Originally Broadcast August 8, 2009

Washington, DC

Mr. Morales: Welcome to another edition of The Business of Government Hour. I'm Albert Morales, your host and managing partner of the IBM Center for the Business of Government. One of today's greatest challenges is protecting the country from terrorists and the instruments of terror, while at the same time, fostering the country's economic security through lawful travel and trade. U.S. Customs and Border Protection operates at the nexus of national security and American economic security. In meeting this challenge, CBP has unique challenges and requires a focused procurement and acquisition strategy. With us this morning to discuss his efforts in making this happen is our special guest, John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection. John, welcome to our show. It's a pleasure having you.

Mr. Ely: Thank you. It's great to be here.

Mr. Morales: Also joining our conversation is Solly Thomas, associate partner in IBM's public sector consulting practice. Solly, good to have you as always.

Mr. Thomas: Good morning Al and good to see you again John.

Mr. Morales: John, let's start by providing our listeners some context around your organization. Can you tell us a little about the mission and this history of the U.S. Customs and Border Protection, otherwise known as CBP?

Mr. Ely: Yeah, I'd be glad to. I think that the best way that I can articulate that is just to read the CBP mission statement because it's very well-crafted and I believe it says everything that CBP needs to say in a statement. The mission statements goes like this: "We are the guardians of our nation's borders. We are America's frontline. We safeguard the homeland at and beyond our borders. We protect the American public against terrorists and the instruments of terror. We steadfastly enforce the laws of the United States while fostering our nation's economic security through lawful international trade and travel. We serve the American public with vigilance, integrity and professionalism."

A little bit of history about Customs and Border Protection, I'm going to keep it really brief. The customs component of CBP was created in 1789. It is extremely old organization. The U.S. Border Patrol was created originally under the Department of Labor back in 1924 and then INS, Immigration and Naturalization Service was created in 1933. And customs, border patrol and some component of INS was pulled together in 2003 when CBP was created as a component of the Department of Homeland Security.

Mr. Morales: So John, obviously a very powerful mission and a very broad mission. Can you put a finer point on the scale of operations over at CBP? Perhaps you could tell us a little about, you mentioned border protection, how many miles of borders are covered? How many ports of entry might exist? And how many people and items pass in and out of these borders?

Mr. Ely: I've got some statistics and some information that I find fascinating. I look at this information quite regularly because it amazes me when I see the mission the CBP undertakes everyday. And I've got some statistics. We protect 1,900 miles of border with Mexico. We protect 5,000 miles of border with Canada. We have 327 official entry ports and we have 144 CBP border patrol stations. In terms of what we process daily, and this is a daily set of numbers, 1.09 million passengers daily. We process 70,451 truck, rail and sea containers. We execute 2,895 apprehensions between the ports for illegal entry and 73 arrests of criminals at ports of entry.

Our seizures, 7,621 pounds of narcotics and seizures of 4,125 agricultural items and 435 pests at ports of entry. And again, those are daily figures.

Mr. Morales: That's certainly a heck of a day. (Laughter--)

Mr. Ely: Sure is.

Mr. Thomas: John, would this description of the agency and its incredible responsibilities, perhaps you could tell our listeners a little bit more about the specific mission and scope of your office. I'm curious to hear what the size of your budget is and how many employees work in your organization to support the agency.

Mr. Ely: First of all, I'm absolutely thrilled to be part of this organization and the important mission that they have been entrusted with and I feel that our acquisition procurement organization is truly a big part of bringing success to that mission. We are in the acquisition business and that is our job. We acquire the products and services to continuously improve the operations of U.S. Customs and Border Protection.

I have about 177 employees. They're located all over the country. I have people strewn along the southern border co-located with border patrol stations. I have people on the northern border. I have a fairly large office in Indianapolis, Indiana and a large office in the Washington D.C. area. Our annual spend is approximately $3.3 billion dollars and that's the money that comes through my procurement organization. That's pretty much a summary of the operation.

Mr. Thomas: And John, continuing to drill down on the responsibilities, talk to us a little bit about your role as CBP's Executive Director of Procurement. What are your official responsibilities and how do you support the mission of CBP?

Mr. Ely: While it doesn't sound official, my belief that my primary role is a facilitator to the employees, customers and the commercial business partners that are all involved in the procurement area and supporting the mission of customs and border protection. I'm responsible for managing the spend that supports our organization as efficiently, as effectively as possible and representing our American taxpayer by being prudent in the way that I spend their dollars; yet being effective in supporting the mission of the organization.

With that said, I'd like to emphasize that this is the operating principles for all of the heads of contracting activities in the Department of Homeland Security components. We all have the focus and we all have that function. I, as a senior procurement professional, I'm very familiar with CBP's mission and I understand the challenges that my customers face and it makes my organization better in terms of standing up the support that they need to be successful in their operations.

As a strategic leader, my goal is to full integrate the procurement process with a customer environment that delivers the required results while complying with law regulation and ensuring prudent expenditure of taxpayer's money. The point there is my goal is to continuously make our process, which at times can be viewed as a bureaucratic process, transparent to my customers so that they don't see the things that aren't really pertinent to them getting the goods and services that they need.

Mr. Morales: Now John I understand that you have some 30 years with the U.S. Federal government. Tell me a little bit about your career path. And how'd you get started?

Mr. Ely: Started very early in my life. I've got 34 years as a federal employee. Pretty much all of my 34 years has been in the procurement or acquisitions environments. I actually started as a summer hire when I was in college. I worked for the Department of the Army. And when I got out of school, I became an Army intern in a contracting shop and I stayed in that contracting shop at the Pentagon for 15 years.

Mr. Morales: That's a long summer.

Mr. Ely: It was a long summer.

Mr. Ely: It was an incredible place to learn procurement. It was an incredible mission supporting the Department of Defense. After that, I moved on to the Internal Revenue Service which was a very different environment where I started off as a branch chief; basically, my first significant supervisory experience. I was promoted later to Division Director and then Deputy Head of Contracting Activity. And I was there for 12 years mostly engaged in the information technology acquisition business, which while it might sound kind of mundane, is a very exciting field because it's very competitive and the technologies that we used and that were acquiring are very important, especially in the tax collection business.

Now I'm at CBP as the Head of Contracting Activity and I've been there for 5 years and I'm absolutely thrilled in this position and very much challenged and excited every day that I come to work.

Mr. Morales: So, John as you reflect back on your 15 years with the Army and the 12 years over at IRS, how have these experiences prepared for you for your current leadership role and perhaps have shaped your management approach and your leadership style over the years?

Mr. Ely: I want to start off with the very beginning. I'm an Army brat. My dad was an Army officer. My grandfather was an army officer. My father was very much loved by his troops and I watched him and I tried to emulate a lot about him that I saw as driving his success. And his success was in genuinely caring about his people and they in turn, delivered for him. He saw himself as facilitator to the success of others and I try to emulate that style.

When I first started working in procurement, I learned the business first. And I always work with the goal of balancing the customers' needs along with properly managing taxpayer dollars. During my career, I worked with a wide range of managers and executives and I tried to develop my style as a combination of what I saw as the best of both. During the latter part of my federal career, I spent lots of time with people who were experts in continuous improvement. And above and beyond the procurement field, I started getting into the concept of continuous process improvement.

I'm not the most organized person in the world but I do recognize the value that predictable processes, improvement processes, being imbedded in organizations and I try to capture that through a process improvement program. So, I worked with process improvement experts that have helped me get in place documented repeatable processes that make my organization extremely efficient and effective.

Mr. Morales: What is CBP's acquisition and improvement initiative? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, 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 today's conversation is with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, much like finance or information technology or human resources, you lead one of CBP's core business functions. Could you take a moment to describe in a bit more detail the procurement function? And tell us a bit about some of the key elements of acquisition management.

Mr. Ely: I'll give you the basic process. It involves early definition of requirements by the customer. That's a little more complicated than it sounds because articulating what your needs are for a government customer sometimes can be difficult. But, we seek to get a good solid definition of the outcomes or the products that our customers are looking for. And then we secure the funding associated with those requirements. There's a collaboration between the procurement organization, the contracting officer and the customer over a strategy for acquisition. There are multiple ways to acquire things and the best fit for the customer and the particular product is something that we arrive at in collaborative way.

At some point, we release a solicitation or a request for proposals for pricing and descriptions on supplies and services that we're looking for. We take those products and we give them to our customers to do an evaluation. And evaluations are either for compliance and award to the lowest cost or we also have what's known as best value awards, where there is technical merit associated with an offer's proposal and those technical merits are evaluated. And then a balance is drawn between the offered price and the technical merit and what we call a best value acquisition can be awarded.

That is very much different than a low cost award because you can actually pay more for something if the government team's perception of the value warrants that extra payment. Then comes the notice to the contractors and the debriefing of unsuccessful offers. What I think is really important is that debriefings to unsuccessful offers are not just I'm sorry, you didn't get the job. We are required to give meaningful, helpful information to companies as to why they did not receive the award of the contract without giving away proprietary or trade secrets for the winning offer.

Finally, we initiate contract performance and contract management activities that in and of itself, is a very important complex process. And then at the end of contract performance, or delivery period, there's a contract closeout where we double check and make sure everything was provided to the satisfaction of the government customer, the contractor's been paid and then at some point we close the contract out completely.

In terms of success in procurement function, I'll give you some ideas about what I view as steps in ensuring procurement success. That mutual understanding between the customer and procurement personnel regarding the procurement process, the roles and responsibilities of the different parties and building a solid, trusting, working relationship between the government procurement personnel and the mission individuals that are representing the customer needs is absolutely critical.

Good contracting organizations have people that are not just buyers, but they're good business specialists. They understand their customers. They seek to engage both the customer and ideas from contractors throughout the lifecycle of whatever product or service is being ordered. Good procurement organizations are involved in all aspects of the lifecycle. We know about our customer. My border patrol buyers are very familiar with the border patrol function. My legacy customs support buyers, they know customs; they know what custom officers do. And all of our buyers are very close to the functional needs of our components and it makes them very good at what they do because they're continuously involved in the mission and the needs of the organization.

In most organizations, weaknesses are found in contract management. And to be honest with you, I think that's a problem with government contracting in general. There aren't the people out there and the emphasis. Even though we've been trying to place the emphasis, it's still not there in terms of what happens once the contract is signed. The government in general needs to be more attentive to what happens after the contract's signed because you've only just begun. But shortage of federal contracting personnel still keeps us in the hole that we're in and not as able to manage contracts after they're awarded.

Mr. Morales: Now John, on that note, in our earlier segment, you made a reference to continuous improvement and you used the word repeatable. So, tell us a little about CBP's acquisition improvement initiative. Where does it focus and how is this program defined, developed and deployed these customer-focused solutions that you reference?

Mr. Ely: When I first started working at IRS, I ended up working with some information technology specialists who were focused on software development and one of the people that I worked very closely with was a certified process improvement expert. And I soon came to find out that these people are out there and they're very good at articulating and stringing together processes so people understand how you get from point a to point z when you're trying to develop and build an end product. In this case, it was software, which is pretty complex. But, the concept behind these process improvement experts is they articulate the process, they make it as efficient and effective as possible and they stick to standards where they repeat the process and you should be able to get the same exact outcomes in terms of your desired results.

In meeting and getting engaged with people like that, I started realizing we could apply this to the procurement process. And I eventually hired a process improvement expert and brought them on as senior staff in looking at the procurement process. One of the problems that we had is our customers felt that every process or every procurement was run differently. And what I basically did is I implemented a very structured environment where we very clearly outlined the process, outlined the outcomes and the roles and responsibilities of all the people that were involved in the procurement process.

It's actually done a lot for me in terms of being able to be predictable in terms of results to my customers. In terms of the acquisition improvement initiative, that is what we've stood up at customs and border protection procurement. And again, I have a full-time process improvement expert responsible for that. In CBP's AI2 program, we focus on four broad areas: assets, business, customer and data. We call it the ABCD model. The asset piece is our people, it's our systems. The business piece is our customers; what they do, what they acquire to achieve. The customer is our customer themselves, you know, who is that customer? What is it that they're looking for? What do they stand for? And then data, which to us, is probably one of the most important things. We strive to collect and understand data relative to what our customers need, what we've bought in the past. And that data helps us optimize how well we do in the future in terms of performing the acquisition function.

The bottom line is all of our efforts in AI2 are geared to supporting customer's needs and mission success in creating a work environment where people can grow and thrive. AI2 generates improvement opportunities from both top down and bottom up. And what is real exciting to me is that with a lot of the new entry-level people we have working in the procurement organization, we have some people that have just walked in the door and they have been with us more than a year, that are coming up with some fabulous ideas because of their fresh perspective. They're not mired in the federal process. And we're starting to listen to those ideas and actually build some improvements in the program based upon somebody who's just walked through the door saying, hey, why not? And that's been very, very good for us.

We have participation goals in acquisition improvement. I have expectations of all my directors on their folks and what percentage of those people will continuously be involved. That hasn't been a problem because what has happened is when people in my organization see that they really can change the direction that we're taking and deliver better results for our customers as a result of their efforts, they participate. And they don't have to be asked to participate because they see that they're making a difference.

I'll give you an example of some of the teams we have because AI2 is broken down into some teams, different teams, and that's how we control memberships and outcomes. We have the quality of life team. The quality of life team really does focus on how are things going for the people in the organization. What's the work life like? What do people like, don't like? How can we make the quality of life from 9-5 better for our people and therefore, make them more productive and effective as federal employees.

We have a contract administration team. Again, federal procurement organizations tend to sometimes award the contract, walk away from them because they've got the next thing they've got to focus on. When we, in fact, with our contract administration team are looking for ways to stay there with our customer, administer the contracts and assure them that they receive the desired products or services.

And then, my data and spend analysis team is probably one of the ones I'm really the most proud of. Although, I really shouldn't say anything about being the most proud. But, our ability to slice and dice the data has been one of the most rewarding things for me. You can ask me how many light bulbs we bought last year and I can tell you. You ask me how many mainframe computers we bought, I will tell you. If you ask me how many detainee meals we bought and where they went, I can tell you. What that has done for us is it gives us the opportunity to sift through our spend data and look for low hanging fruit or even high hanging fruit for our strategic sourcing initiatives. When we decided that we needed to start hitting strategic sourcing, we looked at the spend and it gave us a profile of where our CBP money is going all the way down to the day to day subsistent level.

And then, the strategic sourcing teams. And I also have a mentoring team which is a very structured program around bringing our entry-level people up faster up into operational mode.

Mr. Thomas: Now John, it's been my experience that agencies need to have an effective strategy for organizing and retaining its intellectual resources and its institutional memory. So, to that end, can you elaborate on your efforts to implement an effective knowledge management system. And I'm particularly interested in hearing more about your Acquisition Resource Management System and how it factors into this efforts and provides the one-stop shopping capabilities.

Mr. Ely: We have implemented ARMS. And ARMS is something I'm extremely proud of because we do have, in the organization, a fairly mature knowledge management system. With our aging workforce and the expansion of our headcount, it's imperative that we have that knowledge and that we share the information and this ARMS is a repository for information and also for exchanging ideas, communications across a large, geographically diverse work environment.

And really, one of the most important things that has come of our knowledge management system is connecting our broad customer base and a youthful workforce. We have people now that are attracted to technology and the ARMS system is something people tend to move towards and use because it's got data in it, it's got communications in it; and those are the things people need to communicate effectively.

ARMS is a way to both get knowledge into the repository and a better way to use and improve the knowledge and our collaboration for the betterment of the mission. Our documents, our announcements, our regulations, our memorandum are all posted through ARMS. And probably one of the most interesting things is the discussion threads. We have chat rooms and discussion threads where people can talk about the collaboration of improving a contract document or how to manage a contract better. We have a birds of a feather area in ARMS where people can gather and talk about areas that are of common interest. And we also have a message center and I have a blog now that helps me connect to a very geographically diverse organization. I log in and I can just say hello and talk to my people without ever having to worry about dialing or being in any physical place. And that's been a wonderful, wonderful benefit for me.

Mr. Thomas: Now John, you eluded to strategic sourcing a little bit earlier and of course, that's typically defined as a means to achieve benefits through an organized, systematic and collaborative approach, to acquire goods and services. Could you elaborate more on your strategic sourcing program? What types of opportunities have been identified and to what extent has it enhanced your coordination in strategic thinking across the department?

Mr. Ely: What I'd like to do before I get into the rest of that question, I'd like to talk a little bit about how I got into strategic sourcing in the first place because I think it's a fairly interesting story. When I was at IRS, I signed up for a course, and it had some mundane title and I don't even remember what that course was -

Mr. Ely: -- but a gentleman that I worked with and I went to this course. I believe it was in Dallas, and we ended up in this room full of people and not one of them was a government employee. And it turned out what this group was, and it had something to do with sourcing, sourcing was in the title. Basically, what it was, was a group of people who were part of the sourcing organizations for very large companies. If I'm not mistaken, TI was there, Ford Industries was there, IBM was there. Several other major companies were there. And all of these people had one thing in common and it struck us very quickly that this was going to be an interesting environment.

Every one of those companies were at one point on the brink of going out of business. And what those people in that room had done is through the sourcing of supplies and services into their production process or their delivery process in a service environment they turned to strategic sourcing and said, if we do business the old way we will be out of business. What is the new way of doing business? And I spent about three or four days with those people and I learned a whole lot about how you can adopt that mindset, the stay in business mindset. Even if we're government, let's pretend we could be sent home and fired tomorrow. Let's get lean and mean and look at ways we can be effective, efficient and save money all at the same time.

We came back to IRS and that's when we started realizing our capability in spend analysis; knowing where the IRS dollar was going. And knowing where that dollar was going, we started targeting commodity and service groupings and looking at how can we do business better. We brought in some people that consulted with us to talk to us about smarter ways of doing business and we took on strategic sourcing initiatives for cell phones, guard services, copiers, faxes and printers. And to give you a little bit of insight into the true strategic sourcing concept; copiers, faxes and printers, the idea to strategic sourcing those is not to get economy of scale on contracts. That's one objective. But the perception that we had was that there might be a better way to deal with copiers, faxes and printers.

Now, in a federal environment, a lot of times you'll see a copier, a fax and a printer. And in some cases, you'll see all three of those around an individual's desk and you'll see those all over the place around different individual desks. We started talking about multi-function machines, acquiring multi-function machines. A single machine that copies, faxes, prints. And having those machines in a central environment rather than dedicated to a given workstation. So, you think about how often your printer's humming or fax is humming on your desk dedicated to your work, you can start seeing how a multi-function machine might actually be economical and provide the services that everybody else needs at a significantly lower cost. That's where strategic sourcing comes in.

We changed the way we were doing business. We saved money, yet we delivered the same results. So, when I got to CBP after IRS, I instantly knew that I had to make a difference by standing up a very similar program at CBP and that is our acquisition improvement initiative. And that is the same process. It has a very similar approach where we want to stay in business. We want to take the stay in business mindset as a government entity.

I've already stood up a team that now has the spend analysis capability. I can look at any, every piece of everything CBP has bought and we're now focusing on how products and services are acquired. We've had a few near term hits on strategic sourcing. One of them is body armor. In the old days, we bought body armor, the body armor would be shipped, the employee would put the body armor on, measure his specific fit and then send it out to be tailored to fit him or her. We now have awarded a contract for body armor that has a film clip in the website where you're shown how to measure yourself for body armor ahead of time before you order it. So, you ship the order, you ship the measurements, the body armor's delivered and it goes right out of the box and onto your back saving your life sooner. That is a real good example of how strategic sourcing works.

Again, economy's a scale but also a significant improvements in how we utilize the commodities of services. We are looking at canines. We've had some success with puppies. We do a lot of buying of puppies. They're really cute and even when you buy them in quantity, they're really cute. But, we're looking at strategic sourcing of canines, industrial laundry and we're also looking now at our spend on detainee meals. An early glance tells us that there are different kinds of detainee meals that are being served up all over the southwest and actually in all the detention areas. And while they're all fairly low cost, we think that if we standardize that and bought large quantities of detainee meals that were not perishable or could be used over long periods of time, we could save significant amounts of money. So, there's just a few examples of that strategic sourcing environment.

Mr. Ely: Sure. We have an overwhelming workload as most procurement organizations do. We also have a young emerging professional workforce. Those two have come together for us when we started looking at technology. And there are reverse auctioning tools. We use a tool called FedBid, and basically, what tools do is it allows your contracting officials to post their requirements on an electronic forum and bidders will bid on the requirements electronically and then the buying activity can come back to the end of the day and look at the bidding history and make an award.

Basically, it is a seamless, automated process for running our competitions. Its usually done for commercially available items, but we've had a lot of success in the post and go. And again, we post it, we come back, we see what the natural bidding process that occurs through the system and we make awards to the low, responsible offers. Reverse auctioning has done so much in terms of our ability to load those smaller requirements, while we work on the more sophisticated requirements that require attention; where our employees need to develop their skills. At the same time, we're saving lots of money. And I have some statistics about what that automated reverse auctioning process has done for us.

Basically, it is a seamless, automated process for running our competitions. Its usually done for commercially available items, but we've had a lot of success in the post and go. And again, we post it, we come back, we see what the natural bidding process that occurs through the system and we make awards to the low, responsible offers. Reverse auctioning has done so much in terms of our ability to load those smaller requirements, while we work on the more sophisticated requirements that require attention; where our employees need to develop their skills. At the same time, we're saving lots of money. And I have some statistics about what that automated reverse auctioning process has done for us.

Mr. Morales: What about CBP's acquisition workforce management strategy? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, to share with us as the conversation 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 with us today is John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, the American Recovery and Reinvestment Act of 2009, otherwise known as the Recovery Act, provides some $680 million dollars to CBP for investment in aging infrastructure. First, could you tell us more about your procurement strategy and how the money will be spent. But, more importantly, what role does your office play in this area and how are you managing the procurements associated specifically with the Recovery Act funding?

Mr. Ely: Much of the ARRA funding is targeted for port modernization in both the northern and southern borders. We are very much engaged in writing contracts and facilitating that modernization effort. Our goal is to make awards in a timely manner while competing contracts as much as possible. We've stood up an FM&E facilities management and engineering contracting organization to meet this challenge we're working hand in glove with the CBP FM&E organization to implement. We're competing requirements for technology and construction directly with commercial sources, but we're also utilizing the services of the Corps of Engineers and GSA for construction contracting requirements.

Mr. Morales: It strikes me that balancing the appropriate number of CBP contracting officials with the growth of your portfolio is perhaps a challenging task. What changes have you made to your recruitment process and does CBP use flexible compensation strategies to attract and retain employees who possess what you would deem as critical skills?

Mr. Ely: Excellent question. Initially, when I first came to CBP, we focused on recruiting higher-grade personnel; but, it's really hard to find them. It's really very difficult to find them across government. So, we've moved to entry-level hires and we're supporting the rapid growth through mentoring, training and phased-in levels of contracting sophistication. So, we're trying to bring them up fairly quickly, but we are making sure they're ready for each phase. We think we've got a good plan for getting the entry-level hires up to speed faster than people were ever before by using technology, mentors, etc.

The DHS Chief Procurement Officer supports us through their Acquisition Career Program. They have a very sophisticated program and we are on the recipient list for the ACP interns. And that's born out well for us as well. We're still hiring higher-grade personnel for complex and critical procurements. And if any of you out there are the higher-graded, highly capable contracting types, just let us know.

Actually, on USAjobs, we have a great video clip from one of our CBP contracting officers and some information on job announcements. So, if you go to USAjobs, you'll probably find that icon to click on and see one of my folks with a lot of the products and services in the backdrop giving you some information about working for me. CBP offers flexible work schedules, tuition reimbursement for permanent status employees and in some cases, recruitment bonuses and/or payment of relocation services.

Mr. Thomas: John, staying on that topic, in recent years the size of the acquisition workforce has remained relatively the same while procurement spending has pretty much skyrocketed. For over a year, agencies have had the ability to re-hire the retired acquisition personnel, but only a few agencies have sought to formally use this authority. Could you talk a little bit about the benefits, as well as the possible limitations, of this particular strategy? And more importantly, what are your plans to use this authority as a tool to fulfill staffing needs?

Mr. Ely: Sure. Good contracting people are, as I've said before, are always in high demand both in government and industry. DHS has been successful in implementing authority to hire retired procurement personnel, known as retired annuitants. And we are pursuing the hiring of retired annuitants who offer a wealth of knowledge, skills and abilities and we're seeking to take as much advantage of that as we can. That is still a fairly small number, relatively speaking, of potential resources.

And the flipside of the benefits of that is also that these people will re-retire as some point in time. So, you can't really stake your future on retired annuitants, however, they do help in the near term.

Mr. Thomas: Now shifting from the recruitment discussion to developmental, what are you doing to ensure that your staff has the appropriate training and skills and how are you leveraging the resources from organizations like the Federal Acquisition Institute?

Mr. Ely: I'm very proud of our training program. It's extremely important in our line of business. Our training program is fairly well funded and we have a specific training curriculum in place. Employees can count on receiving specific, substantial training in the procurement business area. And there are training tracks associated with each level of procurement professional. We have a fully funded training. Each employee receives a minimum of forty hours per year. And we utilize FAI for both classroom and online training. And the DHS Chief Procurement Officers Organization has entered into an agreement with DAU to reserve seats in their classes for DHS procurement personnel, and that includes my folks as well.

Mr. Thomas: Now John, at last count, the federal government spends approximately $140 billion dollars on services to meet agency needs and the use of performance-based acquisition is the federal government's preferred approach for acquiring these services. Tell us about CBP's efforts in implementing performance-based acquisition strategies.

Mr. Ely: First, to comment, a personal comment on PBAs. I agree that they are the desired vehicle, but there is something complex about them that needs to be understood and that is that it is an outcomes-oriented acquisition approach. That's where we truly have to get away from the nuts and bolts of how you get from point a to point b when the outcome is articulated get me to point b. And you don't spend a lot of time talking about how you get there. It's the outcomes that drive a performance-based contract to success.

So, in this environment, the government personnel serve as facilitators for contractor success, which is a little different than some government folks you are used to, where they believe that they are supposed to be directing the activities of the contractor. In performance-based acquisitions, they're facilitators. They help the contractor get to the successful end. Again, acting as facilitators versus directors. In CBP procurement, performance-based acquisitions are now automatically the first consideration for service contracts. Every service requirement that we get in, we look for the applicability of performance-based contracting as a solution.

All of my people receive training in performance-based acquisitions and our CBP Acting Commissioner supports performance-based acquisitions, and has asked his assistant commissioners to develop metrics and measures for their contracts to make sure they're receiving value for their dollars. We have a long way to go to reach our PBA goals, but we're working hard and I think we're doing a pretty good job learning more and more as we move along about the unique method of contracting.

Mr. Morales: John, I talk with many of my guests about collaboration. And certainly, procurements and acquisitions are perhaps some of the more complex business processes within a large entity such as CBP. What kinds of partnerships are you developing now to improve operations or outcomes at CBP and how many of these partnerships change over time?

Mr. Ely: That's an excellent question. I think acquisition by definition is a collaborative process. If you're not collaborating with your customers or your contractors who are helping you deliver results, you're going to be surprised by what happens at the end of the day. Procurement's close relationship with our parent organization, which is the Office of Finance, has helped us become very collaborative in terms of working with the components of finance which is budget, asset management, facilities, management and engineering and our financial operations organization.

We work together with them to make sure that CBP's needs are met at a fair and reasonable cost and that taxpayer dollars are properly expended. Our partnerships within the parent Office of Finance have enabled us to leverage our financial management capability. And our relationships with the customers and industry help bring best value for the taxpayer dollars that are entrusted to CBP. I see the further positive change, we build a greater capability in the big A, acquisition arena. The big A, which is acquisition, will bring us closer to being worldclass acquisition organization that's forward-thinking and focused on return investment for the mission and the American taxpayer.

Mr. Morales: Now, since its inception, DHS has had some very large and complex procurements such as, the Coastguard's Deepwater Program and CBP's SBInet. What are some of the key lessons learned from these large acquisitions and how are they shaping and informing your operations today?

Mr. Ely: I'm going to give you a generic answer on that, because I'm not as specifically familiar with Deepwater. I have some familiar, but with CBP's SBInet program, but I'd like to keep it generic because it does apply I guarantee to both programs and probably other, most complex government programs. The key to success with these procurements is planning, proper planning. The formulation of strong acquisitions teams and efficient, effective and responsible source selection process. And most importantly, properly staffed and managed postwar program and contract management organizations.

Too often, we think we've hit the home run. The ball is out the park once the contract's signed, when in fact you haven't even swung yet. I think it's also essential that when managing programs, one must realize that detractors are natural and important part of a balanced government business environment. And while these detractors may be disheartening at times, their presence can help keep acquisition personnel focused on the proper outcomes of their programs.

Mr. Morales: So John, you've eluded a couple times to CBP's acquisition function and its relationship to the broader DHS organization. How does this alignment benefit CBP and DHS' overall acquisition strategy and do you think that DHS will be adopting a more centralized model going beyond just mere oversight?

Mr. Ely: That's an excellent question. I've felt this issue going back and forth. Naturally, the components would like to retain control over their procurement organizations. And it's understandable that DHS would like to centralize, capitalizing on economies of scale, ensuring a consistency in the way that we spend the DHS dollar. But actually, there is a dual accountability role right now at DHS. While, I report to Customs and Border Protections Chief Financial Officer, I have very specific responsibilities for which I'm accountable to the DHS Chief Procurement Officer. And the same holds true for the procurement executives and the other DHS components. They also have that dual accountability.

I would also like to state that the DHS Head of Contracting Activities Organization, that is all the HCAs for the DHS components, are a group that works collaboratively and embraces the authority and leadership of the DHS Chief Procurement Officer. We meet on a regular basis and are actually quite effective in helping make DHS procurement functions as efficient and effective as possible.

Mr. Morales: So what does the future hold for CBP procurement? We will ask John Ely, Executive Director of Procurement at the U.S. Customs and Border Protection, to share with us as the conversation continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to our final segment of The Business of Government Hour. I'm your host, Albert Morales, and with today's conversation is with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. Also, joining us from IBM is Solly Thomas. John, CBP's experience in applying innovative solutions to help address agency procurement issues has provided some valuable lessons and insights, many of which we've talked about. But, could you summarize some of these key lessons and some of these critical insights?

Mr. Ely: I'd be glad to. Number one, continuously improve. The American taxpayer deserves it. Secondly, get people involved in creating solutions. The old saying, two heads are better than one, holds true. Groups of individuals working with common goals will get you there a lot faster than individuals who are spinning off on their own path. Constantly seek to improve and get industry input on a regular basis. Industry must succeed or die and they're a good model to look at when you're looking at the best way to run your own government operation. Finally, communication is key. When you think you've done it or done enough, do more because trust me, you probably haven't.

Mr. Thomas: Now John, since acquisition is a fiduciary responsibility, the business of government must be conducted with complete impartiality. Could you elaborate on efforts being pursued to ensure procurement integrity, making sure the proper standards of conduct, both ethical and legal requirements are being followed by the Federal Acquisition staff?

Mr. Ely: Sure. First, I'd like to start by saying that I'm very proud to be a federal procurement professional. We've all seen situations where integrity has been an issue in procurements and it's inexcusable. And people that don't use integrity will get caught. But, I have faith in the federal procurement process. The vast majority of people that work in that environment are honest, hard working public servants that want to do good. Furthermore, all federal agencies have programs that emphasize standards of conduct and provide continuous training in the areas of procurement integrity.

Mr. Morales: John, I'd like to transition to now to the future. Could you give us a sense of some of the key issues that will affect acquisition and procurement offices government-wide over the next few years?

Mr. Ely: Sure. Shortages of contracting and program management personnel is a huge challenge. Balancing highly innovative ways of doing procurements within a highly regulated environment is another. Increased oversight and the need for transparency for large scale programs with congressional and public and customer scrutiny in how we do business is again, another. The constant pace of change and the scale of procurements that we're seeing as it continues to grow. And finally, the time constraints for planning large major acquisition initiatives.

Mr. Morales: So, then more locally, what are some of the major opportunities and challenges that your organization will encounter in the future and how do you envision your area will evolve over the next say three to five years?

Mr. Ely: I see significant opportunities in the future as CBP becomes more and more sophisticated in its view and management of investments for the good of its mission. I see an organization that's becoming more and more enlightened in ways to efficiently and effectively invest its resources. And I see my procurement organization as one of the best in government; fully integrated with the CBP customer and delivering the best value for the taxpayers' dollars.

Mr. Morales: So, John you've had a very extensive career with the federal government and you just had a wonderful story of how you got started. So, I'm curious what advice might you give someone who's out there thinking about a career in public service and maybe even perhaps a career in the acquisition community?

Mr. Ely: I've been there. I was there on the brink trying to decide which way to go and I will tell you that serving the American public is an honor and a privilege and has significant financial and personal rewards. The government pays well and the work is rewarding. There is an incredible satisfaction delivering good things to the American public. And our government works hard to take care of its people and public service is an incredible opportunity to be a part of that important task.

Mr. Morales: That's just great. Unfortunately John, we have reached the end of our time. I want to thank you for fitting us into your busy schedule, but more importantly, Solly and I would like to thank you for your dedicated service to our country across your 34 years of federal government service.

Mr. Ely: Thank you so much for having me both of you.

Mr. Morales: This has been The Business of Government Hour featuring a conversation with John Ely, Executive Director of Procurement at U.S. Customs and Border Protection. My co-host has been Solly Thomas, associate partner in IBM's public sector consulting practice.

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 may not be able to 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.

Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m. And visit us on the web at businessofgovernment.org. There you can learn more about our programs, and get a transcript of today's conversation. Until next week, it's businessofgovernment.org.

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Originally Broadcast March 29, 2008

Washington, D.C.

Announcer: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created 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 businessofgovernment.org.

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

With its focus on transformational diplomacy, the U.S. Department of State has charted a bold new course in U.S. diplomacy. Implementing this vision includes significant changes to the very culture and view of U.S. diplomacy as well as in managing of institutions at home and abroad.

With us this morning to discuss his efforts in support of transformational diplomacy is our special guest, Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State.

Good morning, Ambassador Kennedy.

Amb. Kennedy: Good morning, Albert.

Mr. Morales: And joining us in our conversation is Bonnie Glick, project executive at IBM.

Good morning, Bonnie.

Ms. Glick: Good morning.

Mr. Morales: Pat, many of our listeners will be familiar with the Department of State as the diplomatic arm of the U.S. Government. But to provide a broader context, could you take a few moments and provide us an overview of the history and mission of the State Department? When was it created and how has its mission evolved over time?

Amb. Kennedy: Well, thank you. The State Department has been around since 1789, since the actual founding of the United States. And there are slight predecessors of the State Department that go back even before. I mean, Benjamin Franklin, who we at the State Department count as our first diplomat and envoy to France during the Revolutionary War, existed prior to the Constitution. But the State Department is the oldest and one of the smallest cabinet agencies.

We provide a number of services to the American people. Our mission essentially is to protect the economic and political security of the United States, and to protect the numerous American citizens who travel overseas, and lastly, to serve as the front line in our border security efforts. Our colleagues in the Bureau of Consular Affairs stationed at our embassies around the world provide not only, as I said, services to American citizens who live and work abroad or are in distress when they're tourists, but also issue visas to foreigners who wish to either live or work in the United States.

Mr. Morales: Now, that's certainly a very broad mission, but you also used the term that it's the smallest of the departments. So could you give us a better sense of scale? How is it organized, the size of the budget, number of full-time employees?

Amb. Kennedy: I should have said it's one of the smallest. It is not the smallest. We have approximately some 20,000 employees stationed in the United States and around the world. That's composed of about 11,000 Foreign Service officers and Foreign Service professionals, who serve both in the U.S. and at embassies and consulates abroad, and about 7,800 or so Civil Service employees, most of whom serve in the United States, but our Civil Service colleagues also do temporary duty, and some of them do special assignments in Iraq.

And we have a number of Civil Service employees, for example, serving in Iraq and Afghanistan now and doing very, very important work. So it's about 20,000 Americans, and backed up by about 37,000 foreign national employees stationed at our embassies. These are either residents of the country where the embassy or council is located, or foreign nationals from another country. They are also an integral part as they help to provide support activities for us.

Ms. Glick: Great. Now that you've provided us with a sense of the larger organization, could you tell us more about your area and specific role within the Department? What are your specific responsibilities and duties as the Under Secretary of State for Management? Could you tell us about the areas under your purview, how your area is organized, the size of your staff and budget? And given the responsibility for both overseas and domestic operations, could you give us a sense of how you balance limited resources between domestic and overseas operations?

Amb. Kennedy: Well, that's a very good question. I am the senior management advisor to the Secretary of State. My responsibility is to organize the support activities of the Department to ensure that the resources, whether they be human or financial, in order to carry out the missions that the Secretary has received from the President.

We organize along about seven major lines. There's the Bureau of Administration. This deals with logistics, supply, transportation, all those essential elements that keep operations going.

Then there is the Bureau of Consular Affairs, incredibly important. Issues passports to American citizens who wish to travel overseas. Registers births of Americans born overseas. Tragically, if an American citizen dies overseas, assists the family in that regard. And then issues visas, whether they're tourists, business, students, journalists, or immigrants.

The Bureau of Diplomatic Security. Our security professionals ensure that embassies are safe, work with the American business community abroad in a very important organization called the Overseas Security Advisory Committee, and work with businesses to advise them on the situation in a given country, and also protect foreign dignitaries who visit the United States. And lastly, do important law enforcement work in ensuring that those who wish to counterfeit or abuse American passports and visas are turned over to the Department of Justice.

We have an important training mission. Our Foreign Service Institute, which is based at the National Foreign Affairs Training Center at the old Arlington Hall station in Arlington, Virginia, teaches some 500 courses a year in management or professional specialties, and also does language training in over 70 languages so that our American diplomatic corps is able to communicate with people in their own languages.

When you have operations all over the world, you have to be able to communicate with them, and we have a robust information technology division, the Bureau of Information Resources Management, under our chief information officer. And that office makes sure that we are able to communicate 24 hours a day, 7 days a week; the most modern means -- satellite, high-speed fiber, to make sure that any information that we collect abroad can get back in the Secretary's hands or the National Security Council staff's hands or to the Pentagon's hands in literally seconds.

We have a medical division. We have the Bureau of Resource Management under our chief financial officer. The State Department has an operating budget of about $3.5 billion a year, and it's up to the chief financial officer to advise me and then help me advise the Secretary and the Deputy Secretary on how our resources should be deployed.

And lastly, we have an Office of Overseas Buildings Operations, which builds and constructs and helps maintain some 15,000 properties that the U.S. Government owns abroad.

The entire State Department's operating budget is about $3.5 billion. That's generally under my purview. In addition to that, there is about $1-1/2 billion in construction and maintenance accounts, and then another couple of billion dollars that are generated by our consular service, which is essentially a fee-based operation. When you go and get a new passport, part of the fee that you pay goes to the Bureau of Consular Affairs to underwrite the service and the staff it takes to produce that. And when somebody in most countries overseas applies for a visa to come to the United States, they pay an application fee that also serves to underwrite the expenses there.

Your second question was sort of the tougher one, which is how do you balance overseas and domestic? Our view, and that's the view of all the senior management at the State Department, is our main focus is overseas. Our assignments are to collect and analyze the political and economic events that are going on abroad, to look at science and technology efforts that are going on in foreign countries, to report those activities to Washington along with the analysis.

And the other thing I should mention is that State Department functions as the owner and the operator of an embassy platform. And so when an agency wishes to go overseas, the State Department provides services, personnel services, financial services, building services to that government agency, but charges them for it.

Domestically, we try to make sure that our focus is supporting our overseas operations, with two important codicils: One is that obviously, there are many U.S. Government agencies in Washington that have an interest in foreign affairs. And so part of our Washington operation is to liaison with the Department of Agriculture, the Department of Commerce, National Security Council staff, and others, to make sure they're getting the information they need. And secondly, our consular services, whether it be assisting you to get a passport or assisting an American who's trying to adopt a child overseas, those are critical. The major force is overseas, and we try to push most of our personnel and our resources overseas to carry out those missions.

Ms. Glick: Well, you have a huge plate that you try to balance. Regarding all of this, in your responsibilities and duties, what are the top three challenges, if I could be so bold as to ask, that you face in your position? And how have you addressed those challenges?

Amb. Kennedy: Well, I think that the first thing to remember is the State Department is essentially a people organization. Basically, our activities, as I mentioned earlier, are to do political and economic reporting and provide consular and administrative services, and to do that, you need people. My first goal is always to make sure that the State Department recruits, retains, trains, and assigns the best people that we possibly can so that we have the human resources to do our job.

Secondly, obviously, is the budget. The State Department's budget is always very tight. The fluctuating U.S. dollar has taken a big hit on State Department operations this year. We figure that between the time we started the budget process and this actual fiscal year, the dollar has probably sunk almost $100 million in terms of what we have to buy in terms of local currency to pay those expenses overseas that one pays in local currency. So budgeting is at times an exercise in triage, and we try to do that very carefully.

And the third activity, which is something that we work on very closely, is to make sure that our services to American citizens are the best they can be. As you well know, there were a few problems last year in terms of a huge surge in passport applications. In 2006, we issued 12 million passports. In 2007, it surged incredibly, literally in a couple of months, and in the end, we issued 18 million passports, which was a 50 percent increase that no one had really foreseen. There was no data that predicted you would have such a surge as that. And so over the past year, we have taken steps to make sure that as passports are again requested this year, that kind of delays to the American public will not happen again. This year, we're running an estimated 20 to 25 percent ahead of last year in terms of passport demand, but yet there is no delay. An American citizen who goes in and gets their passport is going to get them, you know, within a few weeks, and not the month or two that it was taking last year.

So I think those are the three issues I'm focusing on now.

Mr. Morales: Now, you've spent a little over 35 years in government service. Could you describe your career path for our listeners? And how have these prior experiences prepared you for your current leadership role and perhaps shaped your management style?

Amb. Kennedy: Well, I joined the Foreign Service, as you said, 35 years ago, shortly after graduating from college. I spent my first two tours in the Foreign Service in the Bureau of African Affairs, the first part of that as a regional administrative officer, roaming around Africa as, in effect, a spare tire. And then secondly, came back to Washington after that to become the personnel officer for the Bureau of African Affairs, and went on from there to be a special assistant to the Under Secretary for Management.

Went to Paris then as the general services officer in that State Department lingo for the logistics and maintenance officer. Came back to Washington, spent five years as the executive director of the Secretariat, which means that I was the administrative officer for the Secretary of State and other senior officials and took care of their budget, finance, and human resources needs as well as accompanying the Secretary of State for five years on all foreign and domestic travel.

Did a year of advanced training after that; went on to Cairo, which was and still is one of the largest U.S. embassies in the world. Was chief of administration there. Came back to Washington, was Assistant Secretary of State for Administration for a number of years.

Went to New York. I was one of the deputies to John Negroponte when he was the U.S. ambassador to the United Nations, and was responsible for U.S. budget contributions to the U.N. as well as U.S. relations with the U.N. and other nations on what are called host country affairs: protocol issues, taxation, parking tickets, law enforcement issues.

And during my time in New York, I was twice detailed to Iraq. The first in 2003, for about six and a half months, and I was the chief of staff for the Coalition Provisional Authority in Iraq. Then went back in 2004 to do the transition from a Department of Defense-run CPA to the new American embassy. And at the end of my four-year tenure in New York, I went to the Office of National Intelligence and again worked for John Negroponte and helped him set up the Office of the Director of National Intelligence. And then in 2007, came back to the State Department.

That sort of long and varied career I think has taught me a couple of things that hopefully have prepared me for this job. The first is the importance of people. You get things done if you have a good team. But I think what I've learned is people will respond to a mission, they'll respond to tough and difficult assignments if you sit them down and explain this is our goal, this is why that goal is so important, this is your individual mission in supporting that goal, this is how you fit into the big picture. Give them that assignment and then let them do their job.

The second thing I learned is that operations overseas are different than they are in Washington. It's not that it's better. It's just different. And having served overseas, it gives you the context that you're now trying to manage something in Washington in support of the field, you have to keep always in mind that things are different.

The third thing, I guess, is that there are always problems that arise, and that you have to be creative and flexible. Events happen overseas, some good, some bad, but you have to be always prepared to surge resources, to operate almost instantaneously to either protect the lives of American citizens, to working to protect American embassies when they come under attack.

Mr. Morales: Very, very broad mission. Thank you.

How does the State Department manage its resources and infrastructure here and abroad?

We will ask Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State, 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 Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State.

Also joining us in our conversation is Bonnie Glick, project executive at IBM.

Pat, given the release of the joint State and USAID strategic plan of 2007 to 2011, could you tell us about the efforts to integrate USAID operations with those of the State Department? Specifically, how has this joint effort enhanced the ability of both organizations to ensure that the nation's foreign policy and development programs and fully aligned? And how has the effort impacted your bureau and its workload?

Amb. Kennedy: I think there's two separate aspects to that very good question, and let me take the logistical and administrative and managerial part first. Over the years, many AID operations have taken place in a separate building. And so when you have separate buildings, it is logical that there are quasi-separate administrative structures. Thanks to the Congress, we built some 50 new embassies in that period of time. And as we built a new embassy, we have made room so that the State Department contingent, the other agencies, and AID can be co-located on one compound.

As we have done that, we have taken steps to streamline our activities. And so rather than two motor pools or two maintenance elements, we're now pulling all that together in a combined operation. And so that streamlining, which contributes to cost savings and effectiveness, is very important. And so we're seeing State and AID co-located, and we're deriving administrative and managerial efficiencies from that.

The other part of the strategic effort forward is the Secretary has taken steps to ensure that we have very much a holistic look. We have a strategic plan where the U.S. Government should go overseas, and she's taken steps by creating a senior advisor to her on foreign assistance, Henrietta Fore, who also is the administrator of the Agency for International Development. So we're pulling the two organizations together at the top and ensuring that AID knows where the State Department feels it needs to go in terms of foreign affairs support, and the State Department well knows and understands what important missions the Agency for International Development is engaged in terms of helping people in distress.

By having a common strategic framework, we're able to make sure that State and AID are operating in tandem. And I think that contributes both to advancing U.S. interests abroad and also better helping people around the world, many of whom are in desperate need of such assistance.

Mr. Morales: Now, along similar lines, could you provide us an overview of such an issue such as transformational diplomacy, and your corporate right-sizing and regionalization strategies?

Amb. Kennedy: The Secretary feels, and I think she's absolutely right, that as the world has changed, as issues have changed, as countries that may not have been at the forefront of our thought or topmost on our radar screen, so over the course of the past three years, we've gone through three exercises in which we have shifted resources from various parts of the world, Europe to some extent, to Asia, the Pacific, and the Middle East and Africa. We call this "global repositioning." The goal here is to make sure that we have positioned our personnel and our financial resources so that they are most strategically aligned with the foreign policy goals of the United States.

And we do that by also making sure that not only has the focus in terms of countries changed somewhat -- although let me emphasize that it's critically important that we continue to deal with our neighbors in the Western Hemisphere and our partners in Europe through such mechanisms as the European Union, NATO, the Organization for Economic Cooperation and Development. So we're not abandoning parts of the world to move to others. We're simply realigning so that we get the best bang for the taxpayers' buck.

But the second part of transformational diplomacy is to realize that there are additional issues out there. There's issues of science and technology, of AIDS, economic investment, energy, oil and other means. So more and more, State Department must, should, and is dealing with nongovernmental groups. It's important to reach out to academia, to the media, to the private sector, and to private sector organizations within countries, which are having more and more of an impact in their nation, just as in our country, private sector entities have a major influence on how things happen in the United States.

Ms. Glick: Given the size of the Department's budget, would you tell us a little about the Department's efforts to improve its financial performance? And how has your organization expanded the use of financial data to inform its management decision-making process?

Amb. Kennedy: Another good question. We have a chief financial officer in Brad Higgins. Brad is an excellent CFO. And his focus has been to make sure that we can track every single dollar that we have, and he has accomplished that. We have installed a new financial management system in the Department, our global financial management system. In the past, it was very much of a paper thing, where papers were moving from one place to another. And if funds were expended overseas, it might be days, if not weeks, before we had an accurate snapshot of where the resources were at that moment. That's completely changing with the global financial system. It moved to a common platform, electronic transfers, and so we're able now to know exactly where our money is going and we're able then to shift it.

The second part of that is we know that we need more data. We need to have data so that managers can make more informed decisions. And so the colleagues in the chief financial office, our planning office, and our chief information officer working together to build a more robust data warehouse so that all the information the decision-makers need is at their fingertips.

And the third point is we are also collecting data in a more rigorous form. We provide administrative services, management services to some 50 different government agencies overseas on 165 different embassy platforms. All of them follow the same financial rules and input the same financial data. But to a degree, the definitions that they were using as they were counting something as either an apple or an orange or a fruit or a vegetable were just slightly different.

And so through a process in conjunction with our regional bureaus and our posts overseas, we are tightening up that activity so that will then enable us to compare and contrast unit cost in doing business, so that we can challenge our colleagues overseas and ask them the right questions. Why is your unit cost different from another? Obviously, there may be reasons based upon geography or individual circumstances prevailing in a country. But we need better data, and we're getting it so we can ask those tough questions.

Ms. Glick: That's great. Moving to a slightly different place where you have budget expenditures, the State Department's real estate portfolio exceeds $14 billion in value, and as you said, includes over 15,000 properties. And the State Department is one of only four federal agencies out of the 15 that managed to achieve a green for both status and progress in the President's Management Agenda for federal real property.

Would you elaborate on this incredible achievement, and could you tell us about your efforts in this area? And what advice would you provide your colleagues in other agencies?

Amb. Kennedy: The State Department has unique challenges since we operate in so many countries, in different circumstances. Some places, it is easy to rent good facilities; some places, it's very, very hard. We do own a large number of properties overseas. And the first step that the Office of Overseas Buildings took was to develop an asset management plan so that we were sure that every property we had was being utilized to the maximum extent possible. So we analyzed our properties in terms of their value against their utility. And that has led us in some cases to buy properties; it has led us in other cases to sell properties where the value of the property exceeded the utility. There are properties that we acquired right after the Second World War that had become so valuable that it was not necessarily -- we were getting -- that value out of them, so we have sold those properties and bought multiple other ones. And so we have achieved economies of scale against what we have to pay in leasing and rent.

I'm always hesitant to offer advice to colleagues at other agencies, but I think the easiest thing, and it's the simplest, is just to make sure if you've got properties, do you have a plan? Have you analyzed each property, and is each individual property being put to its highest and best use? And if it doesn't fulfill your business needs' highest and best use, get rid of it. The State Department also has one advantage that is not necessarily available to all other government agencies, is the Congress permits us when we sell a property abroad to reinvest those proceeds in the purchase of additional properties. So they've given us a wonderful incentive to be as efficient as we can, and we take advantage of that at every opportunity.

Mr. Morales: Now, Pat, I understand that consular officers around the world process over 7 million non-immigrant visa applications and nearly 700,000 immigrant visa applications each year. This strikes me as sort of an interesting challenge between maintaining security and facilitating legitimate travel. Could you tell us about your efforts to meet the security challenges associated with performing visa services, and to what extent does the visa and passport security strategic plan outline these efforts?

Amb. Kennedy: We feel that we have absolutely two requirements laid upon us in both the passport and visa. The first and the primary is to protect national security. Our consular officers are our first line of defense overseas and domestically in terms of passport issuance.

Every applicant who comes in for a visa is interviewed. We use biometrics, working with the FBI. We now take what's called a tenprint. We take fingerprints from every applicant, and those are immediately loaded into our technology system and go back to the FBI central files, as well as checks at Homeland Security. And no visa is issued if those fingerprints come back and say the individual is on anybody's warrant or watch list.

Secondly, the name of every visa applicant, and other data, such as data and place of birth, are entered into a separate database, which is run through the entire U.S. Government data bank, so to speak. And so if that individual has any activities that are of concern to any element of the U.S. Government, that issue is resolved either favorably by consulting with those agencies. Lots of people have the same name. People with the same name may even have the same date of birth. And so you have to resolve cases like that. But we don't issue a visa until we are sure that there is no one in the U.S. Government who has concerns about that individual.

Backing that up is the Bureau of Diplomatic Security. We have regional security officers and assistant regional security officers around the world, and they are part of our front-line defense as well. They investigate fraudulent attempts to obtain U.S. visas. They're on guard against visa brokers and others who try to suborn the process. And so the consular workload and the visa investigations of diplomatic security work hand-in-glove to make sure that we have a robust and secure process at all times.

Mr. Morales: Now, Pat, I only have a minute left, but I want to bring us back to a comment you made earlier around the recent surge in passport applications. How has your Department enhanced the passport application and delivery process? And to what extent does the transition to e-passports assist in this area?

Amb. Kennedy: Well, we have increased by several hundred the number of passport acceptance agents around the country. It is important, though, that when you apply for a passport, we adjudicate your application. We make sure that you are who you say you are. So we've increased the number of personnel. We've opened a new production facility in Arkansas that has the capacity to produce 10 million passports a year. We also have added, in effect, SWAT teams. We have personnel trained in the State Department who don't do consular work or passport work on a daily basis, but they have been trained and they're deployed and they're in effect our ready reserve.

And lastly, many applications for passports are renewals. Renewals are handled differently than first-time applicants because you've already been adjudicated once. And those are handled in an electronic process, with the image on the screen of your original application, the image of your current application, and the image of your current passport. We have developed a way that if we should get hit with another surge, we can actually send that electronic work to our embassies around the world and their consular officers working the night shift, in effect, will process those applications for renewals and then send the approved electrons back to one of our production facilities, and the passport will be issued the next day.

Mr. Morales: How does State manage its resources and infrastructure here and abroad?

We will ask Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State, 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 Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State.

Also joining us in our conversation from IBM is Bonnie Glick.

Ambassador Kennedy, what are some of the significant challenges your bureau faces in administering the diplomatic missions in hot spots such as Iraq and Afghanistan?

Amb. Kennedy: The State Department normally does not operate in spots that are quite this hot, but we see ourselves as partners with the U.S. military, and therefore, the State Department has committed large numbers of personnel to both Iraq and Afghanistan.

Using Iraq as the example, we have personnel in Baghdad. We have personnel in some 27 other cities and locations around Iraq, embedded in many cases with our military colleagues in what we call "embedded provincial reconstruction teams," and then in reconstruction teams where we're operating on our own. These personnel work with the local leaders to help them develop ways that municipalities can operate better and deliver services, services to the people. Because if individuals believe that they're getting good services from their local government, then they have a higher opinion of their local government. And those who would wish to disrupt good order stand a less chance of doing so.

Security is always a challenge in Iraq. We have taken extraordinary steps to make sure that our personnel are secure, either through the Diplomatic Security Service, or in conjunction with our military colleagues.

We've also had no real shortage of people stepping up to serve. This past year, we advertised all the jobs. We reached a point where almost all of them were filled. We then said that we would use the provisions of the Foreign Service Act to direct personnel to go to fill the remaining jobs. And before we even implemented that procedure, we got sufficient numbers of volunteers stepped up and said, no, we'll take that job, we'll take this job.

Mr. Morales: Now, continuing along this line of security, I understand that the Secretary assembled a panel of outside experts to review the State Department's personnel protective services, specifically in Iraq. Could you tell us more about this panel? And could you perhaps elaborate a bit more on other efforts being pursued by your area in securing people and facilities both here and abroad?

Amb. Kennedy: I was part of that panel, and the charge to the panel was to conduct a serious probing and comprehensive review of the activities. So I was the only member of the four-person panel who was a State Department employee. We had a retired four-star general, a retired ambassador, and the director of security from another U.S. government agency.

The four of us went out to Iraq. We reviewed the situation. We reviewed our processes and the incidents there and found in general that we had good processes in place. We screened personnel who we were using for contract security. We trained them well, but you can always improve a process, so the panel made a dozen or more recommendations to the Secretary, all of which were adopted. For example, now every time we have a motorcade or a convoy taking embassy staff from Point A to Point B, there is a special agent, a federal agent of the Diplomatic Security Service, who accompanies that convoy as the agent in charge to make sure that all of those rules and procedures are followed.

We've been installing cameras in the vehicles to record what may happen along the route. We have increased our coordination with the U.S. military. We had already been passing them data on our movements. So we think we have resolved any potential issues in Iraq, but at the same time, it is a very dangerous environment. umber of security professionals working with us have been killed in the line of duty. There are individuals who seek to disrupt our support for the building of a new and democratic Iraq. And so those challenges are our challenges on a daily basis.

Worldwide, again, there are various terrorist organizations that strike out. Tragically, just a while ago, an officer from one of our sister agencies, the Agency for International Development, was killed on New Year's Day in Sudan. And so we have a very, very robust security operation under the auspices of the Bureau of Diplomatic Security, which works very closely with the intelligence community and others to pull in every piece of information that we possibly can, to analyze this to see who's being targeted, and take appropriate steps, whether it's the provision of armored vehicles or whether it's the provision of bulletproof or resistant doors. Recently, one of our embassies was attacked in Europe, and there were lots of stories in the press about the compound being breached. But the hard line that we construct, that hard line was never breached.

Ms. Glick: The Office of Language Services is responsible for providing interpreting and translating services to the Department. A significant challenge facing this program is recruiting a pool of direct-hire employees and contractors who are among the world's best interpreters and translators. How has your organization handled this challenge? And are there any plans to relax some of OPM's applicant rating procedures and security clearance requirements?

Amb. Kennedy: We think our interpreters are the best in the U.S. Government. When you see somebody standing next to the Secretary of State or the President or many other cabinet officers, it is an employee of the State Department's Bureau of Language Services who are providing that interpretation service. And when you see the United States sign a treaty or any other international agreement, it's always in two languages: the language of the country we're signing with and English. And that work has been done by State Department translators who compare to make sure that the texts are actually equivalent.

OPM and the Defense Department and the State Department and other government agencies are looking at new rules on security clearance procedures. But we don't see those as relaxing the security clearance procedures. I think it is more of bringing them into the modern era, more exchange of information on an electronic basis.

We think streamlining the security clearance process is good, but I believe that the result will not be any diminution of security, but it will rather be greater efficiency and effectiveness.

Ms. Glick: I understand your Department's information technology central fund totals some $260 million. Would you elaborate on your Department's IT investment priorities, including modernization of its global IT infrastructure and various e-government initiatives? What are some of the critical challenges your Department faces, and what are you doing to progress and improve in the E-Gov Initiative?

Amb. Kennedy: I think our major challenges are that we have over 300 activities, missions overseas, consulates, embassies, plus some 30 or 35 operations in the United States, so we have to have a robust IT operation that can reach out in a secure way, whether it's secure meaning it can't be breached, or it's secure because it's moving national security information.

So as diplomacy moves on, we need also to find ways to give diplomats the ability to be more portable, to be more mobile. The State Department has a very, very good system now which issues little fobs, little devices with encryptions and passwords that you could sign on to a PC in your hotel room or in some other facility and move very surely but safely into our unclassified network in a way that no one can trail you through the door, so to speak, so we can do that work more efficiently.

But that's not to say that those who are out there who are either hackers or cyber-terrorists aren't after us every day. They hack at us all the time, and we work very, very closely with our colleagues in the Department of Defense and the intelligence community and the Department of Commerce and others to always keep abreast of what is the best technology we can find to ward off the hackers.

E-Gov is important. We constantly work on the website to make sure that it is the most robust and responsive possible, because it's certainly something that is much more efficient and effective for us, and allows us to deploy our resources in the most efficient way possible.

Mr. Morales: Now, Pat, we talked earlier about the 18 million passport applications and some 7 million non-immigrant visa applications. Could you elaborate on your Department's efforts to improve its IT security to protect such things as personally identifiable information? Specifically, what role does the Information Systems Security Committee, or the ISSC, play in your efforts to improve IT security across the Department?

Amb. Kennedy: Security is always job one, whether it's personal security or physical security or cryptological security, and IT security is right up there. In fact, in the process of just recently appointing our new chief information officer, we elevated the position of director of IT security from an office director to the position of deputy chief information officer as a sign of our commitment, but more than that, making sure that he has full access to the resource table to make sure that we're providing it.

We believe I think in what you might call defense in-depth. We have to be able to combat those who would hack their way into us. So we have multiple layers. I think we have a very, very robust system in place, so it's a daily activity for which we have made a significant commitment in personnel and other resources. And we will do it today and we'll do it tomorrow and the next day.

Mr. Morales: That's fantastic.

What does the future hold for the U.S. Department of State?

We will ask Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State, 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 Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State.

Also joining us in our conversation from IBM is Bonnie Glick.

Pat, I'd like to transition now to the future. We talked about transformational diplomacy, but could you give us a sense of some global trends and changes that will impact the domestic and international deployment of State Department employees? And what perspective do you have regarding meeting these changes head-on?

Amb. Kennedy: Well, I think that the major focus of transformational diplomacy has to get our personnel out and operating in different ways, reaching out to new audiences, to the private sector, to nongovernmental organizations, in ways that we have not done in other parts of the world other than Western Europe and Latin America. But with less than 12,000, only about 11,500, Foreign Service personnel overseas in 267 posts, that's a tall order. That is a big stretch. And so this means that we are going to have to make sure that we continue to recruit the best people who are representative of America, and we're going to have to get them the language skills that they need.

The President's budget request that just went up to the Congress recently includes a request that was strongly championed by the Secretary for 300 additional training positions, so that the State Department can put more people into Chinese and Arabic and Farsi and Hindi and other languages so that our personnel can become more productive and more able to get more done in any given day because they now have the language skills. And the last thing I think we have to concentrate on is more interagency cooperation. It's clear that when something happens overseas, it usually has multiple dimensions. It has a political-military dimension. It has an economic dimension. It has a social dimension. It has a developmental dimension. So the State Department, which has always been the leader of the country team, all the agencies assembled at an embassy, has to do that even more so, and especially partnering with our colleagues in the U.S. military. They have resources and they have training, and we have resources and we have competences. And we need to make sure that we lash State and Defense together in such a way that we can take advantages of each other's skills, and the resulting lash-up is, as they say, the whole is greater than the sum of the parts.

Ms. Glick: That's great.

A recent Center for Strategic and International Studies Commission on what they call the "embassy of the future" argues that buildings themselves will play less of a role in furthering America's diplomatic goals in the future, while outreach and access will grow increasingly important. This goes directly to what you were just discussing. And if true, it calls for a serious rethinking of how and what to build. In your perspective, what will embassies of the future look like, and what role will technology play in building the embassy of the future? Are you looking at virtual technologies, for example, like Second Life, perhaps, in this effort?

Amb. Kennedy: Clearly, we need to have more robust mobile communication skills. When an officer is out away from the capital city and out in one of the provinces or visiting a district capital, he or she needs to be able to both communicate back to the embassy and also file their reports in ways so that the information they gathered has the most timely deliverance. So that's true. Also, we need to make sure that we're using wikis and blogs. I mean, State Department Bureau of Intelligence and Research is one of the leaders in that regard. Those are just marvelous tools that allow people to work collaboratively, sometimes in the same facility, but sometimes in neighboring countries collaborating on a regional perspective or collaboration between Washington and a post in the field. And we certainly need to think about expansion of something the State Department calls "virtual presence posts," where in a university community outside the capital city, you set up a room with some Internet computer terminals that allow people to communicate and research with and about the United States Government.

At the same time, I think that as much as I respected the CSIS study, I think they're overstated their view on buildings. The buildings the State Department has have always been platforms. There has to be someplace for them to go back to at night, someplace for them to keep their files.

So I think we are going to absolutely see greater use of information technology, both in terms of mobile and in terms of wikis and blogs. But I think that we're going to see embassy buildings continue to be an important activity, because it has to be the base. It has to be the platform, as well as the fact that certain activities, such as the important consular work we do, whether it's visa screening or the issuance of passports or help to American citizens in distress need a solid base, literally and physically, from which to operate.

Ms. Glick: There's been much discussion about the pending government employee retirement wave. How are you handling this, what some are calling a crisis? And what steps are being taken to attract and maintain a high-quality technical and professional workforce?

Amb. Kennedy: We see this crisis coming, as does every other government agency, and the State Department obviously has a twofold interest here. We have both the Foreign Service of the State Department and the Civil Service, and neither of those segments can be ignored. To do so would be doing it at your own peril.

We value our Civil Service colleagues and the work they perform as much as we value our Foreign Service colleagues. And so therefore, we're investing significant resources in both the Presidential Management Fellow Program, the PMF Program that's run by OPM, but we're a big taker of those marvelous young men and women. And we also have our own program called the Career Entry Program, which is not the same as, but somewhat akin to the PMF Program, to make sure that we're building a new cadre of individuals who are prepared, who are experienced in the Department, and therefore, prepared to move up in the system.

On the Foreign Service side, we continue to be lucky in getting large number of applicants for just the few hundred Foreign Service positions that we can hire for each year. But again, we're not resting on our laurels. In the past, the Foreign Service Exam was offered once a year. Now we're offering the exam three or four times a year, and we're offering it online at various centers that we have contracted with. And so we know we need the best and the brightest. We're reaching out, both with new programs and more efficient and effective and we hope more fruitful ways of giving the exam in the case of the Foreign Service.

Mr. Morales: So following up, how do you ensure that your employees and future employees have the appropriate training and skills to meet some of the future challenges that we talked about? And how does the National Foreign Affairs Training Center factor into these efforts?

Amb. Kennedy: I think that the National Foreign Affairs Training Center is the jewel of the State Department. Secretary Schultz spent hours and put his personal efforts on the line to acquire for the State Department the former DoD property in Arlington. And we put additional resources into it. We are now literally in the process of building another wing on the National Foreign Affairs Training Center to give us the additional classroom capacity. And that's our commitment.

In addition, we talked earlier about working with the military. We also need to do more training with our military colleagues. But the reverse is kind of true. When a State Department person goes to Army War College, for example, not only does he or she learn how the military does it, but when they participate in classroom exercises, when they participate in discussions, they're in effect teaching their military colleagues the perspective of the State Department, and that synergy is incredibly important. So we want to do more training with the military.

And lastly, the Foreign Service Institute has put into place hundreds of long-distance learning courses that are posted on the State Department website. Thirteen languages are on the website, as well as numerous professional development courses for both American personnel and our many foreign national colleagues working at our embassies overseas who can benefit from this training in consular work or administrative work.

Mr. Morales: That's great.

Pat, you've had a very successful 35 years in government. What advice would you give to a person who's perhaps considering a career in public service or perhaps in the foreign service?

Amb. Kennedy: Well, the first thing I would tell them is to apply to the State Department first. Do not apply to any other government agency. We want you.

The State Department is an incredibly challenging activity. If you want a job that will change every day whether you're in Washington or whether you're overseas, the opportunities that State has across the board, everything from information technology to medical to logistics to refugees to consular work to legal. I think we have jobs there that will challenge everyone.

I think also that one has to realize that the government is a hierarchical organization, and you are probably going to start at the bottom. But every day will be a challenge. Every day will be an education. Every day, you will have prepared yourself another 8 hours or 10 hours or 12 hours to do what the American people need. I encourage people to apply to State because I think that we have the careers and we have the opportunities, as we talked about earlier.

Mr. Morales: That's wonderful advice. Thank you. Unfortunately, we have reached the end of our time. I want to thank you for fitting us into your busy schedule, but more importantly, Bonnie and I would like to thank you for your dedicated service to our country across the various roles that you've held within the Department of State.

Amb. Kennedy: Thank you very much, Albert and Bonnie. It's been a pleasure being with you here today. The State Department is America's front line. We try desperately to do our job. We are not a perfect organization. I encourage your listeners or their friends who have any questions about the State Department or any of the services we provide, our website, www.state.gov, is robust. I encourage your listeners to go there. And we're here to serve you, and I believe that you'll be able to find the answers and support you'll need.

Thank you.

Mr. Morales: Great, thank you.

This has been The Business of Government Hour, featuring a conversation with Ambassador Patrick Kennedy, Under Secretary of State for Management at the U.S. Department of State.

My co-host has been Bonnie Glick, project executive within IBM.

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 may not be able to 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.

Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m., and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and get a transcript of today's conversation.

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