMB appears to have counted some portion of that amount twice—
potentially up to $1.4 billion. The NPR savings claims in these two
instances were overstated.




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Figure 2: Potential Overlap in Estimated Savings From NASA Recommendations




                                       a. No savings were claimed in 1994 for the NPR I recommendation.
                                       Source: GAO analysis of OMB estimates.


                                       OMB and CBO both estimated savings for the recommendation to
Offsetting Costs May                   streamline USDA, and these estimates differed. While OMB estimated the
Not Have Been Fully                    savings to be $770 million, CBO’s estimate was $446 million—a difference
Included                               of $324 million. We did not evaluate the differences between these
                                       estimates. However, according to a November 15, 1993, letter from the
                                       CBO director to the then House Minority Leader, CBO’s estimate differed
                                       from OMB’s “. . . with respect to the costs associated with severance
                                       benefits and relocation. While the administration assumes that agency
                                       baseline budgets are large enough to absorb these costs, CBO assumes
                                       that the costs would reduce the potential savings. The administration also
                                       estimates larger savings in employee overhead costs.” According to CBO,
                                       due to the differences in the consideration of offsetting costs, OMB’s
                                       estimate for the 5-year budget period (fiscal years 1994 through 1998)
                                       exceeded CBO’s estimate by $324 million.

                                       OMB provided documentation showing that, in fiscal year 1996 and again
                                       in fiscal year 1997, OMB factored “up-front” costs of $40 million into the


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                     estimates it reported. The responsible OMB branch chief stated that
                     although he did not recall what the up-front costs for this recommendation
                     specifically encompassed, these costs typically consist of buyouts (i.e.,
                     financial incentives of up to $25,000 for employees who voluntarily leave
                     the federal government), lease breakage costs, and moving expenses.

                     According to OMB, consistent with its normal budget practices, OMB
OMB Lacked           examiners generally did not retain documentation for NPR savings
Documentation and    estimates. The budget examiners were unable to document estimates for
Reported Estimates   four of the six recommendations we reviewed, constituting $21.8 billion in
                     savings claims. Instead, the OMB examiners attempted to reconstruct how
Incorrectly          they thought the savings had been estimated through approximating rather
                     than replicating savings estimates.

                     OMB did, however, provide documentation on the estimated savings for
                     two of the six recommendations we reviewed. These recommendations
                     were to reorganize USDA (with estimated savings of $770 million) and to
                     redirect the DOE laboratories’ priorities (with estimated savings of $6.996
                     billion). Even when documentation for the NPR savings estimates was
                     available, OMB could not always provide complete information about how
                     the estimates were calculated. For example, the responsible OMB branch
                     chief could not specifically remember what comprised the up-front costs
                     shown on documentation for the recommendation to reorganize USDA.

                     The NPR savings claims for both cases where OMB provided
                     documentation were reported incorrectly. These errors led NPR to
                     understate the estimated savings from those recommendations. One of the
                     errors involved a math mistake that affected the amount of savings
                     claimed. When updating the estimate, a subtraction error led to $10 million
                     in estimated savings being omitted from the total claimed for the
                     recommendation to redirect the DOE laboratories’ priorities. The other
                     error occurred because savings of $1.859 billion that the examiner
                     estimated would occur from the recommendation to reorganize USDA for
                     fiscal years 1997 through 1999 were not reported.

                     NPR claimed savings from agency-specific recommendations that could
Conclusions          not be fully attributed to its efforts. In general, the savings estimates we
                     reviewed could not be replicated, and there was no way to substantiate the
                     savings claimed. We also found that some savings were overstated
                     because OMB counted savings twice, and two of the estimates were
                     reported incorrectly, resulting in claims that were understated.




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                      We requested comments on a draft of this report from the Director of
Agency Comments and   OMB, the Secretaries of Agriculture and Energy, and the NASA
Our Evaluation        Administrator, or their designees. On June 14, 1999, we met with OMB staff
                      who provided clarifying and technical comments on the draft report. We
                      incorporated their suggestions in this report where appropriate.

                      We obtained written comments on the draft report from the Director of
                      USDA’s Office of Budget and Program Analysis. He said that a loan
                      program for mohair producers established in fiscal year 1999 provides
                      substantially different incentives than the original wool and mohair
                      program. His letter stated that the costs associated with the 1999 program
                      did not negate the savings derived from eliminating the earlier program. As
                      a result, we eliminated our discussion concerning this loan program from
                      the report.

                      We also obtained written comments on the draft report from DOE’s
                      Controller. She said that OMB’s use of the weapons activity budget
                      account to estimate savings from the recommendation to redirect the
                      energy laboratories to post-Cold War priorities is more reasonable than is
                      implied by the report. She explained that while the title of the NPR
                      recommendation suggests that only laboratories would be affected by the
                      recommendation, related NPR information indicates that the
                      recommendation affected facilities beyond just the laboratories. We added
                      language to the report recognizing that the recommendation, although
                      focused on the laboratories, did include actions to reduce the production
                      and testing of nuclear weapons. Secondly, she said that DOE had
                      progressed beyond the status NPR reported for the initiatives included in
                      the recommendation to realign DOE, and we included the updated
                      information in appendix IV.

                      On June 2, 1999, a NASA official reported that NASA had no comments on
                      our draft report.

                      As agreed, unless you announce the contents of this report earlier, we plan
                      no further distribution until 30 days from the date of this letter. At that
                      time, we will send copies of this report to Representative Henry A.
                      Waxman, Ranking Minority Member of the House Government Reform
                      Committee and to Senator Fred Thompson, Chairman, and Senator Joseph
                      I. Lieberman, Ranking Minority Member, of the Senate Governmental
                      Affairs Committee. We will also send copies to the Honorable Jacob J.
                      Lew, Director of OMB; Mr. Morley Winograd, Director of NPR; the
                      Honorable Daniel R. Glickman, Secretary of Agriculture; the Honorable
                      Bill Richardson, Secretary of Energy; and the Honorable Daniel S. Goldin,



                      Page 14                                          GAO/GGD-99-120 NPR’s Savings
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Administrator of NASA. We will also make copies available to others on
request.

Major contributors to this report appear in appendix VII. Please contact
me or Susan Ragland, Assistant Director, on (202) 512-8676 if you have
questions about this report.

Sincerely yours,




J. Christopher Mihm
Associate Director
Federal Management and Workforce Issues




Page 15                                          GAO/GGD-99-120 NPR’s Savings
Contents



Letter                                                                                   1


Appendix I                                                                              18
                        NPR Recommendation                                              18
Reorganize USDA         Key Actions Reported                                            18
                        Methodology Used to Estimate Savings                            18


Appendix II                                                                             19
                        NPR Recommendation                                              19
End the Wool and        Key Actions Reported                                            19
Mohair Subsidy          Methodology Used to Estimate Savings                            19


Appendix III                                                                            20
                        NPR Recommendation                                              20
Redirect DOE's          Key Actions Reported                                            20
Laboratories to Post-   Methodology Used to Estimate Savings                            20

Cold War Priorities
Appendix IV                                                                             21
                        NPR Recommendation                                              21
Summary of Savings      Key Actions Reported                                            21
From Realigning DOE     Methodology Used to Estimate Savings                            21


Appendix V                                                                              22
                        NPR Recommendation                                              22
Strengthen and          Key Actions Reported                                            22
Restructure NASA        Methodology Used to Estimate Savings                            22

Management
Appendix VI                                                                             23
                        NPR Recommendation                                              23
Reinvent NASA           Key Actions Reported                                            23
                        Methodology Used to Estimate Savings                            23




                        Page 16                                GAO/GGD-99-120 NPR’s Savings
                   Contents




Appendix VII                                                                                     24

GAO Contacts and
Staff
Acknowledgments
Tables             Table 1: Estimated Savings Claimed from NPR                                    4
                     Recommendations
                   Table I.1: Claimed Savings                                                    18
                   Table II.1: Claimed Savings                                                   19
                   Table III.1: Claimed Savings                                                  20
                   Table IV.1: Claimed Savings                                                   21
                   Table V.1: Claimed Savings                                                    22
                   Table VI.1: Claimed Savings                                                   23


Figures            Figure 1: Savings OMB Estimated From NPR’s                                     8
                     Recommendation to Redirect DOE Laboratories’
                     Priorities
                   Figure 2: Potential Overlap in Estimated Savings From                         12
                     NASA Recommendations




                   Abbreviations

                   CBO           Congressional Budget Office
                   DOE           Department of Energy
                   FTE           full-time equivalent
                   NASA          National Aeronautics and Space Administration
                   NPR           National Performance Review
                   OMB           Office of Management and Budget
                   PMC           Program Management Council
                   R&D           research and development
                   USDA          United States Department of Agriculture




                   Page 17                                              GAO/GGD-99-120 NPR’s Savings
Appendix I

Reorganize USDA


                                    In September 1993, NPR recommended that USDA be reorganized to better
NPR Recommendation                  accomplish its mission, streamline its field structure, and improve service
                                    to its customers. NPR had recommended that USDA reorganize its
                                    structure, submit legislation to enact the reorganization, and review its
                                    field office structure to eliminate and restructure those elements no longer
                                                  1
                                    appropriate.


Key Actions Reported                NPR reported that USDA has made progress towards reorganizing at its
                                    headquarters and field office structure. USDA submitted reorganization
                                    legislation, and Congress enacted the Federal Crop Insurance Reform and
                                    Department of Agriculture Reorganization Act of 1994 (P.L. 103-354) on
                                    October 13, 1994. The reorganization at the headquarters level has reduced
                                    the number of agencies from 43 to 29 and has established 7 “mission areas”
                                                                           2
                                    to carry out program responsibilities. USDA also implemented a field
                                    office streamlining plan that consolidates the county-based agencies to
                                    provide services to customers from all agencies at one location. This effort
                                    is to result in streamlining the number of field office locations from over
                                    3,700 to 2,550. As of May 1998, the total number of field office locations
                                    had been reduced to about 2,700.

Table I.1: Claimed Savings
Dollars in millions
                             1994   1995                  1996               1997                1998                1999            Total
OMB estimate                  130    355                   285                  0                   0                   0             770
                                    Source: OMB, revised estimates as of summer 1996.


                                    OMB officials stated that savings for this recommendation were derived
Methodology Used to                 solely from the number of full-time equivalent (FTE) reductions USDA
Estimate Savings                          3
                                    made. OMB took the difference between the fiscal year 1994 current
                                    services baseline and actual and updated reductions and then multiplied
                                    that amount by an average salary that was comprised of both headquarters
                                    and field office salary data. From that amount, OMB subtracted offsetting
                                    costs. OMB officials provided documentation on how these savings were
                                    estimated.



                                    1
                                        USDA’s structure consists of headquarters, regional, state, and county-based offices.
                                    2
                                     USDA is composed of various component agencies, including the Forest Service, the Farm Service
                                    Agency, and the Natural Resources Conservation Service. Mission areas are groupings of agencies at
                                    USDA that perform a common function. For example, the Natural Resources and Environment Mission
                                    Area is comprised of the Forest Service and the Natural Resources Conservation Service.
                                    3
                                        FTEs are used to measure civilian employment, and 1 FTE is equal to 1 workyear of 2,080 hours.




                                    Page 18                                                               GAO/GGD-99-120 NPR’s Savings
Appendix II

End the Wool and Mohair Subsidy


                                     In September 1993, NPR recommended that USDA end this subsidy
NPR Recommendation                   program, which was implemented in 1954 to increase domestic production
                                     of wool by providing direct payments to farmers. At that time, Congress
                                     declared wool a strategic commodity to reduce dependence on foreign
                                     fibers, which was caused by imports needed during World War II and the
                                     Korean conflict. NPR said that this subsidy was outdated, since wool was
                                     no longer a strategic commodity.

                                     NPR reported that this subsidy had been eliminated as a result of
Key Actions Reported                 legislation amending the National Wool Act of 1954 (P.L. 103-130,
                                     November 1, 1993). The act mandated the reduction of subsidies during
                                     fiscal years 1994 and 1995 and the elimination of subsidies for fiscal year
                                     1996. Payments were reduced by 25 percent in fiscal year 1994, 50 percent
                                     in fiscal year 1995, and eliminated entirely beginning in fiscal year 1996.


Table II.1: Claimed Savings
Dollars in millions
                              1994   1995             1996             1997              1998           1999           Total
OMB estimate                     0     47              103              183               181            188            702
                                     Source: OMB, revised estimates as of summer 1996.


                                     In response to our questions, although they were unable to provide
Methodology Used to                  documentation on how savings were estimated, OMB generally could
Estimate Savings                     reconstruct how savings would have been estimated. This involved
                                     subtracting the payments that farmers were receiving as a result of the
                                     subsidy reductions mandated in P.L.103-130 from the amount of subsidies
                                     that were projected to have been paid, had the legislation not been
                                     enacted, for fiscal years 1994 through 1999. OMB said that the source of
                                     the projected subsidy information was 1993 data from the Commodity
                                     Credit Corporation, which analyzes budget projections and assumptions.




                                     Page 19                                                    GAO/GGD-99-120 NPR’s Savings
Appendix III

Redirect DOE's Laboratories to Post-Cold War
Priorities

                                   In 1993, NPR recommended that DOE shift laboratory facilities’ priorities
NPR Recommendation                 to accommodate conditions that accompanied the end of the Cold War—
                                   such as the dramatic decrease in the arms race and cutbacks in defense-
                                   related energy and nuclear research funding. NPR recommended, among
                                   other things, that DOE continue to reduce funding for nuclear weapons
                                   production, research, testing programs, and infrastructure that are needed
                                   to meet current defense requirements; develop a vision for the DOE
                                   laboratory complex; and encourage laboratory managers to work with the
                                   private sector on high-priority research and development (R&D) needs.

                                   NPR reported that DOE is restructuring and refocusing its laboratories by
Key Actions Reported               developing new strategic plans and implementing a science-based
                                   stockpile stewardship program. The stockpile stewardship program is
                                   designed to support the testing of nuclear weapons in a safe manner as
                                   directed by the comprehensive nuclear test ban treaty, which banned the
                                   production of nuclear weapons after the Cold War. DOE has also
                                   established the Laboratory Operations Board and the R&D Council. These
                                   organizations study the use of government/private partnerships to increase
                                   productivity of DOE R&D programs.


Table III.1: Claimed Savings
Dollars in millions
                           1994     1995           1996               1997              1998          1999            Total
OMB estimate                 991   1,519           1,409             1,077             1,000          1,000          6,996
                                   Source: OMB, revised estimates as of summer 1997.
                                   OMB calculated savings for redirecting energy laboratories to post-Cold
Methodology Used to                War priorities by taking the difference in the weapons activities budget
Estimate Savings                   account between the fiscal year 1994 current services baseline and the
                                   actual appropriations for that fiscal year and counting the savings through
                                   fiscal year 1999. The DOE laboratories’ budget is subsumed within the
                                   weapons activities account of the President’s budget. This account
                                   includes R&D to support the safety and reliability of the nuclear weapons
                                   stockpile as well as personnel and contractual services for certain defense
                                   programs’ missions. OMB considered DOE laboratories as well as the
                                   entire weapons complex, of which the laboratories are a component, when
                                   estimating savings for this recommendation. OMB officials provided
                                   documentation on how these savings were estimated.




                                   Page 20                                                     GAO/GGD-99-120 NPR’s Savings
Appendix IV

Summary of Savings From Realigning DOE


                                  In 1995, NPR had six recommendations concerning realignment of DOE.
NPR Recommendation                NPR consolidated reporting on these recommendations for purposes of
                                  developing savings estimates. These recommendations were to (1)
                                  terminate the Clean Coal Technology Program; (2) privatize the naval
                                  petroleum reserves in Elk Hills, CA; (3) sell uranium no longer needed for
                                  national defense purposes; (4) reduce costs in DOE’s applied research
                                  programs; (5) improve program effectiveness and efficiencies in
                                  environmental management of nuclear waste cleanups; and (6)
                                  strategically align headquarters and field operations.

                                  NPR reported that DOE has implemented actions consistent with these
Key Actions Reported              recommendations. For instance, NPR reported that DOE is planning to
                                  terminate the Clean Coal Technology Program by September 2000. DOE
                                  has reorganized the department by implementing the Strategic Alignment
                                  Initiative, which is intended to reduce staffing, support service contracting,
                                  and travel costs; streamline the National Environmental Policy Act;
                                  increase asset sales; and improve information resources management.
                                  DOE has also established performance measures to improve effectiveness
                                  of nuclear waste cleanups, developed a plan for selling uranium reserves,
                                  and is developing ways to reduce administrative costs in DOE’s research
                                  programs. More recently, DOE noted that the Elk Hills Naval Petroleum
                                  Reserves were sold in February 1998 for $3.1 billion. Similarly, in fiscal
                                  year 1998, $0.4 billion was realized due to DOE’s uranium being a part of
                                  the sale of the United States Enrichment Corporation.




Table IV.1: Claimed Savings
Dollars in millions
                          1996     1997            1998              1999              2000                         Total
OMB estimate              1,673   2,244           2,244             2,244             2,244                        10,649
                                  Source: OMB, revised estimates as of summer 1996.


                                  OMB could not reconstruct calculations for the savings estimated for this
Methodology Used to               recommendation.
Estimate Savings




                                  Page 21                                                     GAO/GGD-99-120 NPR’s Savings
Appendix V

Strengthen and Restructure NASA
Management

                                 In September 1993, NPR recommended that NASA take a number of
NPR Recommendation               restructuring steps, both in overall management and in the management of
                                 the space station program. It recommended that NASA, among other
                                 things, aggressively complete its overhaul of space station program
                                 management, implement the management principles developed for the
                                 redesigned space station program, and formally institute its Program
                                 Management Council (PMC), an organization charged with improving
                                 NASA’s internal management processes.

                                 NPR reported that NASA has taken and is continuing to take steps to
Key Actions Reported             improve the management of the agency and the space station. According
                                 to NPR, NASA’s overhaul of space station program management was
                                 accomplished through enactment of the fiscal year 1995 Appropriations
                                 Act (P.L. 103-327, September 28, 1994). Also, the PMC was established in
                                 June 1993 and is fully operational.


Table V.1: Claimed Savings
Dollars in millions
                          1994   1995             1996              1997              1998              1999           Total
OMB estimate                 0    396              396               396               397               397          1,982
                                 Source: OMB, original estimated savings from September 1993.


                                 In response to our questions, OMB attempted to reconstruct how savings
Methodology Used to              were estimated, but could not provide documentation to support its
Estimate Savings                 calculation. OMB officials said the methodology they would have used to
                                 estimate savings for this recommendation was to take the difference
                                 between the fiscal year 1994 current services baseline and the actual
                                 appropriations for that fiscal year and count the savings through fiscal year
                                 1999.




                                 Page 22                                                        GAO/GGD-99-120 NPR’s Savings
Appendix VI

Reinvent NASA


                                     In 1995, NPR recommended that NASA be reinvented. This
NPR Recommendation                   recommendation built on the earlier NPR recommendation to strengthen
                                     and restructure NASA management. OMB consolidated seven
                                     recommendations that related to reinventing NASA for developing savings
                                     estimates. These recommendations included (1) eliminating duplication
                                     and overlap between NASA centers; (2) transferring functions to
                                     universities or the private sector; (3) reducing civil service involvement
                                     with and expecting more accountability from NASA contractors; (4)
                                     emphasizing objective contracting; (5) using private sector capabilities; (6)
                                     changing NASA regulations; and (7) returning NASA to its status as a
                                     research and development agency.

                                     NPR reported that NASA has completed actions consistent with this
Key Actions Reported                 consolidated recommendation. For instance, NPR reported that NASA has
                                     restructured its centers to eliminate overlap and duplication of functions
                                     and has implemented techniques, such as forming partnerships and
                                     outsourcing functions. NPR also reported that NASA was creating
                                     alliances with academic and industrial centers and consolidating all space
                                     shuttle operations management under a single, private sector prime
                                     contractor. In addition, NPR reported that NASA has implemented a
                                     performance-based contracting initiative.


Table VI.1: Claimed Savings
Dollars in millions
                              1996         1997                1998                 1999                 2000              Total
OMB estimate                   226         1,024               1,715                2,418                3,136            8,519
                                     Source: OMB, original estimated savings from September 1995.


                                     In response to our questions, OMB attempted to reconstruct how savings
Methodology Used to                  were estimated, but could not provide documentation to support its
Estimate Savings                     calculation. An OMB official said she took the difference between the
                                     fiscal year 1996 current services baseline and the actual appropriations for
                                     that fiscal year and counted savings through fiscal year 2000.




                                     Page 23                                                        GAO/GGD-99-120 NPR’s Savings
Appendix VII

GAO Contacts and Staff Acknowledgments


                  J. Christopher Mihm, (202) 512-8676
GAO Contacts      Susan Ragland, (202) 512-8486

                  In addition to those named above, Carole Buncher, Lauren Alpert, and
Acknowledgments   Jenny Kao made key contributions to this report.




                  Page 24                                        GAO/GGD-99-120 NPR’s Savings
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