[Senate Hearing 113-706]
[From the U.S. Government Publishing Office]
S. Hrg. 113-706
NOMINATION OF ANNE E. RUNG
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
NOMINATION OF ANNE E. RUNG TO BE ADMINISTRATOR
OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET
__________
JULY 24, 2014
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Gabrielle A. Batkin, Staff Director
John P. Kilvington, Deputy Staff Director
Troy H. Cribb, Chief Counsel for Governmental Affairs
Deirdre G. Armstrong, Professional Staff Member
Keith B. Ashdown, Minority Staff Director
Christopher J. Barkley, Minority Deputy Staff Director
Andrew C. Dockham, Minority Chief Counsel
Kathryn M. Edelman, Minority Senior Investigator
Laura W. Kilbride, Chief Clerk
Lauren M. Corcoran, Hearing Clerk
C O N T E N T S
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Opening statements:
Page
Senator McCaskill............................................ 1
Senator Coburn............................................... 2
Senator Levin................................................ 12
Senator Ayotte............................................... 16
Prepared statement:
Senator McCaskill............................................ 19
WITNESSES
Thursday, July 24, 2014
Anne E. Rung, Nominee to be Administrator Office of Federal
Procurement Policy, Office of Management and Budget
Testimony.................................................... 3
Prepared statement........................................... 22
Biographical and financial information....................... 25
Letter from the Office of Government Ethics.................. 41
Responses to pre-hearing questions........................... 43
Responses to post-hearing questions.......................... 65
Letter of support from IT Alliance for Public Sector......... 66
NOMINATION OF ANNE E. RUNG
THURSDAY, JULY 24, 2014
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:33 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Claire
McCaskill, presiding.
Present: Senators McCaskill, Levin, Coburn, and Ayotte.
OPENING STATEMENT OF SENATOR McCASKILL
Senator McCaskill. We convene this hearing today to
consider the nomination of Anne Rung to be Administrator for
the Office of Federal Procurement Policy (OFPP), within the
Office of Management and Budget (OMB). It has been almost 8
months since Joe Jordan, the previous OFPP Administrator, left
the office, and this is not the first time that OFPP has been
without an Administrator for an extended period of time. The
position was vacant for 6 months from November 2011 until Joe
Jordan was confirmed in May 2012, and the Administration failed
to nominate someone for the first 10 months of its first term.
The absence of leadership in this office has been a source
of great frustration to me as there have been several occasions
when OFPP has been unable to provide a witness for my
Subcommittee hearings because of these vacancies.
So it is with a sense of urgency that I welcome Ms. Rung
here today. I want to thank Dr. Coburn, Senator Johnson, and
Chairman Carper for moving so quickly after the White House
sent Ms. Rung's nomination to the Committee.
As a former State auditor and Chairman of the Subcommittee
on Financial and Contracting Oversight, I have great
appreciation for the importance of OFPP, its potential to save
taxpayers a lot of money with the right policies and the right
leadership, and I believe that Ms. Rung is well qualified to
become its Administrator.
While our Federal Government continues to grow to meet the
needs of a complicated world, the total number of Federal
personnel has, in fact, actually fallen. According to data
collected by the Office of Personnel Management, there are
fewer Federal employees now than there were in 1962. To fill
the growing gap between the falling number of Federal employees
and the needs of this country, the Government increasingly has
relied on contractors.
Last year, the Federal Government spent approximately $460
billion contracting for a wide range of goods and services. In
many cases, the work of contractors is indistinguishable from
the work being performed by Federal employees. Contractors sit
side by side with their Federal counterparts, undistinguishable
other than the difference in their salaries and potentially the
difference in their benefits. Yet all too often, little or no
analysis is done to determine what is the most cost-effective
way to meet the needs of various agencies of the Federal
Government.
Most Federal agencies still do not do a cost-benefit
analysis when deciding whether to hire a Federal employee or a
contractor. Our contracting oversight workforce is
overstretched and underfunded. The data they rely on to look at
contractor past performance is difficult to use and incomplete.
And the contracting process itself is cumbersome and time-
consuming.
To its credit, OFPP has taken on these challenges. Most
recently, the Office of Federal Procurement on July 10th issued
guidance to assist contracting officers in making better use of
contractor past performance information. And the Administration
has set lofty goals for the continued use of strategic
sourcing. However, as I have seen throughout the Federal
Government, it is one thing to issue policies and set goals. It
is quite another thing to see that those policies are actually
implemented and that the goals are met.
In reviewing Ms. Rung's work, it is my belief she is the
kind of leader who will see that these and other policies are
actually implemented, not just words on a paper. Ms. Rung is
currently serving as a senior adviser at OMB, and previously
she served at the General Services Administration (GSA), in
various positions, most recently as Associate Administrator of
Governmentwide Policy.
Prior to GSA, Ms. Rung was a Senior Director of
Administration at the U.S. Department of Commerce from 2010 to
2012, where she won an award for the work she did to eliminate
waste and inefficiency through the agency's Cost Reduction
Project. Her work resulted in reduced wireless costs, better
printing management, and strategic sourcing for seven principal
commodity purchases, including computers. She also created an
agencywide network of strategic sourcing experts from each of
Commerce's major bureaus, where her efforts yielded millions in
savings of taxpayer dollars.
It gives me great confidence to know Ms. Rung has actually
accomplished on a single-agency scale that which we need to
accomplish across the entire Federal Government. There are
still millions, if not billions, of dollars in low-hanging
fruit in the form of savings we can find in our Federal
contracting system, and Dr. Coburn, who is here with me today,
is an expert on all of the low-hanging fruit that exists
throughout the government where we can save money. But we have
to have the right policies and, more importantly, we have to
have strong leadership.
We can start to see some really significant savings and
improvement in our Federal procurement efforts with strong
leadership.
Ms. Rung, I look forward to your testimony today, and I
hope that the full Senate can consider your nomination as
quickly as possible. Thank you.
Dr. Coburn.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. Thank you, Chairman McCaskill, and I thank
Senator Carper for expeditiously having this hearing. I think
it is important that we allow the President the staff to meet
the demands that are placed upon him. And I want to thank you
for your years of service and also being willing to take this
one.
I would note that the low-hanging fruit is easy. What we
have not seen is leadership to do the hard stuff. And I would
just note that even though Federal spending in total in terms
of discretionary spending has declined, the percentage that is
not competed for has not declined at all. It is still at 30
percent.
We just had this recent USIS contract out of the Department
Homeland Security (DHS) to a company that the government is
suing right now, but we are giving them a non-compete contract
for $192 million. It makes no sense. It does not make sense to
the American people. It does not make sense to anybody that has
ever done anything in the private sector.
So I welcome you. I look forward to your testimony. I also
have asked my staff to arrange for a period of time for you and
I to visit next week so that I can actually get a better feel
and show you some things I would like for you to see that we
have been working on.
As the Chairman noted, leadership is important. What you
have done for Mr. Tangherlini has been great. And I have been
really supportive of GSA and OMB in the last couple of years,
and I hope you will bring that vigor that we are seeing at GSA
and the vigor that we are seeing at OMB to a new level that
will actually make a difference.
Senator McCaskill. We welcome your testimony, Ms. Rung.
Ms. Rung. Thank you, Chairman McCaskill, Ranking Member
Coburn, and Members----
Senator McCaskill. Oh, excuse me. It is the custom of this
Committee to swear in our witnesses, so if you would stand. Do
you solemnly swear that the testimony you give before this
Committee today will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Ms. Rung. I do.
Senator McCaskill. Thank you. Sorry I forgot. Thank you,
Dr. Coburn, for reminding me.
TESTIMONY OF ANNE E. RUNG,\1\ NOMINEE TO BE ADMINISTRATOR,
OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND
BUDGET
Ms. Rung. Thank you, Chairman McCaskill, Ranking Member
Coburn, and Members of the Committee, for inviting me here
today. I am honored to be here before you as the President's
nominee to serve as the Administrator for Federal Procurement
Policy, in the Office of Management and Budget.
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\1\ The prepared statement of Ms. Rung appears in the Appendix on
page 22.
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I am touched to be surrounded by so many family and friends
today. My friends include old colleagues from Pennsylvania,
incredible people from GSA and the Department of Commerce, and
college friends going back 30 years. I am really happy to have
my family here as well, including my father, Don Rung, a
retired math professor from Penn State University, and his
wife, Katie, and my cousin Kristin Clay.
I want to thank my incredible mother, Elizabeth Rung, who
at 83 years old jumped on a bus last night from Tennessee,
along with my brother Don, his wife Lisa, and my niece and
nephew, Diana and Aden, to make the 9-hour trek to Washington,
DC.
I also want to acknowledge my other brothers and sisters,
Kevin, Lisa, Margaret, and Sean, who were not able to be here
today, but are watching at home.
My large family, who are teachers, former military, career
government, and small business owners, live their lives with
integrity, a commitment to public service, and an understanding
of the value of hard work. I have always tried to do the same.
I want to thank President Obama for nominating me to this
position. And I want to thank the Deputy Directors of OMB,
Brian Deese and Beth Cobert, for their support and
encouragement. It has been an honor to work with them in my
brief time at OMB.
A key pillar of the President's Management Agenda is
improving government performance. I have had the privilege of
dedicating the last 20 years of my life to this same goal.
Whether I was serving as Deputy Secretary of Procurement in the
Commonwealth of Pennsylvania's Department of General Services,
leading an acquisition reform project at the U.S. Department of
Commerce, or serving as the Chief Acquisition Officer (CAO) at
the General Services Administration, I have had a singular
focus on making the government work better for the people it
serves.
Over the past 4 years, Federal agencies, working together
with Congress, have realized solid improvements in Federal
contracting. Contract spending is down by $80 billion, there
are now more than two dozen strategic sourcing solutions
underway, and the Government Accountability Office (GAO)
removed interagency contracting from its high-risk list in
2013. The Administration is proud of this progress, but more
work remains to be done.
If confirmed as Administrator, I intend to work with
Congress, agencies, and industry to improve Federal contracting
by focusing on three main priorities.
First, if confirmed, I want to work with Federal agencies
to better manage the billions of dollars spent each year on
commonly purchased items. Shifting the Federal Government from
managing individual purchases to managing entire categories of
commonly purchased items can drive greater transparency,
significantly reduce duplication, increase competition, improve
oversight, and, in the end, drive savings and deliver better
value. Strategic sourcing, or leveraging the government's vast
buying power to get better prices and faster delivery, is one
effective approach under this broader strategy of category
management. In Pennsylvania, where I served as Deputy Secretary
of Procurement, we aggressively and routinely undertook
strategic sourcing to generate over $140 million a year in
savings, for more than $300 million in total savings.
My second priority, should I be confirmed, will be helping
to drive greater innovation in acquisitions. While I was at the
General Services Administration, we recognized the importance
of identifying barriers to innovation and worked to speed up
the registration time for companies and make it easier for
businesses to search for Federal contracting opportunities. If
confirmed, I will work hand in hand with the Federal chief
information officer, the Federal chief technology officer, and
other key government leaders to streamline the acquisition
process for agencies and industry, particularly small
businesses, and break down the barriers that can keep
innovation out of Federal Government procurement. In the end,
the goal is to make it easier for the Federal Government to do
business with companies that offer the best value to the
taxpayers, drive the most innovative solutions, and meet the
highest level of business and ethical standards.
Finally, the key to any acquisition success is ensuring
that the Federal acquisition workforce has the support, skills,
and resources they need to be successful. During my time in the
Federal Government, it has been a privilege to work with, and
learn from, these bright, hard-working, and dedicated
professionals. At the Department of Commerce, I assembled a
team of over 100 program managers and contracting officials
from the bureaus to tackle the issue of how to improve our
acquisition process. I saw firsthand their incredible
dedication to the goal of making our acquisition system work
better for the taxpayers. In many ways, they have a thankless
job, rarely receiving the recognition and praise they deserve
for executing the countless successful acquisitions that save
valuable taxpayer money. If confirmed, I want to dedicate
myself to making sure that I support these professionals, while
making sure that they have the skills to meet not only today's
acquisition challenges but tomorrow's as well.
Once again, I want to thank you for the opportunity to
appear before you today. If confirmed, I look forward to
working closely with this Committee to deliver greater value to
the taxpayer.
I am pleased to answer any questions you may have.
Senator McCaskill. Thank you very much.
I need to start with some required questions that need to
go into the record. These are the standard three questions that
we ask of all nominees.
Is there anything that you are aware of in your background
that might present a conflict of interest with the duties of
the office to which you have been nominated?
Ms. Rung. No.
Senator McCaskill. Do you know of any reason, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Ms. Rung. No.
Senator McCaskill. Do you know of any reason, personal or
otherwise, that would in any way prevent you from serving the
full term for the office to which you have been nominated?
Ms. Rung. No.
Senator McCaskill. OK. And let me, before I ask another
question, say I like an 83-year-old mother that jumps on the
bus. [Laughter.]
Ms. Rung. She will also tell you it was $50 round trip.
Senator McCaskill. Yes. She sounds like my mother, who had
some of her roots not far from where your mother came from. And
all of your family is welcome today. We are pleased that you
are all here, and it is a great tribute to the nominee that she
has so many friends and family that are here to support her.
Ms. Rung. Thank you.
Senator McCaskill. Let me start with something that has
been really frustrating, and that is this policy that you have
at the Office of Federal Procurement to not allow senior
executives or career civil servants to testify before Congress.
There are no political appointees, it is my understanding, at
OFPP besides the Administrator. So when there is no confirmed
Administrator in place, there is literally no one from the
office that you will send that can testify at hearings. That is
a huge problem for those of us who are trying to do our job
under the Constitution of Congressional oversight.
Can you talk about that policy and whether or not you would
make a commitment to change that policy so that--first of all,
there are some hearings that we do not need the Administrator.
And you have a lot of work to do. The notion that you are the
only one that can testify is to me nonsensical. Can you speak
to that?
Ms. Rung. Thank you, Senator. It is my understanding that
this policy is the position of the Executive Office of the
President, but I am happy, if confirmed, to take your views
back to my colleagues.
Senator McCaskill. So you think the President is--this is
his policy? Who is making this policy? Who above you should I
talk to?
Ms. Rung. Senator, it is my understanding that this policy
is the position of the Executive Office of the President. I am
not sure which individual.
Senator McCaskill. OK. Well, we have had this problem more
often with this part of what I call the ``business side of the
Federal Government,'' and I want to get to the bottom of it and
get it fixed.
In March, my Subcommittee held a hearing on the Federal
contractor past performance databases. We identified a number
of issues with the past performance databases: a 2-year credit,
as I mentioned earlier. You issued new guidance, OFPP did, to
Chief Acquisition Officers and senior procurement executives
regarding better use of contractor performance information. Yet
we did not get any notification of that even though we have
been yelling at you guys forever about it. You did not even
notify Chairman Carper's staff. That does not help with the
Congressional relationship that needs to be in place for us to
have the give and take that oversight requires.
Would you look and review at your offices outreach and
coordination efforts with this Committee in your new position?
Ms. Rung. Absolutely, Senator. And if confirmed, I look
forward to working closely with you and ensuring that we do
have strong communications.
Senator McCaskill. That is terrific.
Earlier this year, we had a hearing on whistleblower
protection at the Department of Energy's Hanford nuclear site.
I was troubled to learn that the Department has spent millions
of dollars to reimburse contractors' litigation expenses at law
firms charging thousands of dollars an hour in fighting
whistleblowers at Hanford. We are basically paying to fight the
very whistleblowers that are trying to save us money.
Can you speak to this? And will you commit to issuing
guidance prohibiting reimbursements for legal costs associated
with whistleblower retaliation claims?
Ms. Rung. Senator, this issue is not one that I am
intimately familiar with, but if confirmed, I will look into
this matter.
Senator McCaskill. That would be terrific. And we would
love to hear back from you after you are confirmed about your
view on this and what you can do from your important position
to make sure that our contractors understand that we do not
want to fund their lawsuits as it relates to retaliation
against whistleblowers.
I have been very active in wartime contracting reform, and
we passed in 2013 overdue wartime contracting reforms that
changed how the government does business in contingency
operations. There is probably no better poster child of
contractor waste than the contracting that went on particularly
in Iraq during the first 5 to 6 years of that conflict.
Specifically, we are waiting on a final rule on
requirements for the justification on pass-through contracts
and a final rule to ensure that the Federal Awardee Performance
and Integrity Information System (FAPIIS), includes information
on parent, subsidiary, and successor contracts.
As you know, as somebody who is very familiar in this area,
part of the problem we have here with past performance of
contractors and performance awards for contractors is that when
somebody behaves badly, they switch the work to a subsidiary--
and it is very difficult for us to track--that is exactly the
same corporate structure, they have just renamed it.
Will you make this final rule on requirements for
justification of pass-through so we know who we are doing
business with? And, second, the final rule for FAPIIS, which
helps us track who actually is doing the work, will you give us
an expected completion date on those rules once you are
confirmed?
Ms. Rung. Senator, if I am confirmed, I will look into both
of those issues. And I will say that I realize there are
significant challenges across the government, but in particular
in the area of Department of Defense (DOD) and acquisitions.
But if confirmed, I look forward to sitting down with the
Department of Defense and talking to them about ways we can
help support them.
Senator McCaskill. They are better, but we have a long way
to go.
Ms. Rung. The great news is, Senator, that there is a
terrific team and terrific leadership at the Department of
Defense, particularly under Frank Kendall and Dick Ginman.
Senator McCaskill. OK. Dr. Coburn.
Senator Coburn. Just to talk a little bit about your work
at Commerce, my perception is that our biggest problem with
contracting is that we really do not know what we want when we
go to contract for it. And an example comes from some of the
things you all did in Commerce in 2010. You had a $346,000
contract to help you--a consultant firm to help you figure out
your contracting. And there is nothing inappropriate about
that. I do not have any criticism. But following that was
another $800,000, or almost $800,000, on a non-competed, sole-
source contract for a followup.
So my question to you is: One, what kind of signal does
that send to everybody else? Because you obviously did not know
what you wanted with the first contract or you would not have
had a sole-source followup on the second one. And what kind of
signal does it send when we are trying to improve contracting,
and the person that is helping us contract gets a sole-source,
non-competed contract? So it goes really back to the first
issue. It is big in the Defense Department because--especially
on weapons systems. They are buying things they do not know
exactly what they want. How do we change that culture?
Ms. Rung. Senator, I think you touched on several important
issues--one, the issue of competition. Competition is the
cornerstone of the acquisitions system and process.
In the State of Pennsylvania, ensuring that we had
competition was a keen area of focus for us, and, in fact, we
reduced sole-source requests by 50 percent.
You also touched on the issue of ensuring that we have
strong requirements and we know exactly what we need to buy. I
came into the Department of Commerce in the wake of several
high-profile acquisitions that had gone over budget and over
schedule, and one of the areas that we focused on in our
acquisition improvement project was around the area of the
acquisition process before you go out to market, what they
refer to as the ``big A'' in acquisitions.
What Commerce did, and has since developed, is an
impressive new project management structure where there is an
integrated team that oversees and monitors the acquisition
leading up to the purchase. And they ensure that they have
strong agency leadership and their eyes on each key milestone
leading up to going out to the market. And they ask questions
like, from the very beginning, do we even need to buy this?
That is the very first question. If they do need to buy it,
what is the best way to buy it? And the most important question
is: What exactly do we need to buy?
And agencies struggle with that, and we found that at the
Department of Commerce, and it really requires rigorous
oversight and continuous monitoring and integrated project
teams with their eyes on it from the very beginning of the
process.
Senator Coburn. Well, to me it would not be from the
beginning of the process, you need to know what you need. But
more importantly is you need to know what you do not need. And
we will just take, for example, purchasing of information
technology (IT) in the Federal Government last year, $84
billion; $40 billion of it was poured down the drain. And I am
sure those projects at Commerce were probably IT-related. Were
they or were they not?
Ms. Rung. Yes, several were.
Senator Coburn. Yes, and so here is the problem: We do not
have people knowledgeable in the Federal Government that know
how to buy IT. And Big Business--by the way, this is not just a
government problem. Big Business struggles with this as well,
because they have difficulty knowing what they need. The
question to me is, nobody should put a contract out unless we
have the knowledgeable people hired within--Federal employees,
not contractors, Federal employees who know here is the deficit
that we are trying to fill in terms of the hole in our
management or in our needs, here are the requirements, here is
what it should cost by taking a look across the--and I will
give you another example. Four and a half years ago, I
contested in a Back in Black report an Air Force contract. They
spent another $1 billion on that, and when they finished,
finally canceling the program, they ended up paying the
contractor money. There was never a lawsuit against the
contractor for non-performance, which there was non-
performance. So there was no accountability in the contracting.
So I guess what I am wanting to hear from you is Federal
procurement, there ought to be certain goals and standards. No.
1, if somebody is not fulfilling a contract, let us hold them
accountable. And I am talking about contractors. Hold them
accountable to do what they said they were going to do, and put
it into the contract, and give us walk-away rights when they
are not performing, not paying to get out of the contract on
something that they absolutely--and part of that comes from not
knowing what we want to buy. So I hope we will see a lot on
that.
One of the things, strategic sourcing, which is really
setting goals and measuring progress, and I know we have done
some improvement at GSA on that, and I know you were intimately
involved with this. Two years ago, the GAO recommended we do
the same thing at the Office of Federal Procurement Policy and
issue the guidance to save the money, improve the performance.
It has not happened. That was 2 years ago. GAO made that
recommendation. That has not happened.
Is it going to happen under your watch?
Ms. Rung. Thank you, Dr. Coburn. Strategic sourcing will be
a top priority for me, and to me it is one of the key
strategies under better managing and organizing the items that
we buy in common.
I will acknowledge, though, that the strategic sourcing
effort has made great progress in the last several years. The
creation of the Strategic Sourcing Leadership Council,
comprised of the seven largest spending agencies, has given it
incredible momentum and focus.
When I joined GSA, there were only three or four solutions
in place. Now we have over 24 underway in various stages of
implementation.
But there is a lot of opportunity out there, and it is
important that we are buying smarter and saving dollars and
improving services, and strategic sourcing will achieve all of
those.
Senator Coburn. So where do you direct that? Right now the
plan--and what we have seen at GSA is the easy stuff. But what
business does with strategic sourcing that I have not seen
government do yet is they go where the dollars are. They use
the Willie Sutton rule. We are going to use strategic sourcing.
We are going where the biggest dollars are spent.
Do you have any plans to try to implement that?
Ms. Rung. Yes, Dr. Coburn, services is indeed the biggest
area of spend, and right now the Strategic Sourcing Leadership
Council has one team stood up around human resources training
services. Because we spend so much money in this area, it is
important that we are buying it smartly. And it is a huge area
of opportunity. If confirmed, I would like to bring this under
the umbrella of the Strategic Sourcing Leadership Council, and
I think there are a number of ways to tackle it. It may not be
using the same strategies that we use for commonly purchased
commodities. For those items, it is easy to buy in bulk, and
that generates significant savings and delivers greater
services.
Something like a more complex professional services, there
are different strategies and strategic sourcing that you can
use for that. To me, one of the greatest things you can do by
bringing it under the umbrella of the Strategic Sourcing
Leadership Council is giving greater transparency and
visibility into what we are buying and who we are buying it
from, which we have very little visibility today. And by having
that kind of transparency into our complex professional
services, we can create common practices. We can ensure that we
have teams that have the expertise in these areas. We can drive
greater competition.
To me, there are a lot of strategies you can use under
strategic sourcing that may not be the same that we use for the
simplified commodities, but it is a huge area of opportunity.
And if confirmed, I would like to make some progress in this
area.
Senator Coburn. I just have one followup, and then I will
be through. I would imagine that if you would take and look at
the services contract given to the Federal Government and
compare both the earnings before interest, taxes, depreciation
and amortization (EBITDA) and the return on invested equity of
the firms that are running those businesses and then compare it
to the average EBITDA and return on equity in every other
corporation in America, what you are going to see is about a
2\1/2\ times rate, which means the profitability for selling
those services to the Federal Government is super high, which
means the potential for savings is super great if you can
really get competition into it.
And so, I would just suggest you take one agency and go
look at their contracting for services, and then go look at the
EBITDAs on the companies and the internal rate of returns on
invested assets and then compare that, and your eyes will open
wide at how lucrative the services business is in terms of
contracting with the Federal Government, which to me says there
is plenty of room to knock those costs way down through
competition or just say--do not give it to them, just say,
``Not good enough yet,'' and show them their profit and loss
statements and their published data, because it is--if I were a
young man leaving here, the first thing I would do is
contracting services to the Federal Government, because it the
best way to make millions of dollars.
Thank you.
Ms. Rung. Thank you.
Senator McCaskill. Thank you, Dr. Coburn.
And on that, I had a small businessman who came to my
Missouri coffee event this morning, and he pulled me aside and
said, ``I just want to tell you that the work you are doing is
making a difference.'' He sells things to the Federal
Government, and he says his profit margin has declined every
year over the last 4 years because we are tightening the screws
on buying stuff. But I think Dr. Coburn is right. While we have
gotten better at tightening the screws on buying things, maybe
other than hardware and software, we have not figured out the
cost of contracting in terms of services.
And on that note, I am trying to figure out why OMB has
declined to provide guidance to Federal agencies about cost-
benefit analysis on services. In July 2012, we were told that
you were going to issue guidance then. In followup questions in
March 2014 by this Committee, I asked Beth Cobert why OMB had
still not issued guidance on cost-benefit on contractors, and
she said, ``At this time we think the best approach is to allow
agencies to gain additional experience to evaluate what
additional governmentwide guidance may be needed to support
smart and fair use of cost comparisons.''
Well, that sounds like to me, ``We would rather not go
there, and we have decided not to go there.''
We know that there has been success at DHS. They have saved
$28 million by converting 2,600 jobs from contractors to
Federal civilians. We know the Army has reduced expenditures on
service contracts from $50 billion in fiscal year (FY) 2008 to
$32 billion in fiscal year 2009. That was 5 years ago. So we
have had some success in some of these agencies.
If you leave it up to these agencies, it is not going to
happen, Ms. Rung. If they do not get stronger guidance from OMB
about a cost--I cannot tell you how many times on this
Committee we have asked, ``Was there a cost-benefit analysis of
contractors versus employees?'' And almost never do they say
yes. And they are not sure what to do, so it is easier not to
do anything, and it appears you guys are not sure what guidance
to give, so nobody is doing anything.
So help me with this. Can you advocate and actually--I
mean, something is better than nothing. Let us not make the
perfect the enemy of the good. Can we get some guidance from
OMB about performance-based cost-benefit analysis on these
service contracts?
Ms. Rung. Senator, all the issues surrounding the
multisector workforce are extremely important, and I do
understand that OMB has made some progress in this area. My
predecessor I know met with industry and other stakeholders to
get their input. I know OMB has met with Department of Defense
and Department of Homeland Security to better understand what
they are doing in this area, and they did convene a meeting
with other agencies to have them share those experiences, and
OMB wants to use that experience to help inform them about what
tools agencies need to do better in this area.
If I am confirmed, I am happy to come back to you to
discuss this in greater detail.
Senator McCaskill. Well, I think it is really important. I
think if you do not have additional guidance in this area,
especially--there are so many agencies that, frankly, do not
have the lift to figure out what cost-benefit analysis they
should be doing. So I think it is really important that you
provide the guidance, and I will look forward to hearing from
you about that.
Let us talk about intergovernment contracting. This is in
some ways--I have been shocked at times when I have figured out
the intergovernment contracting, and yesterday was a good
example of it. We had a hearing on National Technical
Information Service (NTIS), which I assume you are familiar
with since you came from Commerce, and this is a great example
where we have an agency whose mission is no longer as relevant
because most of the stuff they provide to the public, the
public can get for free through an Internet search. And,
clearly, I think the public is going to figure out that they
are being taken if they are paying for it through the NTIS
portal. So they have decided they are going to start selling
services to Federal agencies, and they are not going by the
Federal Acquisition Regulation (FAR). And they are calling it
``joint partnerships,'' but they have 101 employees. That is
not a joint venture. That is a pass-through contract. Private
industry is doing these contracts.
So how does this happen? And how did they get to go outside
of FAR? And why in the world--I mean, there is no way it can be
less expensive, and we are going to drill down now on some of
their bigger contracts, because there is no way it is less
expensive. I mean, these agencies are gravitating toward NTIS
because they do not have to go through FAR. So talk to me about
how you are going to help us shut down NTIS.
Ms. Rung. Senator, thank you for the question. I am not
familiar with the specifics of the NTIS situation, but if
confirmed, I am happy to look into it further and to keep you
apprised of anything that I find.
Senator McCaskill. I mean, there are other examples. We
found examples where they were--one agency is actually
advertising to get other agencies to buy from them. This is
going on. Are you familiar with how much this is going on, this
interagency contracting, where somebody is glomming on to
somebody else's contract and they are out there actually
advertising as if they are a private business charging another
part of government so they can make more money, so they cannot
be as dependent on appropriations?
Ms. Rung. Senator, to me this speaks to the entire issue of
trying to get greater transparency into our acquisition
operations. There is a lot of activity that we do not have our
eyes on. We need better data and better information to be
making better decisions.
Senator McCaskill. Yes, like I do not even know how NTIS,
how this--I mean, there is nothing they do that the Government
Printing Office and GSA does not do. Nothing. And so one of two
things is happening. If they are getting business, they are
doing it better and smarter, and we should do it the way they
are doing it--if, in fact, it is cheaper. My guess is we are
going to find out it is not cheaper. My guess is we are going
to find out that the agencies did not care whether it was
cheaper or not, and maybe like Dr. Coburn said, they did know
what they wanted and it was salesmanship, because that is what
happens a lot in this space: ``You may not know what you need,
but we know what you need, and hire us and we will show you
what you need.'' And that is a seductive siren call to many
people in positions of leadership in government.
I have a few more, but I am thrilled that Senator Levin is
here--no, go ahead--and thank you, Senator Levin, for being
here, and we will give you an opportunity to ask questions.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Well, thank you very much, Madam Chairman.
And that last item you raise as a matter of fact has been a
subject of hearings, investigations, both on this Committee and
over at the Armed Services Committee. And so if you want to
learn more about the abuses of interagency contracting, there
are a lot of folks here that can help you and your staff. There
are a lot of folks in the Armed Services Committee that can
help you on that issue. We have tried to do some things. There
is an awful lot more to be done.
We have a situation where the requirements are being
circumvented in order to avoid requirements for competition,
for instance, and it is a big problem. So we hope you will get
into that if you are confirmed. It is one of the issues that I
wanted to raise.
One of the other issues has to do with the acquisition
workforce. On the Armed Services Committee, we have tried to
address problems in defense procurement for the last 10 years,
and one of the things that we hear over and over again was the
need to address shortcomings in the acquisition workforce--
short-staffed, undervalued, insufficiently trained. And so what
we did was we require kind of comprehensive workforce
development planning, and we established the Defense
Acquisition Workforce Development Fund actually to support
that.
Do you see similar shortcomings in the acquisition
workforce of civilian agencies? And if so, what plans do you
have to address the problem?
Ms. Rung. Thank you, Senator. When I served as Chief
Acquisition Officer at GSA, I had oversight of the Federal
Acquisition Institute, which is the civilian equivalent of the
Defense Acquisition University. They have made great progress,
but if confirmed, I look forward to making this an area of
focus for me.
There are a few areas where I think we can move forward
more aggressively. I would like to look, if confirmed, at new,
innovative ways we can train our workforce. I would like to get
industry input on the ways that they think there are smart
practices out there and we can do this better.
The Federal Acquisition Institute has recently created a
new, specialized Core Plus training where they take the
acquisition workforce and focus their skills on just IT, IT
project management. This is an area I think we can do more in.
I like the idea of creating specialized areas within the
acquisition workforce. You gain a real expertise in that area.
When I came to the Commonwealth of Pennsylvania, we had a
very fragmented, decentralized organizational structure, and
what we found was our acquisition professionals might one day
be buying a vehicle and the next day be buying pens and papers
and the next day a complex IT service. So we created a
centralized shared services operation, borrowing from the
private sector, and out of that we created specialized teams
around each commodity area. And to me, we could do something at
the Federal level where we really train our workforce and have
them specialize in certain areas so they gain that expertise,
they know the market, and they know what is available to them,
and they can really ensure that we are delivering the best
value in those areas.
Senator Levin. Let me change topics to a subject that a
number of us have been involved in very heavily recently, and
that is a loophole in our Tax Code which allows U.S.
corporations to move their tax addresses overseas in order to
avoid paying U.S. taxes. They kind of have two addresses: One
is the real world where they operate, and the other one is for
tax purposes. It is an alarming trend. There are many causes
for it, but, nonetheless, it is a problem which we have tried
to deal with actually over the last 10 years.
This Committee took action about 10 years ago to try to
stop our contracts from going to inverted corporations, and
under the leadership of Senators Collins, Lieberman, and
Grassley--and Senator Wellstone was very much involved--we put
a provision in the Homeland Security Act of 2002 which was
intended to stop contracts to corporations that move their
addresses for tax purposes out of the country to dodge our tax
system.
We expanded that provision in 2006 by including in a larger
appropriations bill, and in every year since 2008, it has been
included as a governmentwide provision in annual appropriations
bills. But the FAR Council, which, if confirmed, you will be
the head of, published a regulation that was supposed to
implement the provision, but it included a glaring loophole,
and the regulation says that the contracting restriction does
not apply when a continuing resolution (CR) is in effect, which
is exactly the opposite of what the rules are for continuing
resolutions.
So the problem is that companies which are inverted or
thinking about inverting will see the language of the rule as a
free pass to ignore our appropriations law and then bid for
Federal contracts. And when Federal contracting officers see
that the regulations have that language in it, they then
conclude that the ban does not apply, for instance, to fiscal
year 2011 funds.
Now, that view is not correct, but, nonetheless, it is in
that regulation, according to some, and the question is whether
you will update that regulation, whether you are going to look
at it and correct it to reflect Congressional intent and what
the rules are relative to continuing resolutions.
Ms. Rung. Thank you, Senator. I have recently been made
aware of this issue, and it is critically important that we
have clear guidance in this area to our acquisition workforce
and that we are fully implementing the intent of the law. So if
confirmed, I look forward to keeping you apprised of our
progress in that area.
Senator Levin. OK. Thank you.
Thank you very much, Madam Chairman.
Senator McCaskill. Senator Coburn.
Senator Coburn. I would note for my colleague in friendly
jest, the practice of medicine is about finding out what the
real problem is. The real problem is that corporate tax rates
in this country, corporate plus local, are twice what they are
in the average of the rest of the world. Inversion is a
response to fixing that.
The second point I would say kind of in jest is if we did
not have CRs, we would not be having that problem. We should be
doing our work. And I know he has tried to do that, so it is
not a dig at you.
One final question from me. You espouse transparency here.
How do we help the agencies get the data they need to know when
a contractor is charging different rates for the exact same
thing and the same service to different agencies? And do we
need a regulation that says if you get a contract at one agency
but you have four other contracts at four other agencies, we
are going to pay you the lowest rate? How do we get that
transparency going?
Ms. Rung. Dr. Coburn, I really appreciate that question.
When we came to the Commonwealth of Pennsylvania and we began
our strategic sourcing effort, we began with data analytics,
and it showed us that we had a huge variance in what we were
paying.
One example, we had a State hospital paying $23 for a case
of ketchup, and we had another State prison paying $12 for the
exact same case of ketchup. That kind of price variance goes on
across government.
I think there are a couple positive steps we are making in
this area: The good work of this Committee to move forward on
prices paid. GSA has just launched a first prices-paid portal
where we have information at the transactional level and the
actual prices paid for specific commodities.
If confirmed, I would like to ensure that we continue to
put good data and additional information into that tool and we
are using it. We have shown that when we have that kind of
data, we can negotiate pricing down significantly with the
vendors.
I think the strategic sourcing effort is another way we can
get great data. Strategic sourcing is all about using data to
make the right decisions.
So I think there are a number of tools in place to help us
with this effort. The benchmarking initiative is another one
where we are tracking agency performance at the bureau level
across various functional areas.
So if confirmed, this will be a strong area of focus for
me.
Senator Coburn. All right. Thank you.
Senator McCaskill. Thank you, Dr. Coburn.
On that note, not only price paid but past performance of
contractors, I mentioned this in my opening statement, but I
want to go back to it before we let you go.
Did you have any role in the development of FAPIIS when you
were at GSA?
Ms. Rung. I did not. That resided within the Federal
Acquisition Service led by the Commissioner who reported
directly to the Administrator. But certainly as Chief
Acquisition Officer, I played an advisory role on acquisition
issues in general.
Senator McCaskill. Well, you know the problems we have. I
mean, it is just a mess. We have reliability and data quality
issues. We have duplicate entries. We have a lack of
consistency and detailed information and technical
malfunctions, like not being able to use the backlink. If you
are not accessing FAPIIS through Internet Explorer, the
backlink does not work. I mean, stuff like that, it is no
wonder that we cannot rely on it because it is frustrating to
use. And when something is frustrating, I mean, I know what I
adopt in my daily technology is the stuff that is easy. And
this is something we are going to have to make obviously
easier.
Getting this right is a huge component of your work, not
only making sure everybody knows what we are paying for stuff
other places, but making sure if you are about to contract with
someone who has had real integrity and performance problems.
And, in fact, it is the same company that had problems even
though it is calling itself something different.
So if you are confirmed, I would like a commitment from you
today that you would provide us with updated numbers on the
percentage of past performance contractor evaluations that have
been completed and, second, the annual goals for the completion
of information in FAPIIS governmentwide so that we can track
the progress of the use of this database.
So two things: How many of the evaluations, what percentage
of them have actually been done? And, second, what is the
adoptive use of FAPIIS? Is it being used across the board? You
all are in a position to track that, and I think if we start
setting annual goals and we start reporting on those annual
goals, it will drive everyone toward the right result.
Ms. Rung. Senator, thank you for the question, and let me
just reinforce that ensuring that our contracting officers have
access to timely, accurate, relevant information is critically
important to making the best contracting decisions.
We have made great progress in this area. OMB has tracked
the progress of agencies with past performance and FAPIIS use.
When I served as Chief Acquisition Officer, past performance
metrics were in my performance plan, and they were in the plan
of my senior procurement executive.
As I understand, the data is currently being scrubbed and
reviewed by the agencies, but I am happy to take that back to
my colleagues and get back to you on that issue.
Senator McCaskill. That is great.
Ms. Rung. Thanks.
Senator McCaskill. Senator Ayotte.
OPENING STATEMENT OF SENATOR AYOTTE
Senator Ayotte. I want to thank the Chairman.
I wanted to ask you about an issue about insider threats.
This is an issue that we have seen some very damaging breaches
to our national security workforce safety that have come as a
result of actions of contractors. And the examples that come to
mind, of course, are Edward Snowden and Aaron Alexis, both of
whom were working in a contract capacity.
This obviously is an important issue, just thinking about
safety, security of data, all the things that those two
individuals have done. So on this note, as I understand it, in
February the White House actually had issued a report--I
believe it was the White House or it was the Office of
Procurement Policy--that said that your position will work with
the Office of Federal Procurement Policy to propose a change to
the Federal Acquisition Regulations to impose those applicable
reporting requirements on contractors and ensure that
enforcement and accountability mechanisms are in place. And
this was in reaction to some of these events.
So I wanted to ask you, what thoughts do you have on
Federal oversight over contractors given those incidences? How
do we ensure that not only are we addressing oversight within
employment within the government, but also thinking about those
that we contract with?
Ms. Rung. Yes, thank you, Senator. It is important that we
have rigorous oversight of our contractors, and OMB's role is
to be the agency which ensures that we are keeping our eyes on
it and we are working with other agencies to track their
progress. And if I am confirmed, I will commit to playing that
role, both with the contracting community and our Federal
employees as well.
Senator Ayotte. Do you have any particular thoughts on that
process? For example, to the extent that we are using
contractors and they are in positions like someone like Edward
Snowden, for example, how we can have a more rigorous
evaluation process in those instances with the contracting
firms themselves? Because he is the most high profile, but we
have had other examples of it.
Ms. Rung. Senator, the issue of the multisector workforce
is an important one. It is not one that I have great
familiarity with. But I understand it is important, and if I am
confirmed, I will look into this area.
Senator Ayotte. And I came here a little late, but what
will be your biggest priority in this position?
Ms. Rung. Thank you. There are three main priorities for
me, Senator which are:
One around better managing those things that we buy in
common called ``category management,'' and strategic sourcing
will certainly be a strategy we use under category management.
The second area of priority would be driving greater
innovation in our acquisitions.
And the third area would be focusing on the workforce and
ensuring that our workforce has the tools they need to meet
today's challenges as well as tomorrow's.
Senator Ayotte. I thank you very much for your willingness
to serve in this position.
Ms. Rung. Thank you.
Senator McCaskill. Well, I will call this hearing to a
close before anybody else gets in under the gun. [Laughter.]
There were others that said they were going to be here, but
we have been at this for an hour, and I think that is
sufficient.
We have some to-do's after you get confirmed, which I am
hopeful you will quickly so that you can get to work. You have
an incredibly important responsibility. People do not realize
how many strong, capable, and professional people are working
in the Federal Government trying to do the right thing every
day. And you are someone who is experienced in the frustrations
of this area of our government, that is, the accountability for
how money is spent and how we buy things. And it is very
important. I wish more people were interested in it, because I
think the more eyes we have on this, the better all of us can
do at spending taxpayer money very wisely and providing the
goods and services that we should be providing as a Federal
Government.
Senator Ayotte. Before we wrap up, I would be remiss if I
did not mention one thing. The Chair has been excellent in her
focus on these issues, but it is also her birthday today, so
happy birthday.
Senator McCaskill. Thank you, Kelly. Thank you very much.
And we do not like to dwell on that at my age, so I will move
right along.
I would like to thank you for appearing before the
Committee today. The nominee has filed responses to
biographical and financial questionnaires. Without objection,
this information will be made part of the hearing record\1\
with the exception of the financial data, which are on file and
available for public inspection in the Committee offices.
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\1\ The biographical and financial questionnaire for Ms. Rung
appears in the Appendix on page 25.
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Without objection, the record will be kept open until noon
tomorrow for the submission of any written questions or
statements for the record. And this hearing is adjourned. Best
of luck.
Ms. Rung. Thank you, Senator.
[Whereupon, at 11:29 a.m., the Committee was adjourned.]
A P P E N D I X
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