M E M O R A N D U M
TO: President George W. Bush
FROM: Maurice P. McTigue, QSO Distinguished Visiting Scholar Mercatus Center at George Mason University (www.mercatus.org)
SUBJECT: Accountability and Results-Based Management
NB. This advice was given in 2000, and while there has been some progress the events of September 11, 2001 dramatically altered the US Government's focus.
On behalf of the Mercatus Center at George Mason University, I would like to thank you for this opportunity to share my thoughts on future challenges for the federal government in the United States. From my perspective as a former member of Parliament and Cabinet Minister in my native New Zealand, Mr. President, you have before you an exciting but challenging task. You arrive in the Presidency at a time when public confidence in the institutions of government is in serious decline.
During the last election cycle, I followed with great interest polling data from Rasmussen Research's "Portrait of America" series that suggested the issues of government waste and ethics rank consistently as two of Americans' top concerns, along with the economy, education, taxes, and health care. The implication is that confidence in the institutions of government is eroding.
In my view, the secret to reversing that erosion in confidence is to dramatically improve the transparency and accountability of government. Transparency will enhance people's trust in the government and lead to greater accountability, thereby improving public benefits produced by government activities.
Of course, there are skeptics out there that believe true accountability cannot be achieved in government. But they are wrong. Accountability in all organizations starts with the routine disclosure of goals, activities, and results. But that's not where accountability ends. Merely pointing out what has been accomplished is not enough.
It is also important to recognize that the process of accountability should identify superior programs that deliver public benefits and shift investment away from low performers to high performers, always rewarding effectiveness rather than efficiency. Changes that increase public benefits while lowering costs will make a compelling case for improving trust in government.
In order to examine the efficacy of accountability, one needs to look no further than the function of the stock exchange. Strict disclosure rules govern the behavior of all listed companies. Compliance with these rules guarantees high confidence in the institution even as performance of individual players fluctuates and often disappoints. Investors rely on the institution to ensure availability of information they require to make decisions. They value that information whether the news is good or bad, and their responses (buy or sell orders) ensure accountability. The potential exists to create similar incentives in government.
Achieving improved accountability based upon measures of the public benefit produced is the concept behind the Government Performance and Results Act of 1993 (GPRA). The GPRA process consists of four steps — planning, implementation, disclosure, and scrutiny. The first round of disclosure was completed last year with publication of the FY 1999 Annual Performance Reports as required by GPRA. Although strict compliance with GPRA was achieved, evidence of genuine cultural change toward a results-driven operation is sparse.
The Role of Congress
The last stage of GPRA, scrutiny, is absolutely critical, because this is where incentives are created that will lead to true accountability in the federal government. What is required now is for Congress to scrutinize those annual reports and challenge federal agencies to demonstrate their effectiveness at achieving desired results, or program outcomes.
Rigorous scrutiny of agency performance by Congress will dramatically influence agencies' future behavior. The reaction of Congress to the agencies' disclosure process, and the information disclosed, has the potential to create precedents and incentives for both good and bad behavior patterns by agencies. In the past, Congress' appropriation processes frequently rewarded poor performance by allocating more money to ineffective programs while high performing programs were punished with flat or even decreased funding. These perverse incentives are destructive to high performance.
To accomplish optimal performance, the government must clearly identify the public benefit, or goal, it wishes to achieve. Then all activities that claim to have a beneficial impact on that goal can be compared. Those with the greatest success are rewarded with continued funding, while those that cannot meet that level of achievement lose their funding. Alternatively, based on convincing evidence that programs can meet that standard, they might receive conditional funding for another year. At the end of the year, performance is compared with the original goals in order to determine the program's future.
As the impact and cost-effectiveness of various federally funded programs becomes clear, public pressure will mount to shed harmful or wasteful activities in favor of those demonstrating real benefits. This should help the government move forward with the reallocation of resources from ineffective to effective programs with little public opposition.
What I'm really talking about here is unleashing within the public sector the incredible productivity, creativity, and flexibility that is the result of introducing competition into the marketplace. Entrepreneurship in the public sector is an exciting thought and could bring 21st century solutions to 20th century problems.
Competition in Government
Public sector organizations have often been created to promote or protect non-financial values, such as ending hunger or homelessness. Those values can be measured, also, and ultimately the same kinds of signals that are applied in the marketplace can be sent to public providers of these types of goods and services. By continuously testing various approaches to solving any given social problem, government can create an internal market and deliver the benefits of innovation and creativity that characterize healthy competition. Citizens have grown accustomed to such natural phenomena in other areas of their daily life.
The Congressional role in government could come to resemble that of the commercial market's fund manager. If programs produce evidence that they have delivered the intended outcomes in a cost-effective manner and that they are capable of maintaining or improving performance, they are rewarded with re-authorization and funding. If they fail to convince Congress that value has been delivered for the dollars tendered and/or that continued investment is warranted, they will simply go out of business.
Of course, as this door closes, another opens. This is as it should be, and is more eloquently referred to by my economist colleagues at George Mason University as the process of creative destruction . The bigger picture and most likely scenario is that several comparable programs will compete for a pool of resources that represent the portion of the national budget that has been allocated to solve a particular social problem (or to prevent one from occurring). Congress should regard the options in precisely the same way as investors do: What is going to return the greatest gain (in public benefit) from the allocation of these funds?
This may sound like a statement of the obvious. But until now, the federal government has not had the right kind of information to permit a comprehensive analysis of the cost and benefits of federal programs. Fortunately, the institutional vehicle, GPRA, arrived just in time to facilitate government-wide response to the public's demand for increased accountability. The pace of technological change and its ability to provide people with goods of increasing quality and convenience at lower cost has now become a global phenomenon of customization that will not grant exceptions to governments.
From now on, programs, divisions, agencies, and departments — and, indeed, the entire federal government — must be managed for results. Taxpayers increasingly will reject continuance of well-intended activities that may or may not be producing results, and will not be shy about voicing their preference for investing in those organizations that are truly accountable.
Mr. President, your term holds a unique opportunity to mark this new millennium by delivering to the American people the most transparent, open, and accountable government in history. I believe this is a noble goal, and that the civil service, the Congress, and the citizens are seeking the leadership that will make excellence in performance the hallmark of American government.