Angela Styles interview

Friday, April 19th, 2002 - 20:00
Angela Styles
Radio show date: 
Sat, 04/20/2002
Intro text: 
Complete transcript: 

Washington, D.C.

Friday, November 16, 2001

MR.LAWRENCE: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the Endowment by visiting us on the Web at

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Angela Styles, Administrator for Federal Procurement Policy in the Office of Management and Budget. Good morning, Angela.

MS. STYLES: Good morning.

MR. LAWRENCE: Well, Angela, the Office of Federal Procurement Policy is a mouthful. Could you tell us about its mission and its activities?

MS. STYLES: Certainly. The mission of the Office of Federal Procurement Policy or, as most people call it, OFPP, is to coordinate efforts to improve federal procurement law, policies, and practices which affect all federal and federally assisted purchases of goods, property, and services.

In essence, OFPP is responsible for the policies by which the Executive Branch purchases over $200 billion in goods and services every year. Everything from paper clips to nuclear submarines. For those of your listeners that may be more familiar with federal personnel policies, the role of the Office of Personnel Management, OPM, is very similar to OFPP. OFPP is to federal procurement and contracting what OPM is to federal personnel policy.

And much like OPM, we coordinate the setting of policy for the Executive Branch, but we're not actually doing any buying, that is, we don't award contracts, we leave that to the individual agencies much like OPM doesn't actually hire people except for people at OPM.

The activities of our office are numerous and probably too numerous to list, but I would like to focus on four areas of what we do with our mission: First, I probably spend about 60 percent of my time focusing on Congress and legislative issues. How should the procurement system be run; what role should competition play; and what should be the basic statutory framework for procurement.

OFPP works extensively with the Senate Government Affairs Committee, House Government Reform, Senate Armed Services and House Armed Services in fashioning acquisition-related portions of the defense authorization and other government wide legislation. We also work a great deal with some of the small business committees, the Senate Small Business Committee and the House Small Business Committee.

And aside from the legislative area, which I spend a great deal of time in, our second focus and very important to me is OFPP's role in coordinating the Federal Acquisition Regulatory Council, which is responsible for maintaining the Federal Acquisition Regulation. Anybody who has even ventured a little bit into the federal procurement area knows that the FAR is something of The Bible for the contracting community.

Really, the FAR embodies in one regulation all the statutory and policy direction that govern contracting and I serve on the FAR Council with representatives from DOD, GSA, and NASA and we're really the primary procurement policy-making body. And updating the FAR, keeping it current with statutory changes and other things to reflect sound policy is a pretty significant job.

Third, and I think we'll probably talk about this in more detail later, is the responsibility of OFPP for certain portions of the President's management agenda, specifically, competitive sourcing, which is a new area, really, for OFPP in many respects.

And, fourth, I serve as chair of the Cost Accounting Standards Board, which is the regulatory body for setting the accounting rules for how the government makes payments under large federal contracts, primarily with defense contractors. And we're involved in a lot of other areas, as well, but I think those are the big ones.

MR. LAWRENCE: And what's your role as the administrator of Federal Procurement Policy? What do you actually do?

MS. STYLES: It's to provide leadership in the procurement area and to carry out the President's agenda in establishing procurement policy. I think I see myself something as an honest broker, balancing a great deal of competing interest in this area, of which, there really many competing interests, and applying the President's overall goals to achieving results.

The best example I can give you is, really, in the area of competition, which has been hotly debated in the procurement area for a while. Some people think there's too little, some people think there's too much. The President, overall, is really committed to making the government a market-based government, making our departments and agencies market-based and that application applies to procurement in that competition is -- he's really committed to making sure that there's competition in virtually every aspect of government performance.

So, there are a lot of policy debates, I think, between Congress, contractors and among the agencies on how do we increase competition in federal contracts. And I, fundamentally believe that competition is what improves quality, reduces price, and is the key to ensuring hat we're maintaining integrity in how we spend the $200 billion in goods and services.

MR. LAWRENCE: Two key pieces of legislation really changed the landscape of procurement in government: The Federal Acquisition Streamlining Act of 1994 and the Klinger/Cohen Act of '96. What's been their impact on federal procurement?

MS. STYLES: These laws were implemented with some substantial revisions to the Federal Acquisition Regulation and I think, between FASA and Klinger/Cohen, the FAR really underwent some dramatic changes that streamlined and commercialized our acquisition system. Of course, I think the proof is in the pudding, and we have a lot of aspects of those laws to continue to look at, but I think the changes are evident, particularly in light of September 11. The Pentagon had a contract in place for reconstruction on September 14. I don't really think that would have been possible under some of the old methods of contracting, pre-FASA, pre-Klinger/Cohen.

But I also have to tell you that we really have to be concerned about taking a close look at what the effect of these laws have been, what the effect of these laws have been on competition, particularly. There's no question in my mind that prior to these laws, prior to 1994, our procurement system was drowning in paperwork and we brought around much-needed efficiencies in the system. But in the process, we may have left behind some of our fundamental commitments to competition. And that's really what I see my job as, right now, is to making sure that we knew what the goals were; that we achieve the goals; and that we take a close look at what some of the fundamentals -- competition, due process, equitable fair-play for offerers in similarly situated situations.

MR. LAWRENCE: Well, let's spend some time talking about your career. Tell us about your career prior to joining OFPP.

MS. STYLES: I came to D.C. in 1987 as an intern for Congressman Joe Barton; worked on the Hill as a legislative aide for him for a couple of years; worked on some energy and commerce committee issues there. I moved on from there to work at the State Federal Relations for the, then governor of Texas, Bill Clemmence (phonetic), was there for a couple years and returned to Texas after his term expired to go to law school at the University of Texas. And decided I missed D.C. a great deal and came back up after law school; worked first for a Texas-based firm, Baker and Botts (phonetic) for a couple of years in the government law and procurement area on a vast array of issues.

And then I moved to another D.C.-based law firm Miller and Chevalier, and worked there for a number of years, again, on government procurement law issues.

MR. LAWRENCE: You�ve been in both sectors public and private sectors. What drew you to public service?

MS. STYLES: I think it's a fundamental commitment to give back something. You know it's our system of government that has enabled us to do well in the private sector but it's essential for people to come back in and to serve in government, to really bring an influx of private-sector ideas back into the government or, I think, the government becomes distant from the people that it's trying to serve if they're not a group of people that are really committed to being in the private sector but, when the opportunity arises, coming back to public service and bringing the ideas that they had in the private sector to the public sector, we can't move forward. The government just becomes too distant from the people it's trying to serve.

So, I think it's important, even more so in these times and I think it's really a privilege in these times to serve. I know there are a lot of people -- I'm not the only one, but there's a lot of federal employees out there, particularly in the D.C. area that get questions from family and friends about, aren't you worried about going to work every day?

And I think it's a privilege to be able to serve right now. There are a lot of people out there that are putting a lot more on the line than simply coming into work every day in D.C. So, it's really an honor, in these difficult times, to be able to bring some resources, bring some ideas, and to help the government move forward.

MR. LAWRENCE: Which of the positions you described best prepared you for your current job?

MS. STYLES: I think all of them did. I think this job requires a vast array of skills, particularly working with the Hill. Being on the Hill, knowing how it works, having a good number of contacts there helps in this job a great deal. I think you have to know how the system works in order to be able to effectively push legislation through, particularly in the procurement area.

In the legal area, I think my experience means I take a very analytical approach to substantive issues. And that's important, because as the devil is in the detail, oftentimes, in the procurement area. And we have to be very careful about how we choose to regulate people. That's one of my topics that I'll keep bringing up again, is transparency and the need to make sure that people understand that when we choose to regulate, that it's thoughtful, analytical, we know what we're doing and we know what the effect of that is. And I think my legal experience brings that to the job.

MR. LAWRENCE: Why is transparency so important?

MS. STYLES: People have to know why we're doing what we're doing in the government. Certainly, one of my concerns in the acquisition area is that, from the private sector, I saw rules and regulations that came out that would oftentimes say 20 comments were received and they were all considered. Well, fundamental to our system of government is the ability for the public to give us comments about regulations. And to provide information about how they think we would better be able to run the system. And I think transparency, in that aspect, means when people do submit comments that they know that we considered them and that there was an analytical process that we went through in thinking about why we're regulating you and what the effect of that will be on you.

MR. LAWRENCE: Well, this is a good stopping point for a break. Come back as we continue our conversation with Angela Styles, Administrator for Federal Procurement Policy. In the next segment, we'll ask her to explain A-76. If you don't know what it is or how it works, you'll learn when The Business of Government Hour continues. (Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Angela Styles, Administrator for Federal Procurement Policy in the Office of Management and Budget.

Well, Angela, you mentioned the President's management agenda, which includes initiatives to link agency performance to budget, improve management, and increase the use of e-government. How does procurement and acquisition relate to these initiatives?

MS. STYLES: I think procurement and acquisition is actually key to all of the initiatives. In particular, I'll talk a little bit about each one of them but, in particular, the human capital initiative -- the human capital, in terms of the acquisition workforce. And it's the acquisition workforce, the program requirements, the program managers, the procurement people that are really essential to making each and every one of these initiatives work.

But let me give you a little background on how we got where we are on the President's management agenda. When I started back at OMB in March of this year, we sat down, the senior staff, both political and career, sat down with all the management issues that have been floating around OMB for years and years whether it was NPR or through other administrations there were hundreds of good proposals on the table -- some good, actually, and some not so good.

But we kind of felt that the problem was that no one had sat down and narrowed down the proposals to ones that were achievable in the short-term and could make some real significant differences in how the government was managed. So we sat down there for a number of days and vetted through the ideas and came up with five government wide initiatives that we thought were mutually coordinated, achievable in the short term, and could make some significant changes in the way the federal government was managed.

I think the President really gave us some direction in saying he didn't want to look back in a year, two years, three years, or four years and see that the federal government was managed the same way that it was when he came in.

So we came up with these five initiatives. And I encourage everyone to actually go and take a look at them. We spent a great deal of time not only vetting them, but also discussing what each one of them meant and how they work together. And it's available in the President's management agenda at

And we spent a great deal of time explaining each of the initiatives and why each one was important. I'll talk briefly about each of them.

The first one is budget integration, which is the integration of performance with budget decisions. And I think here, you're really seeing the M in OMB or the management side of OMB like you never have before.

Management in these management initiatives is becoming a real part of the budget process. As the director of OMB, Mitch Daniels, goes through the budget review process this fall, management issues have been of primary importance and primary importance in making budget decisions, as well.

This initiative, also, is an attempt to reflect the full costs of many of the programs at different agencies in agency budgets. Many times, I think, somewhat irrational decisions are made because the budget and appropriations process isn't tied to the full cost of some of the programs. So it's very hard for a program manager to be able to make a rational decision one way or the other, because he only sees part of his personnel costs; he doesn't see the overhead costs; he doesn't have the same incentives for making decisions that you see in the private sector where they do have the ability to know what their full costs are.

So, once we have the reflection of full cost, which we have put forward part of it in a legislative proposal of the Managerial Flexibility Act I think we'll be able to move forward with this budget and also in the future when some of this legislation is enacted, some of it we can do internally and some of it requires legislation to reflect full cost, we'll see a real tie between performance on programs and the budget for these programs, as well.

Particularly in these times when we really need to work to reallocate some of the budget resources to priorities -- to fight the war on terrorism -- we need to be able to determine what are the poor performers and what are the good performers in terms of programs and make sure that we're properly allocating those costs and to do so, we really need to know what the full costs of these programs are.

This one also ties into competitive sourcing in A-76. The competitive sourcing initiative, which I'll talk about in some more detail, is really an attempt to infuse the elements of competition that you see in the private sector into the federal government where there are commercial activities that are being performed by federal employees. But a difficulty with that is the fact that, in the public sector you don't have the true cost reflected. In order for the public-sector entity that may be performing payroll services or janitorial services, it's hard to compare them with a private-sector entity because the public sector doesn't reflect the full cost.

Thus, we had the need for this A-76 process, which brings into line through a cost comparison, the public-sector cost with the private-sector cost, so you can be able to compare the two. If we have the true full cost reflected in an agency budget, you wouldn't need to go through a difficult complex cost-comparison process in order to make or for a program manager to make a rational decision.

I�ll just mention briefly, some of the other initiatives, because they do work rather well together. We have one on improved financial performance, which deals with clean audits and many of the overpayment issues.

We have one on e-government really making our government citizen's center, collecting data once, using it many times and really wisely spending our IT resources.

Human capital, which, as I said before, is I think, the key to all of these initiatives and, particularly, the human capital in the acquisition workforce.

And fifth, which I spoke a little bit about is competitive sourcing.

MR. LAWRENCE: You mentioned the A-76 process. Could you describe it a little bit? You did describe it some, but it seems like you're hinting at some of the shortcomings of it.

MS. STYLES: Well, the basis of the A-76 process is the Federal Activities Inventory Reform Act of 1998, which required departments and agencies to identify federal employees who were performing activities that are really commercial in nature.

And what we do with that is we take those people that the agencies have identified and we say the President committed to competing those activities to making sure that where the federal government is performing a commercial activity that they are performing it in a competitive environment with the private sector. So he set a goal of competing 50 percent of the FTEs or the federal employees that are listed on the 2000 Fair Act inventories. And these are set up as public/private competitions, where the public sector functions and actually competes for their job with the private sector under the structure that we have at OMB of circular A-76.

And a large part of this circular or the structure of this is so we can bring the cost of the public sector into line with the private sector so you can have a true competition between the two.

MR. LAWRENCE: Is it a fair comparison and a true competition?

MS. STYLES: I think the question you ask raises are there problems with the A-76 process. And, yes, absolutely, there are problems, it's lengthy -- the private sector often doesn't want to participate because it is lengthy and difficult. There's appeals and we are working closely right now with the General Accounting Office's commercial activities panel that was created by statute last year, to really work to make the right changes to this process. We've got the right people at the table for this. We've got the unions, we've got industry, and we've got the Administration all at the table really discussing, I think, the difficult issues with public/private competition; giving public employees true opportunity to compete for their job; making sure that it's fair and objective, and that we have accountability.

But overall, you know, A-76 and public/private competition is, in my mind, and I think in the Administration's mind, really a tool for management, it's not an end in and of itself. What we want people to be doing is to be looking at their whole workforce. What are people on our workforce doing that's inherently governmental? What are they doing that's commercial in nature? And they also need to be looking at what have we contracted out? Who do we have in the private sector that is performing mission goals for us, that are helping us meet our mission, what are they doing?

I mean, in order to manage the agency well, you really have to have a full view of the process. So we're using one tool that we have to really try to force some good management, and some good management decisions and that's really what we're concerned about, is let's make some good management decisions about how you're using your workforce.

MR. LAWRENCE: We know that House Representative Tom Davis plans to propose legislation called the Services Acquisition Reform Act, SARA, that would create chief procurement officers at the agency level and it would also increase money for training and encourage a shared in savings mechanism for federal contracts. What are your thoughts on these procurement innovations?

MS. STYLES: I think we're always looking for ways to innovate. When I came to this office, one of my primary concerns was not necessarily looking at ways to push the envelope in terms of innovation. I certainly think it's important to always consider those, but I also want to make sure -- and we've been through 10 years of acquisition reform. We want to make sure that we go back and assess what our goals were and whether those were achieved and what changes we need to make in the system to make sure that we are properly promoting competition, that we haven't left behind some of the fundamental ideas.

And what procurement reform really did was bring around efficiency where it was needed and innovation where it was needed. And that certainly doesn't preclude further innovation, I think there's a lot of good ideas out there, but I certainly consider it my mission to make sure we know where we are; make sure the procurement officers that are implementing the changes in acquisition reform are doing it right and see what kind of changes we need to make, sure that we have good acquisition fundamentals; that we've got the basic building blocks there whether it's planning or management of the contract so we don't leave behind some of the important elements in the name of efficiency.

MR. LAWRENCE: Well, that's a good place for us to stop. Rejoin us after the break when we continue our conversation with Angela Styles, Administrator for Federal Procurement Policy. This is The Business of Government Hour. (Intermission)

MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Angela Styles, Administrator for Federal Procurement Policy in the Office of Management and Budget.

Well, Angela, in our last segment, you talked a lot about competitive sourcing, so I'd like to go back to that. How do you encourage competitive sourcing at agencies?

MS. STYLES: It's a difficult process to encourage any large change in management and in the way we manage agencies. Before I got to OFPP, there were some numeric goals that were set for the agencies that they had to compete 5 percent of their FTEs that were listed on their Fair Act inventories for 2000 in 2002, they had to compete them in 2002 and then they had 10 percent in 2003.

What we've really moved to, you know, we set those up as goals and in some respects somewhat arbitrary goals because we had to have something to get agencies moving down the line. But when Mark Everson (phonetic) came on-board --he's the head of OFFM, the Office of Federal Financial Management, within OMB -- he brought some very creative ideas from the private sector with him. And one of them was a management scorecard.

And what we have done is, we have taken all five of the President's management agenda items and we have a scorecard for the major departments and agencies that participate on the President's Management Council. They essentially get a red, yellow, or green mark for a baseline. What we've just gone through is, we've made a baseline determination on where they are on each initiative as of September 30 of this year. And we've communicated with them, you know, what their score on this baseline is. And the President will be receiving it in the next couple of weeks and he'll be discussing it with the Cabinet. And Mitch Daniels will be discussing these scores with the Cabinet officers, as well.

But that's not all of it, we had -- quite frankly, there are a lot of red marks. We have a very aggressive mission and in almost, I think I counted about six yellow marks for the five initiatives at all the departments and agencies. And I can tell you every department and agency is red in competitive sourcing. I had that distinct honor of all the management initiatives that I'm the only one that has all reds for all the departments and agencies. But, you know, that's not very useful in terms of pushing people forward.

So what we did was we have a second side to the scorecard, which is progress on achieving the goals that we've set forth; our progress on achieving our vision. And the second side, we're going to score quarterly. If people have come in, particularly in competitive sourcing, they have a work plan, they have schedules, they have a good mix of direct conversions and true public/private competition, if we see that they're making real progress, they can have a green come January or a yellow come January and it's quite an incentive. It actually is an excellent tool for the departments and agencies to discuss where they're going with us because it's something on one page that the President can use, that the director of OMB can use, that he can talk to the departments and agencies and where they can see what the scores are and how they compare to others.

I've been pleasantly surprised at how this tool, this scorecard tool works much better than setting up somewhat arbitrary numeric goals on the board and saying you need to meet these. This is, actually, a way to effectively work with the agencies on their plans to really make some progress. And I've been pleasantly surprised at the progress we're making, particularly at the civilian agencies as a result. And I think the other owners of these management initiatives are very happy with this, as well.

Not to say that we don't still have aggregate goals that we want to meet of 5 and 10 percent in competitive sourcing, but this is a much better way to make sure that we have good management plans. I'm not looking for just goals, arbitrary FTE goals, I want good management plans; I want people to really be thinking about this in a functional sense. And what makes sense is to compete.

MR. LAWRENCE: Well, let me ask you about the scorecard. Would an agency have gotten a red because they hadn't reached their goals? I know you described the progress towards doing that, but for the first one out, how did you get a red?

MS. STYLES: Well, actually, the metrics are available on our Website at For competitive sourcing, we did have some rather objective goals of have you competed 15 percent of your Fair Act inventory from 2000 and, you know, certainly, you know, 9 months, no agency's actually done that. It will probably be a couple years in the broad vision respect before an agency can move from red to yellow as far as competitive sourcing goals, but we have some other things in there. Are they considering an appropriate mix of direct conversions in public/private competition? Because the point of this is not to just convert or outsource to the private sector. The point is, really, to have true competition infused in the government; to have public/private competition and to give employees an opportunity to compete and to show us their entrepreneurial skills and really move the government forward from a management perspective.

MR. LAWRENCE: Early on in our discussion, you described a somewhat unique mission of OFPP working with lots of different groups. And I'm curious, how do you manage crosscutting issues and the divergent perspectives amongst the different stakeholders?

MS. STYLES: I think it's really the hardest part of the job because OFPP really has a large group of stakeholders. You know, we've obviously got the President; we've got Congress; we've got all the departments and agencies; we have industry; we have the unions; and the only way to be effective in communicating with them is to be out there talking with them. We have an open-door policy, you know, and I truly do have an open-door policy and where people aren't coming in, I go out and seek them, I mean, I've had, I think, in some unique ways, I've had some recent meetings with the government employee unions, AFT and NETEU because I think that it's essential, whether it's competitive sourcing or anything else, that we have good communications -- we many not always agree on issues -- but we have good communications and that we get input and that we work on the issues together because, you know, if we're ignoring one sector of the stakeholders, I don't think we can appropriately move forward. It's essential to have as open a door as possible, whether it's in rule making or whether it's simply in working on some of the policies and initiatives.

MR. LAWRENCE: How do you actually do that communication? You can't meet one-on-one with all the people you described. How do you really do that?

MS. STYLES: I certainly go out and speak a lot. There are some councils that we work with. We, certainly, for the rule-making process, we have the FAR Council, which is a well-developed process that was set up by statute to work with the main rule-making agencies to make sure that we have appropriate input from both the agencies and the public.

You know, as I talked about before, that's really a key to transparency in the system. And I really do get out there and talk to people on a regular basis. And we have formal communications but, you know, the informal ones, in many respects, are the ones where I get the most information from people and I'm also able to relay more information that way.

MR. LAWRENCE: Well, let me shift gears here a little bit and talk about the procurement and acquisition professionals. What kind of training and professional development resources are available to them?

MS. STYLES: I think we've really had an explosion in the resources that we have available in training. I think over the past 10 years there was a reduction in the acquisition workforce but, also, a recognition since there was a reduction in the workforce, and there were a lot of changes in the procurement system of the need to appropriately train these people.

We have numerous schools; we have in-house institutes that offer procurement training, such as the Defense Acquisition University, and the Treasury Acquisition Institute. And there are also a lot of private-sector training firms that have really blossomed in recent years. You've got colleges and universities that have gotten into the act. You've got George Washington University, University of Virginia, University of the District of Columbia, all are offering degrees and programs in procurement and contracting.

I think federal procurement mangers and employees are encouraged and even required, in most cases, to take continuing education credits and to update their skills and to stay abreast of the field, because it is constantly changing and it's essential for them to do that.

MR. LAWRENCE: And I was going to ask you about that. Are those courses teaching the way things used to be or are or the way things should be or might be? I know many of your predecessors have talked about the acquisition professional changing in their role in an organization, so I'm curious. Is the training helping to drive this new vision?

MS. STYLES: I think the training has helped to drive this new vision. I think it's to help to make some cultural changes and some step-forwards and in how the procurement community works and works together. I think one of the key elements for me that we really haven't addressed is how we get a more cradle-to-grave view of acquisition. How we get the program managers, the program acquirements people and the procurement people to all work together. The focus of acquisition reform is really on the isolated piece of procurement.

But to do a good job, to move forward, whether it's competitive sourcing or whether it's simply in procurement, you really have to have these people working together and communicating together or you don't end up with a good product and you don't really end up with a good procurement, but I find at the civilian agencies that there are some cultural difficulties to those people communicating. And that's one of the most difficult challenges of this office is to figure out how to get these people communicating to have better statements of work; to have better contracts; to really take it to the next step.

MR. LAWRENCE: How will you measure your success?

MS. STYLES: Well, I do have a scorecard -- it's not the agency -- it's not simply the agencies that are being measured on the scorecard, I think it's also, internally, that the director, Mitch Daniels, is certainly measuring us on how successful we are in moving the departments and agencies forward in the President's management agenda item.

But I really came to this office with the idea that we need to take a hard look at where we were in acquisition reform and if I'm successful and, in some ways, calming down the system and taking a practical view of it, you know, we can't keep training people on new things if we keep changing the system. I want to make sure that we've trained them on the right parts of the acquisition system; that people understand it; that we know where the problems are; that we know that we've achieved the goals; and that we take a careful and cautious approach to this so we know, from my perspective, that I'm getting the best value for the taxpayer in terms of price and quality and that we've got the proper rules and regulations in place to do that.

I mean, the most important job here, I think, is being a good steward of the $200 billion that we're spending.

MR. LAWRENCE: Well, that's a good stopping point. Rejoin us after the break as we continue our conversation with Angela Styles, Administrator for Federal Procurement Policy. This is The Business of Government Hour.


MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and today's conversation is with Angela Styles, Administrator for Federal Procurement Policy in the Office of Management and Budget.

Well, Angela, what do you think are the greatest challenges facing procurement officials today and in the future?

MS. STYLES: Currently, I think the greatest challenge is trying to figure out how we push forward with what the President has articulated as our primary goals and objectives. And in my mind, in acquisition, that means competition. How do we make sure there is an appropriate level of competition and how do we make sure that our system is appropriately transparent, so people know that the decisions we make are objective and not subjective in nature. And that we are promoting access of lots of different companies, commercial companies into our marketplace.

I certainly am concerned that if it's viewed, if your system is viewed as too subjective in nature, that people don't want to participate, people don't want to contract with the government if they think that the deal is already set that, you know, there are certain agencies that contract with certain contractors. You know, I want to make sure that the system is objective, promotes competition and is as transparent as we can possibly make it.

MR. LAWRENCE: Do you have a timeframe for how this will work? I'm curious because Fair was a '98 act.

MS. STYLES: That's right.

MR. LAWRENCE: Even in now 2001 people have got red dots on their scorecard. Do you think it's going to take a while for people to really want to do what people actually said they were going to do?

MS. STYLES: Absolutely, I think, particularly at the civilian agencies as far as competitive sourcing and public/private competition goes, there's not really significant infrastructure in place to conduct these types of competitions, so it's going to take a long time and I think, as I've said before, I want the focus to be good management plans, to be really taking a look at everything that the agency is doing to be meeting their mission goals and use competitive sourcing and public/private competition as a tool. It's a means to an end, it's not the end in and of itself.

MR. LAWRENCE: What do you see as the upcoming procurement and acquisition trends?

MS. STYLES: From my perspective, I certainly see a focus on, again, on competition to make sure that we have an appropriate level of competition. I see us focusing on the acquisition workforce to make sure that it is well coordinated between what I've mentioned as the program requirements, management and procurement people. Those people have to be working together for us to be able to meet any of our goals, whether they're procurement goals, human capital, financial improvement, competitive sourcing. I mean, we've got to move to a cultural change and a cultural change in the way we contract, as well, you know, a lot of people talk about performance-based service contracts. And the primary difficulty with implementing those is that there's not a cultural change, these three groups in acquisition aren't communicating. The requirements people aren't communicating enough of their needs for procurement people to be able to write a performance-based service contract.

So there's some cultural changes that have to take place, I think, for us to make significant steps forward in how the government contracts.

MR. LAWRENCE: Are there any new procurement technologies on the horizon that will allow this to happen?

MS. STYLES: We certainly have looked at a lot of different areas, and we don't want to move out with something before it's viable. I think we have some past experiences in procurement with things like FactNet, for anybody that's familiar with that. So we don't want to move out ahead of the curve, but we want to make sure that we're appropriately using technology.

What I've found interesting is that we have a federal procurement data system, which, for a number of years, as required by statute, collects data on procurements. But it's really just been used to report back to Congress on meeting small business goals, women-owned small business, minority forum, all the goals, the statutory goals that Congress sets forth.

And what I want to move that to is to a management tool where a manager of a federal department or agency can actually look at it and say, okay, I've got my Fair Act inventories, I've got a list of inherently governmental people, but I also know what my contractors are doing. I can have a tool available that immediately tells me exactly what it is that I have contracted out so I'm able to manage that and know how these contractors are helping me meet my missions and goals.

And we've also got some initiatives in other areas: vendor registration, past performance databases, and certainly taking a look at integrated acquisition.

MR. LAWRENCE: We hear a lot about the coming retirement wave and the difficulty of retaining government employees and recruiting. How will these issues impact procurement offices throughout the agencies?

MS. STYLES: The first step is making sure that Congress doesn't attempt to make further cuts in the acquisition workforce. And we have been very up front in our opposition to some congressional initiatives to cut the workforce, because it really is the key workforce to make improvements in the management of government.

And as I talked about before, one of the elements of the President's management agenda is the human capital initiative. It's actually shared jointly between OMB and OPM, which is very unique in the history of OMB and OPM to share an initiative such as this. And we've actually introduced legislation, the Managerial Flexibility Act. And we've briefed a good number of the stakeholders on it. And one of the titles of the Managerial Flexibility Act would actually make some changes to make the personnel system more flexible for the agencies.

But with that said, you know, we're working pretty hard and I've seen Kay Cole James out talking to numerous departments and agencies about the flexibilities that they have in place and how they should be used. And, certainly, there's some concern that the departments and agencies have a lot of flexibility out there that they haven't, for a number of reasons, used so we're pushing forward with them actually using those, actually working to recruit and retain the good people.

And, I guess, the other element of that is, certainly, the technology workers, which, you know, we've had some historic difficulty retaining versus the private sector. And, you know, we need to think long an hard about what we can anticipate as an appropriate level of technology workers. You know, I'm concerned that even now we don't have an appropriate level of public-sector employees that can even manage our IT contract, so it really -- it has to be a focus of how do we recruit and retain the appropriate people for those positions?

MR. LAWRENCE: Could you tell us a little bit about the Managerial Flexibility Act in terms of what it is and why you think it's important?

MS. STYLES: Well, we came out with a Freedom to Manage initiative that has several parts: a Freedom to Manage Act, which would give us fast-track authority for some statutory barriers that agencies may have to managing their agency. There are some, you know, ludicrous examples, like, not being able to fly test planes East of the Mississippi, you know, there's some -- there's some -- and we're asking departments and agencies to really come forward with their lists of requirements that Congress has put on for one reason or another that, you know, may have had some validity at one point in time, but doesn't now.

There's also the Managerial Flexibility Act, which has three titles: One is a budget integration portion would actually would reflect the full cost of retirement and health costs in agency budgets. OPM actually pays for a great deal of the cost right now, so the agencies don't know what the true costs of their personnel are.

A second title deals with many of the personnel issues and flexibilities. And then a third title has to do with property disposal and actually incentivizing the departments and agencies to determine what some of the excess property is that they have and it would allow them to keep some of the money, once that property is actually sold. Right now, if the Department of Defense has excess property, the money resulting from that sale simply goes back to the, you know, general fund. So the department has no incentive to actually identify excess property, and this would change that.

MR. LAWRENCE: Why, whenever there's a discussion about flexibility, people are quick to point out, as you did, that the agencies actually have much flexibility and they, perhaps, don't use it. How does that work? Do they just not know about it or do they really need more, I've never quite understood the balance?

MS. STYLES: Some of it is not knowing about it; some of it is education; some of it is, certainly, concern about using it. I mean, I think some of the federal employees are concerned about how the authorities will be used, and I think some of that concern is legitimate. But there also are some additional flexibilities that we think would be appropriate, too. So, we'd like to move forward with those, as well. I mean, some of it's educational about what we already have and some of it's moving forward with our legislation on the Hill.

MR. LAWRENCE: What's our vision for OFPP in the future, the next 10 years, what will it look like? What will it be doing?

MS. STYLES: You know, we have some -- it's interesting -- it's a very small shop of people. We've got about 23 people on staff. And it's gone back and forth. I mean, sometimes it's considered to be an implementation office and sometimes it's considered to be a policy office.

And my vision for it is, certainly, to be a premiere policy office. You know, we are within the Office of Management of Budget, we're within the Office of the President and we're really relied upon for advice in all aspects of procurement laws and policies and acquisition and oftentimes a lot of other labor issues and various policies. And I want OFPP to really be the premiere policy office, the place that people go when they have the difficult policy questions, how should we change this regulation; what's the right way to do this? You know, what's the vision for the future of procurement? What laws do we need? What changes to laws do we need?

You know, certainly, we'll always have some mission and trying to implement being at OMB, but I'd like the focus to be on the true policy issues and determining some of the difficult questions that we have in acquisition.

MR. LAWRENCE: Well, I'm afraid we're out of time, Angela. I want to thank you for joining us this morning. Thank you very much.

MS. STYLES: Thank you, for having me.

MR. LAWRENCE: And did you want to mention your Website one more time, you referred to it several times.

MS. STYLES: Oh, yes, it's at and many of the issues that I've discussed here today with the President's management agenda and our scorecard are available there.

MR. LAWRENCE: Are the scorecards with the red dots there yet or is that �

MS. STYLES: No, no, we don't actually have those, but they will be eventually, so �

MR. LAWRENCE: Thank you very much.

MS. STYLES: Thank you.

MR. LAWRENCE: This has been The Business of Government Hour, featuring a conversation with Angela Styles, Administrator for Federal Procurement Policy in the Office of Management and Budget.

Be sure and visit us on the Web at There, you can learn more about our programs in research and get a transcript of today's interesting conversation.

Once again, that's

This is Paul Lawrence, see you next week.

Dr. Susan Offutt interview

Friday, February 8th, 2002 - 20:00
Dr. Susan Offutt
Radio show date: 
Sat, 02/09/2002
Intro text: 
Dr. Susan Offutt
Complete transcript: 

Arlington, Virginia

December 14, 2001

MR. LAWRENCE: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of The Endowment for The Business of Government. We created the endowment in 1988 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the endowment by visiting us on the web at

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest today is Susan Offutt, Administrator of the Economic Research Service at the U.S. Department of Agriculture. Good morning, Susan.

MS. OFFUTT: Good morning.

MR. LAWRENCE: And joining us in our conversation is Owen Barwell, a PWC consultant. Good morning, Owen.

MR. BARWELL: Good morning, Paul.

MR. LAWRENCE: Well, Susan, perhaps you could begin by telling our listeners about the Economic Research Service and the U.S. Department of Agriculture.

MS. OFFUTT: The Economic Research Service is a part of a very large organization, which is USDA. The big parts of USDA that most people have heard of would be the Forest Service, the Natural Resource Conservation Service that fights against soil erosion and maintains natural resources, the Farm Services Agency that delivers services and subsidies directly to farmers.

And the Economic Research Service is one of a group of agencies that create the scientific underpinning for many of the department's activities. That would include biological research, statistical collection and the like. But the Economic Research Service has existed in some form or another since 1920, so it's relatively old, as part of the bureaucracy goes, although USDA itself, of course, dates to the 1860's. So this is a pretty old organization.

When we began in 1920, our focus was on farm management. That was a time when people were realizing that farming was a business, and that there was an increasingly large urban population to feed, and the question of how markets developed and how the business of farming got done was very important.

So we started out focusing just on the farm, but today, some 80 years later, we have charge that includes all the activities of USDA, that would, for example, lead us to look at issues like food stamps. The largest expenditures from USDA come from the food assistance programs, food stamps, school lunch, women, infants, children feeding programs. So we are concerned about the underpinnings of food stamps, of natural resource management, trade policy, pest and disease management, anything that the Department of Agriculture works on is of concern to us.

We have about 500 employees. About two-thirds of those people are economists, and about two-thirds of those people are PhD economists. So we're a research organization, we're specialized in really one discipline, and we use our skills as economists to look at the range of issues that confront USDA. We have been the economic research since the early 1960's, and we celebrate our 40th anniversary this year.

MR. LAWRENCE: When you say you're concerned about the things that the department is doing, does that mean that's the type of research you are undertaking?

MS. OFFUTT: Yeah. Our mission is to improve the information available to decision makers. An important group of those decision makers are within the Department of Agriculture. The policy officials and the program managers who deal with that whole range, that whole raft of programs.

We're also interested in providing information to other decision makers in the food and agricultural system, people in commodity markets, people who are trading overseas, people who are making decisions about buying inputs, or environmental management questions. So insofar as USDA and public policy has a role to play in the food and ag sector, our job is to try to provide the economic understanding of the consequences, circumstances of decisions and the context in which they occur.

MR. LAWRENCE: You mentioned you have a lot of economists there, but not all the folks are economists; what are the skills of the others?

MS. OFFUTT: Well, we have a hearty band of real sociologists, demographers, anthropologists, a few historians, so they complement our discipline, but there's clearly strength in the numbers of economists at the agency.

MR. BARWELL: Do you see the overall as the administrator of ERS, given the context of the employees, the skills they have, and how you operate in the Department of Agriculture?

MS. OFFUTT: Well, come 2002, I will have been administrator for six years, so in a way, my job has changed over that time. That's a long time to be an administrator, the head of a federal agency. I'm a career employee, and that's true of all the heads of the research agencies, so we tend to just have longer tenure. And in the beginning of my time, my job is really to help organize the incentive structure to the agency to get the work done. It was a lot of investment in human capital management and infrastructure, information technology; it was really setting the stage.

As time has gone on and I've also been involved, of course, in determining what research directions we have taken and where we need to be next. And increasingly, my job is, in a sense, to manage the interface between our little agency and the outside world, whether it's the department or other parts of government.

MR. BARWELL: Right. And you mentioned that you've been in your current position for six years. Let's start taking some time to explore your career prior to joining ERS?

MS. OFFUTT: Well, working backwards, I had immediately come from the National Academy of Sciences National Research Council, where I ran something called the board on agriculture that oversaw the studies the academy does on say pesticide use or resource management, animal feeding practices, you name it.

I was there for about four or five years. And that really gave me a good perspective on a broad swath of agriculture. And as we know, biotechnologies are really changing the landscape in agriculture, and that gave me a good chance to get a handle on how that reality was going to be different in the future. I had come to the academy from the Office of Management and Budget, where I was the chief of the agriculture branch. And that was an interesting time.

We did the 1990 farm bill, which was about the time that we dealt seriously with the budget deficit for the first time. And, as well, we were negotiating what was called the (inaudible) the trade agreement. So I was at OMB for four or five years.

I did a brief stint at ERS before that, and that's because I had come into Washington from the faculty at the University of Illinois, where I was on the agriculture economics faculty, and I had been teaching policy and statistics out there in the great prairie, and that was really where my academic interest in research was developed.

But I always had an angle on policy. My economics training at the doctorate level and the master's level is from Cornell, from the Ag college at Cornell. And they had sent me to Illinois to learn about the real business of farming.


MS. OFFUTT: No disrespect to dairy farms in New York State, but there's nothing like what goes on in central Illinois in terms of seeing what powers this country's agriculture economy. They felt that was necessary because I grew up here in suburban Maryland, outside Washington, and I had what they call in Ag colleges, no farm background. So I needed something to complement my academic credentials, so it's been an intersection of all those interests.

MR. LAWRENCE: What is it that drew you to public service? One career path would have had you now as, what, head of the department or dean of the business school?

MS. OFFUTT: Well, growing up in Washington, and particularly, I'm old enough that I grew up in Washington before there was really a presence of business and industry. I mean it was a one-horse town, it was government.

And, quite frankly, a lot of the people that you grow up with, my parents were in public service, my mother's in the public heath service at the National Institutes of Health, my father was in government service, and the notion of marrying an expertise in a scientific or an academic discipline with public service comes very naturally in that setting. And when I discovered an interest in feeding the world in the 1970's, like I think a lot of idealistic college students did, in a way, all roads lead to Washington. The question of food sufficiency and food security comes about because markets fail, and government traditionally steps in when markets fail.

So it was probably inevitable, both because of my professional interest, but also my personal orientation to Washington that I would come back, and public service is the logical thing to do here.

MR. LAWRENCE: A number of people we've spoken to have a background in academia and then make their way to government. Is there something about the similarity of the cultures that makes that logical?

MS. OFFUTT: No, it's probably illogical. The university setting, of course, is unique in the sense that everybody has got a job and you can't get rid of them, most of them. I would, you know, most of my career I was in the job insecure category as an assistant professor. But it's not a very hierarchical organization, and there's not a very good, shall we say, labor/management relationship.

Maybe that's logical coming out of that, as you say, this is no way to run a railroad. It's great for producing some kinds of outputs, but it's a lovely life, it's very stimulating in many ways. But if you're a little bit more goal oriented, as the academics would maybe think it's the pedestrian way, you want to see things change.

The university setting is a fairly diffuse form of influence for most people. That doesn't mean that the relationships that you develop with your colleagues and how you learn to work with them doesn't serve you very well. But for me, coming then into a big organization in government, I was surprised by how the hierarchy works, that was new.

MR. LAWRENCE: Which of the jobs you held best prepared you for your present job?

MS. OFFUTT: I think probably it was the time I spent at the Office of Management and Budget, because that's right where the rubber meets the road and where the decisions, the options are winnowed down to the ones that you're actually going to consider.

I mean by the time things get to that level, to the White House, something has to be done. There isn't a lot of time for creative thinking. And you come to understand in that setting how politics and substance really interact, and that's critical to know how your research can be used, because we don't live in a world in which politics doesn't matter, it does. Now, your research doesn't pull any punches because you think maybe a politically unacceptable option has come on the table. But you have to understand what people are confronted with when they make decisions. They don't have much time. They're smart people, they're dedicated, but they're not going to be able to spend an afternoon delving into the details.

So the research has to be crisply formed and accessible to people. So that really, in terms of how I view my job at the Economic Research Service was the most important. How do I help people who have almost no time to make decisions but want to make good.

MR. LAWRENCE: That's a good stopping point. It's time for a break. Rejoin us after the break as we continue our discussion with Susan Offutt of the Department of Agriculture. We'll find out about the challenges of dealing with a knowledge work force when The Business of Government Hour continues.


MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Susan Offutt, Administrator of the Economic Research Service at the U.S. Department of Agriculture. Joining us in our conversation is Owen Barwell, a PWC consultant. Well, Susan, let's probe a little more on the kinds of services and information you provide to USDA; could you describe some of the products?

MS. OFFUTT: Well, we're in the knowledge business, so our product line includes information, descriptive information say about the food and agricultural system, what do people eat, what do they spend their money on, how much money is spent in restaurants, basic facts about commodity markets, what are exports, what are imports, what do we think prices will be. That's part of our output.

Another part, and what I think may be of paramount importance is the research output, really the analytical work that tells people why things happen. I mean the descriptive part is important, what's going on, what do we know about it.

But our research is really intended to get at causality, about why behavior takes place, because that's the key to understanding how to design good policy. If you understand why things happen, then you may be able to affect the outcome.

And then we have certain data services that we provide. It's descriptive, but we're also providing data that other research economists can use, whether they're in universities or private sector. So we have a range of information products. And in the past year, we have become a web-based operation. And we have gone from the traditional paper based research academic orientation to electronic delivery. That's enabled us to serve this diverse group of customers we have much more effectively, because we talk to them in different ways.

The way we talk to people in commodity markets is different from a policy official, and it's different from our colleagues in research, and the web delivery gives us the ability to put all that different kind of material up in one place by topic, so that we can customize delivery.

MR. LAWRENCE: How do you collect all the data, the amounts spent in restaurants, the crops, how is that all collected?

MS. OFFUTT: Well, we rely on primarily other agencies of government to do the data collection for us. One of our sister agencies in the research area is the National Acts Statistic Service, and they do the census of agriculture every five year, a lot of market evaluation. They're the people who go out and estimate corn yield, say, in the middle of the summer. So they're probably our largest single supplier.

But we also turn to the Bureau of Labor Statistics for food prices. The Census Bureau for information on rural areas. I didn't mention that we have a great concern with rural America and rural development. So we are scavengers, and there are very few data collection agencies in the federal government that we have not relied on at some point in time for our raw material.

MR. BARWELL: Now, Susan, in our first segment, you talked about the kinds of people that you employ at ERS, and I've been fortunate enough to meet a few of them, too. They're very highly educated and skilled. But they must be a tough bunch to manage. How have you managed to deal with that?

MS. OFFUTT: Well, of course, it's a pleasure to work with all these people who are listening. But knowing how they're trained in the setting, the institutional setting at the university in which we've all existed for many years, we appreciate that when you come into this hierarchical setting, you can't all of a sudden tell people who have just finished their PhD or been out for five or ten years, do this tomorrow, do that tomorrow.

For us to do the best job, we have to have people who are intellectually engaged in their work, who are driven by curiosity as much as by their skills. So that means that there's the management trick, I think, and I can't pass judgment on whether or not we're completely successful, but I think we've got some way down the road, is to come to a shared understanding of what interesting problems are, so that people are motivated to work on the things that the agency needs to have done.

Now, every once in a while we're going to have to work on some things that don't interest us very much, we understand that. But by and large, you like it to be an interaction between the analysts, the managers; we're accountable for the output, and then our customers. So trying to get people more involved in the problem that we face, whether it's an agency trying to deliver a program, or a commodity group struggling with a big change in their international market, that helps a lot.

But self-determination and problem definition are really key when you're trained at that level, and so we have to be mindful that people need to participate.

MR. LAWRENCE: Is it by definition a flatter organization with less levels of management, is that what that yields?

MR. OFFUTT: We are the flattest organization in USDA, if not the federal government. I think we have one manager for every 13 or 15 people. And, you know, really, once you get a PhD, you ought to be able to work without a lot of close supervision. So I mean it should be that way anyway, but it also turns out that's the way you want it to be, because people are going -- in a creative process or research process isn't predictable. Micro-management doesn't really suit that very well. So we are a flat organization, and it's a hierarchy, but when you're working on any given problem, you want to create a community of colleagues, and we pull them from all divisions and try not to let the organization keep us from putting together the right resources.

MR. BARWELL: And there must be some hiring challenges, too, given that people have to have specialist skills, but also be able to move around the organization and have the breadth of capabilities, too. How do you manage personnel hiring in that context?

MS. OFFUTT: Well, it's not a requirement that you have a PhD to work at ERS. Most people do. If you look at what we actually say is required, it's a certain amount of training in economics. But clearly to function in this environment where you're an independent researcher, you have to have the skills that you learn in graduate school about how to conduct research, how to test hypothesis, how to do statistics, how to run a program. So when we go out and look for people, we've decided that we will look for people who have the best fundamental analytical skills. Now, when you get a PhD dissertation, you become a subject matter specialist, as well. But over the course of your career, you may want to change emphasis. You may be interested in labor markets in one place and maybe environmental economics in another time in your career. So that's a good thing, the flexibility.

But what it means is that we have become increasingly agnostic about where we look for economists. For most of its history, we've relied on the colleges of agriculture and the land grant universities. That's where agricultural economists come from.

But increasingly, and particularly as we move more and more into trying to understand the well being of people in food stamp programs, we have to look outside to the mainstream economic departments. And anymore, it may be 50/50 where we find them.

But the key is to find people who are solid in terms of their research skills, because they can learn the subject matter as they go along, and having that curiosity and that willingness to be flexible is something that we look for.

MR. LAWRENCE: Let me shift gears a little bit and ask about the processes you do. You create reports, you do research, you collect data; what kind of technology do you use?

MS. OFFUTT: Well, information technology, it's electronic now. We have come to a system where all our internal communication is electronic. We have a bulletin board, we have e-mail, everyone has that. But we really no paper flow in our agency anymore except the stuff that comes in from the department, which is not fully electronic, but that's okay, we can scan it.

And so we try to do things by wire, as it were. And every document that we create has an electronic existence, it, you know, doesn't just exist on hard copy, and it's the basis then for dissemination into the web. So we're not always re-entering and reformatting. We're really working with one document and then using our software to relate it to an internal information management system, to relate it to a website. Owen knows we're not quite there yet, but that's our goal, is to not have to duplicate paper and products all the time because that's a big expense.

MR. LAWRENCE: How do you worry about the integrity of the data you use?

MS. OFFUTT: Well, for a long time, we solved that problem by not making the data available to anyone, so the question of maintaining confidentiality or worrying about how clean it was didn't come up. But now that we've made a big investment in the website, of course, we want to make the data transparent to people who want to understand how we used it in analysis, but who also want to use it themselves.

This creates a lot of challenges; for example, when we're working with micro level data, say answers to a farm survey, that's confidential. So we're learning how to build security into our website so that people can have access, but still we won't breach the confidentiality requirements.

The question of the transparency that allows people to say, well, you might have used these data and this analysis, but these data were so, you know, flawed that we can't believe what you said, that's a bigger challenge. We're working now with the other federal statistical agencies to come up with guidelines for information quality, and that goes beyond questions of can you replicate say a regression to documenting where the data came from, are they survey, how good was the survey, is it, you know, statistically representative, and that's a big job because a lot of the data was -- Owen worked with us on a project where we discovered that it's a form of capital. If you're an analyst it's really important to you. That's a lot of your worth to the organization. If you have in your desk drawer information, then you're the only one who has it. So there's a reluctance to share it broadly because that's really important to your value in the organization.

And Owen helped us try to create an environment where people were willing to do that. So it turns out to be the question of access to data and transparency goes right down to the heart of the matter, which is control of information and how that determines your worth as a researcher, your contribution.

MR. LAWRENCE: And how about the quality controls on say the generation of results; research yields a certain finding?

MS. OFFUTT: All our research has to be done to disciplinary standards. So however we talk about it, however we describe it to an audience, the underlying work has to be done with the right methods and reach the right conclusions, and we use, just as you would in the academic setting, peer review. And we also have our reports reviewed by people in the programs. And we don't want to mischaracterize their environment either.

MR. LAWRENCE: This is a good stopping point. It's time for a break. Come back after the break as we continue our conversation with Susan Offutt of the Department of Agriculture. We'll ask her more about how she manages the process of conducting a research and publishing results when The Business of Government Hour continues.


MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Susan Offutt, Administrator of the Economic Research Service at the U.S. Department of Agriculture. Joining us in our conversation is Owen Barwell, a PWC consultant.

Well, Susan, at the end of the last segment, you were describing how research gets done, and I'm wondering at the end of that when you have conclusions, what happens next?

MS. OFFUTT: Well, a lot of what happens after you reach conclusions depends on when you reach them. If you present conclusions on an issue that's, say, already being debated on the Senate floor, people have already made up their minds. There's not really any value to new information. And, in fact, you can create more trouble than you'd care to by all of a sudden introducing some new consideration at the last minute. The political process is not always nimble enough to accommodate it, and politics being what it is, we can't expect it.

So we find that our conclusions are most useful to people when they come in the beginning to think about a problem, when they're thinking about the options, or how to characterize it, or what really causes this, or what creates an opportunity. So timing is everything in our business and anticipating what decisions have to be made is the most important.

And then our conclusions are non-threatening, because we aren't contradicting an established position someone has taken, and that's when I think we're most useful.

MR. LAWRENCE: How do you do that anticipation? One can't help but think that research takes a long time and issues flare up very quickly and that must be an incredible management problem?

MS. OFFUTT: Well, it's not all a guessing game. I mean there is your guessing in the sense as informed by what you know about the sector and how it's evolving, and so we, for example, saw that the question of labeling food was going to become more important, and that was because people had questions about how food was produced, does it use biotechnology, is animal welfare protected. So the economics of information in the market were clearly becoming important.

We didn't know exactly what the policy setting would be. We didn't know; although we might have guessed that the U.S. and the European community would be loggerheads over the issue, so we can, in a general way, anticipate. That's not to say that we're not surprised sometimes. But over the five or ten years, we're probably right more than we're wrong.

MR. LAWRENCE: Well, you describe a process whereby the researchers conducted in advance and it informs. What happens when that doesn't work out that way?

MS. OFFUTT: Well, sometimes we miss the boat, there's no doubt about it, and then I suppose like everyone else, you try and bury your mistakes. It goes on the website, but we don't make a big deal about it. But sometimes we find that research we did say two years ago all of a sudden becomes important, and that's the beauty of the website, because it preserves that body of knowledge in a way that sequentially issuing reports doesn't, because then you train people to say, oh, what's new, and if it's not new, it's not valuable. But now, because we can create this big treasure trove of stuff, it's a resource, and so they don't say, oh, it's stale. It may very well be relevant.

So sometimes we can improve the timing by managing how we push information to people, which is you think there's nothing new, you think there's nothing out there, but we did this two years ago, here it is, and that's why we invest in the web, and a lot of our management time in thinking about, well, here's an opportunity, here's a problem someone is dealing with, a challenge they've got, have we ever done anything that could be useful, could we repackage that, does it need some new information. So it's an ongoing management process, it's not just research products fall out at one end and you never see them again.

MR. BARWELL: Now, Susan, we talked a lot about the research process and finally getting to some results and some conclusions, and we've talked about how you put that out through paper documents such as magazines and other guides, and also out on the web, too, but who's really interested, who are your real customers and stakeholders in your organization?

MS. OFFUTT: Well, in a lot of ways, we're just learning. Until we had the web, we didn't really have a good way of keeping track of who was using our information. We had mailing lists. I mean we certainly knew who we were sending our information, no question. But who was actually using it? We didn't have that kind of relationship.

Now, we have done, as I think many places, organizations in government have, customer sessions and you ask people, focus groups and the like. But the web is going to allow us, and we're just now investing in the technology to connect directly with users and have them tell us what they want and what they find useful.

In a policy setting, we're now creating extra nets, which are secure, sort of like our own private secure website where we can say carry on a discussion that needs to take place before the U.S. stakes out a position in international in a forum we can manage information in the dialogue there. That's much more advanced than simply sending briefing papers out and hoping someone reads them, because now we know whether we provided the right information.

MR. BARWELL: That sounds like an example of how you incorporate these groups into the research agenda setting process. Are there any more examples that you do?

MS. OFFUTT: Well, for example, one of our most important set of stakeholders, and historically the oldest, are people who grow commodities, which is the business of agriculture in this country. And we, for many years, had a way of communicating with them which was really the analyst with the expertise and say sugar, talk to the sugar people, and the analyst with expertise -- we talk to lead people.

Well, increasingly, we're trying to draw them to all these groups together in one time so we can have a discussion where they listen to each other, but we also listen to what they're saying about the opportunities they face.

On the web, we'll be able to create these communities of dialogue, where we'll know how people customize a web page to suit them, and that should give us clues about what they're using and what they think is valuable.

MR. LAWRENCE: The federal government does what seems to be a lot of economic research. Could you take us through that community and describe how you interact with them?

MS. OFFUTT: Yes. We're one of, gee, I should know the exact number, 10 or so, federal statistical agencies which are coordinated by the chief statistician at the Office of Management and Budget, and some of these agencies are very well known, the Census Bureau, the Bureau of Labor Statistics certainly are well known to probably most Americans. Others like the Economic Research Service are not so well known. The Energy Information Agency, a critical part of DOE is one of them. And we have common concerns, either in data collection, most of those are primary data collection organizations, or in the generation of economic statistics.

The Bureau of Economic Analysis does the national income accounting. We provide them with estimates of farm income that they use in rolling it all up into gross domestic product and the like.

So we have common concerns about data quality you asked about earlier, and integrity, and how do you give maximum access to data for people without breaching confidentiality. So we have a lot of operational concerns that we share, and we have a forum, a monthly meeting chaired by OMB where we do that.

MR. LAWRENCE: I was going to ask is there a formal way that everyone gets together and �-

MS. OFFUTT: Yes, there is. Kathy Walman (phonetic) who is a chief statistician convenes us as a group once a month and we talk about issues, whether it's training or a survey issue that is of mutual concern, or an update on the census, so it's an important communications link.

MR. BARWELL: How do you know you've done a good job? I mean what sort of measures do you put in place to measure success?

MS. OFFUTT: For us, measuring success is very difficult. The way we think about success, it's changing the way people view the world, whether it's giving them another option for an action to attain a goal, or whether it's increasing their understanding of why markets are the way they are, and that's a lot of intangibles, because we can provide the best information in the world and people can still make bad decisions.


MS. OFFUTT: So we don't want to be blamed if they make a bad decision, we just want the credit when they make a good one. So the metrics of this are still a little fuzzy in our minds, but there are instances where we can document that the debate, the discussion was going this way, we issued a report, it said here's another way to look at the problem, go on.

A good example of that would be the work we've done with our farm survey data, to understand how diverse American agriculture is. The policy discussion is about this stereotypical American farmer. And you might think we had two million of the same kind of people out there, right, they all had -- there's ma, pa, and they raise goats, chickens, wheat and the like. But, in fact, in these two million farmers, there's incredible diversity, so not surprisingly, they experience government policies in different ways, whether it's the way they manage their land or the way they market their commodities.

We use the farm survey data to characterize this diversity in important ways, and that turned out to be useful to this Secretary of Agriculture, Ann Venamon (phonetic) when she issued a policy and principals book in September that leaned heavily on that work and talking about her vision of agriculture and appreciating the importance of consumers driving the markets and how that created opportunities for different producers.

So we think that that's a piece of work, where without that empirical underpinning, it wouldn't have been possible for people to convincingly portray the richness in the sector.

MR. LAWRENCE: A lot of information that's generated by the government is tremendously valuable that people use and later go on and do financial things with; is that true about some of the information you generate, and if so, do you worry about the dissemination of it and the control so that it is transparent?

MS. OFFUTT: Yes, we do worry about that, and we are just one part of a group within USDA that does the market analysis. Owen and his colleagues at PWC helped us in an important study to manage that process better. The quality of the output there depends on the quality of the input. How well do we share information across analysts? How available, how accessible is that? How timely is the delivery?

So that's real important because USDA information moves the market, no doubt about it, and there's a real important function there. Some of our sister agencies are the ones that put out the crop forecast, national statistic service, or price reporting, and that's extremely valuable.

MR. LAWRENCE: It's time for a break. Come back with us after the break as we continue our discussion with Susan Offutt of the Department of Agriculture. In the last segment, we'll ask her about some of the changes she might expect the future will bring. This is The Business of Government Hour.


MR. LAWRENCE: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation with Susan Offutt, Administrator, Economic Research Service at the U.S. Department of Agriculture. Joining us in our discussion is Owen Barwell, a PWC consultant.

MR. BARWELL: Susan, we've talked a lot about what you do, but what about the future, what sort of issues do you think will drive the focus of ERS research in the future?

MS. OFFUTT: I think a lot of our work will be driven by the interaction between consumers and the food and ag system. For most of this nation's history, it was a supply side kind of enterprise. We were just concerned about getting people enough to eat. Well, we've moved way past that. In fact, just recently we had the surgeon general tell us that obesity is the number one health problem in the U.S. But affluence, in addition to obesity has brought the people the ability to choose. And the food market is much more sophisticated than it was 20 years ago, lots of different kinds of products, we care about how they're made, we care about where they come from.

So consumers are sending signals back down that supply chain like they never have before. And a lot of the adjustment that the sector makes is to these signals. It's no longer a commodity business, that is, where the goal is to produce as much as you can as at low cost as you can. It's like the car industry now, what kind of car do you want, and that's where a lot of public health issues, a lot of public preference issues will drive our work.

MR. BARWELL: And these issues sound very much different from today's issues.

MS. OFFUTT: They are. Right now I think we're in a transition period and it's certainly not the case that we would ever say we don't worry about the cost competitiveness of the fundamental bedrock of agriculture, which does start with commodity production.

But increasingly, as international trade becomes important, and it is important to U.S. farmers, we have to deal with how other economies are evolving. There's a huge middle class coming up through developing countries, they're the customers of the future. We don't know very much about them, about their cultural preferences, how they view food safety. There's a lot of work to be done there.

MR. LAWRENCE: You hear a lot these days about the coming retirement wave of government employees; that they'll all leave and knowledge will be gone and that will just be an issue. Is this something that you worry about?

MS. OFFUTT: We do worry about it because we're, as an agency, not as young as we used to be, and we're trying to deal with it in two ways, one, quite frankly is, we hire fewer people than we used to.

As we've invested in information technology, we have reduced our hiring. We hire at about half the rate of attrition. Part of why we're able to do that, of course, is that information technology makes each one of us more productive so we don't need as many people. And part of it is, by hiring people and creating expectation that they may work on a lot of different issues during their professional lifetime, we're really moving away from the one specialist or two specialists, one job slot. We really need people who can cover a lot of territory, maybe not this year, but in five or ten years.

So the recruiting strategy is to look for the basic skills that give us the subject matter flexibility we'll need, and I think that will largely help us cope.

MR. LAWRENCE: Is retainage a problem? One can't help but think that you take these highly educated people and you train them about markets and commodities, that they will be incredibly valuable to some private sector organization; is that an issue?

MS. OFFUTT: Yeah, well, not just their value in a private sector organization, but in other parts of the government. ERS had traditionally been sort of a training ground for people who went on to the big program agencies and managed commodity programs and the like. And that pool is pretty sparse these days, and it is a concern, not so much for us, because we know where to get more, but, you know, if we're processing people to learn institutional in's and out's, that supply has contracted, and I think it is a bigger issue for those other agencies.

And people go on to the private sector, and you know, our view is, that's great, you know, every good person who finds a job and has been with us is good advertising for us, and we want people to come and go from the agency, we think that strengthens us.

MR. LAWRENCE: What kind of skills would a young person have to have to be of interest to ERS; is it just economics and the and the highly quantitative skills?

MS. OFFUTT: Well, certainly good economics matters, that's our discipline, and we have to have that to ensure the credibility of our analysis. But we look for people for, as I said, are flexibility, in the sense that they're not going to mine one vein really deeply for a long time, which can be a little bit hard to find in PhD's because that's not what they train you to do at the university, they don't say go for it to be flexible, they say go for it and do this for 30 years.

But the people who also, and it sounds corny to say, but I think it's true, they care about the kinds of problems that come to government. There aren't too many places where you can go to do research on those in a very secure setting like we have at ERS, and we find, for example, people who are worried about food insecurity in this country find a good home with us because we're concerned not just about the immediate problems, was there too much fraud in the food stamp program, but how many poor people are out there, how do they make decisions about food, what do we know about their behavior that would be useful in designing more effective programs. So a lot of people really are motivated because the public policy questions are meaningful to them.

MR. BARWELL: And that's something that I have to deal with in recruitment, too, is, the younger people come to me and they are wrestling with the choices of public or private sector careers. What sort of advice would you give to a young person that wanted to take up a career in the public sector?

MS. OFFUTT: Well, I think your first job experience really makes or breaks your emotional feeling about public versus private sector. Now, I'm a public sector person myself. But my advice to someone who is contemplating public service and working the federal government specifically is, pick a small agency and get a good boss.

Very large organizations, and I don't mean this as a criticism, but as an observation, are not very kind to young, new people. They can often telegraph the notion that you're going to wait 15 years before you do something really fun.


MS. OFFUTT: A small organization, for example, like OMB was, hey, you're there, you're on the ground, you're an integral part of the team right away. ERS is a small organization by those standards, too. So smallness matters. But even more important is, get a good boss. You want somebody you can learn from.

MR. BARWELL: And so what does it take to be a good boss?

MS. OFFUTT: Well, I can tell you what I think about a good boss, that is, the people I've enjoyed working for.


MS. OFFUTT: Number one, you want somebody who can make a decision and explain it to you, all right. You don't have to agree, you may disagree, but at least, number one, someone made a decision, and number two, you knew why, you know, particularly when you go to school for as long as we have when we get PhD's, that's how you are, why. So somebody has got to be able to answer the why question, that's all you need to know, you don't have to agree.

Second, go to work for someone who's got a lot of energy and vitality, you know, where a sense of things can be done. It's just not very inspiring to work for people who are too calm, I guess would be the way to put it. So you want a sense of energy, I think.

MR. LAWRENCE: What's your vision for ERS over the next 10 years?

MS. OFFUTT: I hope that we can make the most of this new information technology. We believe knowledge is power, and we've just been handed this incredibly versatile way to communicate information which our knowledge. And I think if we can exploit that, understanding how our clients differ, one from the other, and what matters to them, and how they absorb information, this influence that we have on how people see the world will only be enhanced. And I think we have the opportunity to do it. It's really a wonderful thing.

MR. LAWRENCE: One of the things I found interesting is the status of the people who lead the research organizations. You're a career employee, some are political appointees; do you have any thoughts on how that's come to be and what the mix is and why?

MS. OFFUTT: Well, we know from reports from the we know from reports Brookings Institution and your outfit, as well as others, that there's been this gradual push down where the political layering comes at lower and lower levels, and I think that's just partly what you see reflected in the change in the leadership of the federal statistic and research agencies.

You know, I guess my feeling is, it's as much a function of the person as it is whether they're career or political, whether they do a good job. But it is the case, I think, when you have a big rebuilding task to do, as I think we did when I came to ERS. Continuity of one kind or the other is important, and you need to be able to give people in your organization consistent signals. If you constantly have changes in leadership, they don't get that. I mean everybody knows this is the garden-variety problem, but certainly the continuity you've had, not just with me as administrator, but all my senior managers having been with us for four or five years really gets you results.

MR. LAWRENCE: Continuity is important, but also, I would assume, especially in research, refreshing is important, and I can't help think that the way you've described the relationship between your staff, they all have PhD's, and academia might be kind of an interesting model to have people move back and forth frequently to get refreshed and learn; is that something that could actually happen?

MS. OFFUTT: Well, there was a time when my agency did a lot of this sort of coming, but you know, with two career families, the old model where you just uprooted everyone and went out to, you know, the University of Nebraska for the year, that doesn't work anymore.

So what you have to do is create sort of virtual relocation. It's important people to go to professional meetings, to make sure that interaction, however important electronics are, human interactions still matter, so you just have to make sure people do that once in a while.

MR. LAWRENCE: Well, Susan, I'm afraid we're out of time. I want to thank you very much for joining us this morning.

MS. OFFUTT: Thank you.

MR. BARWELL: Thank you.

MR. LAWRENCE: And do you have a website if people are interested in all the interesting things you've said, where they can go and learn more?

MS. OFFUTT: Why yes, we do,

MR. LAWRENCE: Thank you very much. This has been The Business of Government Hour featuring a conversation with Susan Offutt, Administrator of the Economic Research Service at the U.S. Department of Agriculture. Be sure and visit us on the web at There you can learn more about our programs and research, and you can also get a transcript of today's fascinating conversation. Once again, that's This is Paul Lawrence. See you next week.

David Norquist interview

Monday, November 29th, 1999 - 20:00
David Norquist
Radio show date: 
Sat, 01/26/2008
Intro text: 
Financial Management; Managing for Performance and Results; Organizational Transformation...
Financial Management; Managing for Performance and Results; Organizational Transformation
Complete transcript: 

Originally Broadcast January 26, 2008

Washington, D.C.

Announcer: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about The Center by visiting us on the web at

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

Over four years ago, Congress and the President created a new department whose central mission would be to secure the homeland, integrating and aligning 22 separate government agencies into a single, cohesive, efficient, and effective department. During this rather short interval, DHS has faced many challenges while continuing to make progress securing our country from threats.

With us this morning to discuss his office and its role is our special guest, David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Good morning, David.

Mr. Norquist: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Steve Watson, partner in IBM's financial management practice.

Good morning, Steve.

Mr. Watson: Good morning, Al. And David, thanks for joining us this morning.

Mr. Morales: David, let's start with some perspective. Many may not realize that the creation of DHS has represented one of the largest reorganizations in government since the Second World War. Could you set some more context by providing us a sense of its mission and its continued evolution?

Mr. Norquist: Sure. The Department was formed out of 22 different agencies, and so we went from something that was not existent to becoming the third largest federal agency, which is a pretty dramatic transformation. Some organizations came intact, such as Transportation and Security Administration, United States Coast Guard. Some organizations, like Immigration and Naturalization Service and the Customs Service, were reorganized during their time with DHS. But the overall idea was that the Department would benefit, the country would benefit by having a department that had one common face at the border, one overarching mission: to secure the homeland, to facilitate lawful trade, travel, and immigration, and to help protect our freedoms. And by bringing all those different groups together with that common mission, that we'd be much stronger for it.

Mr. Morales: So you gave us a sense of some of the components within the Department, but can you give us a little bit more of the sense of the scale in terms of size of budget, number of employees, the geographic reach and footprint of the Department?

Mr. Norquist: The Department has 209,000 employees and a budget of $35 billion for Fiscal Year 2008, and we show up all across the country. If you're getting on at an airline, you'll run into Transportation Security Administration. Customs and Border Protection is the one that greets you at the ports of entry when you're coming across the border or going through Customs security. The Coast Guard is there at sea if you're in trouble, or to help protect the navigable waterways. We have ICE, Immigrations and Customs Enforcement, enforcing our nation's laws throughout the interior. And of course, FEMA during a disaster is there to help and to respond. And so we have a footprint not only throughout the United States, but as well as attaches at embassies overseas.

Mr. Morales: So lots of moving parts.

Mr. Norquist: Yes, indeed.

Mr. Watson: Dave, thanks for that overview of the Department. Could you focus in a bit on your roles and responsibilities as the chief financial officer? What are your responsibilities?

Mr. Norquist: My two jobs boil down to building the budget and being a good steward of taxpayers' money. We just finished the audit on the 2000 budget. We've got the 2008 budget we're executing. We're going to present the 2009 budget to Congress in the beginning of February. And so you have all of those different moving parts at the same time, and we have to make sure that the Sceretary has the ability to reflect in the budget the relative priorities, to be able to address different risks to the nation by investing resources against those higher priority areas.

And so as the chief financial officer, as the different components submit their budgets, I help present them to him as options. What's the relative risk of this threat versus that? What's the relative effectiveness of different solutions? And then he can make the choices about where to invest the resources and the President can submit that recommendation for the budget to Congress.

At the same time, I worry about those funds as they're being executed. Do we have the proper internal controls? Do we have the policies and the procedures to protect the American taxpayers' money? And so we go through review processes of how we execute money. One of the most basic controls you look for is you want to make sure that the person who orders the item and the person who pays for the item and the person who receives the item are three different people. And that is a strong internal control that if you reflect it throughout your organization, it greatly enhances your protection of the taxpayers' money.

Mr. Watson: David, that's a broad set of responsibilities you've defined there, both in budget and as the chief accounting officer in effect. What are the top challenges you're facing right now in executing those responsibilities, and how are you going about addressing those challenges?

Mr. Norquist: Well, Steve, I think the key is we need to move beyond an agency in transition. When I came into the Department, people said, you know, DHS is new, it needs some time. And certainly when you've had a large reorganization, it takes some time to make all the changes you want, but we basically are tackling three areas.

The first is the staff. Do you have the right number of staff with the right skill sets to accomplish the mission? All internal controls begin with people who know how to do their job and do it well.

The second is we've had audits and others that have identified known weaknesses, and so we have a job to go out and address those, to eliminate those weaknesses and fix their problems.

And the third is we have to go beyond that. We have to look at those core things that many other agencies have and take for granted, and ensure that we have them so that we don't have this in the future. One simple example is, most organizations have basic financial management manuals to tell you how to do the processes and the procedures. Our components, some of them brought them with them, but as a department, you don't have that, so you don't know that you've got the best business practice in every organization. And it's our job to establish that, to elevate it, and thereby prevent new problems from occurring. And of course, you have to do all this at the same time you're producing and delivering a budget to Congress and doing the regular day activities.

Mr. Morales: Now, David, you've spent most of your career in the financial community. Can you provide our listeners with a sense of your career path? How did you get started in this field?

Mr. Norquist: Sure. I came out as a graduate of the University of Michigan, with both an undergraduate from there and a master's in public policy. I then went to work for the Department of the Army as a GS-9 program budget analyst through what was then called the Presidential Management Intern Program.

I spent several years with the Department of the Army, and over the course of my 18 years doing federal financial management, I have worked at a U.S. military field site overseas as the director of resource management, I've worked at Army Headquarters, I've worked at a major command, I worked for several years with the House Appropriations Committee, and I've worked at both the DoD comptroller shop, which is their CFO organization, and here at DHS. So one of the advantages of that is I have worked at basically every level at which the federal government spends money.

Mr. Morales: So tell me a little bit about some of these experiences, and how do you think that they have prepared you for your current leadership role and informed your management approach?

Mr. Norquist: I think one of the things that's essential for a leader is to be able to have the perspective of the individuals in the organizations they're dealing with. When you're at headquarters writing a policy, you need to imagine you're the person out in the field site attempting to implement it. Does this make sense to that person trying to implement it? Likewise, you have to take into account the perspective of the Congress. What are their concerns and issues going to be? And so if you've walked a mile in their shoes, if you've had to deal with those day-to-day decisions that are dramatically different between those levels of an organization, it makes it much easier to manage. You understand why something is a particular concern to an organization, or why a certain policy would create a problem rather than be a solution for somebody who's out at the field site.

Mr. Morales: So perhaps more so than any other role, there are many constituents to consider when you're working in this field.

Mr. Norquist: Absolutely. And it's best if you've had the chance to be in their shoes in order to really understand how what you're going to do is going to affect them, and be able to look at how to have an effective control from their perspective as well.

Mr. Morales: Great.

What is Homeland Security's financial management modernization strategy? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, can we talk for a moment about your recent department audit? Now, your department has been working very hard to make headway in a variety of different areas, so would you assess for us your progress on this audit?

Mr. Norquist: Sure, Al, and thank you for the question. The audit for DHS has been in the past a significant challenge, and I think some background here might be very useful. Two years ago, when I came into the Department, we had not just 10 material weaknesses, but they pretty much ran across the Department. For every material weakness, several organizations contributed to the reason we had that. Most of them came to the Department that way. They were not weaknesses necessarily from the reorganization, but ones the Department had inherited, and so this wasn't a problem you were going to be able to solve in a day. But we systematically set out to develop corrective action plans for each and every one of those material weaknesses, and then we began to execute it and track it over the course of the year. And so what's been very gratifying for me is, given all the hours and energy put into that, the results.

We have, for example, had the number of material weaknesses for the Department go from 10 to 7. The number of component conditions that contribute to that went from 25 to 16. Getting a little technical here, but the audit's disclaimer conditions dropped by 40 percent. So no matter how you measure progress in a financial audit, there was significant improvement across the board. The auditors were very favorable about their comments about how we had done. Their guidance to us next year was to keep it up, that that was exactly the type of progress that you should be doing, and the approach was the right way to go ahead.

What we now have done is got it to the point that the vast majority of our organization does not contribute to a material weakness, and we're down to only a few players left, and we hope to be able to reduce that again over the course of the next year as well. And so I've been very pleased to see that those resulted in very tangible results, and results not just of our saying so, but others coming in and saying, yes in fact you have addressed those concerns.

Mr. Morales: Well, that's great progress, and you should be congratulated for that. But as you look to the future, what are some of the steps that you're taking now to improve upon the results in the next audit?

Mr. Norquist: The first thing we're doing is we're producing the second edition of what we call our playbook. And that one is a collection of our internal controls over financial reporting corrective action plans. And so it lays out the steps each component is responsible for. It has milestones by which they're going to meet each of those steps. It has the responsible individual, so I know who I can hold accountable for that. I also then have regular meetings with each of them. One of the important things about a corrective action plan is, like any other program, you have to stay on top of it, you have to monitor it. And so one of the things we did is we created a program management office that effectively treats these plans like you would a program acquisition. Are they on schedule? Are they meeting their milestones? How are they doing, and how much is it they're spending in order to reach those goals?

We're going to do a couple of things different this year building on that success. The first is, many organization either began with a clean opinion and still have them, or the federal agencies have material weaknesses and they haven't eliminated them. We are blessed with several components, like Immigration and Customs Enforcement, which used to have virtually every material weakness the Department had. And in the last two audits, they've gotten to the point that this year they contribute to none.

And that's a reflection on the strong leadership from Julie Myers, their Assistant Secretary. They had a very strong CFO and they had very good corrective action plans. But what that means for me is there are people in that organization who know how to eliminate these problems, who've done it and who've been successful. So now when I sit down with a component who hasn't been able to solve these, I can bring in people from two or three other organizations in DHS who fixed exactly that problem, and now I can have them as sort of an advisory board, helping me review these corrective action plans and helping the components navigate their way through these problems.

Mr. Watson: David, could we talk a little bit more about this internal controls over financial reporting playbook? How are you using it to strengthen internal controls? How are you balancing short- and long-term fixes in the playbook?

Mr. Norquist: The playbook has two tracks. The first track is directly addressing anything that an auditor identified as a material weakness. But our goal with those corrective action plans is not to make the material weakness go away. The goal is to go beyond that, to get to the point that the head of that organization can say not only did the auditor not find a problem, but I have carefully reviewed this process and I believe that the information is correct and the process is sound. And so much like you shoot at a target by aiming slightly above it, we are going to go beyond the point of eliminating the weakness to having confidence in what they call going after the root cause, and making sure we've solidly addressed it.

But we've also got a second track that goes beyond that. We're looking at areas where the auditors have not identified a material weakness, and going through a process of looking at what are the steps we go through. And as I mentioned before about segregation of duties, are those strong internal controls? Do they give us a process that is both sound in design and sound in operation? And when we can validate those, then we can turn to the Secretary and say you can give affirmative assurance that this process is good, not just that the auditors didn't find it, but we've examined it, it represents best practices, you have good assurance about this process. And so we are doing that because I want to get ahead of the audits. I don't want to simply be responding to each weakness and say, okay, I'll play Whack-A-Mole, go after that one next. I want to be looking at where there aren't weaknesses, and knowing that if there is a problem there, we found it and we fixed it.

Mr. Watson: David, I know one of the other things you're looking at is your financial management system and your modernization strategy there. Can you talk to us a little bit about your transformation and systems consolidation plan? What are the next steps regarding this plan?

Mr. Norquist: Sure, Steve. What we have done, when I came in, the Department had inherited numerous financial management systems, and many of them were contributing to some of our material weaknesses. And looking at them, we said do we have any that work well? And we discovered we do.

We have, for example, a system used by Customs and Border Protection, who has a clean audit opinion on their entire financial statement. And their system works very well for them, contributes to no material weaknesses. We also have a system being used by Transportation and Security Administration, and their system works very well for them. And the system isn't the driver between the problems they've had, and they've been very successful in improving their audit position.

So the question becomes, well, do we need to design our own or can we consolidate on either or both of these systems? And from a risk management point of view, asking someone to develop new software for you and tell them these are my thousands of requirements, please meet them, that's a pretty high-risk approach. It's a big challenge. But if you say I've got these two that work and I've got a component that's on a different system, I'd like to move them onto this system, now there are people at DHS who are familiar with it, they know what it does, they know how it operates, and that strategy of migration is much more manageable. You don't have to move the entire department at once, you can move it in pieces, and every step results in a clear demonstrated benefit.

A simple example is in my immediate area, in one of our offices, they process purchase transactions, and their paperwork goes to the accounting shop to enter the data. Under the new system, what they enter would be automatically logged into the accounting system, so there's no risk of somebody mistyping a dollar amount or delay in the paperwork moving. Now the accounting folks can just validate that those in fact are correct, but they're not reentering, and you dramatically reduce your risk of a material weakness, your risk of error, and you most importantly remove the timeliness and accuracy of your financial data.

So we're going through the acquisition and contracting process for that right now, and we'll begin the consolidation and moves over the course of the next several years.

Mr. Watson: David, thanks. We've covered controls. We've covered a new system. Could we talk next about the Improper Payments Information Act? Agencies are required to annually review programs to identify those susceptible to significant problems. As I'm sure you know, but for our listeners, improper payments can include the wrong amount, the wrong recipient, or monies going to the right recipient, but being spent improperly.

What is the Department doing about improper payments?

Mr. Norquist: We regularly test for improper payments. When the Department was first started, we tested based on the size of the activity and the transaction to determine it. Since then, we've been shifting over to doing risk assessment, where are we most vulnerable, and concentrating our test work in that area.

As we have gone through, we've been very pleased to see that across the board, folks have had very good results in their improper payment testing, that the incidents are very low. The most significant exception, of course, is FEMA and the payments that happened during the Katrina disaster. I think people are maybe familiar with some of those challenges. But there, FEMA's done a number of things to strengthen those internal controls. They've increased their capacity to handle the volume of traffic, and that is one item, the simple volume of transactions, that can drive up errors. They've also put in additional automated checks. So for example, to ensure that the person applying for the benefit is in fact who they say they are and entitled to that benefit reduces your chance of error.

We've looked at and done some follow-up testing, and seen that in the hurricanes and events since then, that the error rate is in fact quite low. And so part of that is the volume and part of that is the improvement in internal controls. But we're very interested in staying on top of this issue of continuing our risk assessment and validating that the controls work or, in places where we see a weakness, strengthening those controls to prevent improper payments.

Mr. Morales: Great. Now, David, along similar lines, I understand that transferring money between agencies can be quite cumbersome, and that GAO has repeatedly identified intragovernmental transactions as an issue when they perform their annual audits. Can you tell us more about the government-wide effort to improve its ability to properly count, report, and reconcile these intragovernmental activities?

Mr. Norquist: One of the challenges you have when you go to close out an audit is you have to record how many obligations and how many -- or what exchange of data and finances do I have with, say, the Department of Defense or the Corps of Engineers, and what do they have with our organization. Now, it is quite possible that the individuals and very likely that the individuals within the organization all know about each of those individual agreements. But now the finance and accounting staff at the aggregate has to be able to resolve those. And so if the Department of Defense has one number and we have a different one, you have to figure out, well, what's the difference? Which record am I not having or do you not have from within our organization?

The challenge becomes that the data that's required to be on those documents is pretty high-level. And so you can easily run into a point where I know it's a transaction with DHS and the Department of the Army, but which organization within them? Those are absolutely enormous organizations. And so if we can move to the point of having more detailed data in those records, and I realize it's a specific office within my organization, a specific office within yours, and immediately we can reconcile which one of us is missing a piece of information and get our two numbers to match. So part of this is a standardizing the data. And OMB has been leading the effort in this area, and we're very supportive of the pilots that they are doing to try and examine ways to elevate this, and to be able to have that additional level of data so we know the right way to reconcile these. Otherwise, it becomes manpower-intensive.

And one of the responsibilities you have as a CFO is to say if I were to dedicate, you know, hundreds of thousands of dollars paying multiple federal employees to research this, is there a risk or a problem that I'm avoiding or solving by doing this? In some cases, there might be -- in this case, it may be mostly recordkeeping, and so you'd much rather switch to an automated way than to be spending resources hunting it down in a one-time, one-solution manual process.

Mr. Morales: So do you see a solution for this issue in the near term or is this going to take some more time to resolve?

Mr. Norquist: It's going to take some time, but I think they've been making progress in identifying the types of things that are going to work. And of course, all of us who are affected by this, and that's all of the agencies, are very supportive of OMB and supporting their efforts to find a common solution.

Mr. Morales: It's certainly a vested interest for everyone to see a solution to this problem.

Mr. Norquist: Absolutely.

Mr. Morales: Great, great.

What is the Department doing to integrate budget and performance information? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, we've talked a lot about financial management and accountability, and certainly this is essential to the achievement of DHS's mission, but it continues to be a challenge for the Department since its creation. So focusing on financial management, can you tell us about the challenges inherent to bringing 22 diverse agencies together? And how have these challenges led to the passage of the Department's Financial Accountability Act?

Mr. Norquist: When you look at any sort of self-assessment, are you at risk for problems with internal controls or your finances, one of the first questions they ask you is have you either had significant staff turnover or been through a reorganization? Well, the Department was created, as you mentioned earlier, in the largest reorganization since World War II, and since then, we've been reorganized several more times. And so all of that means that from an independent perspective you're at a high risk for problems and you have to approach it. You will have a lack of standardization in policies, because people came from different organizations, and they bring with them the different policies and practices.

They likewise bring with them the different systems, so they won't necessarily talk to each other or, in some cases, they don't represent best practices. You'll have staff turnover that will kick in because of the change and the reorganization. And you started with a very small headquarters because that was the part that didn't exist when the Department was created. And so their ability to enforce standardization and develop a common culture is a start-up activity.

Recognizing that, Chairman Platz from the Congress and then-ranking member, now Chairman Townes looked at these types of issues and said for DHS, it isn't just about integrating your operations. It isn't about having Customs and Border Protection as part of the Department along with Coast Guard because we want a seamless control of the border. It's as much about the management of the Department and getting those to integrate as well. And I think that's what drove the Financial Accountability Act, is how do we help DHS put an emphasis on that part of the Department's challenge and help them through what clearly to them would be recognized at the very beginning as a hurdle that any new organization would have to get over.

So when I came in, I looked at the Financial Accountability Act, I looked at the types of challenges we faced, and you recognize that it really isn't a single problem. People would say, when I came in, oh, it's the system. Once you fix the system, everything's going to be okay. Well, that's not the only part that was reorganized. That's not the only part that's affected by change. And so I started to map out with my staff and with the CFOs of the components how do we tackle this in a broad range?

And you'd like to do it sequentially. You'd like to say, well, first, we're going to establish department-wide policy. And once we have all of that nicely done and the ribbon on it, we'll move to staffing, and we'll have enough people to implement that. And then you'll lay out the controls and you'll walk through it, but you're up and running. You've got to make payments tomorrow. You've got to support a mission today. You've got to disrupt a terrorist attack right now. And you can't wait on the back office to pull those together sequentially, and so we've attacked them and dealt with those challenges across the board.

We have initiatives in the people area. How do we make sure of the right people with the right training? We've got initiatives to establish the right policies. We have an initiative to put together a financial management manual. Most other departments, you would take that for granted. You'd come in -- in the Department of Defense -- or when I was at the Army, these big, green tomes that sat on the shelf and weighed hundreds of pounds that told you how to do absolutely every step. And here the ones we have are the ones the components brought with them. And so we've been looking at those of different departments, putting together workshops to review what are the best practices that a new department should use, and we've got about half of them done. By this summer coming up, we hope to have the 90 percent solution and be able to publish our set of standards that we can hold folks to.

We talked a little bit earlier about reviewing all our processes. How do we make sure that our processes are right and our controls are right? That, you have to do at the same time. That's what the OMB calls the A-123 reviews. Again, we talked about the systems as well. That's an inherent part of any solution going forward: getting to fewer systems, getting to common systems, getting to those that reinforce your controls.

Another simple example: You can have a rule that says that you can't engage in a certain transaction unless you have an authority or warrant to do that. It's really helpful if your financial system blocks somebody from doing that as well. So it isn't something that you only maintain through external checks, but your system reinforces good behavior by preventing people whose logon does not link to that warrant from being able to engage in those transactions.

And the last part that we focused on was assurance, which is how do you know that over time, these won't decay? How do you know that the controls won't get weak and that people you know, you have turnover. The new person comes in a month or two after the old person left, never quite got the hand-off briefing. How do you make sure that they know what they're supposed to do? And so we have a number of different things to train new people, as well as I have an assurance team that I send out to spot-check these and identify these types of issues before they become problems, before they contribute to a material weakness or before they become a vulnerability that somebody could later exploit.

And so we believe that that intent behind that language, and I really appreciate the strong support we have had from the Congress in this area, is helping to drive us forward in addressing not just one aspect of the financial management challenge, but the full range of challenges that go into strong internal controls.

Mr. Morales: So let me switch gears for a moment here and talk a little bit about the President's Management Agenda, or the PMA. In the last OMB scorecard, nearly half of the federal agencies, including Homeland, received a red rating in financial performance. Could you tell us from your perspective why this is such a challenging area for many agencies across the government? And can you further expand on how has your organization done to progress and improve over the last year?

Mr. Norquist: Delighted to. The President's Management Agenda has ratings on -- sort of red, yellow, green as you progress in solving problems. Many of the earliest ones, such as to get out of red, you have to have an unqualified opinion on your financial statement, well, that alone involves innumerous amounts of work and effort to fix that challenge. And so the standard was designed for the entire federal government and then many organizations who are working their way up that, addressing greater and greater challenges. But for some of us who inherited material weaknesses that prevent an unqualified opinion, you have to be tackling that at the same time you're trying to address the types of challenges that will show up at the higher levels of the standard to make sure you're in compliance with all the laws and regulations that relate to that standard. But it gets back to not focusing on a single problem at a time or thinking that you can just pick a single area, but recognizing you've got to make progress across the board. And what we have found, both here and elsewhere, is that when you make progress in key areas, it really opens it up for everyone else.

To go back to an example, Immigration and Customs Enforcement began two years ago by saying we'll address something called Fund Balance with Treasury. The sample version is, does what we have in our multiple checkbooks match the Treasury's? One of their material weaknesses was that they didn't do it. As they addressed that material weakness, as they eliminated it, all of a sudden, all sorts of other material weaknesses were getting solved. Because in order to get to the root cause of that problem, they were attacking the underlying.

Likewise, in this area, as you begin to address those, you're also addressing the very same problems that would come up as you got to yellow, as you got to green. And so you have to be tackling the full range.

I'm very excited about the progress we've made on the audit. I'm very excited about where it'll put someone who comes after me in terms of their ability to continue to improve both their score on the President's Management Agenda as well as their performance in terms of supporting the taxpayer and supporting the Department's mission.

Mr. Watson: David, sticking with the President's Management Agenda, budget and performance integration is another key component of that agenda. Could you tell us about DHS's efforts to get to green on the budget and performance integration score on the President's Management Agenda? And then more generally, how are you using finance information to inform management decision-making at the Department?

Mr. Norquist: Sure, Steve. The issue here is that you want to make sure that when you're looking at a budget and you're trying to decide what to fund next, you recognize how the funds in the past have been used. Did they in fact accomplish what you intended them to? Are you getting the results that you hoped for? What are the performance standards that you want to set out for the future? And you want that information directly integrated into your budget decision-making. You want that presented to your leadership at the same time, so they're making a decision off the full range of information. This is what's driven OMB's emphasis behind this, is to link the performance results and that what you're getting for your money with how we use additional taxpayers' money.

One of the nice advantages we have in our organization is as the Department was stood up, we created within the Comptroller's Office something called Program Analysis and Evaluation. That office has several responsibilities. One is they work on the President's Management Agenda and the PART scores, the reviews of the different components on how they meet those standards. They also work on the annual performance report. How have we done on the milestones? What were the goals of each organization, and did they in fact accomplish those goals, or how are they doing in accomplishing those goals?

They also have responsibility to review and look at major programs within the Department, not just from a performance, but also from an internal, executing their money, how are they doing on meeting their internal production milestones for new systems coming on board. That office is an essential part of our program build. When we meet with the Secretary or the Deputy, that office is essential to managing that process. They're there at the meetings. They ensure that when a project is up for approval or review or is being considered for additional funding, the leadership knows how it's done in the past. Did it in fact meet its objectives? Is it on schedule? How are they doing on spending their money and staying within budget? And by tying those all into the same organization and by having that with the comptroller -- with the CFO as part of our financial duties, we can ensure that performance is consistently put in front of the leadership to inform them, and consistently linked with our budget and our obligation of funds.

Mr. Watson: David, we talk with many of our guests about collaboration. What kinds of partnerships are you developing now to improve operations or outcomes at the Department? How might these partnerships change over time?

Mr. Norquist: Partnering with other organizations is absolutely essential, absolutely essential to your success as a CFO. Take, for example, other departments. In order to resolve the intergovernmental liabilities issues or any of those challenges, you have to have strong working relationships with the other CFOs of the other departments. In fact, I came to this meeting from meeting with the CFO at the Department of Defense. We have many issues in common, including, for example, the Coast Guard, which performs operations in Iraq, but also through OMB with our council -- the CFO Council there. That close relationship allows you to tackle many of these issues across organizations.

But it also works within an organization. Inside of my organization, we have regular meetings with the CFOs of each of the components. And in fact, I strongly encourage in the hiring process that we have CFOs who have worked in other components or at the headquarters in order to ensure that they have a broader understanding of their mission other than the office and the organization they're in. They've worked in another place. They understand how the two offices work together. Because so many of the issues that we work on, whether it's immigration and border enforcements, whether it's preventing terrorists from entering the country, require extensive collaboration between the organizations. And the financial world reflects that as well.

Perhaps the most important one that I would flag, particularly for the audit, is the close working relationship we have with our inspector general and our independent auditors. And this is a place where it is absolutely critical for us to have them involved in everything. We bring them into our regular meetings. My view is, I know that they're trying to identify weaknesses for the audit, but I'm trying to find them as well and fix them as well, and if they find them, I want to hear about it. I'm not interested in trying to hide the information from them. I want them to see the transparency. That also helps them, because they know going through the audit that they're seeing everything that you're seeing. They're seeing what's going on, and have a much better understanding of the solutions you're taking, what approaches you're using.

One of the ways we have used that strong solid relationship to improve our process is when we initially developed the corrective action plans that we talked about earlier, we asked the IG to take a look at them while they were still in draft. And we asked a few set of questions: do these in fact represent appropriate responses to the challenges that you've identified? Is it clear that the people who developed the corrective action plan understood your findings? The last thing you want to do is be solving a problem that's different than the one they found. You want to make sure you captured theirs, so you get that feedback. Do you think that these corrective action plans are in fact likely to be effective? Are they the right approach? Are they going after the root cause?

Some people will sit back and wait until you're done, and then they'll come back in and say it didn't work, you didn't succeed, and you should have sent something different. That's not particularly helpful. I've already spent a lot of time and resources. I would have preferred that up front. Our inspector general, our auditors, and others have given us a lot of that feedback early, so if they don't think an approach is going to work, they give us that feedback, we can fix it. That's why our corrective action plans last year were so effective. They had been reviewed by a number of people who knew the problems in detail, could provide that good feedback, and so when we executed them, we really saw success, we really saw them pay off.

We're going to do the same thing this year, sit down with them again. They're independent. They're not going to promise you it's going to make your weakness go away. They're still going to look for things. But they're going to let you know if you're off on the right track. They're going to give you that additional feedback from having another player who understands the process. And likewise, again, the close relationship that we have with committees on the Hill, both those on the appropriations side, on the budget, and those on the authorization and oversight side, you know, on the Financial Accountability Act and so forth, all of those are strong and essential to our progress. Because much of our work has been successful because of the support we have had from them.

Mr. Morales: So it's feedback in real time then.

Mr. Norquist: That is very helpful and it's absolutely essential.

Mr. Morales: Great.

Now, at the start of the show, you talked about the 209,000 employees at DHS, but we know that more and more government work is being carried out through the use of contractors. So could you tell us how federal managers can effectively manage this ever-increasing blended workforce? And what are some of the key differences intrinsic to these two core groups?

Mr. Norquist: Well, I think a manager has to recognize that whatever organization they're going to be in, they're going to have both. And they need to recognize their strengths and weaknesses, just as you would with the employees on your staff. What are their strengths and weaknesses? How can I team people up to get the best results?

For example, if you're looking at a challenge or a mission that is stable, it's enduring, it's perhaps a core government mission, that's a place where you're really looking for your federal workforce to be your strength and your backbone. This is a place where you want to develop depth of experience, where you don't want to be potentially changing over the support on a regular basis, because it's essential to your success. You did it last year, you're going to do it next year, and you can manage the work that way.

But there are other places you run into where there's a real surge requirement. And in the audit, for example, this comes up in some areas where while at the same time you're producing the audit, you're trying to solve certain problems. You will not require that intensity and that level of work in perpetuity. You will not need it, so there's no reason to bring on board a large number of federal employees who then after a year or two, you will not have a requirement for that. So you strike a balance.

You identify what are the challenges that are best suited to an organization in the private sector where they can provide that search. In some cases, you're looking for something where they can make a rapid trade-off between technology and staff. In the government, we have a very hard time doing that. You know, we're developing right now the guidance for our 2010 budget. We're about to go to print on the 2009 budget. We're in the midst of executing 2008. So our planning is several years ahead, and our ability to make trade-offs are affected by that. Whereas with other organizations, if you're contracting for a service, they can make those trade-offs very quickly, and the private sector does a very good job at that.

And so as a manager, you really have to recognize both their performance boundaries as well, of course, there are certain legal ones or there are certain ones where by law and by the interest of the government, you want to keep in-house. But it's an important balance to maintain, and I think any manager should recognize that they're going to need both and they're going to end up using both.

Mr. Morales: So along these same lines, you know, given the critical role that financial management plays in the mission and program delivery, could you give us your view on how the role of the CFO will need to evolve in the future?

Mr. Norquist: Well, I think if you look at how the CFO has changed over time, everyone's always been focused on the budget. Ever since the appropriation committees were created over 100 years ago, you had that emphasis on the budget, and everyone understands that process. It's well-established, it will drive itself. But CFOs have had greater and greater responsibility on the internal control and the accountability side. And you've seen this in various levels of legislation that have been passed over the last set of years. And that's helped strengthen and improve the focus of the CFOs on the full range of the financial transactions, following them right out the door and making sure that the strong controls are in place.

Different offices have been tackling this in different ways in the past. And so what you've seen here is ability to get more standardization and more control and a repeated emphasis -- and the resources that come with that, the ability to put the staff on it to ensure that you're doing those checks. And a lot of benefit comes from random sampling and random checks to ensure that the controls are working properly.

Mr. Morales: Great.

So what does the future hold for the Department of Homeland Security? We will ask David Norquist, chief financial officer at the U.S. Department of Homeland Security, to share with us when the conversation about management continues on The Business of Government Hour.


Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with David Norquist, chief financial officer at the U.S. Department of Homeland Security.

Also joining us in our conversation is Steve Watson, partner in IBM's financial management practice.

David, I'd like to continue transitioning to the future. Could you give us a sense of some of the key issues that will affect the CFOs and budget offices government-wide over the next couple of years?

Mr. Norquist: I think the central issue that will be affecting CFOs government-wide over the next several years, particularly the next year, is recruiting and retention. As you look at the agencies like Homeland Security and then the Defense Department, who is continuing to expand its ability on the audits, there's an increasing demand for people with accounting skills or people with CPAs. And as the size of the Defense Department begins to take its effect, you'll see that marketplace become very competitive, which means for the rest of the organizations who have been doing well, we'll be actively hiring their staff away and bringing them onto our organizations, creating challenges for them. And Defense Department, of course, will be by far the largest player in that area as they move forward on the process. So it creates an incentive for us to focus on training our staff and expanding the pool of people with that skill set, as well as the retention to keep the people who've got the longevity to understand the issues and how to solve those challenges.

Mr. Watson: David, on a broader basis, what are some of the major opportunities and challenges your organization will encounter in the future? How do you envision your office will evolve over the next five years to meet these challenges?

Mr. Norquist: Well, we're going to go through a transition over the next several years. We are going to shift from being focused on putting together those building blocks. Do you have a financial management manual? Do you have the right number of staff? Do you have the basic training courses? Can you establish a program for bringing people into your organization? Can you consolidate your systems? Those will either be done or well under way within the next year or two, next couple years, which means that what we're setting up for is, in my case for my successor, that he or she can look at an entirely new set of choices. They won't be talking about the Department is in transition or new. They'll be walking into a department that's well-established with as many of the features that we've expected somewhereelse. In fact, hopefully, they'll see it as better because we'll have been able to have adopted the best practices of those other organizations as we went through it.

But that will really create a whole new playing field. They will -- my hope for my successor is that they are not worried about the same issues that I am, that they're able to look at a whole range of new areas, efficiency of operations in some of our financial areas, things that move beyond the internal controls and the policy manuals and things that we've wanted to do to put that basic building block of a new agency in place.

Mr. Watson: David, having staff with the appropriate skills is obviously going to be key to achieving those objectives you've set out there. Would you elaborate on some of your human capital strategies? How are these programs helping you prepare future financial leaders for the Department?

Mr. Norquist: Well, there's one of the things that we started doing early on when I realized that weaknesses can come as much from people as from systems or policies, was if you are a new hire in the Department of Homeland Security, in the financial management field, whether you work for the Coast Guard, Customs and Border Protection, Immigration and Customs Enforcement, we bring you to Washington, D.C. for a central training class, welcome on board. I don't want them to feel that they've been hired into the accounting office on the second floor of the Indianapolis office. I want them to recognize they've joined the Department. And so they need to understand the mission of all the different components of the Department.

They also need to understand fiscal law. In my view, if you're in a financial management profession, you are the residential expert in that room, on that meeting, on fiscal law and internal controls. And you should feel both that you have the knowledge and the obligation to speak up if somebody is suggesting a policy or procedure that would create a problem. And in many cases, some of the government controls are not inherently obvious to someone who's not in our profession why you have that segregation of duties, why you have some of those other controls.

So they need to be able to stand up and say, wait a second, we need to check the fiscal lawyers here to make sure that's an appropriate way. Maybe if we did it this way, with the right notification, that would be the appropriate solution. So we go through that training with them, fiscal law, the budget, the audit, the overview of DHS, and all the other components, to ensure that everyone being hired into the financial management community inside DHS has that core skill set, that strong understanding of internal controls.

It also helps because they get to meet the different CFOs. We have a panel. They get to see who the heads are of each of these organizations. Both times we've done it, the Deputy has come and spoke, so it also is very effective for the morale of the folks to understand that what they do is important to the leadership of the Department.

We're also going to be promoting certifications. There's a number of organizations that provide certifications to the people in the financial management field. My office has put out an announcement to the components saying that we will sponsor those, we will pay for those. We will encourage people to apply for those certifications. I want them to be a professionalized workforce. And if they are willing to spend time and energy to study to pass these exams, we're happy to pay the cost of them to take the sitting fee and the other associated costs with that. And I recognize that they may take that skill set and go work for some other component inside DHS, but that's great. Because if they move from Coast Guard to ICE or from ICE to Secret Service, that's better for us as a department, and so we're also focused on building that skill set.

We'll have an award ceremony to recognize success. I think it's important for people who have been able to have as much success as we have had in the last few years to be able to be recognized for that. I think that's a positive reinforcement that's worth promoting.

In addition to which we have the CFO Mentorship Program, and this is really about preparing the financial leaders of tomorrow. I think you asked that as sort of the ending to your question, but I'll bring -- come to it here, Steve. When I looked across the Department, I asked the question where are the next set of CFOs coming from?

If you look at Department of Defense or anywhere else, they have an entire pipeline. You go to colleges, you recruit, you bring them in, you promote them up, they move up. Our staff came from other agencies. They came from Treasury, they came from Justice, they came from the Drug Enforcement Agency, they came from the Department of the Navy. They weren't developed and promoted from within. And so I realized that we were going to have to establish training opportunities and developmental opportunities so we can build that next group of career civil servant CFOs.

Our mentorship program is four years -- four months long. And they come in, and we've got five people in this year's class and we had five in last year's. And they spend time with the different CFOs. They spend some time getting residential training and leadership training. And the idea is to expose them to the many challenges a CFO has.

In the financial management field, most people are either from the budgeting side or the accounting side. A CFO has to manage both. And so if the mentor candidate has a budget background, we send him to work on the accounting side to understand the audit and how it relates, and vice versa. And I think this really helps lay the groundwork for a future group of people who everyone can turn to and say that's the next generation. That's the group of 15s and 14s that we look to promote over the next several years.

Again, it's no guarantee; have to compete just like anyone else. You don't have to go through the program to be selected. But by participating in it and by supporting it, I am trying to promote, and I think we've been very successful, in building that future cadre of managers.

Mr. Morales: So, David, we talked about maintaining this high-quality technical workforce, but what about at the front end in terms of attracting new employees to DHS or to the financial management ranks? What are you doing in this area?

Mr. Norquist: We have a number of initiatives underway. We've done a lot of basic outreach, going out and setting up booths at jobs fairs and conferences and things to try and attract. We've reached out to other organizations to promote the opportunities.

I think one of the things about DHS that is particularly appealing is it's really a place where you can make a difference. You can come in here and if you work in the area of financial management policy, we are writing new policy. We are putting in for places that didn't have it. You can come make a difference. If you are in any of these other areas, this is a place where you can wake up in the morning and recognize that what you did that week has really made a difference in making the world better, whether you work in the Financial Management Office or whether you're patrolling the border or whether you're doing checks on people boarding airplanes or whether you're looking for terrorists or you're protecting -- rescuing people at sea. People at DHS consistently are able to wake up and point to the successes and the accomplishments that they have had, and have that job satisfaction of knowing that the mission is really what made it successful.

We're also in the financial management area setting up an internship program to bring in folks from universities. Most departments have those, but our staff, as I mentioned, came from other departments. And so with Congress' support, we'll be reaching out to universities looking for those people with CPAs or financial management interest to drive them and draw them into the Department, give them the training and the rotational opportunities they need, and begin building that pipeline so we have a place to draw our GS-7s and GS-9s into our organization as opposed to simply always taking from other departments.

Mr. Morales: David, you're obviously very passionate about your work, and your success is unquestioned. So what advice could you give to a person who perhaps is out there, whether, you know, they're coming out of college or perhaps, you know, have several years in the workforce? What do you tell them if they're thinking about a career in public service?

Mr. Norquist: What I would tell them is to go where their passion is, to go where their heart takes them. This is not a job you do because it's going to make you large sums of money or it's going to make you famous. This is a job you do because you believe that you can make a difference. And so if you're really interested in boating and safety at sea and the Coast Guard is a place for you, go there, because you need to have a job where you're going to really understand and feel that sense of accomplishment. If you're interested in uniformed military service and protecting the country that way, there are great opportunities there. If you're interested in securing the border, there's a lot of hiring going on on the border protection. But these are places where people can bring safety and security to their friends and family, wake up every day knowing they made a difference interdicting a drug shipment, preventing a terrorist attack. Those are the types of things that you should look for.

In the financial management field, I've always passionately cared about two things, and I've been able to do it throughout my entire career. The first is protecting the country, and the other is protecting the taxpayers' money. And there are very few jobs where you get to do both at the same time, and so I've been blessed by having that opportunity. And I would encourage folks who are interested in a career in government service look for where that -- where your passion takes you. Look for the type of job where you can be satisfied with what you've accomplished and be able to look back on it with pride.

Mr. Morales: That's great, David. It sounds like there's something for everyone and you guarantee a high level of satisfaction.

Unfortunately, we have reached the end of our time this morning, David. I want to thank you for fitting us into your busy schedule. But more importantly, Steve and I would like to thank you for your dedicated service to our government and protecting our homeland.

Mr. Norquist: Thank you, Al, thank you, Steve, for having me on the show. I appreciate the opportunity to talk about the success that we've had at the Department of Homeland Security, our improvement both in the audit and in internal control. I particularly thank all those hard-working folks in the Department who day-in and day-out make all of this possible. If anyone is interested in the financial management career field at DHS, just e-mail us your resume at We'll let you know where the applications are, help you navigate your way through some of the job application process.

Mr. Morales: That's great, thank you.

This has been The Business of Government Hour, featuring a conversation with David Norquist, chief financial officer at the U.S. Department of Homeland Security. My co-host has been Steve Watson, partner in IBM's financial management practice. As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

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