CONSULTANT REFORM ACT OF 1980 MONDAY, AUGUST 25, 1980 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HUMAN RESOURCES, COMMITTEE ON Post Office AND CIVIL SERVICE, Washington, D.C. The subcommittee met at 9:35 a.m., pursuant to call, in room 311, Cannon House Office Building, Hon. Herbert E. Harris (chairman of the subcommittee) presiding. Mr. HARRIS. The subcommittee will come to order. Today's legislative hearing represents one more step by this subcommittee to identify the amount of tax dollars spent on Federal consultants and contractors and to bring the Federal procurement process into the sunshine. Over the past 2 years this subcommittee has investigated Federal procurement activities and has concluded that serious problems exist which result in the waste of millions, perhaps billions, of Federal taxpayers' funds. A little over a year ago, we joined forces with Senator Pryor's subcommittee in an effort to get a handle on the problems in the use of consultants by the Federal Government. Staff investigations and GAO investigations undertaken at our request have produced shocking evidence that the policies of the American Government are not being made by accountable Government officials. Rather, executive branch policies and information being provided to this Congress by the executive branch are being developed by consultants and firms who stand to profit from the very policies they are determining. Three recent GAO reports have found that: Serious and pervasive problems persist in the Federal Government's use of consultants, despite 30 critical GAO reports issued over the past 20 years; Sixty-seven percent of the consulting contracts reviewed by the GAO were awarded on a sole source basis; Consulting services are used to meet over 40 percent of agencies' reporting requirements-I want to make this clear-the reports we are getting from agencies are actually being made by consultants in 40 percent of the cases and are congressionally mandated reporting requirements; Agencies continued to contract to avoid personnel limitations; Agencies contract for consulting services despite the fact that inhouse capability exists to perform the same functions; and Agencies repeatedly use consulting service contracts in violation of OMB regulations. (1) The most astounding finding was the fact that agencies freely admit that it is easy to obtain funds for contracts, but difficult to obtain in-house staff to perform needed work. The saddest finding is the fact that agencies and the administration appear to condone these abuses through nonenforcement of regulated guidelines. During the course of these hearings we will be told that the problems which exist could be corrected through regulation. I do not dispute that. However, as I view the deplorable record of the executive branch under the existing regulations, I am convinced that this Congress must establish statutory discipline to insure that the Government's consulting activities are exposed to the sunshine of public scrutiny. The American people have a right to know that their public officials are free from conflicts of interest. The Ethics in Government Act of 1977, which was strongly supported by the administration, established in law the principle that those who formulate and implement this country's policies and programs must publicly disclose their financial interests. As a cosponsor of that legislation, I believed then, as I do now, that the American people must be assured that their Government and the individuals who carry out its programs act in the public interest. Although the disclosure in the ethics bill could have been required through a series of administrative regulations, the current administration felt that the issue was serious enough to warrant congressional action. They were right. The major reason why the hidden Federal work force is now suspect and controversial is the fact that virtually all of its activities are unknown. Although billions of taxpayers' dollars are spent for consultants, the public does not know what is produced, how the products are used, or even how much public money is used to support consulting firms. In a free and open Government the taxpayers are entitled to know whether their tax dollars are spent judiciously. The cloak of secrecy surrounding Government contracting must be removed. The bill which we are examining today is a first step toward achieving this goal. It is a straightforward measure which requires less disclosure of consulting activities than is currently required of Federal employees under the Ethics in Government Act. It requires budget itemization equal to the budget line item requirement for the salaries and expenses of direct Federal employees. It requires agencies to make conflict of interest determinations in order to protect the integrity of the policymaking process. It will make the unenforced regulated goal of maximum competition a reality by requiring advance publication of Government needs to be met through contractual arrangements. It will require that each report prepared by a consultant clearly indicate the name of the consultant and the degree of outside involvement. The Congressional Budget Office has found that: With the exception of section 207 relating to contract evaluation-which CBO says may have a small cost, depending upon its implementation-this bill is not expected to result in any significant cost to the Government. I believe that whatever the cost of evaluation, this is an essential management function which must occur in order to achieve accountability. During the course of these hearings we will be urged to limit the disclosure provisions of the bill to apply only to contracts which agencies categorize as consulting contracts. I would refer those who advocate that position to review the record citing longstanding and continuing problems concerning the definition of consulting services. OMB last week testified that total reported consulting was $392 million, although reliable estimates range to over $9 billion. This is precisely why the disclosure provisions must be broad. The problems surrounding consulting contracts have been defined away for 20 years. This legislation is designed to address problems rather than define them away into the abyss of Government waste. We will be receiving testimony from Members of Congress, Federal agencies, public interest groups, industry witnesses, and labor organizations. We will also hear the personal views of an admiral whose career achievements have had a profound effect on the lives of military leaders, Members of Congress, and the President himself. I think we should all recognize at the outset that the public has the right to know how its funds are spent, except in situations where legitimate national or private interests must be protected. The public business cannot be conducted behind the closed doors of executive board rooms or administrators' offices. I wanted to make it clear after the information exposed at hearings that Senator Pryor and I conducted particularly with respect to the Department of Energy, where we have major support service contracts for the Department of Energy being provided by consultant firms and which also provide consultant services for major oil companies and for OPEC countries, that we thought it important to have such organizations testify before us. We sent letters requesting their testimony and called them, as well. One went to Booz-Allen & Hamilton which replied-and I will place this letter in the record: Dear Congressman Harris: Booz-Allen & Hamilton Corporation would like to thank you for the invitation extended in your August 7 letter to testify on H.R. 7674 before your Subcommittee on Human Resources. Unfortunately, vacation schedules and other previous commitments make it impossible for us to accept your invitation at this time. We hope, however, there will be another opportunity to testify in the future because we are vitally interested in this legislation. I want to make it clear that this subcommittee is vitally interested in the legislation, too, and want to be very considerate of vacation schedules. When someone is a consultant to the Federal Government, after rather serious matters have been brought up with regard to them, it is difficult to understand why someone could not be available to present testimony concerning these matters at public hearings. A company called TRW also responded to the subcommittee: Thank you very much for your letter of August 7 informing me of the hearings planned during the final week of August on H.R. 7674 offering TRW an opportunity to submit its views. Because there is such a short time between now and the hearings, and because of unavailability during the month of August of many of the TRW officials who would be involved in preparing the statement on our behalf, we will not be able to meet your August 15 deadline for response but I will be in touch with your office as soon as I can to get an estimate of submission date for TRW comments on this proposed legislation. Have we received any more information from them as far as testifying? Ms. GOTTLIEB. No. Mr. HARRIS. Planning Research Corp. also sent us a more lengthy 1-page letter. It says: I appreciate your offer to testify on H.R. 7674. Our views will be included in the testimony of the committee on contracting out before your subcommittee and the testimony of the National Council of Professional Services firms before Senator Pryor's subcommittee. I think it is extraordinarily important that those consulting firms that are in fact operating as agencies of our Government be prepared to present testimony in this subcommittee. I would like to indicate on the public record this subcommittee's tremendous concern about people that have been vested with the authority of submitting reports to Congress and still do not see the need to come before the subcommittee and testify with regard to their activities. This, I think, presents a rather remarkable hole in our Government's activities. Before I call the first witness I would like to state Senator David Pryor, of Arkansas, has introduced an identical bill in the Senate. He held hearings last week on S. 2880 which is the identical bill. I have asked that he make available the statement of all witnesses at the Senate hearings for inclusion in the hearing record of this committee and he has made a similar request for House testimony. Such a proceeding, I think, will minimize duplication and maximize the opportunity for parties to comment on this particular legislation that is before us. want to express my personal appreciation for having before us two of my colleagues this morning. I would like to recognize my distinguished colleague from the Civil Service and Post Office Committee, the chairman of the Civil Service Subcommittee, the Honorable Patricia Schroeder. We appreciate having a copy of your testimony and are pleased to recognize you at this point, Pat. STATEMENT OF HON. PATRICIA SCHROEDER, A COLORADO Mrs. SCHROEDER. Thank you very much. I want to compliment the gentleman from Virginia for being so persistent in this difficult area of contracting out. I remember when he was kind enough to come to Denver and we held some very intensive hearings there about what was happening. We went into great detail about what happens to morale, effectiveness, and productivity. We have been through many battles on H.R. 4717 which we had hoped would pass. I think all of us felt it was a lot better way to balance the budget than deciding to squeeze it out of the retired Federal workers or raise postal rates. Obviously, H.R. 4717 has been snagged somewhere by another committee, not ours. We have certainly been moving on it. I am delighted to see this bill today, H.R. 7674. I support it heartily and I compliment the gentleman for moving forward with it. |