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CONTENTS

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General Accounting Office material submitted to the committee-Continued
General Accounting Office report on the President's Private Sector

Memo from Stanley Harsh to task force members on conflict of

interest, July 23, 1982.
Agreement on disclosure of information that task force members sign

OMB memo to Assistant Secretaries for Management, April 5, 1982....
Survey on Cost Control, documents and charts-Continued

Survey briefing document, May 13, 1982 ...
Survey Management Information Report, August 13, 1982
Project managers
Personnel Task Force
Social Security Task Force
Low Income Standards Task Force
Correspondence
List of agency contacts
Summary of agency interviews.
Tabulation showing personnel from corporations, employee name and

position, and position held with the task force survey. General Accounting Office opinion...

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PRESIDENT'S PRIVATE SECTOR SURVEY ON
COST CONTROL IN FEDERAL GOVERNMENT

WEDNESDAY, SEPTEMBER 15, 1982

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INVESTIGATIONS,
COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C. The subcommittee met, pursuant to notice, at 10:18 a.m., in room 311, Cannon House Office Building, Hon. William D. Ford (chairman of the subcommittee) presiding.

The CHAIRMAN. The Subcommittee on Investigations of the Post Office and Civil Service Committee meets this morning to take a look at how the President's Private Sector Survey on Cost Control in the Federal Government is progressing.

In opening his press conference last February 18, the President announced his intention to launch an extensive private sector investigation of inefficiency in the Federal Establishment. Later, in March, the President asked J. Peter Grace, chairman of W. R. Grace & Co., to head a committee that would look into every nook and cranny of Government to ferret out wasteful procedures. The Executive order formally establishing the machinery for the Survey came on June 30. At that time, there were a few detailed news accounts about Mr. Grace and his mission.

Since then, however, there has been a paucity of information about the private sector investigators and the work they are doing, except from concerned employees and managers in agencies of Government who, for some time, have been sending inquiries to our committee to find out why they were being asked to do certain things, which brought this matter to our attention.

At the outset, I would like to make it clear that the Subcommittee on Investigations has no reason to believe that there is any deliberate attempt to conceal the activities of the study. It is just that nobody has noticed them until very recently. But given the scope and mission of this large and ambitious undertaking, we feel there is a need for Congress to know much more than it does about how the inquiry is developing, who is doing the work, and the methods that are being employed. Quite frankly, we are in the dark about what is going on. I hope that today's witnesses will remedy that situation for us.

The reason for the subcommittee's keen interest is readily apparent. The Committee on Post Office and Civil Service has jurisdiction over at least two of the entities that we know are being scrutinized by the study group at the present time—the U.S. Postal Serv

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ice and the Office of Personnel Management being two of the agencies where we have had numerous inquiries. Moreover, the results of the President's Survey could have a deep and lasting impact on the entire Federal work force, which clearly falls within the committee's purview. We would be remiss in our duty if we failed to inquire about how such an indepth survey is progressing and along what lines.

In his Executive order, the President pointed out that the work of the private sector investigators would have to be completed by December 31, 1982, to comply with the Federal Advisory Committee Act, which we assume covers activities of the study group. That apparently was assumed in the announcement by the White House. So there is not very much time for the Congress to find out how the project is moving along. We are facing imminent adjournment before the elections of November.

As we understand the structure, there is an executive committee, of which Mr. Grace is chairman. This committee has about 125 members, most of whom are executives in large corporations. There is a private foundation that solicits funds from large corporations and has a contract with the Commerce Department for the study. In addition, there are 35 separate task forces, each assigned the task of studying a specific department or agency. I am not sure, and we will find out this morning, whether the task forces are assigned by department or agency or by function, but we think that most of them are by department or agency. It is our understanding that there are about 1,000 task force members, most officers from private corporations, at work across the landscape of the Federal Government.

The committee is especially interested in getting some idea about who these people are, their methods, and their assigned missions. We are interested, as well, in the arrangement with the Department of Commerce, the funding of the overall operation, and the involvement of agency personnel and facilities. We also would like an insight into how various members are cleared for security and how they are screened for potential conflicts of interests. I am confident that today's witnesses can shed some much needed light on the activities of the different groups involved in the President's Survey.

Our first witness will be Mr. Felix Larkin, a member of the executive committee. I want to say that we thank Mr. Larkin for accommodating the committee. We invited Mr. Grace, chairman of the executive committee, but he could not appear because of business commitments. Thus, Mr. Larkin had to appear on very short notice.

The committee is appreciative, Mr. Larkin, of your willingness to respond in a positive way so quickly after our request. You may proceed, if you have an opening statement, or if not, we will proceed with questions, whichever you prefer.

STATEMENT OF FELIX E. LARKIN, MEMBER, EXECUTIVE COMMITTEE OF THE PRESIDENT'S PRIVATE SECTOR SURVEY ON COST CONTROL, ACCOMPANIED BY J. P. BOLDUC, CHIEF OPERATING OFFICER OF THE SURVEY

Mr. LARKIN. Thank you, Mr. Chairman. I do have an opening statement, and with your permission, I would like to read it. I believe you have copies of it. You can follow it, if you care to, as I do read it. It should not take very long. With that statement, I will begin.

Mr. Chairman and members of the committee, my name is Felix Larkin, and I am a member of the Executive Committee of the President's Private Sector Survey on Cost Control. For further identification, I am also chairman of the executive committee of W. R. Grace & Co. I am a former president and a former chairman of W. R. Grace & Co., and I have been associated with Mr. J. Peter Grace for the last 30 years in the business of W. R. Grace, and I have worked closely with him on this project since its inception.

I am present today as a result of an exchange of correspondence between you, Mr. Chairman, and Mr. Grace. As Mr. Grace indicated, his business commitments at this time are very extensive, and it is not possible for him to attend. I am pleased to appear on his behalf, and I will be glad to give you background information on the President's Private Sector Survey and discuss the items listed in your letter of August 30 to Mr. Grace.

Before proceeding, I would like to introduce my associate who is sitting here, Mr. J. P. Bolduc, who is a vice president of Booz-Allen & Hamilton, Inc., and who is the chief operating officer of the Survey. Parenthetically, Mr. Bolduc is one of very many who is contributing his services, as I am, without cost to the Government.

I think it would be helpful if I briefly review the chronology of the President's Private Sector Survey. As you will recall, initially the President announced on February 18, 1982, the establishment of a Private Sector Survey on Cost Control in the Federal Government. He was taking this step, he said, because:

Our Government is spending money at a rate that is intolerable if not incomprehensible-almost $2 billion a day; $1,400,000 a minute; and about $23,000 a second.

The President further stated that the Private Sector Survey: Will report directly to me (the President) and I have made it clear that, in examining Government efficiency, I expect them to roll up their sleeves and search out waste and inefficiency wherever it is to be found in the Federal establishment.

The President also said: Special emphasis will be placed on nonessential administrative activities and increasing management effectiveness.

By Executive Order No. 12369 of June 10 of this year, the President expanded those above objectives. Under that Executive order, an executive committee was established, and its functions were outlined, as follows:

The committee shall conduct in-depth reviews of the operations of the Executive agencies as a basis for evaluating potential improvements in agency operations.

In fulfilling its functions, the committee shall consider providing recommendations in the following areas: Opportunities for increased efficiency and reduced costs in the Federal Government that can be realized by Executive action or legislation; areas where managerial accountability can be enhanced and administrative control

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