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

can be improved; opportunities for managerial improvements over both the shortand long-term; specific areas where further study can be justified by potential savings; and information and data relating to governmental expenditures, indebtedness, and personnel management.

In carrying out these functions, the Survey is focusing principally on the operational aspects of Government programs as they currently exist. I would like to emphasize this at this point. We are looking at operations, not at programs, whether they are justified or whether they exist. Therefore, we are looking at how efficiently the programs are administered. To do this job, the Survey itself is organized and managed along three primary managerial lines: an executive committee, a management office, and 35 task forces.

The Executive order established, as you know, an Executive Committee of the President's Private Sector Survey on Cost Control. The members of the Executive Committee were selected from lists prepared by the White House and Mr. Grace, the chairman. The committee consists of private citizens, chosen principally for their special ability to give detailed advice on cost-effective management of large organizations; for their record of performance in their own industry; and for their willingness to contribute their time and resources to participate in this Survey.

Many committee members head the largest companies in the United States, and they represent a wide variety of types and sizes of businesses. The companies are manufacturers and marketers of virtually every type of industrial and consumer product, and they provide a broad spectrum of services to businesses and to individuals. It is a nonpartisan, nonpolitical group from about half the States in the United States and from the District of Columbia.

In addition to serving on the Executive Committee, most of the executive committee members are acting as cochairpersons to the 35 Survey task forces which are examining the operations of the departments and subdepartments, as well as independent agencies of the executive branch.

It should be noted at this point that the Executive Committee members are working closely with the Cabinet Secretaries, agency heads, and key staff of their assigned agencies. The reception and cooperation accorded the members by agency leadership has been outstanding, and we are very grateful for their assistance. Mr. Chairman, I believe you have been furnished with the names of the Executive Committee members, and I have brought an updated list which I will be glad to leave with the committee at this time.

With regard to the management office, the Executive order also provided for a management office which would furnish overall administrative staff support to the committee, guide the day-to-day operations of the Survey, and provide liaison with the Executive Office of the President. The management office has a director, a deputy director-who is the governmental employee designated as the Government liaison by the Secretary of Commerce-and a chief operating officer. It also includes 12 desk officers, most of whom are Washington-based senior executives with broad experience working with the Federal Government. Each is responsible for preparing the assignments and guiding the efforts of two to three task forces into the most productive areas of review, coordinating communications, and monitoring progress.

The management office also has on its staff a legal counsel and public affairs section. Survey operations are coordinated and communicated with the Inspectors General offices, the Office of Management and Budget, the General Services Administration, the Office of Personnel Management, and the Assistant Secretaries for Management of the different departments.

I would also like to emphasize that we have benefited from the cordial reception and extensive discussions that I, myself, and numerous others of the survey have had with the top officials and staff of the General Accounting Office and the Congressional Budget Office. It is very encouraging that all of us, whether from the private sector, the agencies under review, or the agencies of your branch, the legislative branch, are so united in our desire to reduce wasteful spending and inefficiency in Federal operations. With regard to the task forces, the balance of the organization of the President's Private Sector Survey consists of 35 task forces. which are reviewing the operations of the departments and agencies of the executive branch. These task forces include 22 which are assigned to cover individual Cabinet departments or subdepartments and a number of independent agencies. The other 13 task forces are studying functional areas, which cut across the departments and the agencies, such as data processing, procurement, real property management, personnel, user fees, and so on. I believe the committee has received a list of these 35 task forces.

Each of the 35 task forces has members of the executive committee who act as chairpersons to that task force. A task force typically has four cochairpersons, a project manager, and from 25 to 30 members. Project managers are generally senior employees of cochairpersons, who have recruited these people and pay for them, some of them from their own companies. These project managers bring extensive managerial expertise and commitment to the review of their assigned areas. These 35 task forces are in various stages of analyzing areas of study and preparing work plans.

In an undertaking such as the survey, with so many subelements, operating in so many places, under tight time pressures, certain internal control systems and procedures are necessary to insure cohesiveness of approach and consistency of execution. To meet this need, the chairman and the management office are leading each task force through a fourphase sequence of activities. This is the chronology which we followed in developing the organization and looking into the areas of study.

The first phase covers the assignment and clearance of executive committee members, recruitment of project managers and core staff, orientation briefings of cochairpersons and staff by the management office. For this critical phase, we in W. R. Grace & Co. prepared bibliographies of books, brochures, and articles written in recent years on the Federal Government, and we excerpted a great deal of material relevant to the different departments and agencies of the executive branch. We felt this was the duty of the chairman to prepare a lot of this background material, and we at W. R. Grace & Co., felt that, therefore, the chairman was entitled to support in preparing all this material.

This material I just mentioned, I do have a sample of it here, and I would be happy to leave it for you and your committee to show

the kind of research we have done-one sample, a representative sample. This little booklet identifies 349 different books, pamphlets, articles, and studies that have been written, and also hearings before the Congress on the Federal Government and its functions. We bought all those books, and they are in the library of the task force.

We further excerpted from many of those books what we regarded as interesting key conclusions in those studies, so that the task forces have been able to examine these, see if they think they are interesting for them to look at, and then get a hold of the basic book from which they have been excerpted. It is a useful tool that we thought has been helpful, and I think it has been very helpful. So I will be glad to leave it with the committee for their examination. Second, we in Grace examined Federal budget trends for all major programs over the last 20 years.

We synthesized a great deal of the material into a single spread sheet, relating to each of the departments or major agencies. In other words, Agriculture, Labor, State, Defense, you name it. I brought one sample, as they are a little heavy to carry. This is what we call a spread sheet, and I guess we could go across the room with it. It is a good résumé of the number of personnel and budget authorizations and expenditures of certain sample years over a 20-year period, which gives a good perspective of trends and so on. We have one for each department; this happens to be Agriculture, which I just brought as a representative one. You might find it as an interesting background study.

We availed ourselves of the numerous studies that have been made of the executive branch, particularly the unimplemented recommendations of your agency, the General Accounting Office, as well as the findings of the Congressional Budget Office, the Office of Management and Budget, and Inspectors General reports that have been prepared for the different agencies. We studied all of those documents. As you know, the General Accounting Office has published-which was very helpful to us—this huge number of recommendations that they have made that have not been implemented. To us, it seemed that this was a good beginning, a grist for the mill, and to the extent that we were able to conclude that many of them were meritorious and should have been implemented, I believe we will be re-recommending them. But at any rate, there are many of them, as you are well familiar with.

Since that is very complex, we took all those recommendations, we segregated them into those that apply to each of the departments and agencies, and we compiled an index so that each task force was able to have a ready reference to what was in those books as it related to their department. For instance, the Agriculture Department, we searched out the recommendations relative to the Agriculture Department that referred to the Office of the Secretary, the department administration, the Office of Government and Public Affairs, the Office of the Inspector General, the Office of the General Counsel, and we listed the pages where those recommendations could be found for each task force. This was a rather extensive, very difficult job, but we have such an index from all these Government recommendations for each task force, for each agency, and we gave it to them, which really gave them quite a

headstart. This was such a large project and so complex, as you know much better than we do, and we felt that this would help speed up our examination because our time is relatively limited. I think it has turned out to be a very good tool, and I will also be happy to make this available to you for your examination, and incidentally, if you think it is useful, I would be glad to furnish the spread sheet on all the agencies that we did.

I just mention those to tell you that this is the kind of research we did, and clearly gave us a head start. It took a great many people in W. R. Grace & Co., and we have defrayed a rather extensive amount of cost. But since Mr. Grace is the chairman, we felt that he was entitled to that kind of support, so we proceeded.

A second phase of our development of working toward our study and recommendations had to do with the completion of the task force recruitment. First we had to find all these executive members. Some of them could not serve. Some came and decided they did not have the time. But then beyond that, there was this very large problem of recruiting all the people who were going to do the examination. So that phase involved the recruitment, the identification of interesting issues as they were gleaned from these recommendations that have heretofore been made by the GAO and others, and the preparation of work plans which identified the initial areas of further study.

The third phase-and I think that most of the task forces are now in this phase-involved the performance of in-depth studies by the task force, periodic progress reports of what they are doing to the chairman and the management office, discussion of preliminary findings with agency heads and the management office.

The last phase of our work will be the preparation of drafts and the final task force reports and the dismissal of all the people who are working on this. We have not arrived at that phase yet. We are gradually, and hopefully speedily, approaching it. That will handle the resolution of this whole effort.

In addition, the management office, which I have been trying to describe to you, provides each task force with operating guidelines, report formats-how we would like them to give reports to uspreparation instructions, and disclosure and conflict-of-interest guidelines. We have given all the task forces this material.

You have requested, Mr. Chairman, that we discuss the nature and purpose of the task force work plans. I would like to describe them for you briefly. They are basically management tools, of which we have a number, which are designed to assist the task force in planning their work, in identifying areas they will study. They are used for purposes of setting deadlines, and we are examining them as they are submitted. They also outline the work they need to do to recruit additional people. So they are a multipurpose kind of work plan. Naturally, these work plans change, and as a matter of fact, they have been changed by the different task forces as they pursue their inquiry. Some of the areas they thought would be interesting, when they get into them they find there is not much use in pursuing it, and they change them. Others they find may be of interest. So they are really fluid documents for work

purposes.