The Productivity Revolution Trickles Into Government

By Steven Pearlstein
Wednesday, June 24, 2009

Not long after taking over as secretary of energy, Steven Chu called in the top officials working on a program that had been one of his department's top priorities: providing government loan guarantees for $80 billion in clean and renewable energy projects.

Congress had authorized the program in 2005, made the first appropriation the year after, and by the time gas prices reached $4 a gallon last year, even the Bush administration was keen to move ahead. And yet by the time the new energy secretary called his team together early in 2009, not a single loan guarantee had been approved.

When could he expect the first one? Chu asked.

Last quarter of 2010, he was told.

The incredulous new secretary declared that that would not do. He hired a management consultant, Matt Rogers, and announced that he would shake up his department's notoriously slow-moving bureaucracy.

It didn't take long. By March 20, Chu announced a conditional offer to guarantee a $535 million loan to a California firm to construct a commercial-scale manufacturing plant for its cylindrical solar panels. Last week, four utilities disclosed that they had been chosen for loan guarantees for next-generation nuclear reactors. And by the end of the year, the department expects to be pumping out the guarantees at the rate of several every month.

What Chu discovered is what corporate executives and management consultants have long known -- namely, that there are tremendous efficiencies to be achieved by reengineering the way that work is done. And significantly, it can be done even in government, without changing laws, firing lots of employees or outsourcing work to the private sector.

That is the same conclusion reached by McKinsey & Co., which published a report this week suggesting that the government could save $45 billion to $135 billion a year by increasing government productivity gains to match those of the private sector.

Tom Dohrmann, one of the authors of the study, said there are numerous examples of departments that have shown how it can be done. The Defense Department, for example, has recently reduced the amount of time needed to obtain security clearances for civilian employees from an average of 440 days to 40. And the Internal Revenue Service has reduced the average time to hire a new employee from 120 days to 15.

Such efforts are almost sure to take on more importance as the Obama administration moves to show its seriousness about reducing the budget deficit. Peter Orszag, the director of the Office of Management and Budget, tried to kick-start that effort earlier this month with a memo to all agency heads, ordering them to come up with a contingency plan for cutting spending by 5 percent next year. And in the next few weeks, Jeff Zients, the Washington business executive nominated to be the government's "chief performance officer," should begin knocking on the doors of Cabinet secretaries with some strategies for cutting costs by reengineering processes and improving productivity.

According to department officials, Chu's success with the loan-guarantee program began when he turned his original question around and asked the staff what it would take to begin approving projects within three months.

The staff's response was to present Chu with a long list of laws and rules and standard procedures that had to be complied with as part of the loan approval process, each one requiring weeks if not months to complete. On further inquiry, however, it turned out that, as secretary, Chu had the authority to waive, alter or expedite more than half of those. It was just that nobody up to that point had bothered to ask.

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