One of the big arguments given for “Lean Government” efforts are the cost savings that are generated by various Lean projects at local, state, or federal levels.
I've heard stories and rumors from people who have done Lean Government work… complaints that so-called “cost savings” never lead to budget reductions because one's power is pretty proportional to the size of one's budget. The “use it or lose” it mindset kicks in and all sorts of stupid spending occurs at the end of the year.
The Washington Post solicited stories and has a report that documents this dynamic: “As Congress fights over the budget, agencies go on their ‘use it or lose it' shopping sprees.”
From the article:
This past week, the Department of Veterans Affairs bought $562,000 worth of artwork.
In a single day, the Agriculture Department spent $144,000 on toner cartridges.
And, in a single purchase, the Coast Guard spent $178,000 on “Cubicle Furniture Rehab.”
I've heard rumors of a department buying tons of toner/printer cartridges that sat in a room… while another part of the organization bought lots of printers with “use it or lose it” funds… and the toner was compatible with said printers.
People are just irresponsibly wasting our tax dollars. This is shameful.
It's clearly a systems problem, rather than a “bad individuals” problem, as described:
“The way we budget [money] sets it up,” said Sen. Tom Coburn (R-Okla.). “Because instead of being praised for not spending all your money, you get cut for not spending all your money. And so we've got a perverse incentive in there.” But, Coburn said, “nobody's talking about it but me and you.”
The end of fiscal year spending is clearly shown in the spending data:
In 2012, for instance, the government spent $45 billion on contracts in the last week of September, according to calculations by the fiscal-conservative group Public Notice. That was more than any other week — 9 percent of the year's contract spending money, spent in 2 percent of the year.
Some federal employees suggested changes to the budgeting system through a federal online suggestion box system… but that suggestion box was plagued by the problems that usually occur with a suggestion box — VERY FEW ideas were actually implemented (see “The 86,000 budget-cutting ideas that got away“).
So, until this changes, I'm going to scream “B.S.!” when I hear of “cost savings” in Lean Government projects. I'm going to ask, “Where is the budget reduction?”
I *do* think Lean Government should be focused on reducing cycle times and providing better service to citizens, including:
- Faster passport processing times
- Faster processing of military disability claims (something that's STILL a seriously embarrassing problem a few years later)
I think better service is the best we can expect – not lower government spending.
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From Twitter:
Scott Rutherford -@srlean6
@markgraban Agreed. CPI projects work best when tied to readiness, right force @ right place @ right time. $ are a result; shouldn’t be goal
From a Facebook friend:
The ‘use it or lose it’ phenomenon is very real. It exists at least in part due to constant political pressure to reduce the cost of government. We need to figure out a way to incentivize coming in under budget; cutting people’s jobs when they perform better than expected isn’t working. I am afraid the only suggestion I have (switch to a money-free society) is not a practical near-term solution, and one that many, probably including you, wouldn’t agree with in any case. :-)
I can tell you that in the current sequester climate, there are agencies with $X worth of spending they’d like to do, but $Y
From LinkedIn:
I think the whole “spend it or lose it” attitude can’t be fixed until Congress gets serious about fixing it. Let’s say the entire DoD decided to come in under budget (yes, I know, a pipe dream). Would Congress say “great job” to the SECDEF? No! They’ say “You only spent 90% of your budget this year, so we’ll only give you 90% of what you requested for next year.” Congress needs to recognize this, and enact some real reforms that would encourage saving money vs spending all of your budget. I know there are mechanisms in government contracting to reward a contractor for coming in under budget, so why not establish something similar for government agencies?
Yes, Congress is certainly part of “the system” here… individuals are acting quite rationally (to use it) given the system.
I appreciate the challenge Mark. Actually reduce overall government expenditures and deliver better value to more Washingtonians. It’s hard, and we’re just getting started, but we believe we can do hard things, so stay tuned to Washington state government’s Lean journey.
Thanks, Darrell – my cynicism aside, I do admire that the State of Washington, Iowa, and a few others are doing to improve the services that are delivered to people in your states.
Maybe you can’t comment on it, but has “use it or lose it” been a problem at the state level?
Mark
Let’s look at a real issue, that of personnel costs where retirement benefits dwarf the private sector, and are created from inaccurate projections by people who aren’t held responsible. Let’s get rid of defined benefit plans and use only defined contribution plans in government from local to federal, and let’s pay government employees what private sector employees earns, not 25% more.
Hi Mark – As I see it from the work we do with government throughout the US, there are two segments – Federal which mirrors what you describe since there is no need to produce a balanced budget; and State & Local which have to produce a balanced budget. The ability to achieve real savings is not a problem in our experience at the State and Local level. One state agency we’re working with (just a few examples):
1. undeliverable mail – $890K+ – reviewing and reducing what was being mailed, and using Pitney Bowes’s fast forward system.
2. Reducing error rates in food stamp applications – eliminating citizen advocacy group lawsuits, rework processing, allowing attrition of employees.
3. Introducing better standard work practices for social workers to reduce variation in medicaid assessments which in turn narrows the variation in client servcie plans = reduced costs to the agency and state.
Some of the main principles we drive toward:
1. One stop shopping of services for government clients
2. Right the first time – war on errors and rework
3. Improvements are handled via attrition, not layoffs
4. No new hires unless a critical skill needed: ex. a COBOL programmer
5. Clear understanding of what all laws and statutes truly require, not what they’ve morphed into or been interpreted as over time
6. Simple data mining to know “how are we doing?” – which is usually lacking. Getting the data drives many “aha” or “OMG” moments leading to quick improvements.
And I could go on, and on…
So it seems like there are opportunities for service improvements at all levels of government… and there’s hope for true cost reduction and small budgets at the state and local level. That’s good to hear.
Thanks for sharing, Harry. Good luck with the good work you are doing out there.