Pennies From Heaven

But within your existing budget, money you can use to meet your mission is waiting to bring you at least a small measure of relief, like a summer storm. Let it pass by, and tax dollars that could have been better spent will evaporate. Make the right moves and, like pennies from heaven, savings will rain down.

Across government, civil servants who like to pinch pennies have learned the savings rain dance. Maintenance bosses, safety officers, mail managers, computer specialists, lawyers and procurement experts have learned how to make millions of dollars fall out of overhead budgets into program managers' hands. "I'm always looking at ways to reduce the budget," says Edward Sias, the mail manager at the Coast Guard.

Like Sias, champions of efficiency across government are doing simple things to reduce wasteful spending. Their successes suggest that tens of millions of dollars in savings are available, if only federal managers would turn their umbrellas upside down.

Check in the Mail

For starters, a small fortune may be hiding in your agency's mail-delivery system. Sias has been stamping out waste in the Coast Guard's mail budget for five years. Using quarterly reports prepared by the U.S. Postal Service on agency mailings, he looks for inefficient or unnecessary mailings. In 1998, Sias discovered the Coast Guard sent 2 million recruiting brochures to high school students at the first class mail rate, racking up more than $1 million in postage. The following year, Sias took a trip from Washington to New York, where he helped the Coast Guard's advertising agency redesign the mailing to take advantage of bulk mailing rates. Instead of costing 55 cents per brochure, the mailing went out for 17.5 cents per copy. The total cost: $330,000, a 69 percent savings over the previous year. Now, says Sias, "when anyone is going to produce a mailing, they coordinate with me to get the best rate."

"I don't have a secretary. I don't have a staff. I have a telephone, a computer and a travel card," Sias adds. He travels to Coast Guard offices, offering training courses on mail efficiency, explaining how bulk mail works and identifying ways to cut costs. If employees are sending multiple pieces of mail to the same location, Sias urges them to put all of the mail in one pouch to cut down on the cost. He pushes people who maintain mailing lists to purge duplicates and eliminate old addresses.

In areas such as New Orleans, San Diego and Seattle, Sias has consolidated Coast Guard mail functions with other agencies to get volume discounts. The Coast Guard used to notify employees by mail when they were being considered for promotions. Now the agency sends such notices by e-mail.

Sias' thriftiness has saved his agency a pretty penny. In 1996, the Coast Guard spent $6.8 million on postage. In 2000, the agency spent only $5.1 million, a 25 percent drop even after three interceding postal rate hikes. "I saved it at 33 cents at a time, 34 cents at a time, 29 cents at a time," Sias says. "I look for ways to save, one mailing at a time."

Peaceful Savings

Meanwhile, Air Force attorneys are looking for savings one workplace complaint and one contract dispute at a time.

Accusations of wrongdoing against federal managers and contracting officers can get downright nasty, leading to years of filings, appeals and litigation. Both the processing costs and the settlements can be staggering. A single formal EEO complaint can cost the Air Force approximately $16,000 to process. Governmentwide in fiscal 2000, judgments and settlements resulting from lawsuits cost Uncle Sam $1.8 billion, paid out of the Treasury-run Judgment Fund.

In 1999, the Air Force adopted a new policy: try to nip disputes in the bud rather than let them bloom into full-blown battles. The policy centers on alternative dispute resolution, a mix of techniques including mediation, face-to-face negotiations and arbitration, aimed at avoiding protracted legal fights.

Joseph McDade, associate general counsel at the Air Force, says workplace disputes often wind up in the discrimination complaint system. But only about 1.1 percent of complaints lead to a finding of discrimination, and another 8.5 percent lead to settlements involving corrective actions. "If you have a workplace problem, you need to get people to talk to each other," McDade says. The Air Force now encourages employees to sit down with their managers and work out their problems informally. Informally resolving a complaint costs less than $2,000 on average. From fiscal 1997 to fiscal 2000, the Air Force increased its use of alternative dispute resolution by 36 percent. Over the same period, formal complaints dropped by 21 percent, and informal complaints declined by 39 percent. Lawyers, EEO counselors, administrative staff and managers spend an average of 45 hours processing each informal complaint, compared with 321 hours processing each formal complaint. Employees whose problems get resolved more quickly get back to productive work more quickly.

The Air Force also is reaping savings in time and money by quickly resolving procurement disputes. Darleen Druyun, principal deputy assistant secretary for acquisition, and Gen. Jerald D. Stubbs, Air Force Materiel Command staff judge advocate, have encouraged contracting officers and lawyers to work out disputes as they begin to fester, before problems bring business to a halt.

Working with contracting officers on the B-1 bomber program, Stubbs' attorneys stepped in when Boeing officials began complaining that the Air Force needed to pay the contractor about $13 million. Normally, such a dispute would have headed into litigation. Instead, Boeing and the Air Force agreed to a three-part alternative dispute resolution process: conduct fact-finding, negotiate and, if necessary, get a third-party ruling. Boeing and the service reached an agreement in the fact-finding stage, during which Boeing dropped its claim for $13 million and the two sides agreed to a procedure for dealing with similar claims in the future, clarifying an ambiguous clause in the B-1 contract. In another case, a dispute in Alaska that languished for seven years was settled in two months through third-party arbitration.

By using alternative dispute resolution techniques in 38 contract disputes that had been pending before the Armed Services Board of Contract Appeals last year, attorneys saved about $3 million in labor, travel and interest costs, estimates Col. Al Purdue, director of the Air Force's contract dispute directorate. "We're talking about a major shift in the way the Air Force does business, where we get involved early in cases when conflicts are still fresh instead of having these issues festering, poisoning the air," says Col. Cheryl Nilsson, chief of the service's alternative dispute resolution division.

Drug Money

It's a basic truth of commodities: The more you buy, the less you pay per unit. Pharmaceutical buyers at the Defense Department and the Veterans Affairs Department have long known that. That's why they each were getting pretty good deals on drugs for their respective patients. Then in 1998, they got even smarter. Why not join forces and buy drugs together, wielding their combined $3.2 billion annual pharmaceutical budgets to get even lower prices?

From October 1998 through April 2000, the VA and Defense awarded 18 joint contracts, saving $1.3 million on inhalers, $24.2 million on blood pressure medication and $1.5 million on insulin in fiscal 2000, the General Accounting Office estimated.

In all, the departments saved $40 million by contracting together, helping stem the tide of rising prescription drug costs.

The government also saves money because VA and Defense aren't duplicating efforts by negotiating separate contracts for the same products. "The drug companies like this too," explains Steve Thomas, director of VA's national contract service. "Before, they had to administer two contracts. You would have double the effort going on."

A joint steering committee of VA and Defense officials makes sure the departments evaluate and purchase new drugs together whenever possible. Officials now are considering joint contracts for medical equipment and vitamins as well. The more they save, the healthier the nation's military personnel and veterans will be. That's a priceless return on investment.

Safety Pays

At Tobyhanna Army Depot in northeastern Pennsylvania, safety manager Robert Barnikow knows that no pain means a lot of gain.

In 1991, the depot spent $1.3 million on workers' compensation costs. The depot also incurred the cost of lost productivity when workers were off the line because of preventable injuries. Tobyhanna doesn't receive appropriations, instead generating revenue through the sale of its services to Army installations and other government offices. If customers think they're paying too much, they'll go elsewhere. That budgetary setup means the depot has a strong incentive to reduce costs.

Barnikow decided to enroll the depot in the Occupational Safety and Health Administration's voluntary protection program, which requires workplaces to set goals for reducing injuries and then meet those goals to stay in the program. Belonging to the program shows an organization's business partners that safety (and the reduced costs that come with it) is one of its primary concerns.

The key to reducing workplace injuries is making safety a central part of every one's job, Barnikow says. Under his leadership, depot managers and employees began conducting regular safety inspections of their work areas. Every month, Barnikow generates a safety scorecard, which managers and employees analyze to figure out ways to reduce injuries. "In most agencies, the safety officer does inspections," Barnikow says. "Now, all the employees and managers do safety inspections themselves."

The result: the depot spent only $200,000 on workers' compensation costs last year, cutting days lost to injury from 109 in 1992 to 40 in 2000. The depot also reduced minor injuries that affected productivity but didn't result in lost days of work from 78 in 1996 to 41 in 2000. "We have a happier workforce," Barnikow says. "And we have a lot more people on the production lines every day." Barnikow notes that most federal agencies look only at lost days of work, a measure that fails to consider the costs of lesser injuries. Workers' compensation drains the federal treasury of nearly $2 billion a year-a cost that could be significantly reduced if federal workers were more conscious of safety.

Power to the Purse

This summer's rolling blackouts in California put energy efficiency in the spotlight. Across the state, federal facilities found ways to reduce their power consumption and save money in the process.

At NASA's Ames Research Center in Moffett Field, Calif., energy chief Steve Frankel spearheaded an energy savings campaign that has reduced the center's energy costs by $30,000 to $65,000 a month. Lights were turned out in areas with sufficient natural light, lights were taken out of the fronts of vending machines and air conditioning units were turned off for 15 minutes every two hours-without making workers uncomfortable-on days the state issued energy warnings.

Frankel is also replacing the center's lights with more energy-efficient models through a share-in-savings contract with Milwaukee-based Johnson Controls that will cut energy costs by $250,000 a year for 19 years. The majority of the savings will go to Johnson Controls, which is taking on the upfront costs of replacing the lights.

Frankel also is experimenting with renewable energy sources. He replaced an electric pump used to remove water from a storm basin with a windmill. The windmill, expected to last for a century, cost $11,000 but has no annual maintenance costs. The electric pump cost $2,000 a year to maintain, meaning the windmill will pay for itself in less than six years.

Paper Cuts

Who says money doesn't grow on trees? Officials at the Naval Facilities Engineering Command have discovered that saving some trees is saving them millions of dollars.

In fiscal 2000, the command issued solicitations for 745 construction projects and 642 facility service contracts. Solicitations, accompanied by drawings and a host of supporting documents, ranged from 20 pages for a small job to several thousand pages for complex projects. "Pages" may be an anachronistic term, however. All of the command's contract documents were published online, not on paper. As part of the Defense Department's push to make the procurement process as paperless as possible, the command-which has 14 regional offices and 130 field offices around the world-began in 1999 to develop an online procurement notification service. The command's paperless acquisition program managers, Paul Miller and Deborah O'Rourke, asked regional offices that had begun developing their own procurement Web sites to stop and let the command develop a central site. The managers called on Jim Carberry, the command's assistant chief information officer, who spent just $200,000 on off-the-shelf software and hardware and programming labor to develop the procurement site.

The site went live in December 1999, allowing contractors anywhere in the world to download solicitations and supporting documents instantaneously. The command closed so-called "plan issue rooms" in the regional and field offices that served as the distribution points for contracting documents. "At our larger offices, they had whole rooms of racks and racks of plans," Miller says. Shutting down the rooms is saving the command $6 million a year in labor costs, he says. Even more impressive, the command is saving $13 million a year in printing costs. And Miller hasn't estimated the Web site's savings in postage.

Contractors have flocked to the site (www.esol.navfac. navy.mil) for the latest opportunities. More than 15,000 contractors have registered on the site, which alerts them when contract amendments are issued. Every day, contractors download about 5 gigabytes of information, equal to about 100 yards of shelved books, from the site.

Reliable Dollars

The Western Area Power Administration's 7,745 miles of power transmission lines in the upper Great Plains pulse not only with electricity, but the potential for millions of dollars in cost savings.

Like most organizations, the administration-an agency within the Energy Department that provides power to 15 western states-planned its maintenance schedule so that, at least on paper, workers would check every piece of equipment along the transmission lines and in substations once a year to make sure they were working. Maintenance workers would also replace equipment at regular intervals-wooden poles that hold up power lines were replaced every 50 years, for example.

Time-based maintenance, in reality, can be wasteful and unrealistic. It's difficult for workers to get to every piece of equipment each year, and replacing equipment at preset times often is unnecessary.

That's why Mark Buchholz, WAPA's general engineer for North Dakota, South Dakota, Montana, Nebraska, Minnesota, Iowa and parts of Missouri, got hooked on reliability-centered maintenance. The idea behind this approach is to use equipment to the fullest extent possible, replacing assets only if they're about to stop working well.

Buchholz used the technique on a 53-mile stretch of transmission lines in south-central South Dakota that was up for regular pole replacement. The poles and cross arms holding up the lines were built in the 1950s and would have cost about $5 million to replace. But using reliability-centered maintenance techniques, Buchholz assessed the health of the poles and found that he could repair some cross arms, guy wires and vibration dampers at a cost of $120,000-extending the life of the poles another 20 years.

Using reliability-based assessments, Buchholz also discovered that he could cut back pole-by-pole inspections by contractors from every eight years to every 12 years. And sensors placed in substation equipment can alert maintenance workers to potential problems, eliminating the need to open up equipment once a year. "Time-based maintenance certainly has a place," Buchholz says. "But we're also using reliability-centered maintenance techniques to take a look at those intervals and see if we can extend them." Buchholz says the ultimate goal is to make sure that every piece of equipment works as it's supposed to all the time. The new techniques also better use workers' time and maintenance budgets, helping reduce sticker shock for the Western Area Power Administration's power customers.

Words of caution

David McClure, an analyst with the General Accounting Office, notes that several problems stand in the way of frugal feds. For starters, agencies' accounting systems are murky, making it tough for would-be penny-pinchers to see where money could be saved. In addition, savings in one account cannot always be used in another area, eliminating a key incentive to reduce costs. Of course, money that doesn't get spent in one fiscal year doesn't carry over to the next fiscal year, so the savings generated late in the year and not re-allocated to other areas disappear. On top of that, initiatives aimed at cutting costs can actually increase costs. The creation of electronic government programs, for example, won't lead to the complete elimination of face-to-face government service delivery. "It could be that e-government ends up costing more," McClure cautions.

But most observers both inside and outside government see opportunities for savings throughout the federal establishment. In fact, every organization can benefit from extra attention to overhead costs. "I've never seen an organization where you couldn't save 5 percent or 10 percent if you were allowed to manage it properly," says Defense Secretary Donald Rumsfeld. The bonus in government is that when managers save money, citizens reap the benefits.