Untangling the Recovery

Government gets one more shot at proving it can get the job done.

Many people see the $787 billion American Recovery and Reinvestment Act as an opportunity to prop up a faltering economy, spur long-term investments in energy and education, and put millions of unemployed citizens back to work. For the nation's 2.7 million federal employees, the stimulus plan represents a more personal mission. It is a chance for redemption, to convince the rest of the world that the government still can operate as an efficient and effective management organization.

The last two contingency operations that involved such a considerable infusion of taxpayer funds-the effort to rebuild Iraq and the cleanup of New Orleans after Hurricane Katrina-were management debacles in which millions of dollars were wasted on bloated contracts, or slipped through the cracks to unscrupulous con artists. And the Treasury Department's Troubled Assets Relief Program is off to an inauspicious start. Polls, meanwhile, show the public is again losing faith in its government.

But President Obama's popularity and the unique circumstances of the nation's economic malaise offer a rare opportunity to turn around those perceptions and attract greater respect for the civil service. "There is a lot expected of the federal government right now, and it's our job to deliver," says Bill Guerin, head of the new Recovery Act program management office at the General Services Administration. "And if we do deliver and people see that we don't get written up in the papers for the inefficiencies but we get written up for the speed and efficiency of what we do, it will be a huge shot in the arm for the federal government."

Planning on the Fly

The past eight years likely will not be viewed as the height of government competency. The Bush administration appropriated roughly $50 billion for relief and reconstruction in Iraq. According to the Office of the Special Inspector General for Iraq Reconstruction, a failure to plan and poor management led to billions in misspent funds. Similar failures plagued the Katrina recovery efforts, as well as expensive contracting operations such as the Coast Guard's Deepwater fleet modernization project.

The Obama administration vows it has learned from those mistakes and promises the Recovery Act will be historic in its transparency, accountability and efficacy. Vice President Joe Biden was put in charge of stimulus efforts and Interior Department Inspector General Earl Devaney was named chairman of the new Recovery Accountability and Transparency Board. It will oversee fund disbursement and manage Recovery.gov, the central government repository for information on the stimulus.

"If done right . . . it will be a prototype for the future," Devaney says. "And I also agree that if things go awry it will set back American confidence in government. It does up the ante, and it keeps me awake a little bit at night."

The administration has appointed field generals to manage the program on the ground. G. Edward DeSeve, who was deputy director for management at the Office of Management and Budget during the Clinton administration, will coordinate efforts and report directly to the president and vice president. Frank DiGiammarino, formerly of the National Academy of Public Administration, will act as DeSeve's deputy, and each federal agency has named its own senior official accountable for the Recovery Act. Several agency coordinators declined to be interviewed for this story.

The stimulus bill was signed into law less than a month after Obama took office-a significant political achievement but one rife with operational disorder. The hastily written 647-page bill left dozens of unanswered questions regarding data collection and reporting responsibility. The administration has been attempting to answer many of them on the fly through federal and state guidance. But with money moving out the door at a rapid rate, some equate the policy to changing the engine of a truck barreling down the highway at 70 miles per hour.

Critics contend that haste will unavoidably lead to waste. "The things we do down the road and the costs of that will be greater because it was not designed into the initial process," says Rep. Darrell Issa, R-Calif., ranking member of the House Oversight and Government Reform Committee.

Establishing a proper speed for distributing stimulus funds could be the single most crucial factor in determining the success of the Recovery Act, observers say. Weekly reports show that most early spending has gone to shovel-ready projects or pre-existing contracts in which much of the administrative work was done in advance. Long-term endeavors that involve significantly more planning, including retrofitting federal buildings to become high-performance green facilities, will be rolled out slowly and more deliberately, officials say.

"It's easy to manage the stimulus money when it's coming through existing programs that have operated for a number of years," says John Thomasian, who directs the National Governors Association Center for Best Practices. "But in newer areas like health IT and broadband you can't treat them the same way." The stimulus plan requires agencies to spend quickly-75 percent of the funds are expected to be issued in the first 18 months-but also with an abundance of caution against waste and mismanagement. The Association of Certified Fraud Examiners, for example, has found that U.S. organizations lose an estimated 7 percent of their annual revenues to fraud, a frightening figure that would amount to a staggering $55.1 billion in Recovery Act funds. "I am anxious to see the economy turn around, but in terms of wasting money, that's not the proper way to do it. We need to turn it around with efficiency," says Rep. Edolphus Towns, D-N.Y., chairman of the Oversight Committee.

Devaney is bullishly optimistic that funds will be spent appropriately. "Every contract, theoretically, is going to be visible and every recipient is going to be known," he says. "And these are the kinds of things that on some level will have an effect on self-correcting behavior."

Reviews of early spending are mixed. The administration has found that bids for many of the first construction projects are coming in lower than expected. "And because these projects are costing less than we thought, we can utter a sentence rarely heard in recent years: This government effort is coming in ahead of schedule and under budget," Obama said in April as he announced funding for the 2,000th transportation project using Recovery Act funds. But some question whether the government is doing enough to actually put checks in the hands of businesses and employees. According to the first quarterly report on the stimulus, released in mid-May by Biden's office, federal agencies have obligated $88 billion. Only $28.5 billion has been actually paid out. The administration has set a goal of spending 70 percent of the stimulus funds by the end of 2010.

The Environmental Protection Agency, which is receiving $7.2 billion in recovery funds, has adapted internal financial and management processes to expedite the flow of money to qualified grant recipients and contractors. The agency also began conducting ongoing, rather than annual, on-site reviews of states managing recovery funds. "We are monitoring the use of Recovery Act funds with vigilance," says Craig Hooks, EPA's coordinator for stimulus activities.

It's a Tough Job

This central conflict of the stimulus-slow down and risk not creating jobs quickly enough, or speed up and face being called out for a large-scale blunder-could provide a bailout for the antacid industry alone. Many observers worry that federal officials could become so paralyzed by the fear of making a mistake or being second-guessed by their bosses that they will become overly risk averse and slow-roll spending decisions.

"Everyone wants results yesterday, but the truth is that it will take time, and we're not going to get it right in all respects immediately," says Max Stier, president and CEO of the nonprofit Partnership for Public Service. "So one of the challenges is to do a triage of which mistakes are the price of doing business and what mistakes are, in fact, unacceptable."

In many respects, Obama has staked the economic resurgence squarely on the shoulders of the oft-maligned civil service. Career employees will be in the trenches, gauging project costs, designing programs, issuing contracts and performing audits. In other words, it's on them to make sure the largest recovery effort in history does not fail.

"This will be an opportunity for people who don't pay a lot of attention to government and take for granted what government does, to recognize the work that federal employees do every day in agencies across the country," says Colleen Kelley, president of the National Treasury Employees Union.

But with a workforce decimated from nearly two decades of cuts and outsourcing, the ranks are lean. "The federal government's capacity, if you use the historical approach of managing through agencies, programs and the existing bureaucracy is probably fairly thin," says John Kamensky, senior fellow at the IBM Center for the Business of Government. "Having the right capability in place to deliver and implement is probably the biggest risk that is facing the administration at this point."

The depleted acquisition workforce, in particular, will be stretched to unprecedented limits in the coming years. While the Recovery Act specifies that fixed-price contracts should be used in most cases, the sheer amount and complexity of the work will force agencies to leverage all their resources. "We are looking at vehicles that will get competition as well as speed of delivery," says Guerin of GSA's program management office.

The Recovery Act allows agencies to use some funds for staffing, predominantly for temporary hires-two years or less-or for contractors. The Office of Personnel Management has launched a stimulus support initiative to help agencies tailor workforce strategies to their individual needs. Agencies can hire quickly by using direct-hire authority, which permits them to bypass the formal ranking and rating process. Dual compensation waivers that allow agencies to rehire federal annuitants require OPM approval and can be used only when an agency has a critical hiring need. Salaries for re-employed annuitants are reduced by the amount of their pensions, although legislation introduced in the Senate could change that rule.

OPM has resisted overhauling the hiring system just to staff up for the stimulus. "We had the merit system in place when we got through the Great Depression," says Angela Bailey, OPM's deputy associate director for talent and capacity policy. "We had veterans' preference during World War II. The federal government is quite capable of reacting to crisis with its current rules and regulations."

Additional hiring and training capacity will help agencies deal with the initial rush of work, but analysts contend what's more important is how that manpower is used. "Some programs are being implemented across multiple agencies . . . but we hear there is no coordination between the agencies" says Raj Sharma, president and CEO of Censeo Consulting Group, who also serves as president of the Federal Acquisition Innovation and Reform Institute. "Cross-agency coordination can avoid duplication of effort and can lead to knowledge sharing, which is important and critical in managing risk."

State of Control

Much of the focus thus far has centered on providing agencies with the necessary resources and tools, but success is not entirely in the hands of federal officials. Nearly half the spending programs in the Recovery Act will be administered by nonfederal entities, according to the Government Accountability Office, which is tracking how 16 states and the District of Columbia spend stimulus funds. And many state and local officials have more questions than answers.

An April GAO report revealed states were itching to use stimulus funds to conduct oversight of their Recovery Act spending, but said OMB guidance was unclear on the issue. Without that approval, states could be hard-pressed to keep up with demands. In April, Towns and Issa co-sponsored a bill that would allow state and local governments to spend a small percentage of their Recovery Act funds for audits, investigations and other administrative purposes.

State officials have said they are reluctant to create positions that might be difficult to support once the stimulus funding dries up. Thomasian concedes it's "probably not plausible to keep the size of government the same given the money coming in. They will probably move more people around to deal with the stimulus and then backfill some of the [state] agencies with new hires."

State and local governments also are lacking concrete guidance on the level of data they should collect. For example, if stimulus dollars are used for shovel-ready projects, thereby freeing up state and local funds for other purposes, do the latter projects require reporting? OMB guidance issued in April spelled out the reporting rules for direct recipients of federal funding, but the administration has yet to require disclosure of contractor and subcontractor data when stimulus money is funneled through states and localities, creating what critics call a "transparency barrier."

"At this point it's going to be pure luck from state to state," Issa says. "The government will arrive at what they are going to do so late that there's a very high likelihood that expensive contracts will be issued to third parties to take the data that is available on the state and local levels and somehow turn it into useable reporting to the federal government."

Issa and other critics of the recovery effort fear the government already is falling into the traps of Iraq and Katrina-insufficient planning, inadequate resources and a lack of coordination. If they're right, it could be years, or even decades, before taxpayers trust government with such a massive amount of their money again.

If the Recovery Act is a success, observers note that the nation could be at the precipice of a fundamental change in how citizens view their government. "We are seeing the opportunity for a transformative moment for the civil service," Kamensky says. "An emphasis is being placed on them to do something that is not only visible to everybody in the public but also something millions of individuals will experience personally."