Leadership

 

Leadership

Russell Chew interview

Friday, November 11th, 2005 - 20:00
Phrase: 
The Air Traffic Organization has set out to focus on, not just one element of its business like capacity or safety, but all elements of its business, so that, on a comprehensive basis, every gear is turning the right way and turning in the same direction.
Radio show date: 
Sat, 11/12/2005
Guest: 
Intro text: 
Chew describes how the ATO was created to improve air travel in the midst of a failed automated air traffic control system, an increase in airport delays, rising FAA operating costs, and 9/11. ATO was designated a performance-based organization (PBO)...
Chew describes how the ATO was created to improve air travel in the midst of a failed automated air traffic control system, an increase in airport delays, rising FAA operating costs, and 9/11. ATO was designated a performance-based organization (PBO) with a COO. Chew talks about the challenges of creating and running a PBO within a government culture, which he describes as "personality driven and fairly risk averse." Chew also talks about ways in which the ATO is working to improve performance and accountability.
Magazine profile: 
Complete transcript: 

October 26, 2005

Arlington, Virginia

Mr. Morales: Good morning and welcome to The Business of Government Hour. I'm Albert Morales, your host and managing partner of The IBM Center for The Business of Government. We created the center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the center by visiting us on the web at www.businessofgovernment.org.

The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Russell Chew, chief operating officer of the Air Traffic Organization at the Federal Aviation Administration. Good morning, Russ.

Mr. Chew: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Pete Boyer. Good morning, Pete.

Mr. Boyer: Good morning.

Mr. Morales: Russ, can you please describe to us the mission of the FAA and, more specifically, of the Air Traffic Organization, otherwise known as ATO?

Mr. Chew: Well, sure. The FAA is really here to provide the safest and the most efficient airspace system in the world. Now, about 80 percent of the FAA is the Air Traffic Organization, and the Air Traffic Organization really is the one that provides service to those who use the national airspace system. And there's a lot of services that are provided. The most common one that everyone thinks about is air traffic control, but the reality is there's a lot of other service as well. There's weather briefings, there's navigation signals, communications systems and things like that. In fact, what people don't know is that the Air Traffic Organization is, in many ways, a large telecommunications company within itself. We have things like microwave towers and things so that we can effect communications among all our of various facilities and communications from those facilities to the pilots who are using the system.

Mr. Boyer: Is this primarily a U.S.-based organization or are there people internationally also?

Mr. Chew: Well, there's U.S. interests internationally, like in Puerto Rico, Guam -- where we actually provide services there as well. But for the most part, most of the services are in the United States.

Mr. Boyer: Your listeners may not know that you're relatively new to the FAA and, in fact, relatively new to government service. Can you tell us a little bit about your career?

Mr. Chew: Yeah, I'm actually new to government -- completely new to government. I started off in the private sector. I did my undergraduate studies at Stanford University, I did my graduate studies at University of Southern California, and got interested in aviation while I was in school and actually completed most of my private pilot's license through my flight instructor while I was in undergraduate and graduate school. Following that, I came out and went on into the non-Schedule 121 cargo industry and ended up flying charter Lear jets. And from there, I got hired to American Airlines, and I spent about 18 years at American Airlines. And at American Airlines, I started out as a pilot, but within a couple of years, I was -- started into management there. And I started in pilot management at a crew base, ultimately ending up in systems and development because I have a background in many of studies in information technology. And that led to regulatory business and ultimately running the daily operation at American Airlines; that's where I actually ended up before coming to the government.

Mr. Boyer: You talked about ATO being about 80 percent of the FAA. What's the size and budget of your specific organization?

Mr. Chew: So the Air Traffic Organization is about 35,000 people. About 17,000 of those are actually in the -- kind of the traffic side of the business. About 7,000 or so are in the maintenance, engineering, infrastructure part of the business. It's different than the private sector -- we look in terms of budgets -- but it's -- in terms of budgets, it's about a $9-billion organization annually. About 6-1/2 of that is our operating budget, and about 2-1/2, or a little less than that, is our capital budget. We operate about 50,000 flights a day -- or we handle about 50,000 flights a day. About 30, 35,000, depending on how busy the day is, are our air carrier flights.

Mr. Boyer: Russ, that's an impressive organization. Can you tell us more about your responsibilities and duties as a COO and how you support the mission of the ATO?

Mr. Chew: Well, being the first chief operating officer for the FAA -- and really, the Air Traffic Organization is only a couple of years old -- my role was mainly to bring businesslike practice into what was a government organization that was really in the service business. The service model, which is a business model that's age-old, is a model based on the fact that you have customers that you're delivering services to and that you have owners that have certain expectations of what the characteristics and quality of that service is. Then you have employees, for the most part, are responsible for delivering the actual service itself.

Now, in the service model, the balance between those three main stakeholders in that model is a very important balance to reach. What you find out when you really look at how government runs is not necessarily the clarity of what a service model is and why those three things have to be in balance. You instead have one of them taking priority over another, depending on the budget, the pressure on the budget, the political environment at the time, what's happening externally in security and safety, and a lot of perceptions. And so to keep your eye on the ball and to move the business forward, you really have to have discipline around what exactly you define as your business and how you execute it, and that is not a characteristic of a typical -- or I shouldn't say "any typical" because I don' t know. I'm new to the government, and this is the only government agency I've been involved with, but when I arrived, after three or four months of assessment, it became pretty clear that a standard discipline around a business model was not there. The organization tend to react on an annual basis to the priorities that just happened to be present that year, and it was very hard for it to execute a strategy for the long term.

Mr. Boyer: Shifting the discussion to performance-based organizations, why is this type of change needed within the government?

Mr. Chew: Well, I think about 10 years ago or so, the FAA came under a lot of criticism. About that time, there was a system called the Advanced Automation System, and it really was supposed to be the air traffic system of the future. And it failed. I mean, they shut the program down around the mid-90s and had spent what was purported to be about $2 billion or more on that program. And so following that in the late 90s or the year 2000, there was an alarming increase in the number of passenger delays. If you remember the scare stories or horror stories of being on an airplane and being stranded in that airplane for hours and hours waiting to take off or waiting to get to a gate or sitting in the terminal, those horror stories were rampant in the summer of '99, the summer of 2000.

And so, it was during that time, really, that there was a commission that was established to look at that, and this Congressional study determined that they should create an organization that was performance-based organization, because they saw that as the solution to these problems, and that the FAA establish a chief operating officer to run that. And hence the Air Traffic Organization was born. Since then, and even during that time, there was also a recognition that the operating costs of the organization were rising -- in fact, they were rising even though traffic was falling after 9/11 -- so all those factors put together really motivated everyone to try to do something different.

Mr. Morales: Russ, you use terms such as "performance-based organizations" and "service-provider model." What's been one of the greatest challenges in bringing these concepts and this lexicon to your role now in the government?

Mr. Chew: Well, the government process itself. Now, even though we have both personnel reform and procurement reform with the FAA, the way those are designed are -- were still designed around what I would call government process, and that process is based upon how money flows in the government and how priorities flow. Now, typically, a government organization is personality-driven because we elect officials and things like that and fairly risk-averse because anyone appointed to run an agency or to run anything in the government is sometimes measured by not the output of the organization, but managing to stay out of trouble with the organization because there are a lot of political things and oversight that occur that could damage one's future -- and particularly if you're a political appointee. So a performance-based organization is intended to supersede that. To go from a risk-averse culture to a performance-based metrics-driven culture is a very, very important aspect of the Air Traffic Organization but is very, very difficult to actually achieve in the government process-oriented organization.

Mr. Morales: Great. How is the ATO becoming a performance-based organization? We will ask COO Russell Chew to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with FAA Chief Operating Officer Russell Chew. Also joining us in our conversation is Pete Boyer.

Russell, in our earlier segment, you described your desire in moving ATO to a performance-based businesslike organization. Can you tell us more specifically what you mean by "businesslike performance-based organization"?

Mr. Chew: Sure. The -- a business -- I mean, any successful business has a strategy that surrounds what it does, and those businesses that are most successful can execute that strategy with precision and can keep that going year after year after year. And it really provides the focus, that really drives the business and everyone in it.

When you look at that the Air Traffic Organization set out to do, it was really to get a focus around not just one element of its business, like capacity, or one element, like safety, but all the elements of the business so that on a comprehensive basis, every wheel, every dollar, every resource, every gear that's turning in that organization is turning the right way and in the same direction. Now, that's hard to do when you're either large, complex, or sprawling all over the United States, which we are all of the above. And so what we set out to do was set up a balanced scorecard approach to that strategy. Now, of course, it's anchored in the service model with customers and owners -- what I call owners -- where I came from, it was called shareholders, but here call them owners -- and employees. And in the balanced scorecard process, you couple that by setting up what exactly are your goals for each of those constituents, and then you define the processes with which you grind out the output and measure that output and see if you're making progress.

So setting that up is not a trivial exercise. I mean, that is a very difficult exercise because you can't do that at the top only, you have to do that through the whole organization. Now, so far, we've -- the organization is only about a year-and-a-half old, and we have the strategy at the executive layer, and it's really built around four pathways. First of all, operating excellence, which is, we need operate safely and efficiently, and we have to deliver those kinds of things the owners expect; they expect a safe operation, they expect an efficient operation. The customers expect their efficiency and their level of service to be what they want, and the employees are expected to be taken care of so they can deliver that service. Then you set up those processes and develop metrics for every one of those.

The second pathway is financial management, which really didn't exist before. We had budget management. So we want to manage costs, not just budgets. To do that, you have to actually use a cost accounting system to understand your costs. Now, financial management is more about managing costs forward, investing in things that can help reduce your costs while you're improving your service. That means all your capital programs have to be joined up with the operation. In addition to financial management as a pathway, the organizational change that we put in place actually merged the capital programs and those who managed it with the operating units that deliver the service. Before the organization, those two were separate, and when they're separate, those who buy the equipment aren't connected with those who have to use it and deliver the service, and what happens is you waste a lot of money on things you don't need, and you don't have enough money on the things you do need. And the capital program's not moving the metric, which is ultimately moved by the operation, not by those who buy the equipment.

Mr. Boyer: Russell, I do what to probe this concept of financial management a little bit more, but just to clarify, you use terms such as "customer," you use terms such as a "shareholder/owner," and you use terms such as "employees." I think I get the employees ones, and I think most of our listeners probably got that one, but can you describe to us, when you use the term "customer" and you use the term "shareholder/owner," who are you referring to?

Mr. Chew: That's a good question because when I got to the organization, nobody knew who the customer was, or there was a lot of differing opinion who they are. We use -- in this business, we use "customer" as any entity who actually consumes the service we provide directly. So if it's an airline who uses the system to run a business, the airline is the customer. If it's in general aviation, where there's a pilot who actually owns the airplane that's flying through the system and using its services, then it's that pilot as the owner of that airplane. Our customers are varied as well. I mean, the -- actually, the military is a customer of ours. In many ways, we're partners, so the military has kind of a dual status in the model. But certainly while the military provides services to our customers at some sites, we actually provide a lot of services to the military because a lot of military airplanes fly in the system at any given time.

The owners are those who actually control what they want out of the system, and they're, for the most part, represented by the three branches of government, although two of them stand out -- the administration -- the Executive Branch -- and the Legislative Branch. Now, the challenge, as I think -- and this is where the ambiguity in government ownership comes about -- is that the administrative -- or the Executive Branch and the Legislative Branch don't necessarily agree on what our priorities should be. And so they come to some compromise, usually that culminates in an authorization and an appropriation of funds to the various activities that we have. Our challenge is that those appropriations are not performance-based, and so we have to convert those programs and those funding streams to a performance-based organization, and that's very, very challenging. Now, what we're setting up is the processes on how to do that, and financial management is all about that.

So customers really are the ones who receive the service, and the owners are the ones who dictate what we're supposed to be doing with the service and what we're supposed to be funding as part of the service, and really, ownership ultimately then becomes the American citizen, who ultimately funds this thing through taxes.

Mr. Morales: You used the word "compromise," and I was reminded of a saying that says that flying is a lot like a group of compromises moving in tight formation.

Let me come back to financial management. We understand that the focus in 2005 has been to push management budgeting and reporting and accountability down to the program managers within FAA using new cost accounting and labor distribution reports. How has this effort changed the operational activities and outcomes within your organization?

Mr. Chew: Well, the first thing is actually pushing that down doesn't change it. Pushing it down to -- not just program management, but all managers, whether they're in the field or at headquarters, is a byproduct of the process we use to get to results. So if you become a results-based organization or a performance-based organization, you actually have to set up processes that make it most efficient. If you try to manage the budget from Washington, D.C. -- where most of your people are actually in the field -- I use the analogy that you manage with an ax. You make a decision at a high level, and while you may achieve ultimately -- you want to control or cut costs here or improve or enhance funding somewhere else -- you do it with an ax, and there's a lot of collateral damage in that, and there's a lot of waste and inefficiency that goes along with it.

The idea behind driving things down, not just in budgets, but also in accountability, is to manage that at a lower level. But you can't just give them the money and say, spend it however you think is right, you have to set up a lot of targets and guidelines and metrics so they understand what their goal is. And that's why you need a scorecard that goes all the way down to that level. And you actually can't push that responsibility or accountability down until you actually get the money connected with it so people have a budget to work with, and they understand what their responsibility is with producing results with that budget that they're giving. We're several years away from really achieving all that. We have pushed at least down one level already. We have 10 service units in the Air Traffic Organization; some include things like terminal -- that's the -- you know, the control towers and terminal radar control facilities. Then we have en route, and there's 22 en route air traffic control centers. That's under two separate lines of business, and each vice president has been given a budget now, and they have to manage that budget, and they're also given goals to reach.

That's actually a collaborative process at the executive level. We've actually formed an executive council which is composed of the 10 vice presidents of our service units, and this is new. Rather than the COO making all the decisions, the executive council, which is this group of 10 vice presidents, have to deliberate on all the strategic decisions for the organization so that it's not one person, who could leave -- right? -- and bring someone in new, making all the decisions, but, in fact, a collaborative balance between the needs of the 10 service units.

Mr. Boyer: Well, Russ, as you previously mentioned, the FAA publishes quarterly performance measures and ranks itself on a scorecard. How do the performance metrics contribute to operational efficiencies and what kind results are you seeing?

Mr. Chew: The FAA has a scorecard that's quarterly, but the FAA scorecard is not comprehensive. What we have underneath that is an ATO scorecard, if you want to call it that. So the organization itself has a comprehensive business plan that feeds the flight plan, which is reported quarterly. Now, our business plan -- because it's comprehensive -- is fairly large, and in fact, we have a dashboard at the executive level of the dozen or so metrics that we look at on a monthly basis and we track. And then every level has that same scorecard, and they have metrics that contribute to that. We're already starting to see -- because we're focusing on it -- improvements in the quality of service we provide. That includes things like airport capacity -- to make sure that we are providing capacity and making it available -- airport efficiency, or how well we actually deliver traffic at the rates that call; productivity, or how many people it takes to deliver how many flights; overhead rates, or how many people we have in overhead versus people who are delivering service; and what we call the line organization. Our direct employees we define, for instance, as the people who deliver the service -- that's a controller or technician -- and the first-line supervisors. Everyone else is considered overhead or indirect. We're managing those ratios.

So once you put those metrics in place, and you drive them down and you say, I want you to come up with ways to improve those ratios, then the managers at every level begin to work toward that, and just the focus alone and the fact that you decided to measure it actually starts to change the behavior in the organization. Now, that only is good for a year or so, after which you really have to think about innovative ways to do that, and of course, that's where capital spending comes in. Capital spending isn't just to spend on incremental improvement in the quality of the service; the capital spending has to be there also to improve your cost ratios so that you can continue to provide the service -- a better service -- with more safety, more quality of service, at an ever-decreasing unit costs.

Mr. Boyer: Now, clearly the topics we've discussed so far require a large amount of cooperation from the employees of the ATO. How do you encourage your team to change, and what kind of steps is the ATO taking to motivate staff to change?

Mr. Chew: So -- the answer's really it's a -- like any changed management effort that you put forth. There's two elements to it; there's a top-down element and a bottom-up element, and they're different. You don't actually directly motivate employees, but you have to actually tell a story that fulfills the needs for employees to understand and behave differently. And it really kind of boils down to three things, and in government, what I found, there's actually a fourth one there.

The first thing is, you have to tell them why you're doing this, and it has to be a compelling reason because people, by nature, don't really want to change. You know, why would I want to change who my boss is and all the things that make them comfortable with -- gee, I'm successful today, you might change something that might make me unsuccessful in the future. So you have to give them a pretty compelling reason to change. Our reason was that our budgets were increasing and the available funds were decreasing, and so if we didn't change the way we worked, we didn't have a sustainable way of projecting our future other than for asking for more money, which really wasn't happening. And we looked at -- in spite of the fact we were asking for all this money over the last 10 or 12 years, we really never gotten it. And so there's been a slow degenerative spiral on the number of people in the organization, which has been retreating away.

So that's the first part, is just to tell the story. Then you have to tell them what you want me to do, and that's of course where this balanced scorecard comes into place. Well, we want you to move these metrics and to get them to understand that things we're going to measure are things that are very, very well-defined. Metrics has never been a weakness of the FAA, it's just they had so many, and they would focus on different ones, depending on what the priority was that year. We're trying to create a system of really basic fundamental metrics for the business that will transcend those changes. They'll always be there.

Now, once you -- once they feel like, well, we better change, and you tell them what is it they need to do, you always have to ask and answer the basic question. Every employee's going to say, what's in it for me. And so you have to give them a reason to move from where they were to where you want them to go on an individual basis. That's the most challenging. And the way you accomplish that is through a lot of communication, and to make them uncomfortable where they are today. So we set out to create that level of discomfort. Now, the restructuring itself does that automatically -- you restructure, and everybody's boss changes -- but we restructured in a massive way. This kind of massive reorganization takes a long time, it can take five or ten years to really achieve. But it makes everyone very, very uncomfortable and very, very anxious. But through that, you give them a light at the end of the tunnel, and that becomes something that they would like. You have to put in recognition systems, you have to put in what I call safety systems -- what we call psychological safety is something that will make them feel better. And we're in that process now. If you were to look at the organization today, you would find they're still in a very anxious stage, and we have a window of opportunity when they're in that anxious stage to bring them to the other side.

Now, the fourth part is what I would call more of a government-oriented characteristic of changed management. There's a tendency to look at political leaders as transient, one party to the next, one election to the next, one Congress to the next, one year to the next. And you have to overcome the natural tendency to wait it out. Now, that's difficult to do because they're right, there is transience to it. So in our messaging, you have to convince them that whatever the situation is, it's going to be here after these particular leaders are gone and no matter what administration's in place. And if you can convince them that that's the case and that the only solution is for them to take action and for them to be part of the solution, then you've actually established a way to solve that fourth characteristic of change management. Now, that is -- that's not easy to do, but it's absolutely essential to do.

Mr. Morales: This is great advice for any organization going through the massive change that yours is.

How's the FAA handling outsourcing? We will ask FAA COO Russell Chew to share his experience when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with FAA Chief Operating Officer Russell Chew. Also joining us in our conversation is Pete Boyer.

Russ, in the last segment, we spoke a lot about the significant changes going on over at ATO, specifically the organizational changes. Can you be more specific and describe some of those to us?

Mr. Chew: Sure. I mean, organizationally, splitting the lines of business in to things that made sense from the customer point of view was the first step because most government organizations tend to be organized in what we do. You'd have a section on weather, you'd have a section on traffic, you'd have a section on procurement, and moving those and merging those in a sense so that they were oriented along very specific output was an important part. And that's still actually very hard for them to understand. For instance, a terminal or a control tower or a terminal radar control facility is really more about through-put to and from an airport. And so you would measure their performance in terms of the number of operations, takeoffs and landings per hour. En route, which manages the upper airspace, is more about how much controlled flight hours that you can produce per person or for so many dollars. And so the actual metric that you use to measure their performance is different.

Another one was flight service; flight service used to be kind of buried as a suborganization on a geographic basis under an air traffic control center, which managed upper airspace. Well, those services were very different; they provided weather briefings, weather reports, advisories to general aviation pilots and some corporate pilots and some military pilots as they flew over that airspace or landed at an airport that didn't have a control tower, but had some flight service personnel there. And so they had a very different type of output, which is the quality of the weather briefing, how many weather briefings an hour that you were able to disseminate, electronic dissemination of that kind of information, processing of flight plans from general aviation on electronic way or a manual process, and flight service was particularly problematic because being kind of a lower priority for an en route center, their facilities suffered more, their staffing suffered more, their equipment and technology was suffering a lot.

Mr. Boyer: Russ, much like the rest of the federal government, I would imagine that FAA is facing potential turnover problems with its air traffic controllers, perhaps as an aging workforce issue or for a variety of other issues. What is your human capital strategy to address this expected turnover in the workforce?

Mr. Chew: Well, you know, actually, this problem has been approaching for some time. It's pretty well known that in 1981, all the air traffic controllers were fired by the President of the United States. Back then, they were represented by a union called PATCO, I think it was. Following that, a lot of new people were hired, and of course, they were hired all around the same age because there were age restrictions on the hiring of air traffic controllers. And so we're facing a wave of retirements in our air traffic control work group, and also our technicians -- not as much, but our technicians that keep all the infrastructure running. And that wave of air traffic control retirements that are on the horizon -- because there is a mandatory retirement age for controllers -- is here now. And even though we've known it for some time that it was coming -- because it's not run like a business, but it's run on a reactive basis -- they would hire as many as the budget would allow. So what we set out to do was create a workforce plan, and the first thing you have to do is actually create a workforce model that has a lot of fidelity to it, that can estimate with some degree of accuracy the number of retirements, where they're going to occur and be able to be updated on an ongoing basis. So it has to be a dynamic model.

So we set out to do that the very first year that we started the ATO, and last December produced the first workforce plan for controllers. And it's very important because it projects retirements out for the next 10 years, and what you find out is more than half -- or, actually, over 70 percent of the controllers will actually become eligible to retire in the next 10 years, so you have a very, very important task to take on, which is how do you get controllers hired, trained, and certified to replace those who are going to retire. And it's a very, very specific skill you need to train to, and the talent that they have to have. And so your screening processes, your recruitment processes are all part of that plan. For us, the plan includes having to train to certification in a terminal in two years and in a radar/en route facility in three years. And that's very challenging for us because in the past, it's taken longer than that. So we have to apply better training disciplines around how we train and how we certify and how we get them the experience they need so that they can be certified in that amount of time. And for us, that's very important, otherwise we'll end up with too many trainees at a facility and not enough certified people, and then we'll have to slow the traffic down so that we don't have any kind of problems with the quality of our service.

Mr. Boyer: Russ, on a related topic, we understand the FAA has outsourced the automated flight service stations. Could you describe this for our listeners, and specifically, what has been your experience with competitive sourcing and what have been the results to date?

Mr. Chew: Yeah, there's a lot of interesting things that surround this, and there's a lot of myth versus reality on what outsourcing means to any government agency. The FAA actually for years has outsourced many things -- I mean, we don't own our own telephone lines and things -- and over the course of time have established certain efficiencies by sourcing competitively different service infrastructure things that we have going on. But the reason this one was so visible is because this was one of the services that the outside customer actually wants, and very visibly, we deliver. And this was the weather briefings that I mentioned that we created its own line of business. And so once you create your own line of business and you understand those costs, the outside world looks at it and says, well, why is that so expensive for that kind of service that you're giving us, and hence, the focus on A76.

Now, oddly enough, it began long before the Air Traffic Organization was actually established, this notion that this was a service that even could be considered in a competitive sourcing. We would still control the service, but rather than delivering it with our own people, we would have and hold a contractor potentially accountable for it. And you ran a competition. You ran a competition by forming your own internal bidder, what we call the most efficient organization. So we try to compete against the outside bidders and see whether or not we can do a better job, as good a job as an outside bidder. So the outcome of a competitive sourcing initiative is either an external source will do it better and so you select one, or your internal organization can do it better, and you get a more efficient internal organization. So there's a good outcome either way.

Now, obviously, this means that you really have to be careful in what you set up as the requirements for these -- this initiative and what kind of quality of service do you have, what kind of escalating procedures you have to remedy problems that you might have, and metrics on how you would measure the quality of the service you're providing. So we set out to do that, and the competitive sourcing was set up. We had set up a most efficient organization, and when the selection time came, the winner of the bidding process was Lockheed Martin. And not too long ago, that was actually executed and, that service today is now being provided by Lockheed Martin through us -- or by us -- by -- under our control. Now, we're measuring their quality of service, and the initial results are quite promising that the average wait time on a phone call is down and the average number of dropped calls is down. So the quality of the service is improving so far. The transition will take the better part of 18 months to complete, but in that time, at the end of that 18 months, the service will be virtually completely provided by Lockheed Martin with our oversight. The expected reduced cost is very significant. Over 10 years, the savings -- is being tracked, but the savings is expected to be over $2 billion.

Mr. Boyer: Now, with this experience and these results, what advice would you give to other agencies that are considering outsourcing one of their functions of their organizations?

Mr. Chew: Take care of your people. One of the most important things you need to do is exercise all avenues you have to provide a soft landing for the employees. Now, that's difficult to do because, generally speaking, the savings that you're going to get are based not just on the technology and the facilities -- which, in our case, was getting very old -- but also in a reduced number of people because you're going to be productive. We worked very hard with Lockheed Martin to try to guarantee as many jobs for our people as we could. We put in early retirement provisions, we put in what we call priority selection processes to make sure that anyone who was being displaced by this initiative would be the first to be considered for a job that might open in the FAA -- any part of the FAA, not just the Air Traffic Organization -- and will continue to provide some priority to those, if they were to be displaced, when Lockheed Martin continues to become more efficient that any open positions we have in the FAA and the Air Traffic Organizations for which they're qualified, that they would get priority in being reviewed for that -- considered for that position.

All of those things are important because if you don't, I think there'll be a lot of people -- a lot of owners and potentially even some customers who would say, you're not -- you know, this is not good and -- for anyone and you ought to -- they'll try to stop it, which, of course, there's always going to be those who try to stop it. But you know, you really can't stop progress. Even if this one didn't happen, sometime in the future when the world passes you by that far, there's going to be a lot of demand that we spend taxpayers' dollars more efficiently. So I don't see A76 as an end point; it's kind of a continuous process of improvement where you can use an A76-like initiative to help improve your own efficiency, even if it's not an outside bidder who wins.

The circular that A76 really describes -- I mean, we call it A76, it's really competitive sourcing -- has been changed over the years to try to make sure that we take care of our employees and to make sure that there are enough controls around it so that we don't arbitrarily outsource things that we really shouldn't or wouldn't be good as outsourcing alternatives. So my advice would be take care of your people, one, and two, follow the circular closely because it'll help protect you from making mistakes in the process.

Mr. Morales: That's great advice. What does the future hold for the Federal Aviation Administration? We will ask Chief Operating Officer Russell Chew to peer into his crystal ball when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Russell Chew, chief operating officer of the Federal Aviation Administration. Also joining us in our conversation is Pete Boyer.

Russ, we understand that the ATO is aligning capital investment with operations. Why is this alignment being made, and how will it affect the future of ATO and the future of air travel?

Mr. Chew: Well, that -- you know, the future of any business lies with its capital programs, and that's what capital's all about. It's about funding things that can change your business forward, and that business affects not only the quality of the service you provide, but the costs that are associated with those services. Aligning capital and operations was about making sure that every capital dollar we spend has an important and a measurable effect on what's going to happen to the operation and the quality of service forward. We spent a lot of money on a lot of things. I mentioned we spend over $2 billion a year in capital. Now, if you think about that, in the private sector, how many operations or how many businesses do you known of that have about 6-1/2 or about $7 billion in revenue and spend $2 billion in capital? That's a lot of capital. Well, we have a very large infrastructure, and that infrastructure is deteriorating. Most of the facilities we have are very, very old, and they need to be restored, replaced, or consolidated in some way. Those are all the things you look forward because all of these are long-term investments, and whatever you invest in today, you're kind of stuck with for the next 25 years. So making those investments wisely is important to the future of the organization, more importantly to the future of the quality of the services it provides, and the demands that are going to be placed upon it in the future.

Mr. Boyer: How will the performance-based approach you described -- setting goals, developing metrics to measure your progress towards these goals and others -- affect the decisions about future capital investment?

Mr. Chew: Well, what we've done is we've taken the balanced scorecard and used those pathways I mentioned earlier to rank and rate our capital programs. That way, we take our capital portfolio and balance it across all the requirements for the business strategy going forward. That really wasn't done before; capital projects in the past were rated upon what effect it would have on the customer, and that was it. So if you looked at our capital programs prior to Air Traffic Organization's establishment, they didn't really have anything to do with reducing our unit cost at all. And of course, that impacts your ability to continue to provide services into the future -- unless you assume there's an endless stream of capital at an ever-increasing rate, which, of course, is not a good assumption in these days with the federal deficits that are out there.

Mr. Morales: Interesting.

Mr. Boyer: Russ, we had a fascinating conversation at the break around your career. I'm curious, how has your experiences served you in carrying out this role now as an agent of change at the FAA?

Mr. Chew: Well, coming from an airline business, change is every year.

Mr. Boyer: That's certainly true.

Mr. Chew: There are challenges every day, every month, every year, and I have been lucky to be part of a very dynamic business where the business models are challenged -- the basic business model is challenged every few years. That's what's really transformed my company that I came from, American Airlines, in 1983 from, even then, on the brink of bankruptcy to the hub-and-spoke models, which is now changing. You saw computer reservation systems use frequent flyer miles -- things like that -- as ways of changing their model of customer loyalty and market share and things like that. Well, that's all changed.

Now, contrast that to the government where, really, things are meant not to change. In fact, I think most processes are designed to make sure change doesn't happen to quickly, and for good reason in many cases. That kind of experience, when you bring it to a government agency, can be very beneficial because you're going to try to invoke a culture of change, continuous improvement into a culture of status quo. So I found my experience to be very applicable to what we're trying to accomplish with the new Air Traffic Organization.

Mr. Boyer: Russ, you've been now with the government for just a few years. What advice would you give a person who's thinking about starting a career in public service?

Mr. Chew: That's a good question. I'd say buckle your seat belt.

Mr. Boyer: Buckle your seat belt, that's great.

Mr. Chew: You're in for a rough and a challenging ride. In some ways, it's very frustrating, but in other ways, it's very, very rewarding. One of the things that always impressed me, whenever I go around and talk to all the people in the organization, is how committed they are to the mission -- and it's my commitment as well to public service -- that we're here for a greater purpose than ourselves, and that's what I would leave anyone with as far as what it's like to be in public service. It's very rewarding because literally, the country's future is at stake, and you're going to have an impact.

Mr. Morales: That's fantastic. We've reached the end of our time, and that'll have to be our last question. First, I want to thank you for fitting us into your busy schedule today. Second, Peter and I would also like to thank you for your service to the public as your current role and also to thank you for your service in the airline industry.

Mr. Chew: Well, thank you very much for the opportunity to talk about this. Of course, I have a lot of passion around it. And actually, if you're interested in some of the inner workings of what we're doing in the Air Traffic Organization, you can go to our website, which is at ato.faa.gov, and we allow public access to that currently, and you can learn a lot about what we're trying to accomplish.

Mr. Morales: Great. This has been The Business of Government Hour featuring a conversation with Russell Chew, chief operating officer of the Air Traffic Organization of the Federal Aviation Administration. Be sure to visit us on the web at www.businessofgovernment.org. There you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's www.businessofgovernment.org.

As you enjoy the rest of the day, please take time to remember the men and women of our armed and civil services abroad who can't hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

Executive Response to Changing Fortune: Sean O'Keefe as NASA Administrator

Friday, October 28th, 2005 - 20:00
Author(s): 
This report describes the tenure of Sean O’Keefe as administrator of the National Aeronautics and Space Administration (NASA). The report describes how O’Keefe faced three difficult challenges during his three years at NASA. His first challenge was to solve the space station’s financial mess. His second challenge was to manage the aftermath of the Columbia shuttle disaster. His third challenge was to steward the President’s 2004 vision for the further exploration of space.

Dr. Linda M. Combs interview

Thursday, August 25th, 2005 - 20:00
Phrase: 
"In the financial management line of business, one of the things I've learned is whether you're using procurement vehicles, systems implementation, or schedules, make it clear, make it consistent, keep it simple."
Radio show date: 
Fri, 08/26/2005
Intro text: 
Dr. Linda M. Combs
 
Complete transcript: 

Friday, August 26, 2005

Arlington, Virginia

Mr. Morales: Good morning and welcome to The Business of Government Hour. I'm Albert Morales, your host and managing partner of The IBM Center for the Business of Government. We created the center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the center by visiting us on the web at www.businessofgovernment.org.

The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Linda Combs, controller of the Office of Federal Finance Management at the U.S. Office of Management and Budget. Good morning, Linda.

Ms. Combs: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Debra Cammer. Good morning, Debra.

Ms. Cammer: Good morning, Al.

Mr. Morales: Linda, please begin by telling us about the history and mission of the Office of Management and Budget.

Ms. Combs: The Budget and Accounting Act of 1921 actually created the Bureau of the Budget in the Department of the Treasury. The Bureau of the Budget later moved to the Executive Office of the President in 1939. And the Bureau of the Budget was actually reorganized into OMB in 1970. It serves, actually, a couple of primary roles, Al: the budget itself and management. The budget responsibility of OMB is to assist the president in overseeing the preparation of the federal budget and actually to supervise its administration in the executive branch agencies. And the "M," or the management part, of OMB, is responsible for helping to improve administrative management, such as coordinating many of the administration's procurement, financial management, information systems, and various regulatory policies.

Mr. Morales: Linda, would you tell us about your office within OMB, specifically the Office of Federal Finance Management?

Ms. Combs: The Office of Federal Financial Management, as we call it, OFFM, was created by the Chief Financial Officers Act of 1990. We are responsible for implementing the financial management improvement priorities of the President, carrying out financial management functions of the CFO Act, and overseeing federal financial management policies such as taxpayer dollars not being wasted, making sure that the government books are in order, and making sure that our government decision-makers have access to accurate financial information.

Ms. Cammer: And Linda, you were recently appointed controller. Congratulations.

Ms. Combs: Thank you, Debra.

Ms. Cammer: What are you responsibilities as controller at OMB?

Ms. Combs: I'm actually head of the Office of Federal Financial Management, and the responsibilities entail providing government-wide leadership for strengthening financial management in the federal agencies and programs government-wide. In December of '04, for example, we issued some revised internal control financial reporting requirements relating to the Circular A-123. Now, those are requirements that are similar to requirements of internal controls that many of us have heard about that private or publicly traded companies are required to do through the Sarbanes-Oxley requirements. We also require management to implement a strengthened process for assessing the effectiveness of their own internal controls throughout government over financial reporting. And these are based on widely recognized internal control standards. We also lead the improved financial performance criteria. We have, as our responsibility, an initiative for eliminating improper payments, and a federal real property initiative that's part of the President's management agenda as well.

Now, these specific initiatives set out to improve financial management practices across government, and we're trying to ensure that managers have all the accurate and timely information they need for appropriate decision making. We're setting out to see if we can't reduce the number of improper payments. We actually have $45 billion a year that the federal government makes in improper payments. We hope that we can reduce that by more than half -- by $25 billion -- by 2009. And the real property initiative -- we're trying to see if we can't dispose of excess property that's no longer needed and that would be, of course, costly to maintain. Our projections indicate currently that the size of the federal real property inventory could certainly be decreased by 5 percent, or $15 billion by 2009, so you can see we have some long-term goals that we're shooting for that we believe are very realistic and very doable.

Ms. Cammer: What were your previous positions before becoming a controller?

Ms. Combs: Immediately before becoming controller, I was the assistant secretary for budget and programs, and chief financial officer, at the U.S. Department of Transportation. Prior to that, from 2001 to 2003, I was the chief financial officer at the Environmental Protection Agency. During the first Bush administration, I was the assistant secretary for management at the Department of the Treasury, and in the Reagan administration, I was deputy undersecretary for management at the Department of Education. Before I actually came to the federal government, I was manager of the National Direct Student Loan Division for Wachovia Corporation. Before coming back into government in 2001, my husband and I owned our own company, and I served on some corporate boards and have actually been an elected official back in Winston-Salem, North Carolina, which has been our home for about 30 years.

Mr. Morales: Linda, I noticed in your background that you spent approximately 10 years working at the Winston-Salem/Forsyth County School District. Can you share with us your experiences in that role with what you currently do today?

Ms. Combs: You know, I think in every single position that I've been involved in, somehow financial management in one shape or form has come to play in those various positions. And in the school system, while I was beginning as a teacher, when I moved into the administrative roles of assistant principal in the various schools in which I served, it seemed to me that budgets seemed to come my way, or helping to streamline things seemed to fall into my bailiwick. And I truly enjoyed my experience with the school system. And even though that was a very long time ago, I think one of the things that I learned from that experience was that if you can manage a classroom with 26 students, you probably can manage just about any other management role anybody throws at you.

Mr. Morales: Do you find yourself still using some of the techniques from back then?

Ms. Combs: Oh, absolutely. They come in quite handy.

Mr. Morales: That's great. How are shared services changing government operations? We will ask OMB Controller Linda Combs to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Linda Combs, controller of the Office of Federal Financial Management at OMB. Also joining us in our conversation is Debra Cammer.

Linda, in March 2004, OMB initiated a government-wide analysis of the five lines of business supporting the president's management agenda to expand e-government. Can you give us an overview of the five lines of business and the reasons for undertaking this analysis?

Ms. Combs: I think that the Lines of Business Initiative is a perfect complement to the president's management agenda. This administration certainly sees cost savings in standardization and consolidation of government business processes, and that is the way we feel like it's the most productive way to conduct the people's business. And it's similar to creating a draftsman's blueprint, as I would say, in the way that we are adjusting the blueprint right now to reflect these particular improvements. But the line of business concept is basically built around three premises: all agencies will use common solutions; the solutions focus not just on standardizing business processes -- although that's a huge part of it -- but in making them more efficient, more effective, and of course, more cost-effective as well; and that all of these solutions, the business processes, and the systems, will be developed using common architectural tools. The five distinct lines of business are: human resource management, grants management, federal health architecture, case management, and the one that I'm directly responsible for, financial management.

Mr. Morales: With respect to financial management line of business, what are the specific goals for this LOB?

Ms. Combs: The primary goal is, of course, to assist the agencies in getting to green on the President's management agenda, and of course, what that really means is that the financial management line of business is going to help come into the agencies the standardizing processes, improving those internal controls so that there won't be any negative findings as a result of the annual financial statement audit. I think the other goals would be things like reducing the likelihood that internal control weaknesses exist, because when we start consolidating and using common systems, that makes everybody more sure of what they're doing and being in more control. It also -- one of the goals is making sure that we can compare data across agencies, you know, common business processes, solutions, and common systems. Certainly creating cost savings opportunities for agencies is a primary goal for making it easier for agencies to take advantage of specific common solutions in financial management. We also think a goal is simplifying the procurement process. That, too, reduces the risk that agencies have and allows for greater contractor oversight. But the one primary goal that I think we will also see is the momentum that we're going to create as we continue to standardize and consolidate.

Ms. Cammer: Linda, you often hear people talk about shared services in the same breath with the financial management line of business. Would you define what you think shared services is for our listeners, and then also describe the concept and the history and the benefits of it?

Ms. Combs: You know, I think shared service, to me, means exactly what we've been talking about, where agencies share common systems and common business processes. The ones that we have found to be most effective in the financial management community are based on the concept of economies of scale. I think you go back to the model that's been demonstrated in industry over and over again of gaining process efficiencies through either mass production or through common procedures. That's a proven concept; it's one we need to continue to embrace in the federal government. If that means consolidating services, consolidating productions, and the kinds of work we do -- applying often a heavy dose of technology is important, but a business process that can be done faster and cheaper, regardless of whether it includes hardware, software, or supporting infrastructure, or whether it merely is just a tweaking of a process that somebody has found to be effective from one agency to another -- I think those are the very important things that we have to look forward to. We intend to gain many similar process efficiencies by this standardizing that we're embarking upon in our financial business processes.

Ms. Cammer: Do you reference this coming from private industry as a best practice? In private industry, you understand, the shareholders are motivating it, so for you, what's the big driver in government improving their financial management in this way?

Ms. Combs: Just as the private sector is interested in the motivators, we, too, are interested in getting the best we can for our shareholders, who are the taxpayers -- you and I -- as well as our audience today. We think they deserve these economies of scale. They deserve a situation where, in essence, we can buy once and use many times over, in federal government. Whether we were in our previous private sector enterprises, or whether we're here doing the work that needs to be done for our taxpayer-shareholders, the interests are the same: economies of scale, business processes changes that are productive for the entire enterprise, and our entire enterprise happens to be the entire federal government. We intend to gain these process efficiencies and standardizations for our shareholders as well.

Ms. Cammer: Now, I've also heard about this COE, or centers of excellence, concept in relationship to the financial management line of business. Can you describe that and how it relates, for our listeners?

Ms. Combs: The center of excellence concept allows our government agencies to meet some of the goals that we've set forward in the financial management line of business concept that we've put out. It emphasizes these common business practices, it emphasizes common systems solutions, and it emphasizes what I think is becoming somewhat of a term called "economies of skills" as opposed to, and in conjunction with, I should say, economies of scales. We have some very well trained experience systems accountants, for example, software and hardware technicians, and program managers in specific places in the federal government, but they may not be in the place that we need them to be at all times. So if we look at this shared service concept, we can take better advantage, I believe, of where these skills, these economies of skills, are located. I think we've often looked at hardware service centers or software in terms of economies of scale, we continue to look at the specialization of running one of the CFO council-approved financial systems, and how that is going to work for other departments. But it allows agencies not only to outsource, when they need to, their hardware and software, but I think it opens an opportunity for the centers of excellence to perform agencies' accounting operations. If they do a very, very good job of that, and they're approved as a center of excellence, we need to take full advantage of that and take the competition aspect into each and every department that needs to embark upon changes in their financial management systems.

For example, we have over 50 of our smaller non-CFO -- non-Chief Financial Officer -- Act agencies, of which there are 24 of the largest departments and agencies. But there are 50 smaller non-CFO Act agencies that are currently using centers of excellence. There are four government-managed centers of excellence currently within the CFO Act agencies, and that's the Department of Transportation, General Services Administration, Department of Interior's National Business Center, and the Department of Treasury's Bureau of Public Debt.

Mr. Morales: Linda, you made reference to the CFO council. Can you describe what this is and what the goals of the council are?

Ms. Combs: Well, I'm happy to talk about the CFO council because that gives me a great opportunity to brag on my fellow CFOs and deputy CFOs of the council, which are really the largest 24 federal agencies; they're actually named in the CFO Act of 1990, which I talked about earlier. But these are the senior officials of the financial community throughout the federal government and the career deputies who are very, very instrumental in working collaboratively with their fellow CFOs and with those of us in the Office of Management and Budget. And we're looking at improving financial management across the federal U.S. government enterprise. And the council has several committees, and these committees are led by chief financial officers or sometimes deputy chief financial officers. And the priorities that we currently have reflected in our subcommittees of the CFO council are a Best Practices Committee, an Erroneous Payments Committee, Financial Management Policies and Practices Committee, Financial Statement Acceleration Committee, Grants Governance, Performance Management, and Financial Systems Integration.

Mr. Morales: Linda, you mentioned Best Practices Committee. Is that best practices within government or do you also look to the private sector?

Ms. Combs: We actually do both. We have made it a point at all of our chief financial officer meetings, which we have probably seven or eight of those a year. We don't meet every single month, but we make it a point to share best practices, whether it's a dashboard, for example, that one agency has had good success with, or whether it's a best practice that people have embarked upon in internal controls or a best practice of looking at ways to improve our erroneous payments. It could be anything. We actually looked at some best practices early in -- when I was actually a sitting CFO in terms of whether or not we could have economies of scale and economies of skill. We've done a lot of searching within the CFO community to determine which CFOs have good best practices in many areas that they're working on. And we bring those to the council, and it's a good chance for the CFOs to showcase what many of their opportunities have been, and how they've successfully implemented good business practices.

Mr. Morales: What are the challenges of implementing government-wide financial systems? We will ask OMB Controller Linda Combs to explain this to us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I am your host, Albert Morales, and this morning's conversation is with Linda Combs, controller of the Office of Federal Finance Management at OMB. Also joining us in our conversation is Debra Cammer.

Linda, what are the concerns of agencies while converting to government-wide financial systems from previous agency-wide applications, and how is OMB addressing those concerns?

Ms. Combs: There are some concerns about changing the way agencies do business. I think there're also some concerns about continuing to have a flow of reliable and timely financial data that is needed to carry on day-to-day operations. One of the things we're doing at OMB to help ensure the flow of reliable data is that we are actually requiring the use of only those financial systems that are hosted by a government Center of Excellence or a private sector Center of Excellence that have been approved by the CFO council. Placing a larger share of implementation responsibility on contractors has also been a must, as we've implemented new systems, and we've increased the use of fixed-price and cost-sharing contracts as well. I think the real key here, though, is that we have continually tried and will continually make it our approach to work very, very closely with each and every agency and department as it moves through the entire implementation process by reviewing these strategies that are so important and ensuring adequate communication between us and all of the stakeholders that are involved in making these significant changes.

Mr. Morales: Linda, implementing government-wide financial systems across all agencies sounds like a monumental task. How do you address the competing priorities and agendas to achieve true collaboration towards a common goal?

Ms. Combs: You know, I think one of the things that we talked about earlier in terms of the CFO community coming together to address government-wide issues -- we've been able to create a number of partnerships between the CFO agencies in the CFO community. I think it's been important that we've involved other functional communities as well, such as the CIO community, the acquisition community, property managers, supply and inventory managers. It's been important for us to address the issues that the Hill has seen fit to be involved in, and these functional communities and their leaders are extremely important to all of our efforts. I think the processes that we have used and have been created throughout the CFO community to support the President's management agenda addresses a number of issues, and many of these issues overlap, and particularly in the areas of e-gov and financial management. We will continue to use our greater community to bring the necessary measures into focus that we need to focus on, that we need to address, and that we need to make sure not only we have collaboration in, but that we also have success in.

Ms. Cammer: Now, as you move more towards a shared services approach in the federal government, there's likely to be a lot of concern amongst the agencies, and I'm wondering what steps OMB is taking to address change management?

Ms. Combs: You know, I think those of us who've been in change management for a number of years have one word to say about change management, and that's communication, communication, communication. I don't think we can over-communicate, and we're constantly looking for ways to communicate, not only our vision, but our actual strategy in moving this forward. We work through a number of forums from time to time to ensure that government mangers can understand everyone's role and everyone's responsibility. And I can't say enough about our partners in the CIO and the acquisition communities, the meetings, the briefings, and the other discussion forums that many of our private sector partners bring to play, bring us all to the table, and serve a most useful purpose, along with things like what we're doing right now is a great way to communicate with our federal partners and people who are involved in our federal CFO community.

The president's management agenda, because it incorporates systems and business process initiatives -- we have various requirements of the PMA, but our policies and our guidance that modify and support and consolidate these standardized approaches probably have an awfully lot to do with making these changes happen, and making them happen in a positive way. But we do need to always continue to find forums, find better ways to communicate what kind of changes are expected, but we also need to find ways to make sure that people understand our vision, and where we're going to be when we finish. And we will finish some of these things during our tenure, and I want us to be able to look back and say, here's where we were in 2005, here's what we've accomplished by 2009, and say we've made a tremendous difference because we were all willing to embrace this change.

Ms. Cammer: That's great. You can obviously see that this work requires a great deal of partnership with shared services providers and customers and agency heads and the private sector and -- what are these types of partnerships important and how are you encouraging the federal government agencies to build them?

Ms. Combs: Because financial management touches almost every business and every business process in the federal government and outside the federal government, it is extremely important to get this right. And financial data, I think that is used by our outside accounting organizations, whether it's a human resource, property management, supply inventory management, or whether it's used by managers on a day-to-day basis to make better financial decisions -- all of those things are so important because I think the small amount of actual financial data that is used in the financial community is small compared to the huge amounts that mission area managers need in order to effectively manage their program. And I think it's really important to help mission managers understand that their mission is part financial management as well; it's just as much a part of their mission, and I know they want to embrace it that way. I think it's up to us as federal financial managers to help these mission managers accomplish their missions in a more productive way.

Ms. Cammer: We've talked about the challenges of transition leading to new systems and the change management involved in the challenges of a partnership. Could you talk about what other major challenges that agencies could encounter as they integrate their financial systems, and what are they doing to overcome those challenges?

Ms. Combs: I think some of the tenets that we're advocating to reduce implementation risk actually address significant challenges that agencies encounter when they're implementing new systems. And having done this as a sitting CFO myself, I know how important it is to develop the right simple strategy, and a strategy that actually supports and fits in well with the department's or the agency's overall approach to financial management. I think it's important to minimize the changes to the business process that is already certified; in fact, I would say don't change it. I think it's important to use phasing of projects; in other words, don't try to do too much too quickly. Implement one functionality at a time. If you're going to implement multiple functionalities, such as core financials, procurement, and asset management, I'm not sure I could have done all of those at one time myself, so we tended to concentrate first on the core financials. But using a simple contractual vehicle, introducing competition when you're selecting the right host -- agencies, I think, continue to have to take implementation risk, but we need to be very, very careful that we are simplifying our approach as much as possible, both from a technical and a procurement perspective, and we need to work very, very closely up front and all the way through with the end users of the data in our agencies and departments. It's really, really important to find out what managers actually need, but to focus them on the fact that we've got to have standardized business processes, and we have to change our processes rather than changing the product. That's where I think we have, in the past, had some difficulties, and I hope that my mantra of change the process, not the product, will become a standard throughout government.

Mr. Morales: Linda, we talked a lot about change management and collaboration, but I would imagine that another major component of these types of transitions is employee training and retraining. What can you tell us about the plans or implementation of training for government-wide systems implementations?

Ms. Combs: Training is extremely important. Hiring and retention of specific skill sets is extremely important, as well. And I think, as I talked earlier about the advantages of these economies of skills as we've embarked on the Centers of Excellence approach, that will continue to become an even more important element within our financial management component. Training cannot be overemphasized any more than communication can be overemphasized when you are changing processes particularly. That's why I think it's so important to optimize the skills we have within the Centers of Excellence because these are people who have not only gone through this already, they have the right skills in place, and we just need to be able to replicate and duplicate what has gone on there to take advantage of the skill sets that are already there with these specific communities.

Mr. Morales: What does the future hold for the OMB's Office of Federal Finance Management? We will ask Controller Linda Combs to explain this to us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Linda Combs, controller of the Office of Federal Financial Management at OMB. Also joining us in our conversation is Debra Cammer.

Linda, what are some of the lessons learned in the government-wide analysis of the five lines of business?

Ms. Combs: You know, particularly in the financial management line of business, one of the things I've learned from personal experience that I hope to continue to pass on to my fellow CFOs and people in the CFO community is start simple and keep things simple. Whether you're using procurement vehicles, systems implementation, schedules and timeframes, make it clear, make it consistent, keep it simple. And the huge systems implementations that have been attempted, particularly in the financial line of business, I think a lot of people have learned some very valuable lessons from those, and it goes back to keep it simple and don't attempt to do too much at one time. Also, I think it's important for timing to be considered. If you're implementing a new financial line of business or a new financial system, you have to continue to keep control of your financial systems all during the year, regardless of whether you're changing systems or not. So developing a very good, viable, long-term strategy, and shorter tactical methods to know when you succeed, is an extremely important thing to keep in mind. I think you have to constantly reevaluate your strategy as you go along and make sure it's still being relevant to the community you're doing this for, communicate with the various leaders that touch your area, and certainly involving these end users in the design, the testing, and the awareness of making sure when we finish an implementation that we're going to be giving people what they feel like they need to manage better on a day-to-day basis.

Mr. Morales: Keeping it simple is certainly a well-learned lesson and often one of the most difficult ones for all of us to keep in mind. But specifically, what advice would you give a government executive today who will be implementing government-wide financial systems?

Ms. Combs: I think one of the things that I just talked about -- avoiding mid-year financial conversions -- is pretty important. We would hope that we could have our long-term strategy and even our short-term strategies to the point that we would be able to bring up financial systems early in the year rather than waiting longer and later in the year. We talked about simplicity already and developing a long term strategy and -- not just developing a long-term strategy, but keeping in mind what are we going to have when we finish, making sure that this design and the strategy that we've embarked upon is not just a simple strategy, but it's also a strategy that's going to help us to implement all of the financial management systems later on that we will need to add to that. I would say start with your core financial system and make sure that's tweaked to the point you want it and operating well, make sure you've got the processes worked out -- make sure you change the processes, not the products.

Ms. Cammer: How do you envision the use of shared services and its implementation in five to ten years?

Ms. Combs: I think if we look out five to ten years from now, we'll be closer to the end of the journey, whereas now we're probably closer to the beginning of this journey. I think that the shared services concept is being embraced. It's being embraced in the corporate world, and it continues to be embraced in the federal sector as well. But the applicability of the economies of scale and the economies of skill will drive us and help to drive us through technology, through training, and toward becoming as practical as we possibly can in the world of the service industry, as we are in heavy industry. We have a lot of guidance out there; we have a lot of best practices to look at in the private sector, and my hope is, as we go through this journey, continue to use the best practices that we possibly can and optimize utilizing the skills of our good federal employees to make these come about.

Ms. Cammer: We've been talking a lot about shared services as an operational change. Could you talk about how you see the future of government financial management and their statements being generated different in the future?

Ms. Combs: You know, one of the things that continues to drive people to better financial management is the indicators that we have, and our financial statements are really indicators of our ability to show that we have things under control. So achieving a clean opinion on our financial statements and using them fruitfully depends, in large part, I believe, on using common accounting standards throughout government, standardizing our business processes, and consolidating the systems that we need to help us bring this about. I think those are the things that we need to continue to look at, we need to continue to do anything we can to improve our processes, our internal controls, and all those things will help us build and publish our financial statements in a more timely and effective way.

Ms. Cammer: How do you plan to further expand the PMA's e-government initiative for the future?

Ms. Combs: You know, the federal financial e-gov proposal -- our financial line of business -- is very important in our CFO council work. The CFO council is committed to making positive experiences work for each one of our federal partners. Our agencies talk to one another, we continue to figure out ways to help agencies talk to one another even better, and I think working together with our CIO partners, working together with many of our other partners, is a very, very important element to bringing this about. I think we're definitely aware of what agencies have done and are doing. Having been a sitting CFO, even a couple of times already in this administration, I know what my fellow CFOs are going through, and having been through many of the things that some of them are just now going through and setting up a financial management system, it's very, very important to make sure that we now in OMB are great partners. Hopefully, we can be even better helpers in making agencies aware of what has been done and what other agencies and departments are doing to support the financial management line of business. We look for any and all ways that we can actively participate across the financial management community to generally and specifically support agencies as they go through changing their financial management systems.

Mr. Morales: Linda, you've had a fantastic career, and I wish we had another hour to talk about all the different jobs that you've held in government and the experiences we've had. But what advice could you give a person who's interested in a career in public service, especially in financial management?

Ms. Combs: I would say to anyone who's interested in public service to consider it strongly. It's an avenue that you cannot find anywhere else. The scope and responsibility of the decisions that are made on a day-to-day basis, whether you're in a department, or whether you're in OMB, are significant. And so significant that one would never have the opportunity to do that in any other place except in public service. Public service is definitely a public trust and added to the overall scope of responsibility, the public trust aspect of what we all do in public service is a leadership role that one can have and embark upon and have a wonderful career if they choose to stay there their entire career. But I would say to any person who's interested in a career in public service that they should prepare themselves and prepare themselves well for a leadership role, prepare themselves in financial skills in any way they possibly can because whether they're going to be working in a program area or in a financial area, these financial skills are going to become more and more important as we move through the next few years. But I would say work hard, be bold, and think big.

Mr. Morales: Linda, that's great advice.

We've reached the end of our time. That'll have to be our last question. First, I want to thank you for fitting us into your busy schedule this morning. Second, Debra and I would like to thank you for your dedicated service to the public and our country with your experiences at the county school district, at EPA, and now at the Office of Management and Budget, and all of the other organizations you've served at in between.

Ms. Combs: Thank you so much. It's been a great pleasure to be with you today. We appreciate this opportunity to get our message out there. And if people would like to know more about the things we've talked about today, I invite you to go to whitehouse.gov/omb or to another website called results.gov and learn more about financial management in the federal sector.

Mr. Morales: Linda, thank you.

This has been The Business of Government Hour featuring a conversation with Linda Combs, controller of the Office of Federal Financial Management at OMB. Be sure to visit us on the web at www.businessofgovernment.org. There you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's www.businessofgovernment.org.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who can't hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

Marion Blakey interview

Friday, July 1st, 2005 - 20:00
Phrase: 
"The FAA is providing an important customer service and we have to match the demand. As air traffic increases and as aviation is an enormous driver on our economy, we must invest smartly in infrastructure, technology and the service to match the demand."
Radio show date: 
Sat, 07/02/2005
Guest: 
Intro text: 
Missions and Programs; Leadership; Strategic Thinking; Innovation; Financial Management; Market-Based Government...
Missions and Programs; Leadership; Strategic Thinking; Innovation; Financial Management; Market-Based Government
Complete transcript: 

Thursday, November 4, 2004

Arlington, Virginia

Mr. Lawrence: Good morning and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of The IBM Center for The Business of Government. We created The Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can learn more by visiting us on the Web at businessofgovernment.org.

The Business of Government Radio Show Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Marion Blakey, Administrator of the Federal Aviation Administration.

Good morning, Mary.

Ms. Blakey: Good morning. Nice to be with you, Paul.

Mr. Lawrence: Thank you. And joining us in our conversation, also from IBM, is Dave Abel.

Good morning, Dave.

Mr. Abel: Good morning, Paul.

Mr. Lawrence: Well, Marion, let's start by filling our listeners in on the FAA. Could you talk to us about its mission?

Ms. Blakey: Well, the FAA's mission is to ensure that the traveling public, when they're flying, can be assured it's safe and efficient. We run the largest, most complex aviation system in the world. Of course, Air Traffic Control is a big part of that. But we also do a great deal in terms of setting the regulatory standards for what aircraft operators must meet; new aircraft coming into the system, and we also work, of course, to make sure those operations day-in and day-out are inspected and overseen in a way that, again, ensures safety.

Mr. Lawrence: How do you describe the size of the FAA; the network, the people, the budget. How would you describe it?

Ms. Blakey: Well, it's an agency of about 48,000 people scattered all over the country and around the world, really, because, as you can imagine, aviation is a global business, and that's the business we're in. The budget right now is around $14 billion, so again, one that both ensures the ongoing operation of the system and makes investment in the modernizing of the system and the future generation of the system.

Mr. Lawrence: 48,000 people. Can you give us a little bit about the range, the skills these people have? I immediately think of sort of heavy technical engineers, and the aircraft and the like, but I suspect it's much broader.

Ms. Blakey: It is broader. You know, we have a wide variety of professions involved. Everything from highly technical people who are pilots and engineers; people who can go on board an aircraft and inspect for all the right things; people who know how to control traffic and who are able, in fact, to look at the most efficient ways to design our air space. And then we have people who are policy folks, who are out there looking at issues of congestion management; what should we do in the future in terms of designing the revenue streams for a system like the one we have. Obviously, people who are in international fields, working with our counterparts in other countries around the world so that we have a seamless global system that works. A lot of different things. If you're an economist, if you're in policy, lawyers, all those are part of the FAA's workforce.

Mr. Abel: Marion, when you were describing the mission of the FAA, there's a vast number of stakeholders, and they fit into a number of different groups. What's the relationship with a couple of these groups? Let's start first with the airlines. What's the nature of the relationship between the FAA and the airlines?

Ms. Blakey: We look at the airlines as our customers. I think it's fair to say that because they provide the service to the vast majority of the American public that flies, we want to make sure that the service we're providing, both in terms of air traffic control and the overall approach we're taking in terms of operations in the system, meets their needs. At the same time, of course, we also regulate their work. We oversee safe operations, and so we place requirements on our customers as well. So it's a combination of things, but I think it's important to stress that it has to be a strong partnership, because after all, they're out there every day on the front lines and we're trying to ensure that they do the best possible job for the flying public.

Mr. Abel: How about some other organizations within the federal government, say the Department of Defense. I know there's a strong relationship between FAA and DoD. What's the nature of that relationship as well?

Ms. Blakey: Glad you mentioned it, because, you know, when you really look at the domestic air space, a lot of it is also devoted to military operations. Needs to be -- particularly in these days after 9/11, when the safety and security and surveillance missions are all caught up together. So we work very closely, particularly with the Air Force, as you can appreciate. We have military controllers out there who control some of the airspace as well as our own federal employees. And we try very hard to make sure that all of the regulations we do and requirements also meet the needs of our military. And in some cases like commercial space, we also work on commercial space launches, whether they take place from a federal Air Force facility or a private sector facility now.

Mr. Abel: I would imagine there needs to be a relationship with the Department of Homeland Security as well?

Ms. Blakey: A very close one, as you can appreciate. A large part of the work force that initially went over to the Department of Homeland Security came from the Department of Transportation. That's our parent agency. And, in fact, a number of them were involved with security on the aviation front at the FAA. So we've worked very closely, because they're the ones who have to assess what the threats are; they obviously do all of the surveillance in the airports of passengers as people get on the planes, but we're the ones who control the airspace. So we work very hard to make sure that when operational changes need to occur -- when there are, for example, areas where flights are restricted -- as you can appreciate, we've had a number of those with big events that go on, certainly during the Presidential election, we had to be certain when there were areas where we really didn't want to have flights at a low level over those areas, we work very closely with Homeland Security to figure out how to do that well.

Mr. Abel: Let's talk a little bit about your role. Can you tell us a little bit about the job and the responsibilities as Administrator?

Ms. Blakey: Well, I would like to say that this job involves sort of both being a pitcher and a catcher. I think the pitcher part, of course, is that you do try to look at the needs of the aviation system over the long haul. And a part of what I've spent a lot of time on is developing a strong business plan for the agency that looks strategically at where the system is going to go. I'm very proud to say that we are in fact developing a plan now that will be going to Congress in December for the next generation system of our aviation system here in this country. So there's a lot of that that's involved. But, certainly, day-to-day manager, and being, as I say, a catcher of the issues that you never expect and come your way; all of that's a part of it. I think most important, fundamentally, it is strong management skills that are required for the job.

Mr. Lawrence: Let's take a little look at your experiences before becoming Administrator of the FAA. Can you tell us about some of the previous positions that you held before this role?

Ms. Blakey: Well, I can. Certainly recently, they were all involved with transportation in various stripes. But, I'll tell you, I'm also very proud of having been a civil servant for many years. I started as a GS-3 clerk. Wasn't even a clerk-typist, because I couldn't type. So you can imagine I was pretty far down the totem pole. But liked government for many reasons including the broad scope of issues, the feeling that you really do have an impact on the lives of people all over this country. So I worked in a number of departments and agencies and had some great opportunities. Worked in the White House, Department of Commerce, Department of Education many years ago. But became fascinated by Transportation, and had the opportunity to head the agency that regulates the automobile industry.

I had a firm in the private sector that was all focused on transportation issues, a communications and public affairs firm that I'm proud to say flourishes to this day: Blakey and Agnew. It was Blakey and Associates then. But worked on a number of public policy issues with a number of corporations, all focused on transportation. And then came back into government as the Chairman of the National Transportation Safety Board that investigates accidents. It gives you a very fine appreciation, of course, as you can imagine, for the safety issues of our system. And I was very surprised but delighted to be tapped by President Bush to be head of the FAA. So I guess that's the quick version.

Mr. Abel: You mentioned that one of the responsibilities and one of the areas that you need to manage now is reacting to things that happen on a daily basis. How have those roles prepared you for the responsibility in FAA of management, of reacting to events on a daily basis?

Ms. Blakey: You know, you have to again try to look at the broad picture, and every day, frankly, go in and say, how am I going to move the agenda that I believe is important on the two, three, four things that you really set in front of yourself as goals and objectives in that job? It's very easy to get caught up in all of the pressures of the issues, concerns, problems that everyone brings to you. And so I do think you really have to start out, as I say, with trying to see if during that day and that week -- I can't say I accomplish it every day -- but at least during that week, you feel like you have actually moved toward the goals that you're setting and at the same time, trying to be responsive and nimble. One of the things that I certainly found in my years in the private sector is you have an appreciation for how important it is to be able to react quickly, to size something up, to make decisions.

Government doesn't always engender the kind of culture that prompts good, strong and efficient decision-making. And so you try, I think, in the kind of role that I play as Administrator, to try to make those decisions on a basis that then people below you can be responsive and react in a way that's timely.

Mr. Lawrence: Let's continue along that path. You were just contrasting the public sector and the private sector, and having been in both those sectors. How about some other comparisons in terms of management approaches from all your experiences.

Ms. Blakey: In terms of management in the private sector, of course, you do have the feeling of being much more nimble, much more able to react to forces quickly, and frankly, decisions are not ones that you have to look at a variety of overseers before you can make them in a way that holds. That is all very refreshing. I will also say that many of us in the private sector look at ourselves fundamentally as salesmen, as people who are advocates, as people who are promoting an agenda in a very direct way. It doesn't hold true for all jobs, but certainly ones that I have had. And I have prized that.

I have to tell you that I've enjoyed the opportunities to really set a marker out there and go for it in a way that -- sometimes within government, it's much more of a process. So those are the things that I would say from a private sector standpoint you can appreciate and try to employ as you move in to the public sector and to public policy. But of course, public policy, as I say, the opportunity to work with a variety of organizations, whether it's the Congress, OMB, the Administration, more broadly, other agencies, is a genuine challenge that also is very reinforcing, because again, the impact and scope of what you can accomplish that way is enormous. And that's something that I think many of us who have enjoyed our tenure during our life in government, it is all about that kind of scope and impact.

Mr. Lawrence: That's an interesting point, especially about the contrast.

Air travel is up significantly in the last couple of years, returning to the point where many airports are close to their pre-9/11 volumes. What does this mean for FAA operations?

We'll ask Marion Blakey, the FAA's Administrator when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Marion, in the last segment, we talked a little bit about the size of FAA. I'd like to ask a little bit about the size of the FAA's mission. About how many people fly in commercial and private air carriers each year?

Ms. Blakey: Well, if you look at it basically in the area of commercial, because private is sometimes hard to know because a lot of those folks are out there flying VFR, and we don't tally them up each time they leave a small air field. But if we're talking about commercial passengers it is somewhat under 700 million. 689 million was the last figure that I had for the last year we were counting, which was, you know, pretty accurate.

Mr. Abel: Over the past two years since September 11th, we've started to see a significant increase again in the volume of people who are flying commercial aviation. What type of impact does that increase of volume or demand have on the FAA?

Ms. Blakey: Well, certainly, we have to stay up with demand, and since we are an operational agency, the more folks up there flying, typically, the more services we have to provide, the more people it requires to do it, et cetera. One of the interesting things that's a phenomena now in aviation is we have seen very different patterns of traffic since 9/11: much more point-to-point flying, much more use of regional jets. And so what that means from our standpoint is we have a high number of operations that we have to provide the air traffic control for, the services on the ground for, and yet they are not carrying as many passengers as they might have with the widebody's bigger aircraft that you saw more of before 9/11.

So there's a shift in the fleet. And as we're looking at some of the things that are coming at us, we're going to be seeing even more of that with what are called Microjets, the very small aircraft that are coming online in the next few years. And of course, then there's UAVs. So there's a lot out there coming at us.

Mr. Abel: So what are some of the things that -- in your strategy, what are some of the things that you're looking to be able to do over the course of the next couple of years to address this increase in demand of operations, in addition to the increase in passengers?

Ms. Blakey: It is to have the FAA be a very flexible agency in the sense of where we assign our work force, how we allocate our resources, because obviously, as there's a dynamic in the airline business and in aviation that's changing, we really have to stay up with it. As I say, we see ourselves as providing an important customer service, if you will, and so that means we have to match the demand. At the same time, we've also got to invest in the system, and a fair amount of time that I spend, of course, is looking at the way that we are investing in technology; are we getting a good return on that investment; are we modernizing our system. So that in fact, it's going to anticipate the requirements in the future, and frankly, use our air space and our airports and ground infrastructure ever more efficiently, because as traffic continues to increase, which it will, and as aviation is an enormous driver on our economy nationally and it will be internationally, we had better provide the infrastructure and the service that will match it, and that means we are going to have to invest smartly.

Mr. Abel: So if you think about it from a very simple perspective, in order to be able to manage the demand for air transportation, we have to look at flight delays and capacity. What are some of the things that the FAA is doing to be able to increase capacity at airports. Is it as simple as building more runways?

Ms. Blakey: Well, runways are a lot of it. I'll tell you, there's no substitute for pavement. And in fact, I am very pleased with the way our country is really stepping up and recognizing that, because it takes a lot of on the part of city fathers and communities to make the political headway and then the investment that's required to put in new runways. But we're seeing a lot of that. Over the course of the last five years, we've had eight major runways go in, and that's a big thing. You know, places like Houston, Orlando, Miami. We've got them coming in, you know, in places like St. Louis. It's a great thing.

And of course, Chicago O'Hare, one of the real challenges in our system, because so many of our flights go through Chicago -- they're planning a major modernization of O'Hare as well. So there's a lot of pavement that is involved in ensuring that we're going to have the infrastructure there to support the passengers that are coming through. At the same time, technology is a great part of it. We also need to really have a system that has new technologies there so that we can use the air space more efficiently. And we've worked pretty hard on that as well.

Mr. Abel: What are some examples of some of the potential new technologies that may help to be able to more efficiently manage the air space?

Ms. Blakey: One of the big things, basic. We have a change out going on on what we call the host, if you will, the central nervous system of our air traffic control system. This is a major thing. And as you can appreciate, over many years, that system was developed, the software was written. The software right now is still written in a language called Jovial. There aren't many people out there who write Jovial anymore. So we are changing all of that, and that is a big multi-billion dollar investment.

Another thing that we're doing is in the terminal air space. I'm sure some of our listeners have seen those round scopes; you know, the old air traffic control radar. You don't see that now. What you're seeing more and more is new, very impressive screens that look a lot like the big computer screens at home, full color; where we are not only able to fuse radar coming in from as many as 16 different sources, but we also are able to infuse weather information for the controllers. Other kinds of very critical information so that they're able to sequence flights and with greater and greater precision, control them.

Another thing that's going on which our listeners will begin to have the benefit of in January of this coming year is that we're reducing the vertical separation between flights in the air space. Now, I'm sure that might cause some concern for some folks. You know, lots of space is good, but the more efficiently we use the air space, obviously, the more we're going to be able to handle increased traffic without delays, with the kind of reliability people want. And the air space, the upper air space is now going to be used in thousand mile vertical separation rather than two thousand mile. It's done around the world. The United States is moving to that. And again, that's going to offer some real efficiencies.

Mr. Abel: You describe for us the increase in demand and the increased requirements on the FAA to be able to manage that demand. And the listeners may assume that that means that there's a lot more money to be able to manage the organization, but we certainly know that not to be the case. You've focused a lot recently on the efficiency and effectiveness of the Air Traffic Organization, or ATO. What is the ATO?

Ms. Blakey: The ATO is a new performance-based organization within the FDA that brings together several of our major, what were formerly lines of business, in an integrated streamlined way. The concept, of course, is to develop a organization that has layers, that is very service-oriented, and that operates to specific performance metrics. We have targets that we are setting for our organization that go to issues that reduce delay, on-time performance, using the infrastructure to the best possible capability there, and, of course, indications of safety and the kind of performance that we'll always require from that standpoint.

But we do believe that having those kinds of targets, and frankly, cost efficient measures. We are looking at cost accounting, being able to understand, really, for the first time, what it costs to undertake air traffic control of a given airplane. How much does it cost to control over an hour in upper air space the flight of an airplane? Because, obviously, as you're thinking about service and how you provide it and what things cost, you really do need to be able to get it down to unit cost. That's what the private sector does. And we can do it in government as well. It makes us much more accountable and transparent as to how we're using our resources. All of that is part of the air traffic organization.

Mr. Abel: What has been the impact of the implementation of the ATO so far. It's a relatively new organization. How's it going so far?

Ms. Blakey: Well, it's going well. We have been working very hard, for example, to streamline our operation at the top tier of management and in headquarters, dropping the number of layers from around 11 down to 5 or 6. We're doing a number of things to align the question of how you invest in new capital improvements in the system, with also the people who have to operate the system. It used to be that the FAA made research, acquisition investments in one part of the FAA and the folks who are operating the system were off in another part. When these new improvements, technologies, were then handed over to the operational folks, sometimes we found that they didn't align too well. Sometimes we found that the issues of how much it costs to maintain over time, how much it costs to really operate it, we did not have a good integration between those two sides of sound decision-making. So the Air Traffic Organization has now put those decisions again in the hands of people who have to both operate the system and have to think long-term about the return on investment. And by integrating that, I think we're going to get a much more efficient system.

Mr Lawrence: The FAA has several initiatives underway to better regulate and enforce safety standards, to include improving customer satisfaction. Could you tell us about these?

Ms. Blakey: Yeah, we have found all along that we needed to be more consistent in the way we provided interpretations of our regulations, the way we provided guidance on how those who are out there both developing aircraft, modifying aircraft, doing the kind of maintenance that's involved, what those standards and certification requirements were. And there has been the impression; certainly, that I think has been real in some cases that different parts of the FAA in different parts of the country operated differently.

The guidance was not always consistent, wasn't always as reliable as it needed to be. So what we've done is, we've provided to all of our organizations out there a required code that says these are the kinds of things that to be responsive to our customers, you need to do. And if someone comes in and believes that the guidance that they've been given, the decision they were given on a given issue problem, aircraft, they want to appeal it, it also provides the information to our customers on how you take it up to the next level, and guarantees a hearing, so that if there are issues of consistency from one place or another, as it moves up, we are able to address those and understand that they're there. That kind of accountability, I think, we're having good reactions from all those out there that the FAA touches and affects.

I'm also very proud of the fact that the customer satisfaction survey that we do has been consistently going up. We're getting good grades from pilots out there as to how well our Air Traffic Control is working, how we're touching a number of our customers now. And that matters to us.

Mr. Lawrence: Most FAA employees are in a pay for performance situation. What does this mean to the employees and its leaders?

We'll ask Marion Blakey of the FAA for her thoughts when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour, I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Marion, in our first segment, you talked about the need for you to balance between strategic planning and operations. We talked a lot in the last segment about the operations of the FAA and the increase in demand. Let's flip back and talk a little bit about strategic planning. How in the organization do you do strategic planning?

Ms. Blakey: Well, you know, it's pretty challenging in an organization that is really required to keep up with transactions, millions of them a day. In other words, unlike a lot of agencies of government, the FAA really operates a system, and both achievements and occasional mistakes are very public, so it's hard to pull back and then to say, nope, we're going to take a longer view, and we're going to set goals and then attach not only metrics to those goals so we can tell whether we are meeting them or not, but we're going to tie our budget to those goals and see what it's costing us, and see whether we can afford to do this and continue to keep up on it on a week-in week-out, month-in month-out basis.

The way we tackled it was that we decided that we would construct a flight plan for the FAA, a rolling five-year plan that was going to, as I say, be tied to performance measures and tied to our budget. That does, believe me, get the attention of all your executives in a hurry, because that means that everything is going to be run by a strategic plan, a business plan. As many of us know in government, I think there are probably strategic plans all over town that are gathering dust on shelves. You have one, you post it on your web site and that's the end of that.

Ours is one that we developed over the course of about six months. It was a very arduous process of really trying to determine what the kind of goals and initiatives were that would genuinely improve our system, that would genuinely advance safety, and how you would measure that; how you would measure our achievements internationally, because we wanted the FAA to be much more proactive internationally -- frankly, set the standards globally for aviation -- and how we were going to set standards of organizational excellence that really would put us first in government. That's the goal there, and we're not shy about saying so. But we work very hard internally, and then we had the plan in draft put out there for comment by all of our stakeholders, we hold town hall meetings, we encourage comments from our employees, and then we posted the plan on our web site and said we are going to be measured by this.

I hold meetings every month where all of our executive team comes together. We spend a full day together going over all of those metrics. Are we hitting it or we not? Are we making our numbers or are we not? And we are then accountable on a quarterly basis just like a corporation, for whether we're doing it or not. We use a simple system: red, yellow, green. For people who want to click into it, we have a good software-based system called PB Views that allows people to go as deeply as they want to into the specific initiatives and performance measures of the FAA, and see specifically how we're doing on those.

And because we do tie our pay at the FAA, the annual awards and bonuses that frankly are automatic just about everywhere else in government, in ours, we have to make our numbers. Last year, we didn't make all of our numbers, and as a result, we only awarded 85 percent of what is usually the annual increases, the quality step increases, all of that, which we combined for our organizational success increase. We only awarded 85 percent, because that was really what we made on our numbers. This year, for '04, I'm just doing the assessment right now with our executive team. We're going to do better than that. But we're still not hitting every goal, and that's because they're strict goals. But we intend it to be that way.

We have just published our new draft plan, we'll be rolling it out soon, and at this point, I'm pleased to say we've had over a thousand comments and suggestions on it. That's good, because that means both our stakeholders and, very significantly, our employees, 85 percent of the comments came from my employees; they've got ownership in it, and that makes a huge difference.

Mr. Lawrence: Who participated in the initial development of the plan?

Ms. Blakey: You know, it started out with executive-led teams. But then we worked it out through our facilities, and then we asked our customer base to come in and meet. The FAA is not short on having advisory groups and people we can count on to help us with good advice, and frankly, it really was a big group effort. I don't take any personal ownership in this. It's something that needed to be developed organically, and I think that's one reason why it's working.

Mr. Lawrence: Could you provide us with a couple of examples of things that you measure? What would be some example measurements that are in the plan?

Ms. Blakey: Well, I certainly can. One of them, for example, is to reduce the risk of runway incursions, two planes getting too close together on a runway, vehicles getting out there, and I'm proud to tell you that we set specific numbers that we were trying to drive down the numbers of those incidents, because we believe it has very fundamental affect on safety. Reduce the number of Alaska accidents. You might say why Alaska? Well, because, frankly, that was where we saw the greatest incidence of accidents and fatalities. Being a pilot in Alaska used to be a high-risk profession, largely because of terrain and weather. But we knew we could take on some of those issues with new technologies, and we did.

When I look at questions of how we operate the system, we looked at things like on-time performance; how are we doing from the standpoint of actually being within 15 minutes of the time passengers expect to arrive at the gate? We don't control it entirely. That's also a part of weather and the way the airline is scheduled. But we've got specific metrics. Frankly, that was one last year we didn't make. So I could go on, but that gives you some idea, you know. These are not soft goals.

Mr. Lawrence: You mentioned that a number of the employees; in fact, a large percentage of the employees, are rewarded based on being able to meet these metrics. Are they rewarded on meeting all of the metrics, or ones that apply to their specific job?

Ms. Blakey: We do it on two levels, if you will. I am proud of the fact that 75 percent of the FAA's workforce, and this includes our unionized work force to a very significant degree, is on a pay for performance system. We have what we call an organizational success increase, which means that out of the 30 goals that we have for the FAA, we're expected to meet 90 percent of those if in fact people are going to get the full OSI, as we call it. Then there are specific also awards that go for the more-detailed duties that each individual employee has. And those increases also are really tailored to their responsibility, so they vary from one part of the FAA to another.

Mr. Lawrence: As long as we're talking about the employees of the FAA, can you tell us a little bit about some of the human resources challenges you face in the organization today?

Ms. Blakey: Well, you know, I bet like much of government, from what I understand, we're dealing with an aging workforce, and that's not surprising, particularly for the FAA, because of two things. One is that when you think about the folks you want out there inspecting airplanes and providing oversight from the standpoint of certifying aircraft and all of that, needless to say, you draw on very experienced people. A lot of them come out of the industry. They're highly trained, but that means it is an older work force on the whole.

Another phenomenon was that for our air traffic controllers, the PATCO strike meant that large numbers were hired in the early '80s, because President Reagan fired over 10,000 air traffic controllers, and the need to replace those all happened within a few years. Those folks are reaching the maximum retirement age, which is 56, as the system is set up. So we're going to see large numbers mustering out over the next ten years. And that means we're going to be hiring lots of people, and we have to figure out a plan that both figures out how to begin to step that up, and how we can train highly efficiently so that you move people into the system well.

Mr. Lawrence: How long does it take -- when someone decides to become an air traffic controller, how long does it take before they can actually work in the system? Is it a long lead cycle or is it relatively short?

Ms. Blakey: It depends, of course, on the experience base that they bring. We recruit from the military, where they've been controlling live traffic; we recruit from schools around the country where they may have spent four years in an undergraduate degree learning a lot. But we also recruit people straight in. Average is three to five years to be a fully certified controller, particularly at the more complex facilities. Now, fully certified means that you can work all positions in some of our most complex facilities out there.

We think probably, as we need to step up the pace on this, we're going to use simulators, for example, which is something that has been highly successful, as you know, in the training of airline pilots. The FAA hasn't relied on it as much. We believe in simulating all sorts of circumstances that hopefully controllers will never see in their actual air space that they're going to control. We'll be able to bring people through the system more quickly, and that would be a good thing.

Mr. Lawrence: In 2002, the FAA won an award for the most improved government agency. I'd be curious about some other awards you've won as well, and I guess, sort of even, how you continue to improve to win these awards.

Ms. Blakey: Well, you know, we do focus on that a lot. I really do believe that it is important to have people recognize the excellent performance and the real steps that we're taking to be a performance-driven organization. For example, we were very pleased that we were, with the Department of Transportation, top agency of government in terms of the President's Management Agenda. Four out of five of the key scores, we were green on. So we were right up there in the very top tier, and the FAA drove a lot of that because we're a big part of the Department of Transportation.

The Association of Government Accountants, in this last year, gave us award for our performance in financial report. We're very proud of that. We're proud of the fact that we have had clean audits for the last three years, and believe me, we're working very hard to get another one this year. Customer satisfaction index, as I say, this continues to go up, and we're looking at expanding that so that we have the real measure of how people feel we are doing in terms of being responsive to their needs.

So all of these are the kinds of things that, you know, as I look at it, we're working very hard, I'll tell you this, to get off the GAO's high risk list. I'm sure there are folks out there who know government agencies are often targeted there. The FAA's financial performance has been there for a while, and I'm very hopeful that we're going to move off of that as a result.

Mr. Lawrence: That's interesting.

What are the implications for the FAA of things such as commercial space travel? We'll ask Marion Blakey from the FAA for her thoughts on what the future holds for the FAA when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Over the past ten years, most businesses have gone global, but none more than commercial aviation. What is some of the impact now of the international nature of air transportation on operations of the FAA?

Ms. Blakey: Well, you know, it is a global system, and it is very much in the interest of the American flying public that we encourage open skies, the ability of not only of our carriers to fly routes all over the globe, but also to co-chair with foreign carriers so that in fact, you know, you don't have to have expensive service everywhere, because you could link up with a lot of others. That drives the price of tickets down, but at the same time, we have to be sure that it is not only a seamless system out there, but a very safe system. And parts of the world, as you know, safety challenges in aviation are much greater than they are in the United States. So we're trying to raise the bar on safety in a number of places.

We're also very convinced that American technology, American safety, is something we should be exporting. It's one of the great aspects of the fact that the United States has been a leader in aviation since the Wright Brothers. So in markets like China, for example, we're working very hard on both air traffic control systems and procedures, satellite-based systems. We have a satellite-based system now that we believe uses our GPS system, that will extend all the way from India through, we hope, China. Certainly Japan has already committed to it, and around the globe into the United States. It's going to be a great boon for aviation.

So we're working hard to expand those benefits, and frankly, that also benefits the United States economy in a variety of ways, our companies and our passengers. It's a big part of our goal these days.

Mr. Lawrence: Does the FAA have a single counterpart in Europe, or are there multiple organizations?

Ms. Blakey: I'm glad to say that with the European Union's advent, they have now developed an agency that's brand new called EASA, the European Aviation Safety Agency, that actually is going to be officially opening its doors in Cologne before the end of this year. So that's a good thing, because that brings all those countries together for us to work with on a joint basis. We are also encouraging safety on a regional basis in a number of parts of the world. Because, especially less developed countries with fewer resources, if they combine forces and we can provide them technical assistance across national boundaries that will work well in Latin America, in Africa and other parts of the globe. So that's another thing that we're doing. But we work very closely with our European counterparts

Mr. Lawrence: Now a bit earlier, you talked about some of the things that are coming in the future of commercial transportation, and just to pick out a couple of fun ones, you were present as Spaceship 1 completed its second trip into space earlier this year. What was it like to witness that?

Ms. Blakey: Wow, I'll tell you, that was the longest period of sustained goose bumps I've ever had in my life. No, it was fabulous standing out there in the Mohave in the early morning, freezing cold, watching that flight. When Mike Melville took it up, really into space, really expanded what has happened in terms of a privately developed, privately piloted aircraft that all of a sudden can go, not only into space, but come back, and has the capability to carry passengers. I was there with Richard Branson, who has decided that Virgin Galactic is going to begin carrying passengers into space in the next couple of years. So you can imagine, from the FAA standpoint, I see a lot of challenges coming together. I believe, of course this is very exciting in the future of aviation and aerospace, and we need to enable it. But there are issues of risks to passengers, issues, of course that we have to protect the safety of folks on the ground. So it's a challenge.

Mr. Lawrence: Do you have an organization today that's focused on space travel within FAA?

Ms. Blakey: Absolutely, our commercial space organization within our organization actually has ensured the safe launch of 167 commercial launches already. Now that we're getting into the reusable vehicle area, of course, that's got new challenges. But we're very proud of that track record.

Mr. Abel: You also mentioned a bit earlier a new type of travel called Microjets. What is a Microjet?

Ms. Blakey: It's a small, high performance aircraft. There aren't any out there on the market, but there are two companies, Eclipse and Adam, and there are several others coming along, which are using composite materials and very high performance small jet engines, to provide transportation for four to six people typically, that can be right up there with commercial jets. Glass cockpits, all of the kind of safety and navigation features that you really see, you know, in a Boeing 777. And what that's going to do is it's going to allow air taxis to flourish. Service to a lot of smaller airports, because a small number of people on a cost efficient basis can go on a non-scheduled basis point to point. Over time, it is really going to infuse transportation in this country with a lot more flexibility and cost efficiency than you have right now, when you're restricted just to the large commercial jets.

Mr. Abel: So if we put a couple of these together: we have microjets, space travel, increased demand for commercial aviation today, even just based on these regional jets versus larger jets we were saying before, how long can the FAA continue to operate as it is today, or are there plans for a new way of being able to business in the future.

Ms. Blakey: Well, Dave, I'm glad you asked that, because it's one of the things I've really spent a lot of time thinking about with some smart people. The system is not infinitely scaleable. In fact, we're getting to the limits of it. When you think about the fact that we use active ground to air control, voice communications, you can appreciate, as the traffic gets more and more dense -- UAVs coming into the system, a lot of things -- we're really going to have to change this.

The next generation system, we are bringing out a plan, in fact, again, before the end of this year, that I think is going to address what a next generation aviation system, both in terms of air traffic control, much more emphasis on satellite-based, satellite to aircraft, aircraft to aircraft separation; much more on automation; much more in terms of controlling traffic as managing exceptions with automation; looking to ensure the safety routinely, and in point of fact, we are also going to have to see a much better use of our infrastructure in terms of airport infrastructure, where do we need them for the years to come?

You know, it's not all going to be where it is right now. And so, the "build it and they will come," we've got to build it and anticipate where it's going to be. And so we're working very hard on those kinds of things, as well as what will a really stepped-up safety system be all about. The Europeans have already developed such a plan. So we're going to be moving out on this because, again, we believe that the leadership of the United States overall, both for our domestic health as well as internationally, depends on it.

Mr. Abel: What is the timing of a plan like that? What type of horizon would you look at as far as the time that it would cover?

Ms. Blakey: It covers out to 2025. That sounds like a long way away, but remember that the aircraft that are rolling off the assembly line right now will be flying in 2025. It typically can take as long as seven to twelve years to build a runway, so this kind of planning, it's not so far out there. And what I will also tell you is that this is an inter-agency process, which we rarely see in government. We are doing this with the Department of Defense, Homeland Security, Commerce, because, of course, they have the Weather Service, and weather's a big factor in aviation, along with the White House, in terms of our science and policy shop over there, so we've got really a lot of folks who are working with the Department of Transportation and the FAA on this. And NASA is a big part, of course, of that partnership as well.

Mr. Lawrence: Is there participation of commercial entities as well, airlines or cargo carriers, or other users of transportation as well?

Ms. Blakey: Absolutely. Our stakeholders really have to be involved and say, yes, we see the system serving us in the future, and that's going to be a big part of it, and frankly, such a plan will be governing our federal investments. One of the things that I think is exciting in this is, as we all know, the tremendous advances that have occurred in the Department of Defense in terms of the use of satellite-based navigation, air control systems that can translate into the civil side and benefit all of us. So this kind of joint effort together for surveillance, navigation, communication -- it's going to yield real dividends, and it will begin to govern our investments, not only looking at 2025, but in the near years, because you've got to have a smooth transition.

Mr. Lawrence: Marion, in our first segment you talked about your career beginning as a GS-3 and now working up to the Administrator, and cutting across both the public and private sector. What advice would you give to someone interested in a career in public service?

Ms. Blakey: Well, I would certainly say that I've found it tremendously personally rewarding. The mission orientation of the opportunities that you often have in government service; the ability to get up in the morning and know that you genuinely make a difference in people's lives. That's a tremendous engine, I think psychically for all of us in terms of -- do you like to come to work, do you care about what you do? Do you feel like you're making a difference? I can tell you that my career in government has really given me the ability to answer that affirmatively every time, but never more so than at the FAA, because we obviously have a mission that touches everyone's lives.

Anyone thinking about careers broadly, but certainly in terms of public service, I think it's also important to be open to opportunity. I would never have projected that my career would have taken the turns it has. I could not have anticipated some of the opportunities that one career in one agency would then lead to another. And it's been very exciting to realize that sometimes, the way that mentors, the way people see you that are above you in government, may not be the way you see yourself. But in fact, that opens opportunities; that opens challenges that you rise to.

And I have found government to be a wonderfully supportive environment from that standpoint, of being able to move into arenas, that as I say, I wouldn't have anticipated, but it's been tremendously rewarding. I would also say this: that I would encourage anyone who is interested in public service to look at the FAA. I'd like to see them go to www.faa.gov, because there, they'll be able to see what we're doing. Look at our flight plan. See how we're doing on our performance. But they can also look at the careers we have at the FAA. I think they're terrific.

Mr. Lawrence: Thank you very much for joining us this morning, Marion. I'm afraid we're out of time. That will have to be our last question.

Do you want to mention the web site once again?

Ms. Blakey: The web site is www.faa.gov. And I'd love to have people go there. You can even get good information about how the system is doing on a given date. You can even access it from your wireless, from a PDA, to see how your airports out there are doing, if you want to know if there are delays in the system. It's a great site.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Marion Blakey, Administrator of the Federal Aviation Administration.

Be sure and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Johnnie Burton interview

Friday, June 3rd, 2005 - 20:00
Phrase: 
"Deep water production of the Gulf of Mexico has been fantastic. It has surpassed the volume of oil that's produced in traditional shallower parts of the gulf. This shows that oil and gas reserves exist in areas where we never thought about going before."
Radio show date: 
Sat, 06/04/2005
Guest: 
Intro text: 
Missions and Programs...
Missions and Programs
Magazine profile: 
Complete transcript: 

Friday, April 8, 2005

Arlington, Virginia

Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of The IBM Center for The Business of Government. We created the Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the Center by visiting us on the web at www.businessofgovernment.org. The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Johnnie Burton, Director of Mineral Management Service of the US Department of Interior. Good morning, Johnnie.

Ms. Burton: Good morning, Paul.

Mr. Lawrence: And joining us in our conversation also from IBM is Steve Sieke. Good morning, Steve.

Mr. Sieke: Good morning, Paul.

Mr. Lawrence: Well, Johnnie, not many of our listeners might have heard of MMS or the Mineral Management Services. Could you tell us about its history and its mission and how it fits into the Department of Interior?

Ms. Burton: The Department of the Interior is really the department charged with being the steward of all public lands. So starting from that you can see how that department is going to have different bureaus that will specialize in different aspects of public lands.

The Minerals Management Service, as the name indicates, is charged basically with managing public lands off shore which sounds strange when you talk about lands off shore. They're submerged lands but nonetheless they are federal territory so we manage the submerged lands only in view of production of energy; that is, oil and gas production but there could be other minerals. We also handle sand and gravel, these kinds of things.

We also have a second mission which some people will argue with me is the main mission of the agency which is to collect for the American public the revenue that come from those lands and specifically the revenue that comes from minerals. So we collect rent, we collect royalties on all minerals produced on shore and minerals produced off shore.

This amounts to quite a bit of money, as you might imagine. We're one of the top agencies bringing money to the federal Treasury. Last year I think we brought in about a little over $8 billion to the Treasury from different revenue from minerals.

We also collect money, and I'm going to use a term here that may not mean the same to everyone so I'll define it quickly, from bonuses; that is, that on shore as well as off shore some of the public lands are put up for auction, if you will, for the right to exploit a mineral and that auction brings in a certain amount of money on the very front end. For example, we have several lease sales on the off shore per year and depending on which part of the off shore we are putting up for auction the money can vary.

The last sale we had was in Alaska in the Beaufort Sea off the north slope and it was somewhere around $46-47 million in bonuses alone. But then you compare that to the central Gulf of Mexico where the bonus is running to 3-400 million depending on the year, depending on the sale. So this is a considerable amount of money. Then we collect on those leases and then we collect royalty if the leases produce.

If I want to tell you how this agency came about because it really is by federal standard a very new agency, about 22-23 years old, it was created by an executive order. The people who did the jobs were scattered in different parts of the Interior Department, the USGS, the Geological Survey, the Bureau of Land Management, the Bureau of Mines. There were different bureaus.

In 1982 or so all these people were put together into one agency which is now the Minerals Management Service. It was created by executive order which means that it is the only bureau in Interior that does not have its own organic act, its own congressional statutes, if you will, legislative statutes, so it's a little bit different. But this is what we do. We're a small agency. We're a new agency. We have a very narrow focus.

Mr. Lawrence: Even though you have a narrow focus how would you describe the skills sets of the employees on your team as you were describing and I imagine engineers and geologists and then when you began to speak about the money I thought about such a wide range of skills.

Ms. Burton: You're correct. We have a narrow focus but we have a very broad set of skills that are required. Obviously in managing the offshore land we need a lot of scientists because besides just managing the land itself and the leases and the rights to drill and then the drilling operation and so on we do a fair amount of research and we do a fair amount of study of the marine environment.

So we have oceanographers, we have marine biologists, we have geophysicists, we have geologists, obviously. We have a whole slew of scientists at various levels that have very specific skill sets in some areas. We also have obviously lots of engineers because when a company wants to drill and later on if they find petroleum and they will have a production facility, a platform, we need folks that are capable of telling whether this is safely done and that means different kinds of engineers.

So we have people that watch what industry does, that set the standards, which help write the rules that industry will have to follow with the over-arching goal of keeping the environment safe, keeping the people safe. That's really a very important part of what we do. So we do have a lot of engineers.

And then when it comes to collecting the money we obviously have to check on what industry reports to us which means we have lots of auditors. We need to not only check that they reported what they really produced but we need to check that they reported the fair market value of what they produced and that in itself is a whole different area. We have to check on markets, we have to check on indices, we have to make sure that industry has deducted from its proceeds what it was allowed by rule or statute to deduct and that they paid the fair amount.

So we do a lot of valuation of minerals and a lot of auditing, obviously. Then we have to process all this data so we have a fairly good size IT-type group of people. Then we have to distribute that to the various recipients of that money and if it is on shore a lot of the money that comes from onshore mineral is split with the state.

In fact the states receive 50 percent of anything that is produced within their borders from federal lands except for Alaska, which gets about 90 percent. So we do have to keep books that are fairly complex. We also put money in various accounts within Treasury and we have to make sure this is properly done.

In order to make sure that we are doing our job correctly we ourselves are audited every year. We have a financial audit within the department and each bureau is audited and we have to reconcile all the accounts. So we have a fairly good financial group plus a technical group.

Mr. Sieke: Johnnie, speaking of employee skill sets, could you describe your own role and responsibilities as the director of the Mineral Management Service?

Ms. Burton: Well, you need to somebody to blame when things go wrong. That's what the boss is for. Each bureau at the Department of the Interior is led by a director who is an appointed person. It is a political appointment. We serve at the pleasure of the Secretary, the President, the Senate, whatever the setup is. Typically people that head bureaus have demonstrated some good administrative skills, not necessarily technical skills, although I can tell you from my personal experience that in this particular position it helps a lot to understand how that particular industry that we regulate functions and it's nice to have had some background in that industry. But basically what I must make sure of is that everything is done according to statutes, according to regulation, that the staff does what it's supposed to do, and that the train runs on time, so to speak.

I also have to make sure I have a good interface with industry. We regulate an industry but we're also very dependent on that industry to produce the energy this nation needs; therefore, we need to talk to them. We need to understand their needs as well as they need to understand how we expect them to do their job. So it's really a people's job. It's leading an organization in the direction the President wants it to be led, which in this case is produce more energy but do it extremely safely and be very sensitive to the environment and to the safety of the people. So that's what I do.

Mr. Sieke: You've had a really interesting career. I was wondering if you could share some of your past positions with us before you were appointed as the director back in March of 2002.

Ms. Burton: Well, before I was appointed to this position I served the governor of my home State of Wyoming. I was a member of his cabinet and was asked to run a department for the state. The department was the revenue department, which in Wyoming is the department that handles state taxes, sales tax certainly, which is a big part of the state. Now, the State of Wyoming does not have an income tax so it's a much smaller department than you would have in any state that has an income tax but we handled sales tax. We valued the property for property taxes and the major part of the job was mineral taxes which gave me a wonderful preparation for the job I do now. Although royalty and taxes are not the same thing I had to deal with valuation of mineral, with relationship with a company, with making sure everything was done correctly, with auditing companies to make sure they were paying their severance tax as well as their property tax on minerals, and that's what I did for seven years for the governor.

Mr. Lawrence: That's a very interesting background. What is deep-shelf gas and why is it important? We'll ask MMS Director Johnnie Burton to explain this to us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning's conversation is with Johnnie Burton, Director of the Mineral Management Service in the US Department of Interior, and joining us in our conversation is Steve Sieke. Well, Johnnie, could you describe to us the strategic goals of MMS?

Ms. Burton: The goals of the agency obviously have to be in sync with the goals of the department which are the goals of the President. The overwhelming goal of MMS is really to help production of energy for the nation and make sure that the public, since they are public lands, receive a fair return on its asset, which in this case happens to be oil, gas, and on shore there are other minerals, obviously coal, et cetera. So the strategic goal is to make sure fair market value is attained by those minerals and that the royalty on those minerals is the correct amount as decided by Congress and we need to produce as much energy domestically as we can.

Obviously we would like to hold the line on imports. This country has been importing more and more of its oil. It's a very difficult thing to do because we are a very mature province in terms of producing oil and gas and mature provinces decline. You exhaust your capabilities after a while; however, this is not entirely the case here. This country has lots of resources not being exploited; by choice at this point, but the areas that are open to exploration MMS is trying very hard to facilitate the work industry does so they can produce as much as possible.

There is a conservation, and the word is often misunderstood, component to what we do, conservation meaning managing the reservoir so they produce as much as they can. Sometimes if you produce a reservoir very fast you get a lot of production but you damage the reservoir and a lot will stay in the ground. We need to guide industry so they produce it at a level that will produce the most from what's available.

Mr. Lawrence: I understand that MMS' goals focus on two programs, the offshore mineral management program and the royalty management program. What are the goals of these programs?

Ms. Burton: Well, we call it the management revenue. The management of the revenue has to be done in such a way that we can assure the public that the minerals have been valued correctly, that the amount of royalty and the amount of rent, the amount of bonus received whenever we lease some area, is a fair market value amount and that the public receives its fair share. That's really the overwhelming goal of the Minerals Revenue Management Group.

The Offshore Minerals Management Group, their goal is to manage offshore land and we have submerged ocean land. Around the United States you have roughly 1.76 billion acres. Now, we're supposed to manage all of that but in fact most of that is off limits; we don't do anything there. So in fact we manage less than 10 percent of that total amount but that's still a very sizable amount, as you can imagine.

Right now I think in the Gulf of Mexico we have about 40 million acres that are under lease, active leases, and so our goal there is to manage the submerged land so that we will get good production if there is production to be had but at the same time we protect the marine environment we don't do any damage, the companies don't do any damage, so we have rules and regulations they have to follow. We make sure that the safety of the people is a consideration and safety in terms of the ruggedness, if you will, of the material they put off shore.

You get a hurricane like Ivan that we just had. We have to try very hard to make sure the standards of building that industry is going to follow are strong enough to stand that kind of a storm. That particular storm was like the 500-year storm. It did a lot of damage but it didn't do that much damage to the facilities. It did damage to pipeline mostly because we think there was a bottom wave that actually caused some super mud slides when it got to the mouth of the Mississippi and those mud slides literally dragged pipelines and buried them and disconnected them but because of the standards we set and the rules companies follow and the technology that they've come up with when something like that happens there are so many valves that automatically shut that even if the pipeline disconnects there's a little bit of oil coming out, what was in that segment of pipe, but there's no more oil coming from anywhere because the valves are shut. All the valves held beautifully. All of this is what we do and what we feel is the critical part of our job.

Mr. Sieke: Johnnie, there are several interesting initiatives going on now at MMS. For instance, one is the deep water gas and oil exploration being done in the Gulf of Mexico. Can you describe for our listeners what deep water oil production is and how it's done?

Ms. Burton: Deep water production is relatively new and by relatively they've been drilling in deeper and deeper water for the last 10-15 years but certainly the last four, five, six years have seen some tremendous progress in how they handle deep water. You have to sink.

Remember, drilling a well on shore, for example, you put the bit in the ground and you turn it until you get down to a certain level. You run into problems, certainly hard rock, pressures, temperatures, et cetera. You have all of those things when you drill off shore but you have one added component which is enormous. It's the water column that you have to go through.

All you need to do is go swim in the ocean to know there are lots of currents. They're not always in the same direction and they're not the same at all depths. So when you put a drill pipe into the water you're going to have to think on how to keep it straight to go where you want to go with all of the motion that you have to subject your equipment to.

When you drill in 20 feet of water it's not that big a deal; 200 feet, 400 feet, the deeper you go the worse it gets. Well, this last year, I think, or the year before we saw the record of water depths worldwide was obtained in the Gulf of Mexico. A company drilled a well going through first 10,000 feet of water. When they can do that and stay on target and drill another maybe 15-20,000 feet into the ocean floor, then you realize what technology has done in the last 10 to 15 years.

What that has shown us is that not only can they do fantastic things but it also has shown us that the reserves of oil and gas exist in areas where we never thought about going before. The deep water production of the Gulf of Mexico has been fantastic. It has now surpassed the volume of oil that's produced in the traditional part of the gulf, which is the shallower water part of the gulf. We think that the deep water production is going to really become almost three-quarters of all the gulf production and the gulf production is very substantial.

So this is a very important province and it shows that the Gulf of Mexico is not a dead area. A lot of companies had thought we need to move away from here; we've produced everything it's going to produce. Well, not so. Now that they have the capability of going deeper and deeper and further out we now have rigs drilling almost 200 miles from the coast.

Mr. Sieke: Another area of development is deep-shelf gas. Can you describe what deep-shelf gas is and what's the difference between that kind of production and deep water production?

Ms. Burton: Right, as I was saying a little bit ago, you drill certain depths in the earth but you have to worry about the column of water. In the deep gas that you're talking about it's the reverse. This is on the shallow shelf, shallow meaning shallow water, under 400 feet of water, but they never had drilled very, very deep in the floor of the ocean.

Now we think that there will be some substantive gas reserves in the very deep part of the shelf, and so that's where they are looking for natural gas. We've put in some incentive for them to do it. Since 2001 we've had an incentive to give them some royalty-free volume if they drilled below 15,000 feet in the shallow shelf. We think that our tally tells us that since then they've drilled about 26 wells; 20 of them are producing, which is a tremendous success, and the interest there is that there is all the infrastructure they need to take that gas to market because along side that shelf that has been developing for 50 years you have about 36,000 miles of pipeline so you can tie into a pipeline fairly quickly.

Mr. Lawrence: Interesting. How is MMS measuring the performance of its programs? We'll ask its director, Johnnie Burton, for her perspective when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning's conversation is with Johnnie Burton, Director of the Mineral Management Service at the US Department of Interior, and joining us in our conversation is Steve Sieke.

Mr. Sieke: Thanks, Paul. Johnnie, with the deep water and deep shelf initiatives there are certain risks involved. How are you ensuring the safety of your workers while at the same time reducing oil spill risks?

Ms. Burton: You are hitting here on a key goal of MMS, which is obviously safety. Safety of the environment, first, we have a fair amount of rules. The industry will tell you we have too many we have to be very concerned with the marine environment, the life in the marine environment. We do a lot of research and a lot of study in areas before we put the area up for sale to begin with.

Once an area is leased and a company intends to explore we really stay in very close touch with them. We have established a lot of standards that they have to follow and industry itself works together to establish some standards for safety. It costs them a lot of money if they don't do things safely anyway so they are concerned with safety.

So are we. We watch what they do. We give standards where we feel they don't have some that are sufficient. We have a lot of inspection. We have inspectors that are all along the Gulf Coast, for example, since the Gulf of Mexico is really where the offshore activity primarily occurs. We contract with a helicopter company and every day we have inspectors going off shore watching what companies are doing.

If they are in the midst of drilling we inspect their drilling activities once a month. If they are already producing and have simply a producing facility obviously we won't inspect as often. I believe last year we had probably something like 26,000 inspections off shore so that's one of the ways we ensure that it's as safe as it can be.

Before a company can drill they have to submit their plan in great detail. We spend several weeks, months, reviewing those plans, making sure that what they will do is safe. We look at the coastal state that is adjacent to the area and we make sure that what the company plans to do is in sync with the coastal management of that state and that it's consistent with their rules and regs. So we go to great lengths to make sure that everything will be done safely.

We have unannounced drills. The companies have to have planned for spills in case there is a spill but the fact is the record is fantastic. I think that the Academy of Sciences has done some research and in the last 15 years found that there was never a spill of more than 1,000 barrels from any place in the ocean. Although that may sound like a big number to you the natural seeps, earth has area where the oil and gas is really close to the surface and it seeps in the ocean all the time. This is particularly true of the California coast, for example. The seeps are about 10 times more than anything that has been spilled from exploration.

Another area that is more difficult is the tankers. There are more spills from tankers and more pollution in the water than there is from exploration and production domestically. We study all of those. We keep track of all of those. Whenever there is any kind of spill and I mean a gallon of diesel fuel on the platform, that's reported and that's counted. We think the record is really stellar.

Mr. Sieke: That's really outstanding. We're at a time now where I think everybody has the high cost of energy in this country on their minds. I'm just wondering what MMS plans to do to try to secure as much energy as possible for the United States and how you balance that with protecting the natural environment.

Ms. Burton: It's a difficult balance, as you can imagine, Steve. What the Interior Department and the Secretary are trying to do is to give enough incentive for industry to invest in this country rather than go to West Africa, Russia, or somewhere else, although they go to those places, obviously, but we're trying to give them an incentive to stay here and produce here. I don't think we'll ever be self-sufficient. We're consuming way too much to become self-sufficient but our goal is to hold the line so we don't import more and more and more every year.

We are now close to 60 percent imports on oil which puts this country in a very precarious position, as you know. We need to try and hold the line and decrease that import quota, if you will, if we can. So we give incentives. We talked a little bit ago about incentives to drilling deep water. We give them a certain amount of royalty-free products. We do the same for gas but we also try to have a regime of regulation that is certain, that is well-defined, so industry knows what it's going to cost them to drill here, they know what they're going to have to do to live with our standards and with our regulations, and I think that has helped a lot with keeping industry here.

The last sale we had in the gulf was a very good one. The sale we just had in Alaska was the best one in 17 years. Now, having said all of that, the primary driver for industry to drill is price of the commodity. With the price of oil and natural gas lately we have seen a renewed interest in drilling and producing.

Mr. Sieke: Johnnie, MMS is involved in many important programs. I'm just curious how you measure whether goals of those programs are being met.

Ms. Burton: Well, we are setting metrics. It goes through our whole MMS organization but then it goes through the department and they are approved by a lot of people. We try to keep measurement on everything we do and at the end of the year the department looks at the results and OMB looks at the result, and, as you know, the President has a management agenda that he's been very, very strict in enforcing with these agencies so we live by the red light, the green light, and the yellow light and we all try to get to the green light, obviously.

So we do measure our performance. We have studied metrics for every one of our objectives recently and I don't know whether you're familiar with it but the government takes in kind some of its royalties. Instead of taking money from the company it actually takes the barrels of oil or the MCF of gas and sells it on the open market.

We had questions about is this a good way to do business, do we make as much money as we would if industry would just give us a check, and for that we didn't have very good metrics. Two years ago, a little after I arrived at MMS, I asked that we do a study and that the study be done by an outside entity. I didn't want us to be accused of being biased in looking at what we do so we hired an entity that does that for the private sector and asked them to come in, look at what we do, and then help us develop that will tell us how we're doing.

That has been very profitable, very good. In fact this last year we found that the royalty in kind program, as we call it, what we sold on the market, we made about $18 million more than we would have had we followed the other method which is getting a check from the companies. That's simply because, frankly, when you get 12 or 16 percent as a share of what's produced you become one of the big owners. When you do that you can get better deals on the transportation, for example, on the processing of the product. So we essentially cut the middle man off and so we do a better job but we have to prove it. The General Accounting Administration needed some proof so we just put in some metrics in place that seem to be working quite well. That's how we measure.

Mr. Lawrence: You've talked about working with industry in a very unique way. You simultaneously partner and regulate. Could you tell us about some of the management challenges of this unique relationship?

Ms. Burton: It is a difficult balance at times. Let me give you an example. About a year ago some companies came to us and said your leases are five-year leases or eight or ten-year leases depending on how deep the water is. We give them more time when they are in very difficult terrain, obviously. They said that sounds well and good but we now have the technology to drill down to 30,000 feet; however, we have to go through salt sheets. The Gulf of Mexico has a very different kind of geology. It has some salt sheets that make it very difficult for seismic wave, if you will, to come back clearly. They can't quite see what's below the salt.

They said we run all kinds of programs but we have to really know what's below there before we're going to invest millions. A well down there can cost $80 million. They said it sounds like 10 years is a lot of time but in fact they gave us a time line and they said we barely make it. If we're going to go that deep we need to have time to run all the different tests, analyze them, write the computer program that can interpret what we get, the raw data, then we need to drill. That needs a special ship. It needs special equipment, special metallurgy, for example. We need more time.

And we said as government we lease, we get money. We don't want to tie up a lease for 20 years and nothing happens so it's in our interest to get them back on the market very quickly but on the other hand we need the production. So we said okay, give us all the information of why you need more time and we're going to try under certain conditions to extend the lease.

That's the kind of partnership that we want. We make the rules. They're tough but there are times when you need to look at your rule and say in the long-term interests of the nation maybe we need to tweak that, and we do it.

But none of that would happen if we didn't have and didn't keep a fairly good relationship with the industry we regulate. They need to trust us enough to come and lay it on the table. They need to trust that we will consider what they give us and that we will make a fair decision. Now, sometimes they don't like the decision but they know they're going to get a fair hearing. And that's really a difficult balance to keep but that's the one I aim to keep and that's what I've been trying to do for the three and a half years I've been there.

Mr. Lawrence: That's an interesting example. What does the future hold for MMS, especially as it continues to explore for ocean energy? We'll ask its director, Johnnie Burton, for her perspective when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Johnnie Burton, the Director of the Mineral Management Service at the U.S. Department of Interior, and joining us in our conversation is Steve Sieke.

Mr. Sieke: Johnnie, how do you envision MMS in the next 5 to 10 years?

Ms. Burton: I think MMS will have to continue to work with industry to produce oil and gas where we can but I think it needs to also go in a slightly different direction and it has begun the process of looking at how to encourage alternative sources of energy. The Secretary of the Interior is very, very interested in alternative sources of energy to try and shift the burden away from the petroleum into, let's say, biomass, wind energy, wave energy, and certainly MMS would play a part because off shore might be an ideal place to have wind farms, to have wave energy.

The technology is almost there. It certainly is for wind and for wave there are several mechanisms that can produce energy. I think that an agency of the federal government is going to have to be the lead agency to look at new sources. One of the sources that may be fantastic but it's not there yet is methane hydrates which exist in the Gulf of Mexico and in the permafrost of Alaska.

It's really natural gas, methane, which is trapped in frozen molecules of water. It's like big mountains of ice but if you let that ice melt the rest is gas. It compresses the gas so much that when it releases it's 600 times the volume it had in that crystal.

This is being studied by the Department of Energy, certainly, and by the Geological Survey, which is a bureau of Interior, and MMS also participates. All of these new sources of energy will have to be investigated and we need to figure out how to regulate that production when it occurs, again, for safety reasons mostly, safety of the environment and safety of the people.

I think that MMS is going to have to go more and more in that direction. Right now we don't have the authority to do that. We're hoping that Congress will take a good look at it and give Interior the authority to manage, to lead, that development because right now if you want to put a wind farm off shore you have to go probably first to the Corps of Engineers to get a license for traffic in the sea but there are lots of other things.

Who is studying the impact on the environment? Who is deciding how that's going to be decommissioned when it doesn't work any more? Who is watching over the safety of the people that work there? There are no answers right now so we're hoping that the Department of the Interior can make a good enough case with Congress that we would be given this authority.

If that occurs I suspect MMS is going to have to grow a bit. I know this is an anathema when you talk about growing a federal agency but we actually do what we do today with a fairly small number of people considering the way the federal system works and what we have to do. I think we're going to need more resources to do alternative resource management. I think in another 5-10 years I'll see a third program, if you will, because we need to do that, and we need to prepare for it now.

Mr. Sieke: Johnnie, you've talked about a lot of different promising technologies, things that might be surfacing in the near future. What are your thoughts around how you support new technologies? Do you place your bets on all those things? Do you go through a process to say no, we've got to pick a few of the most promising and invest our resources there? How do you see that unfolding?

Ms. Burton: The technology development is really done by industry. We do not invest in it. We do not choose. We let industry do the development, do the research, and come to us. Now, what we need at MMS are the tools to evaluate what they bring to us. For example, there's been tremendous progress in seismic survey but in order to really interpret what you see you need very special computer programs, et cetera. We need to have our people trained to do that and to have the tools, the computer systems, et cetera, that can look at what industry's bringing to us and say yes, that sounds safe enough or that sounds good enough.

But we don't choose. We have to be able to pass judgment on all the things that come to us which means we need to have a lot of training, a lot of specific skills. We constantly have to know what industry's doing and we stay on point with them. But essentially industry is going to make the decision of what is the most economical and most efficient and we have then to look at it and we look at the down side, this technology, what is the danger of it. We try to give them some guidelines about you could do it this way but we're worried about this, you might want to work a little more on that, et cetera.

Mr. Lawrence: Johnnie, you've spent a significant portion of your career in government service as a public servant. What advice would you give to someone interested in a career in public service?

Ms. Burton: First of all let me say that the last not even 15 years I've been involved in state government and then in federal government and prior to that I was in the private sector so I've had a feel for both. There is certainly some real rewarding aspect to serving the public. I think you need to want to serve the public. It is truly a service.

Having said that, I also can tell you that there are some really interesting things happening that government has to know about and to do -- such as all the technology, for example, which MMS employees are exposed to. For somebody who's a scientist it's real exciting. Somebody who's an engineer and sees those things coming at him, where else would he have the ability to see such a spectrum of different things? If you work in the private sector you tend to be focused on one particular type of technology, for example. Here you see it all so it's very exciting, I think.

Now, working for the government has its advantages. One of them is really a certain amount of safety and security. Chances are the MMS is not going to be dissolved tomorrow but when you work for a private company you never know how the stockholders are going to react or how the market is going to react and then you could be working for Enron. So I think there are lots of positive things working for government and I would encourage anybody who wants a fairly steady path to their career to start.

You shouldn't be afraid of starting at the bottom. There are many, many opportunities of promotions in government. I think that most staff we have at MMS are very, very knowledgeable people that seem to be happy with what they do which brings me to saying that we need to encourage people to come and work in government.

We seem to have an aging work force right now and I am concerned on how we're going to replace them when they retire. We have internships. We like people to come and detail with us, spend some time, see what you like, and then hopefully when you come out of school you come and serve an internship and we can interest you enough that you can stay with us. We'd like to do a lot of recruiting. We're trying.

Mr. Lawrence: Well, Johnnie that will have to be our last question. Steve and I want to thank you for fitting us in your busy schedule and joining us this morning.

Ms. Burton: You are quite welcome. I enjoyed it. Thank you very much.

Mr. Sieke: Thank you, Johnnie.

Mr. Lawrence: This has been The Business of Government Hour featuring a conversation with Johnnie Burton, the Director of the Mineral Management Service at the US Department of Interior. Be sure to visit us on the Web at businessofgovernment.org. There you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's businessofgovernment.org. For The Business of Government Hour I'm Paul Lawrence. Thank you for listening.

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