To save $1 trillion, Uncle Sam should take cues from CEOs, group says

By Jia Lynn Yang
Washington Post Staff Writer
Tuesday, October 12, 2010; 8:01 PM

Washington could run a little more like Silicon Valley, say several tech chief executives who have compiled a report on how the federal government can save $1 trillion.

Saying they've tried several of the strategies in their own businesses, the executives presented White House officials last week with ideas on how the government can cut the number of data centers it uses, reduce fraud in programs by using technology and streamline supply chains, among other suggestions.

The group, the Technology CEO Council, includes IBM's Sam Palmisano, Intel's Paul Otellini and Motorola's Greg Brown.

"This distinguished group of corporate leaders . . . believe that by utilizing some of the best practices of the private sector, the government can realize significant savings and improve the service delivered to you, the taxpayers," Jeffrey Zients, chief performance officer for the Office of Management and Budget, wrote on the OMB blog after the meeting. "We couldn't agree more."

Zients and OMB chief information officer Vivek Kundra have spearheaded some of the ideas as part of a mandate to modernize the federal government by improving its information technology and making it run more efficiently.

In their report, the executives say they want to offer solutions that won't require legislation.

"The CEOs chose to examine the topic in part because discussions of the deficit too often lead to across-the-board spending cuts or across-the-board tax hikes," said Bruce Mehlman, executive director of the Technology CEO Council and a partner at the lobbying firm Mehlman, Vogel, Castagnetti.

The biggest potential contributor to savings, the executives say: overhauling the government's supply chain, which could save $500 billion over the next 10 years.

The report says that the federal government has tried this before, including in 2005. The problem with that effort, they say, is that the government limited its focus to commodity purchases and not reforming how it picks suppliers across the board. As a corporate example, they said that Motorola integrated its supply chains in 2004, and the company said it has saved about $1.2 billion every year.

Zients said the government is consolidating its purchase of office supplies, which will save 20 percent or $200 million over four years.

Another idea from the executives: reducing the number of payments that shouldn't have been made under federal grants, Medicare, food stamps and tax refunds. Their report says that new analytical techniques can help the government pick out the bad payments and save roughly $200 billion over 10 years.

President Obama has set a goal of cutting improper payments by $50 billion by 2012. The OBM has created a "do not pay" list to try to keep mistakes from being repeated.

As lawmakers look for ways the government can save money, a report last year by McKinsey & Company showed that an improvement of 5 to 15 percent in the government's operations could save $1.3 trillion.

Michael Nelson, a visiting professor at Georgetown, said reports from the tech council can be influential.

"The main thing is who's saying it," Nelson said. "To have seven CEOs stand up . . . they're putting their credibility on the line."

Nelson, who read the group's reports when he worked in the Clinton administration, said the group helped shape thinking in Washington on a number of issues, including e-commerce, export laws around personal computers and electronic health records.

The OMB has turned to corporate America for answers before. In January, the White House invited several high-profile executives to come up with ideas on how to make the federal government run more like one of the country's best businesses. Executives included Microsoft chief executive Steve Ballmer, PepsiCo's Indra Nooyi and Time Warner's Jeff Bewkes.

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