Reduce Internal Regulations by More Than 50 Percent
Reduce Internal Regulations by More Than 50 Percent
Background
The cost of internal agency directives is tremendous. The cost of
researching, writing, printing, storing, and maintaining internal
directives, guidance, and procedures are themselves huge. However, the
additional expenses of training, supervising, implementing, waiting for
clearances, collecting and analyzing data, monitoring performance, and
enforcing and auditing regulations, plus preparing the countless
reports, generate further costs not always easy to measure but which are
equally draining on limited agency resources. A full accounting must
also include the cost of delay, confusion, loss of initiative, and
paralysis resulting from the inevitable impression on so many workers
that nothing is permitted, least of all creativity or initiative.
The demands of internal directives and regulations are growing faster
than the executive branch itself over the past 10 years. Although
executive branch personnel grew only 7 percent between 1980 and
1990/1991, in the personnel function the number of employees increased
11 percent, in financial management staff grew 27 percent, and in
procurement it jumped 60 percent.(1) In the case of procurement, much of
this growth is attributed to the increase in the number of internal
directives.(2)
A Case Study. Figure 2 is a tally of internal regulations and the number
of pages of directives and regulations affecting one field office in the
Department of the Interior--a relatively unregulated state office of the
Bureau of Land Management in Idaho. In other words, the total is a
minimum rather than an average or a worst case. Using the most
conservative estimates, there are nearly 33,000 pages of internal
regulations and handbook requirements that apply to this office of less
than 200 people.(3) The numerous additional agencies with at least
partial jurisdiction, plus the case law and interpretations, and various
other commentaries, would increase the total pages several fold, as
would applicable state and local regulations.
This tally of directives, guidance, and regulations does not directly
measure their burden. A single regulation may impose a huge burden,
while in some cases there were several regulations per page. But the
tally does indicate how obsessive the regulatory process has become. It
is hard to believe that this number of regulations can be internally
consistent and always the best approach for local circumstances.
Sources of Overregulation.
It is easy to blame the proliferation of regulations on Congress, but
the issue is more complex. Problems may be seen as falling into one of
three categories: general system failures, individual failures (due to
problems in training, judgement, or integrity), and acceptable error
levels. The private sector approach, which admittedly may be very
difficult in the public sector, is to treat system failures
aggressively, provided the solution is cost-effective. It also
rectifies individual failures by providing training or other remedies to
the individual (like firing people who steal). General error rates are
monitored to be sure they do not become uncontrollable. The current
government approach, by contrast, is zero tolerance for error and
treatment of every failure as a general system failure, remedied solely
by law or regulation even if the occurrence was isolated.
There are perverse incentives that contribute to the proliferation of
internal directives and regulations. For example, successful vendors
have a self-interest in complex procurement regulations--they have
adapted to them, they bar entry of competitors and, in certain cost-
type contracts, vendors get paid for the time required to comply with
the regulations while outsiders do not. Federal employees rationalize
requests for larger staffs and position upgrades on the ever more
complex regulations their agencies must enforce.(4)
Figure 2
Tally of Internal Directives and Regulations Affecting The Idaho State
Office of the Department of the Interior's Bureau of Land Management,
1993
Manual Biann.
Fed Dir/ Circ/ Instr.
Source Regs---Supplmnts---Bltns---Stmnts---Memos---ndbks
#/Pgs. #/Pgs. #/Pgs. #/Pgs. #/Pgs. #/Pgs
OPM */* 59/*
GSA 6,160/2,687
OPM 2,260/1,131 2,040/1,721
OSHA. 587/1,456
EEOC. 45/30 */*
DOT 136/61 */*
DOE 63/258
DOI 1,628/3,081 830/1,890
BLM 19,052/9,546 750/* 7,366/8,093
State of Idaho BLM 109/917 227/2,047
Total 9,251/5,623 20,789/13,544 59/* 2,040/1,721 977/2,047 8,196/9,983
GRAND TOTAL OF PAGES 32,918
The tally of pages was conducted by actual count of pages. The tally of
regulations was conducted by actual count using the tables of contents
when available. Both tallies were conducted with assistance and guidance
from the responsible offices. In some cases, there is more than one
regulation to a page. Guidance in the handbooks is required, equivalent
to a regulation. Totals for OMB Circulars and Bulletins and for BLM
Instructional Memoranda are for Fiscal Year 1993--large quantities of
additional ones are still in effect from previous years. The tallies
from handbooks and interpretive statements are based on the number of
directives within the handbooks and interpretive statements
respectively. The asterisk (*) notes offices that were unable to provide
tallies, usually because the totals were larger than they were willing
to count.
Narrow definitions were used for regulations and handbooks. As a result,
their tallies are vastly lower than other published figures, which
include case law, interpretations, and other secondary sources. These
secondary sources frequently exceed 5,000 pages per agency.
The tally is limited to the chain of command (the Department, the
Bureau, and the state office itself) and the primary federal agencies
with jurisdiction over the operations in the state office (Office of
Management and Budget, General Services Administration, Office of
Personnel Management, and the relevant portions from the Occupational
Safety and Health Administration, the Equal Employment Opportunity
Commission, the Department of the Treasury, and the Department of
Energy). The tally excludes the regulations of numerous additional
federal agencies with jurisdiction over aspects of the state office
(e.g., Environmental Protection Agency, Historic Preservation, Small
Business Administration, etc.).
The tally also excludes the regulations and case law covering various
aspects of government legal process that also have jurisdiction over the
state office. These include the Administrative Dispute Resolution Act,
the Agency Practice Act, the Claims and Debt Collection Acts, the
Contract Disputes Act, the Equal Access to Justice Act, the Federal
Advisory Committee Act, the Federal Tort Claims Act, the Freedom of
Information Act, the Government in the Sunshine Act, and so forth.
In short, the total of pages is a very conservative figure.
Need for Change
According to a 1992 study by the Merit Systems Protection Board,
procurement regulations have become so complex that it is no longer
reasonable to expect qualified procurement officers to use them
effectively.(5)This impasse is due to a combination of the large number
of complex regulations and the speed with which they must be applied.
Overregulation is not limited to procurement, but is a governmentwide
problem, according to a still-relevant 1983 study by the National
Academy of Public Administration:
Federal management systems are now over-regulated in the sense that, by
accretion, each has acquired an overburden of controls, limitations and
constraints, reviews and approvals, data requirements, and other
mandates, which, in total, significantly reduce their value and
effectiveness.(6)
Most regulations start with a law, usually designed to solve a specific
problem. The central management agencies (Office of Management and
Budget, Office of Personnel Management, General Services Administration)
then develop a regulatory process to implement the law. The departments
then interpret how the regulations should be applied in their agencies
through additional regulations.(7) The agencies and bureaus then
customize that process, frequently with regulations at both the national
and regional level and occasionally at the local level. This chain
produces an inevitable torrent of internal regulations. There is
currently much variation in compliance and enforcement of these
regulations within any given agency.
Goal of Internal Deregulation.
The goal of internal deregulation is to weed out needless regulations so
that: (1) the outcomes to be achieved are clearly articulated; (2)
responsibilities for decisionmaking and action are clearly assigned; (3)
direct and objective measures of accomplishment exist; (4) oversight
shifts from process to outcome; (5) there is a clear understanding of
the fiscal and ethical propriety required in public administration; and
(6) the remaining regulations and requirements for uniformity are given
highest priority.
Regulatory reform will greatly increase accountability, creativity, and
motivation, while decreasing the administrative costs of completing
work. The goal is certainly not to give federal workers carte blanche to
do as they choose, but allow them to get the job done by the most
sensible means possible within the bounds of fiscal and ethical
propriety.
For years the burden of internal regulation has been something like Mark
Twain's observation about the weather: Everyone talks about it, but no
one does anything about it. But in the last few years there have been
enough experiments that a best practices model has emerged.
A pivotal point was discovered at the Department of Commerce. According
to Alan Balutis, the Department's Director for Budget, Planning and
Organization, about two-thirds of the requests for waivers from internal
regulations submitted as part of Commerce's reinvention effort seek
relief from regulations not even required in the first place. Balutis
concludes that much of the internal regulatory burden is self-inflicted,
either from informal withdrawal of authority by non-required reviews,
from a desire for "security blanket" documentation to avoid individual
responsibility, or from a control mentality that confuses 100 percent
review with an appropriate level of oversight. What is needed, Balutis
said, is not an edit of the regulations but meaningful reform.
A Success Story: Forest Service.
Dale Robertson, then Associate Chief of the Forest Service, undertook a
bold reform in 1985. He saw his agency's budget declining while overhead
was increasing, and feared the Forest Service would strangle in red
tape.(8) The original 20-page handbook written by Gifford Pinchot, the
agency's founding director, had grown to a bloated tome 17 feet thick.
Robertson selected four test units (three forests and a research
station) and completely deregulated them. He gave them authority to
reach their planning targets in the most efficient way they could
devise, discarding needless regulations on the condition that the
participants remained within the bounds of the law, basic policy, budget
integrity, and congressional direction.
Robertson also implemented "end-results budgeting." The test units were
responsible for only one to eight line items, consolidating from nine to
15 programs in a single line item. Budget performance would be evaluated
through output targets, such as number of acres reforested, rather than
solely through strict, detailed spending targets. Appropriations would
be biennial, and the four test units would be free to shift dollars
among any of the programs in a consolidated line item.
The General Accounting Office found that "end results budgeting is
conceptually sound."(9) Internal evaluations showed that the test units
also saved money. In the Eastern Region, for example, 11 separate
hierarchies were merged into five team groups with interlocking
expertise and responsibilities. The regional office cut its budget by $2
million, reduced its staff by 40 positions, and reduced its overhead to
the agency's lowest. The region provided 12,000 proposals that
eliminated outdated rules, streamlined work procedures, and improved the
quality of work life.(10)
It was only when the needless rules were stripped away and management
was empowered to use the budget wisely that the managers themselves
truly became accountable for goal accomplishment while maintaining
fiscal and ethical propriety, according to Bill Delaney, the analyst
responsible for evaluating the pilot program. In 1989, the Forest
Service chief acknowledged the success of the pilot study and signed a
new management philosophy establishing the pilot approach nation-
wide.(11)
Unfortunately, Congress rejected the proposal to permit service-wide
end-results budgeting, and the service's deregulation effort lost a good
deal of momentum. The 17 feet of regulations were reduced by about
two-thirds. But objective measures were not established, and the
revision of the hand-books was not included. Program managers quietly
shifted many of the requirements to handbooks or directives, with the
result that much of the deregulation progress was illusory. The
emphasis on management controls and documentation is still so strong
that the pilot efforts are "caught between two cultures," according to
Delaney. He sees the current rate of progress as slow.
A Success Story: Department of Veterans Affairs.
The Department of Veterans Affairs reported success in its Management
Efficiency Pilot Program (MEPP). The MEPP, conceived as a three-year
pilot program starting in 1987, was supported departmentwide and by the
House Veterans Affairs Committee. The program's goals were to provide
flexibility to managers in the field, cut red tape, and ease
restrictions and reporting requirements.
The results were positive. MEPP approved over 1,000 waivers. This
resulted in improved veterans service and millions in savings.(12) The
MEPP experiment went so well that it is currently being expanded on an
incremental basis beginning with 38 new MEPP sites. Waiver requests
continue being processed on an ongoing basis.
A Success Story: Air Force.
In 1992, General Merrill A. McPeak, Air Force Chief of Staff,
established the Policy Review Initiative, headed by Brigadier General
M.L. Haines. The Initiative is replacing 1,510 regulations with 165
policy directives and 750 instructions. Each new policy averages about
five pages, of which no more than one page is the policy itself, about
three pages are the performance measurements, and the remainder are
definitions and applicability standards. The Initiative will cut the
55,000 pages of intermingled policy and procedures to approximately
18,000 pages, which will clearly separate policy from procedure.
The deregulation effort is managed by a staff of about 10 plus the
policy writers and various consulting editors. Full reform will require
about 30 calendar months and will be completed in fiscal year 1994.
Hand-books, manuals, and other non-directive publications will be
produced over a five-year cycle.(13)
To develop the basic performance measures, the team first identified the
decisions and the information bases for the decisions, and then selected
the most important outcome.(14) For example, the basic performance
measure for the motor pool is the percent of requests filled with a
suitable vehicle. The basic performance measure for the lawyers was the
number of case settlements favorable to the Air Force, counting both
cases won and settlements more favorable than the expected trial
outcome. The basic performance measure for long- range planning was the
percent of plans incorporated into the budget. The basic performance
measures for pollution prevention were reduction in pollutants purchased
and pollutants discharged.
There were initially many skeptics to General McPeak's initiative.
Developing the measures was difficult, requiring several versions to
eliminate perverse incentives. It was also difficult for individuals to
accept being held accountable to these standards. Most groups initially
believed their areas could not be measured. However, the only areas
where appropriate measures could not be developed were those where
high-level policy regulations were inappropriate.
At the end of the initiative, the headquarters will be free to focus on
policy, using real measures of outcomes. And the field will have clear
guidance, clear delegations, clear accountability, and useful handbooks.
Now that all the policies, instructions, and handbooks are in digital
form, the Air Force is converting the entire set of documents to CD- ROM
disks because of the dramatic cost savings.(15) The process will be
completed by mid-1994, at which point the Air Force will stop printing
paper copies.
The entire Defense Department is now converting all its directives:
First, to clarify--from top to bottom--its policy guidance, and to
ingrain forever the principle of clear, concise policy unmistakably
separated from essential procedures. Second, once the policy is
clarified and separated, policy accomplishment must be measured to
assess how well it is carried out. Third, procedures must be pushed to
the lowest possible level. People should be given the necessary latitude
to carry out policy in a way that best fits local conditions.(16)
The agencies noted above have cut their own regulations, but have no
power to reduce the thousands of regulations from the central management
agencies with jurisdiction over them. Deregulation is often more
difficult in the central management agencies, because so many of the
requirements are statutory. But the results are worth the effort because
of the appreciable cumulative effect on the remaining agencies. The
following example shows that the central management agencies can also
reduce the number of regulations.
A Success Story in Progress: General Services Administration.
The Federal Acquisition Regulation (FAR) Improvement Project was
designed by GSA and the Civilian Agency Acquisition Council to determine
how the FAR could more effectively serve its customers: government
contracting personnel and the contractors. GSA sent questionnaires for
dissemination to 12 federal agencies, the Small Agency Council, and the
National Contract Management Association. About 95 percent of the
respondents suggested one or more ways to improve the FAR.(17) The most
common suggestions were to provide greater flexibility in the FAR for
exercising good business judgment, to consult users in the formulation
of necessary regulations, to ensure that regulations are consistent and
clear, to provide more guidance but less regulation wherever possible,
and to notify users of regulatory revisions prior to their effective
date. These are essentially the same issues as for internal
deregulation. The FAR Council formed an Executive Committee, which
reviewed the recommendations and established 19 implementation projects
broken into four sub-groups: philosophy, policy, automation, and
training.(18) Most of the projects are scheduled for completion by the
end of 1995.
The GSA approach may serve as a model for other central management
agencies to deregulate. In the future, such reform should include
objective performance measures. The Bottom Line Outcome Measures
developed by the OPM in conjunction with federal personnel directors
illustrate that meaningful performance measurement is possible even in
difficult-to-measure administrative areas.(19) A strong deregulation
effort in the central management agencies would inspire other agencies
by showing that deregulation is possible even in areas highly
constrained by laws. While it would be possible to deregulate central
management agencies first and then the remaining agencies later, such
sequencing would delay total deregulation many years.
Two Basic Approaches.
There are two basic approaches to deregulation. The top-down method (Air
Force and GSA) is faster, more systematic, and emphasizes clear
headquarters policy. The bottom-up method is slower, but allows testing
and emphasizes field priorities. The bottom-up method can be driven by
either waivers (Veterans Affairs) or pilot sites (Forest Service).
Because waivers identify the specific decisions being decentralized,
they allow the changes to be more rapidly extended to all offices. The
experiences of these agencies show it is not only possible to cut back
on internal regulation, but also, with top management support, it is
relatively straightforward to dramatically cut back, leading to better
work at lower cost without endangering fiscal and ethical propriety.
Lessons Learned.
Identifying the need for deregulation is not enough. The solution has to
be successfully carried through to completion. A GAO study of 12
governmentwide management initiatives undertaken between 1970 and 1980
concluded that these initiatives failed to achieve their objectives for
a number of reasons: rapid turnover in executive branch leadership, a
lack of real consensus on what constitutes good management, lack of
careful implementation planning and execution, and lack of adequate
staffing and management attention to management concerns.(20)
The agency examples described above give some dimension to the levels of
leadership, consensus building, planning, resources, administrative
support, and sustained effort required to achieve deregulation
objectives. The number of people required and the length of time will of
course depend on the size and complexity of the agency, but the total is
smaller than first assumed. The range in the agencies described above is
5-15 concentrated work years for the headquarters policy task force, and
probably a similar but more dispersed number to write the field
handbooks. Most agencies should be able to conduct an effort this size
within current employment levels and budget.
In addition, the headquarters task force and field writers will need
training. At the present time no such training exists, but the
Department of Defense Policy Directive Team has prepared a very helpful
work plan.(21) If there is a governmentwide push to reform internal
regulations, it would be appropriate to assign training to federal
training centers, which in turn could seek guidance in training design
from the agencies that have already undertaken such efforts.
There is no alternative to sustained sponsorship from agency top
management. Only senior staff can initiate radical deregulation and
overcome the inevitable resistance and conflicts.
Endnotes
1. See Figure 1: Staff Growth in Selected Staff Functions, 1980 -
1990/91, p. 10 of this report.
2. See NPR Accompanying Report Reinventing Federal Procurement, PROC2:
Build an Innovative Procurement Workforce.
3. According to the BLM Idaho personnel office, there are 195 permanent
and 30 temporary employees in that office. There are approximately 350
additional permanent employees in the Idaho District and Resource areas,
but these offices also have additional regulations.
4. Interview with the Assistant Director for General Management, Office
of Management and Budget.
5. Merit Systems Protection Board, Workforce Quality and Federal
Procurement: An Assessment (Washington, D.C., July 1992).
6. National Academy of Public Administration, Revitalizing Federal
Management: Managers and Their Overburdened Systems (Washington, D.C.,
November 1983), p. 2.
7. The nomenclature of government entities can be confusing.
Technically, the heads of both departments and agencies report to the
president, while the heads of bureaus report to department heads. In
this paper, the term agency is used generically to refer to agencies,
bureaus, departments, commissions, and other entities.
8. Robertson, Dale, "How to Overcome a Sluggish Bureaucracy and Tap Into
the Strengths of Your People," Vital Speeches (1987).
9. U.S. General Accounting Office, Forest Service: Evaluation of
"End-Results" Budgeting Test (Washington, D.C. : U.S. General Accounting
Office, March 1988).
10. United States Forest Service, Shaping a New Culture (1992).
11. United States Forest Service, Chartering a Management Philosophy for
the Forest Service (December 19, 1989).
12. Department of Veterans Affairs, Management Efficiency Pilot Program:
Innovative Test is Meeting Overall Expectations (March 1990).
13. Department of the Air Force, Policy Development and Management
Information System Storyboard (September 1992).
14. Ibid.
15. Department of Defense, Defense Performance Review, Policy Directives
Team, DOD Policy Directive Team Report (July 14, 1993). The Defense
Logistics Agency (DLA) made a one-time capital investment of $900,000,
which allowed annual cost savings of $600,000 by eliminating
conventional printing of publications and reducing distribution and
storage costs, plus annual cost avoidance of $1,370,000 through the
elimination of inserting page changes in DLA publications. The CD-ROM
disks are replaced every three months with updated versions. In other
words, the savings more than paid for the conversion in the first year.
The issues in comparing CD-ROM to traditional printing are clearly
identified and easy to understand: See U.S. Department of
Transportation, Federal Aviation Administration, If, When, Why and How
to Publish with CD-ROM, A Guide to the Planning Process (1992).
16. Ibid.
17. General Services Administration, The FAR Improvement Project: An
Assessment of User Views (June 1991).
18. General Services Administration, FAR Improvement Project Executive
Committee Report (October 1992).
19. Office of Personnel Management, Strategic Plan for Federal Human
Resource Management, Appendix (1989). This report is currently being
updated.
20. National Academy of Public Administration, p. 7.
21. See DOD, Defense Performance Review.
22. Duquette, Dennis, "Enter the Era of Performance Measurement
Reporting," Government Accountants Journal (Summer 1992).