President's Management Advisory Board Meeting - Part 2

Uploaded by whitehouse on 12.10.2012

Speaker: Thanks, Jeff, and thanks again to everyone for coming.
Most importantly thanks to you and your teams for all your
help, it's really made a difference; we've gotten some
really great progress since we last talked.
The site visits were really informative.
And I'm excited to go through and kind of get your feedback on
some of the things that we've done.
So we're on slide 14 in the binder.
Flipping to the next slide, basically what I wanted to go
through today is briefly recap the recommendations here.
And before I begin, I'd be remiss not to introduce Dan
Tangherlini, the acting administer from GSA who's
partnered with us on all of this and will be helping to walk
through some of this as well.
We've three kind of strategic and tactical elements that we
want to talk through on strategic source.
And the first is the key components of our focused
federal effort that we've stood up around strategic sourcing
over the last few months.
The second is some tactical potential targets for commodity
areas for this year based on a lot of feedback and conversation
we had at the last full board meeting looking at kind of a
combination of dollar amounts, which higher is better,
complexity and commodity, kind of move towards the lower end of
the value chain, and where are those sweet spots to start as we
build inertia and go forward.
And then lastly, I wanted to talk a little bit about a prices
paid information sharing tool, prices paid portal that we want
to create based on one of the best practices we heard over and
over around price transparency, and you guys gave us some
feedback about how we can move forward there and dealing with
vendors and others.
So the recommendations that you all gave us and formally adopted
on the call filling of these three buckets.
Make sure that we have government wide policy
directives, and that those mandate the use of these
vehicles where appropriate, and have a senior accountable
official at each agency on the hook for results.
Secondly, we've got to step up our data collection, our
utilization of that data both through request of the vendors
themselves, and then also some internal standardization around
the way we track and measure performance here.
Lastly, we have to make sure we're communicating these
things, top down communication is the importance here, all of
you talked about the importance or the critical nature to the
success of your endeavors when the head of the organization
said this is important to me, this is not an ancillary
function, this is core to us capturing savings, driving value
into our mission.
As well as once you had successes, highlighting those
and syndicating those around, lifting them up.
So the point is, and I was watching the previous segments
on the White House website, and, Gail, you and Jeff had the whole
conversation about the carrot is you save these dollars, you can
invest a number of them in the mission.
Now, there's a huge carrot for the taxpayer, because we're
going to put a bunch of this back into the Treasury and
towards deficit reduction, but it's really a win-win
on that point.
And we need to create the framework that in hesitance
they stick, but creates, you know, a very limited room for
leakage and those types of things and encourage
best practices.
So moving to slide 16, here are the key components of our
effort right now.
We're really targeting three areas as we implement this.
The first is, and this slide lays out, standing up some
commodity teams in targeted categories which will create
additional governmentwide vehicles and is populated by
senior leaders from the key agencies, like the folks at
this table, who will commit their spend through them.
So it's -- you know, looking at the slides, a focused effort,
instead of boiling the ocean or addressing every agency,
focusing on the top spending agencies, partnering with GSA
as a lead agency on a number of these cost-savings initiatives.
Secondly, having this body both at a senior level, but a cross
functional level.
You know, Steve VanRoekel will talk a lot about portfolio stat
in the first section.
Well, I.T. is an $80 billion segment of the government
procurement pie, so we absolutely need to partner
with the CIO's.
Danny is going to talk about improper payment
and all of his great work with the CFO's.
We need those CFO's, those purse string holders in the room, too.
So we've populated not just with acquisition professionals, those
contacts, first of all, CFO's, CIO's and other senior leaders.
Lastly, you know, under Jeff's clear direction, we are setting
very aggressive goals.
You know, we're looking for transformational change here,
not just baby steps.
So the way that we're kind of creating the framework is first
set up these commodity teams governed by these
core components.
Secondly, let's capture some initial wins, let's get some
quick wins, both through some targeted commodity areas and
improve demand management.
And Dan is actually going to walk through a bunch of that
in just a minute.
And then lastly, again, this prices paid portal to increase
the internal government transparency of the price
we paid.
We've just seen huge impacts from even the incremental steps
we've made there already.
So when we meet early next year, what I'm hoping is that we'll be
discussing new vehicles we've stood up, the increased adoption
of the vehicles we already have, and all the increased savings
that we'll be driving.
You know, that's kind of the path as you help us kind of
give us more input as we mature down this road.
So slide 17 talks a little bit about when I say we're
targeting, we're being focused, what does that mean?
Well, of the $535 billion that government spent, we can't just
look at every -- you know, we're not going to strategically
source necessarily fighter planes, tanks, warships,
all of these types of things, so let's (indiscernible),
what's really addressable.
And that's where we come up with about $150 billion pie, a big
sizable meaty chunk where we can drive significant savings.
So that's being focused in what segments and industries
we look at.
We also need to be focused in the buyers.
So we took the big seven agencies, DOD and any
conversation about buying is the big dog in the room.
They're about 70% of all procurement.
But then the next six agencies represent an additional 20%.
So by just focusing on seven agencies, we covered 90% of
the spending.
Classic, you know,(indiscernible) model right there.
And we feel that that can both cut through any bureaucracy on
decision-making, again, spend commitment is huge, and also
cover the vast majority of spend.
And we're still absolutely opening up these vehicles to
the smaller agencies so they can leverage the great prices we'll
get predicated on DOD and other agencies' spending.
So the go forward plan, and I know I'm going a little bit
quickly given Jeff's procure of time,
but I want to ask a few questions here is, as I
transition to Dan, we've got a few solutions that we've stood
up on the right-hand side of this page.
We've got about five more that we're ready to sprint
on right now. And then again, I'm convening this strategic sourcing
leadership council group to stand up even more all
in this year.
But I wanted to get kind of a few perspectives from you
on the savings themselves.
You know, Debbie, you've -- something that resonated with me
and that we've kind of used as an operating mantra is, put the
dollars on the screen, it exactly translates to all
of our agencies have different missions.
You know, Rafael is trying to protect and secure the homeland,
NASA is trying to do things, everybody's got a different
mission, but they're all jointly can -- you know, that message
resonates, put the dollars in mission, put the dollars
to screen.
Speaker: Right.
Speaker: When we do things like this at cost saving,
we want to put most of those dollars back into coffers,
you know, for the taxpayer, but some of it we want to --
we want to reinvest.
How do you guys make that decision when you think about
you do a cost savings initiative, how much do you give
back to the shareholders or the donors and how much do you
reinvest in programs that you think will still be
(indiscernible) to value, but make that tradeoff?
Elizabet Smith: Well, I think you said it, it's the value of the programs,
don't spend the money just for the sake of
spending the money.
The compelling part -- the compelling items on the table
that you can't do that you need to find the money to do
will drive it.
And some years, you don't have a good idea to spend it against
and you should drop it all, and other years, you really need to
make an investment to move something forward.
So I would -- I would not be in favor of the percentage
spend-back approach, because I do think that's
a peanut butter thing.
Speaker: Yes.
Elizabet Smith: You need to invest to the idea.
Speaker: Yeah.
Elizabet Smith: Okay.
And some years there's just not any things on the table that
need to be done that should take priority over returning
those dollars.
Other years, you need the whole thing, because you have a really
important initiative.
Speaker: So match the individual and potential investments
against the savings --
Elizabet Smith: Yeah, and as a group, you have to decide --
Speaker: As opposed to saying a percent automatically --
Elizabet Smith: I've never liked the percent strategy for
that exact reason, because it's not -- what you find is that
funds are spent on projects that aren't worthy of it just because
they're being turned back.
Speaker: Yeah.
Gail McGovern: You could just create a war chest, so if you're trying
to save 10% and you want -- you have in your head you're
going to give 5% back to the taxpayers, you take that other
5% and you have people construct project asks against it.
Elizabet Smith: Um-hmm, right.
Gail McGovern: And --
Elizabet Smith: If they're worthy, they'll --
Gail McGovern: I have done that in the for-proits base and the
nonprofits base where you look at the return on investment
for each of these projects and, you know, if it's worthy, you
dole out the money, and if not, you know, more goes back
to the taxpayers.
But in terms of incenting people for it, you know, you could have
a blend of examples of projects that are funded because we were
able to cut the money.
And, you know, the interesting thing is so much of this is
other people's money, it's not --
Speaker: Yes, yes.
Gail McGovern: It's not their money, so it's all goodness.
Speaker: Yes.
Gail McGovern: So part of it is examples of projects that are going
to get funded as a result, because then more people
want to save more money.
And then other parts of it is just some way to translate what
it means to the taxpayer.
And even if it's, you know, like a half of one cent, it somehow
becomes more real.
Speaker: Yes.
Gail McGovern: You know, if every department did this,
it could be --
Speaker: Yeah.
Gail McGovern: Because that's a really good way to talk to people
that work in government.
I mean, because they really do care about the citizens
in this country.
Speaker: No, I think that's right.
I mean, that's a constant messaging challenge that I
have is, the first sense, hey, I want to talk to you about
procurement, people's eyes might glaze over a little bit, but
when I talk about the dollars that we can really save here,
people get really excited, because this is real money.
Gail McGovern: I like to do it in terms of meals, blankets, you know,
the things that the Red Cross does every day.
And there's got to be some translation here.
Speaker: What's the equivalent?
Elizabet Smith: Right.
Speaker: What's the equivalent?
Speaker: Absolutely.
And I think that's great.
And then one other question before we transition to Dan to
walk through some of this is, we've called from some of your
teams especially who are doing this already, some of the ways
that you incentivize your folks to really focus on this, you
know, making -- again, that top down approach is big, but then
making them feel like this is part of my job, I know I'm a
mission-oriented, you know, my primary duty is to care for
these people who have been displaced by a disaster or to
put on a great show, but this is important to the boss, this is
something I want to do, and it translates fine, but in -- how
do you do that without any monetary incentives, you know,
some of the challenges that we have there.
I was thinking things like, you know, just Jeff sending emails
or, you know, congratulatory notes or we highlight these
things in a newsletter, we put a blog on, you
know, there's some of the things that we have in our toolbox for
sure, and we've got a great bully pulpit, but I didn't know
if you had best practices there that you've maybe already seen
or thought of.
Elizabet Smith: Is it -- is it in their performance goals?
Speaker: We are -- that --
Elizabet Smith: Because if it's not --
Speaker: Yes.
Elizabet Smith: You know, you got to start with it's in their
performance goals, and so at least they'll be
recognized for --
Speaker: Yes.
Elizabet Smith: -- you know, for playing ball and exceeding the, you know --
Speaker: Yep.
And that's one of the ways that we intersect with John Berry's
team, talked about the SES evaluations, that's one of
those areas as well.
And then I've actually -- next week is my last one, I'm meeting
with every single agency one-on-one similar to portfolio
stat, we like the stat title there, so it's acq stat,
acquisition status updates, and this has been in every
single one where they give us all of the data for what they've
done to date, they've heard the priorities, they've obviously
seen the conversation we've been having and your recommendations,
and so that's fostered a good conversation, too.
That's another --
Debra Lee: Another way to do it, because we just had a presentation on I.T.
and how much different agencies had already pinpointed,
is to make it competitive, and --
Elizabet Smith: Yeah, I agree.
Debra Lee: People that uncover the most savings be recognized by Jeff.
Speaker: Yep.
Speaker: Or (inaudible).
Elizabet Smith: And also don't -- don't underestimate,
I think Debra's point is great, because we've done that, we've
set up contests among our five divisions and five contests, and
people take it personally.
You don't get money at the end of the day, but it is about, you
know, who pulled -- and you have all the visuals, you know, you
have the pot being -- the pot being filled and the
temperature, and --
Speaker: Right.
Elizabet Smith: You know, let's face it, we're all wanting
to do that and do well, and that works.
You know, people want to succeed in a common mission.
Speaker: I think that's a huge point.
And we've always heard since we --
Elizabet Smith: It really works.
Speaker: -- you know, the limitations on compensation and the difference
between the public and private sector,
I totally think that's a great idea.
If you can't pay them, plaque them.
Elizabet Smith: We set it up as a horse race where we literally,
like in an arcade; you have the horses moving forward.
Speaker: Yeah.
Elizabet Smith: Believe it or not, people were obsessed, the
first thing they did was stop and see where the horse was at
the end of that month, like where are we at the end of the
month towards -- it was called, you know, race --
race for the dollars.
And, you know, and then they could have fun against it, like,
you know, it's liked you pulled up lane, you know, et cetera.
Gail McGovern: This conversation is reminding me when I was a branch manager,
God, I was so young, but I had 100 salespeople working for me
and they were highly compensated if they made big sales, and just
almost like a throw-away thing, I said if every one of you makes
your objectives, we'll have a huge pizza party, you know,
pizza on me.
And this was more motivational than the huge paychecks they
were going to get for the comp plan, but it was like this
spirit of teamwork and you know, they started poking at each
other, how come you didn't make it, I'll go make calls with you
if you can't make it, it's that psychic gratification --
Elizabet Smith: Have fun with it.
Gail McGovern: Yeah, exactly.
Elizabet Smith: Have fun with it.
Debra Lee: (inaudible) another example, I'm on a not-for-profit board
and we have a gala every year in D.C.,
and it had kind of stagnated in terms of fund-raising.
Well, I got a whole new group of vice chairs, and just on the
email system, people started shouting out when they got a
donation (inaudible) really jump up, you know, I had a
guy that sold a 10,000 table, dollar table, and everyone said
congratulations, and then someone came back five minutes
later, I sold a 5,000.
And you know, just that excitement of immediate
recognition for having done --
Elizabet Smith: At the end of the day, you're right; everyone
wants the star from the teacher, the gold star from the teacher.
We're nerdier I think than we were when we
were seven or eight.
Speaker: Right.
Speaker: And it's the best way to simultaneously do the --
foster the competition but build camaraderie simultaneously.
Speaker: Yeah.
Elizabet Smith: Yeah.
Speaker: Because everyone's pulled for the same thing.
And I think Liz said this before, there never is enough
budget, and I see it all the time in my company, one year
we'll focus on programming, because that's important, but
you get the programming to where it needs to be, and it's like,
oh, we don't have enough money for marketing.
So, you know, when executives see that and they know each year
you set priorities and -- that there's limited pot.
If you can grow that pot by saving on things that you don't
really, you know, necessarily need or done --
Speaker: You can get the same thing for a lower price.
Speaker: Right. Right.
Another example, we had, you know, when Blackberries came
out, for a while we had executives, everyone was
carrying a cell phone and a Blackberry, and no one liked to
use Blackberries for calls.
So they're walking around with two devices.
And then i-phones come out and then the phone gets better.
So one day our I.T. department just said the new rule is you
can't have two devices, you have to have a Blackberry,
you have to use the phone on the Blackberry, and we're only --
you can't have unlimited calls -- I mean, you can have
unlimited calls, but we're just going to reimburse you
$100 a month for the calls you make.
So those family calls that we know everyone makes or
the calls that --
Speaker: They're on your own dime.
Speaker: It's just amazing the amount of savings we got
from that simple rule.
Speaker: And I think that's a perfect transition, because we're going
to -- Dan is going to walk through some of the
potential commodities, but also the demand management that
you've just -- you just outlined.
Speaker: Yeah.
Speaker: So thanks, Joe.
And I'd have to say I'm not one of those people whose eyes glaze
over when you start --
Speaker: I appreciate that, thank you.
Speaker: And I'm really glad that this group isn't either.
And now I want to start where you started.
Frankly having the leadership of this group, having the support
of Jeff and having the support of Joe really sends a signal
into the entire organization that we take this very
seriously, we're committed to these outcomes, and it really
gets people to come to the table and really cooperate.
You can't underestimate the power of executive leadership in
any organization, but certainly in government.
What we've been doing is working collectively with Joe, OMB and
the entire agency portfolio is really exploring the places
where we think we can continue to push and make progress within
strategic sourcing.
We've identified five commodity areas that we want to pursue in
in FY 13, desktop software, that's the -- that's the office
supply equivalent of computer software, wireless, looking just
along the exact point you make, thinking about ways that we can
better manage our wireless communication.
Janitorial and sanitation products, so that is, you know,
again, thinking about the office supply model, thinking about
those commodities, where are there places where we can very
easily and without really -- you know, without really getting
into anyone's particular line of business that they deeply care
about, find places for savings.
Maintenance repair and operations, that's spare parts,
that's filters, spare, you know, spare parts for heating systems.
And then rental cars for official government travel.
What we've done is said let's think about kind of three
dimensions by which we can explore the entire field of
commodities that we could go and look and see where there
are opportunities.
And we've set a kind of list of parameters, value, complexity,
strategic impact.
Value, the potential for duck (phonetic)
reducing total costs of ownership in the near term.
Complexity, which is difficulty to develop and implement, and
strategic impact.
This align the solution with other OMB and
administration priorities.
And I would like to stop for a second and say, is that the
right approach for us to pursue?
Speaker: Well, I like -- I like the value complexity
The question I ask is how did you select these five?
Because one that we had talked about seems to go hand in hand
with rental cars is hotel rooms.
Speaker: Right. (inaudible) add airfare.
Elizabet Smith: Travel.
Speaker: Yeah, travel.
Speaker: Airfare, travel.
Speaker: Airfare is actually one of the things we already
strategically source with our City Pairs program.
We just announced a new travel program, a single combined
travel system by which reservations will be made.
And on hotel rooms, that's a broader policy issue that I'm
going to be working with these guys on.
There's some actual legal limitations on our ability
to compete for hotel rooms.
We do have something called fed rooms, which is a competition
within the limitations we have where we think that there's some
savings, and we're working with OMB with the agencies to see if
we can move more business towards it.
Speaker: And just to pick up on a comment Deb made, when she -- when she
talked about the switch to, you know, using Blackberries,
that was a bit of a vision, you know, like somebody had
a vision, this is how we're going to do things.
But some of the question is, are we also thinking about how we
become not just doing what we used to do and doing it more
cost effective, so the great example is on -- you have an
example about printing.
Speaker: Yes.
Speaker: You know, get rid of printing, I mean, most people are getting
some form of tablet device, I mean, we could PDF
this whole presentation and not have to reproduce it.
So who's got the -- who's thinking about the vision of
not just getting better pricing, but also --
Speaker: Changing.
Speaker: -- changing.
Speaker: I think that's a -- it's a great point, and it's
something that we're working on collectively.
And why this group isn't just a bunch of acquisition folks, it's
the CIO's who are thinking about where is this going, one device
policy stuff that Steve's team is working on, you know, GSA has
actually been a leader in the use of tablets and everything.
Speaker: Exactly.
Speaker: So how do you do that sort of thing.
And then having folks like Rafael from Homeland Security
and other leaders in this community who have a broad
management portfolio at the user perspective, the agency
perspective, say what's really working, how can we do things
better, that whole kind of, you know, SAVE award.
And somebody raised their hand and says look, I don't know if
anybody is going to hear me, but I've got a better way to do
this, and then quickly grabbing that and circulating it,
syndicating it to all the other agencies.
Speaker: (indiscernible)
you say how much everybody is printing, for example, and make
it a contest, as you said earlier, to say, you know, you
print less, you get the prize.
I mean, it's not -- it's not -- it's just -- I think you should
do the print savings you're describing, don't get me wrong,
but --
Speaker: You're exactly right.
In fact --
Elizabet Smith: The whole (indiscernible) waste thing goes very well on
organizations, you know, it's a source, because also you have
the whole sustainability issue, it's not just cost, it's like
stop using, you know, we got to address the paper issue, and we
really -- we really have a -- (inaudible)
Speaker: We have our campaign to cut waste, and we've made
printing part of that.
And we talk about double-sided and we talk about number of
printers per employees, trying to get to a ratio
that makes sense.
But, Enrique, you said no printing.
I'm wondering, is there a corporate best practice here?
We -- we're not at that point, but if there's a way to get down
to a very di minimus level of printing, that's something that
we, you know, we would like to track with.
Speaker: We can go there.
I mean, it's moving pretty quickly, make it a contest.
Speaker: I think actually we have a good example.
My last assignment over at Treasury, the adopting of one
of our high priority goals of paperless Treasury.
And that actually freed us up for an opportunity to look at
policy and ask ourselves, do we really have to mail benefit
checks to everyone.
And we actually have a proposal, at the end -- middle of next
year, we'll be eliminating paper benefit checks.
It's actually a better result for the customer, a huge cost
reduction at the organization.
And so that's the trick is finding those places where we
actually have within the organization thought the next
dimension, supported with the strategic sourcing effort.
Speaker: Absolutely.
Speaker: Support it.
But I think you get me to my next slide, which is is this
idea of demand management part of the places where we can
explore best practices in agencies and best practices in
the private sector, setting rules, sharing -- sharing best
practices and experiences.
We've set up this print wise activity, which is not just a
strategic sourcing mechanism for buying stuff, it's actually a
strategically source mechanism for people to share best
practices and information.
Speaker: Yes.
Speaker: Knowing what this industry standard ratio of
desktop/printers are per person, six to 12, and then beginning to
get agencies to see where they stand against that benchmark --
Speaker: Yeah.
Speaker: -- has a very powerful impact on the agency.
I know where I'm am, I'm at 6.5, I want to be up at 12, I want to
be at 12.5, I want to be better than the industry standard.
And I think to your point, everyone who takes one of these
jobs and is in a leadership position, they want to be the
best at what they're doing, we just need to give them some
score card by which they can measure --
Gail McGovern: You know, a random thought that -- on the
printer side, that we were pounding the table two-sided,
less color, you know, the whole routine, and this
grassroots group of, you know, millennial --
Elizabet Smith: Yes.
Gail McGovern: -- types --
Elizabet Smith: Sustainability.
Gail McGovern: -- pulled together and basically shamed us into
this doing across the board, everything from how many paper
towels you use in the --
Speaker: Yeah, that generation.
Gail McGovern: I mean, if you just aim them at this,
and there's something more compelling than a group of
over-passionate, and they're in the government, there is no
doubt in my mind you've got a handful of them, so it's --
you know, you've got a lot of do-gooders in your organization,
and if you do this in terms of not just dollars saved,
but carbon footprint or whatever, you know,
it's going to make a difference.
Speaker: Are there other ways we can, you know, monetize it or measure.
Gail McGovern: Absolutely.
Speaker: And that actually gets to slide 20.
Speaker: Now, as you say, quickly, on your print wise website,
you know, for the internal folks, it shows
agencies, okay, if you've done this, how many dollars you
saved, that's great, but also how many trees you saved.
Speaker: Right.
Gail McGovern: Exactly.
Speaker: And I know, you know, that's somewhat made light
of the task, but it resonates with folks.
Gail McGovern: Yeah, it works it.
Speaker: So that's a big deal, that's a great number.
Elizabet Smith: The one thing I would just, you know, say,
is that it's very hard to take stuff away, right?
Speaker: Right. Yes.
Elizabet Smith: So, you know, just taking a page from,
you know, as you launch new programs, launch them without
a printing option.
Okay, because it is very difficult to take it away.
So I'm just thinking about a (indiscernible) example like,
you know, we have that brochure, 180 pages and so.
When they launched in Finland, the brochure was only available
online type of thing.
Speaker: Right.
Elizabet Smith: So taking it away is very difficult, but everything you
do from now on, make it electronic only so that
you never have that era of how do I transition this.
And it's amazing that people figure it out.
Speaker: Yeah.
Speaker: That's a great idea. Sorry.
Speaker: No, that's fine.
And I think that gets us actually to my last slide, which
is slide 20, which is really in order to do it, we need to be
smarter about having the data, really understanding where our
spend is and how much we spend.
So one of the things that we are working on is developing
a prices paid portal.
It is the old adage, you know, if we only knew what we knew,
or what we know.
And that is the idea is to try to figure out what
agencies are paying.
Even in janitorial and sanitation without a
strategically sourced initiative, we know that the GSA
vehicle saves agencies about 17 percent over the average that
they are already paying.
So if we could move people just to the existing system while we
then bring that scale together and then push that scale into
the marketplace, we think that there is actually savings to
be reaped immediately and then savings that can be built on.
Enrique Salem: We get back to the original value of
ownership -- (inaudible) -- transparency, visibility may,
may be something that you care about, because that is actually
what you just described.
This is something that describes visibility and transparency and
what people are doing.
Speaker: That's right. Yes.
Speaker: Yes.
Speaker: Yes. Absolutely.
We think what we actually need to do is have visibility into
how each of us are acting.
Because again it gets to the contest nature.
I know DHS doesn't want to pay more than HHS.
And I think that that is the trick.
And particularly if we have a vehicle where we have a price
point that is better than what any other agency has, then the
agency has permission in a way to not spend the time, effort,
and energy in building their own structure for going out
and making that purchase.
It backs people into strategic sourcing, in a way that they are
absolutely moving towards the goal in a measurable way.
And then they can bring those results to their leadership and
say, hey, look what I found.
It was sitting on the street in the form of savings.
Speaker: Yeah. So I know we are up at our --
Speaker: Can I ask a question?
Enrique Salem: One comment I have is, so we talked about 150
billion estimated --
Speaker: Yes.
Enrique Salem: -- and we are talking about income in the nine billion.
Speaker: So there are, there are about 20 different categories.
So we put together this group of cost functional leadership.
They met about a month ago.
Then in two weeks after that they set up implementation
teams to build a bunch of kind of profiles of other
commodity areas.
We have got about 20 of those that they are going to present
back to the leadership group next week.
And that will be all on top of those, the three that we have
already started and the five that GSA is running with.
So that we can keep going after them.
But we just wanted to show you kind of that first project quick
wins and things stood up.
And a second piece, you know, still in it's leadership phase.
So they will be getting the other you know in just
a few days.
Enrique Salem: It just feels like it is sort of seems like
there is a lot more.
Speaker: Yeah. And it was like to the point and Jeff made this point
in the last meeting.
He was like, hey, start down here and move up
the complexity chain.
And that is exactly what we are trying to be.
Elizabet Smith: Yup.
Speaker: Because we will get, we'll build that positive inertia.
Enrique Salem: Well done.
Speaker: Thanks.
Speaker: I do want to -- just a quick thought.
I have got our Acting Commissioner of Federal
Acquisition Service, Mary Davie here.
We have got our Chief Acquisition Officer, Ann Ron,
and we have got Rick Miller who has been
helping out a lot too.
So I wanted them to have a chance to --
Speaker: Good job guys.
Elizabet Smith: Well done.
Speaker: (inaudible)
What would you think about if we swop out -- (inaudible)
swop out with these folks so we can keep rolling.
Elizabet Smith: Good to see you.
Speaker: Good to see you.
Speaker: Thank you so much.
Speaker: Thank you.
Speaker: We do want to keep this on time.
So that --
Speaker: I am completely in agreement same with the SCC and the --
Elizabet Smith: I am in Baltimore for a Johns Hopkins board meeting
that starts this afternoon and tomorrow.
And I missed the debate and everything watching
the ball game.
I am die hard Yankees fan.
I do not want to be in Baltimore.
I just don't want to be in Baltimore.
Whether they win or lose.
(no audio)
They are nice fans.
They are really nice fans.
Speaker: It was a really beautiful Baltimore setting.
And everything.
Elizabet Smith: I love Camden Yards and the fans.
You could go to Memorial Stadium for 50-cents and a Johns Hopkin
student ID.
And I went to everything.
Things are blocks away literally from the campus.
And just -- (inaudible)
Speaker: It is all right.
Put that on there.
Elizabet Smith: They are so loud, in that stadium.
I mean, we watched the -- (inaudible)
Elizabet Smith: So good. Me too.
That is what I was saying.
So spot on.
Gail McGovern: It was two to one.
They, the bats were dead.
Jeffrey Zients: Great. Why don't we get back to, why don't we go
ahead and get started.
My apologizes for a quick out and back in, swapping out some
of the folks.
I just wanted to make sure we recognize some of the folks who
just joined us.
Obviously we have Dan (inaudible)
federal controller who has been leading our efforts.
We also are joined by Seth Harris, the Deputy Secretary
Department of Labor.
And Dick Greg, who is joined us from the Treasury Department.
Dick Greg: Hi.
Speaker: Dan, why don't you take us.
Speaker: We are on the next page over from strategic sources
for payments section.
Let me start with a little bit of, of context of the background
before I get into the specifics.
I do want to spend a lot of time, detailing the slides,
the history of improper payments.
We have been through that before.
Just, just recall that the, there is a broad spectrum, of
root causes of errors that we make at one end of the spectrum.
We still continue to make the more basic errors.
Someone is ineligible because they have been
suspended or debarred.
Someone owes a delinquent, has a tax delinquency or
other type of delinquency.
They might be imprisoned or they might be dead, and we
make those payments.
Those are what we sometimes call the more basic errors
that we make.
And then the other end of the spectrum is a much more complex
scenario in terms of validating eligibility like is the person
back at work?
What is the person's household size?
Or their adjusted gross income for their family?
These are relevant elements to determine whether a benefit
should be paid out and we don't always have a trusted available
source to tap into to know as soon as someone is back to work,
and then Seth knows okay, stop the UI.
The unemployment payment.
We don't have that real time information often.
So what we have learned over time is that there are ways to
use data strategically to build risk profiles, and analysis,
that can help us make more informed decisions.
Because we don't have perfect information.
Now, the other point I want you to make is we have had a variety
of different interactions with the working group and they have
ranged from guiding principles which we'll talk a little bit
about here.
We have been given specific tools.
For example, Motorola provided us a primer, on how to apply
different risk judgments and looking at data in a lot of
ways and that was helpful.
I think that, that a lot of the work of the PMAB really
synthesized the improper payments team when we did a
site visit to Aetna and met with their -- they spent an entire
day with us and gave us a fantastic presentation on how
they used data and analytics to look for error trends and fraud
and drive their mission, and, and, and their service delivery.
And there is a lot to take from that, from that presentation.
It blended some of the guiding principles.
It blended the specifics.
What impacted me was seeing how many different parts of
the organization came together.
It was, there was no sense at all that the data analytics team
was out on an island.
It was very clear to me that the data analytics team was very
integrated into the business lines and so there was a common
understanding of what the customer needed.
And that was important.
But I think the biggest thing that I took away from it was how
clear the bottom line was for everyone involved.
They all, every, and some of them weren't in the room at
the same time.
But when they came in the room to give the presentation, they
were on the same exact song sheet in terms of what the
bottom line figure of the business was trying to achieve,
and how the metrics were helping in form that bottom line.
And that is something that, that we want to make sure that we are
embracing within the federal context and having this
combination of greater integration to the people that
are actually in charge of making the payment and determining
eligibility with the folks that can help them do the
data analytics.
And that we all have a common understanding of what we are
trying to achieve which is not proven easy to have that type of
clarity sometimes in government and in particular in federal
financial management.
So with that turning to the slide, which my slide is
numbered, but it is slide 22.
You know, at the top, you know, just to over arching questions,
we wanted to learn best practices from corporate
organizations in using data to drive down error.
And we wanted to make sure that we were getting feedback based
on you learning about our challenges, what you think we
should be doing to more effectively tackle this issue.
At the bottom here you see kind of a relationship that we are
starting to see between the various inputs that are given
and the actions that we take.
You know, there was a big push from the working group
on prioritization.
So we have focused our efforts over the past several months on
unemployment insurance, and our government wide Do Not Pay
Solutions we'll talk about in a bit.
Another thing that came across from the PMAB was to try new
things, to pilot game changing approaches, and to you know kind
of break the glass ceiling so to speak on things that we have
been doing.
And in doing so, there is an undercurrent of thinking about
incentives and governance.
And piloting those game changing approaches.
So one of the things that Seth is going to talk about is that
we are launching a new state lead model for addressing UI
errors which is trying to encapsulate innovation with
the different government's model, because this is going
to be owned by the states.
So we need to feel more ownership of the errors because
these are programs that are essentially administered
by the states.
There was very almost from the first meeting, particularly when
you handed us off to some of the folks on your staffs, it was a
lot of about standardization, standardization of data,
standardization of business processes, that in other words
data analytics will hum more freely if you enable the
foundation to be standardized in terms of systems and data.
Treasury is initiating an effort to standardize all disbursement
data which we think obviously is going to be, but we are not, but
we are not going to wait until that is done.
Because we are already working on the issue.
But we believe that will free up a whole host of new analytics
that will help us be more effective.
And obviously I mentioned a site visit and other types of
discussions that are providing us more input on how to do data
analytics, how to evaluate risks differently, how to determine
the top ROI opportunities.
As I transition into Seth's presentation, I think the key
for us is in particular, as we wait -- (inaudible)
-- for New York state, we are going to shepherd in this new
data, that we make sure we take what we learned at Aetna, for
example, and make sure that there isn't a barrier between
those learnings and what is going to happen with the UI New
Integrity Center.
So with that, let me turn it over to Seth.
Seth Harris: Great. Thanks, Danny.
Thanks to all of you.
I'm happy to provide an update on how we are doing with UI
improper payments.
And I want to pick up Danny's point that we are doing our very
best to follow your advice, which is very good advice.
So one of the pieces of advice he gave us was prioritize.
So Danny talked about the government prioritizing UI which
they most certainly have and it has become a priority in my life
as a result.
But even within UI, we are prioritizing.
So we have been able, I think we gave you this
description last time.
We have been able to identify what are the root causes of the
improper payment.
And we have taken on three of the top four causes because we
think that is where we are going to get the biggest yield.
Interestingly, we didn't -- we have taken on root causes one,
two, and four.
We skipped over number three which is by the way work search,
because we, it is just we don't know what the right thing to do
is yet.
We don't really have a solution.
So we are focusing on those places where we think we can
actually get a yield quickly.
You also told us to pilot some game changing approaches and to
invest in data analytics and in data mining.
And so as Danny mentioned, stepping on my big
announcement --
Speaker: Sorry.
Seth Harris: -- because my notes say I am pleased to announce,
but now it is announced already.
But the Labor Department ran a competition in which six states
competed to run the new UI Center for -- UI Integrity
Center for Excellence.
New York State won that competition and will be
receiving $15 million over the course of two years to be the
lead organization in running a UI Integrity Center.
Speaker: Seth, what was the basis of the competition?
And what -- basis were they --
Seth Harris: Well, you know, we had a number of criteria for the states.
First of all, had they already demonstrated a leadership role.
Two was, did we think they had a grasp of their own situation?
The other was their proposal to respect to how they were going
to go after this big problem of data analytics
and update mining?
Interestingly, I won't point out fingers, but there was one state
that competed that has one of the worst UI improper payment
rates in the country.
That was relevant to the decision.
They don't yet have a grasp of what is going on in their, their
own state and how to solve those problems.
So we -- here is what we are going to ask this integrity
center to do or, integrity, we have got to come up another
name, Integrity Center of Excellence maybe is
a little too loaded.
So what are they going to do?
They are going to identify building on their own experience
picking up on your question.
They are going to identify what they think are promising
techniques and tools that deter.
Not only deter fraud, but identify fraud.
That is going to be done in partnership with Treasury's
Do Not Pay Initiatives.
We have these two things running in parallel.
We are going to bring them together through
this initiative.
It is going to be a clearinghouse for
best practices.
And I will talk about how they are going to get other states
involved in just a second.
Technology is going to be a very important issue.
UI, the UI system, there are 53 UI systems that we have in our
country are at varying levels of technological sophistication.
Some of them are using Cobalt, some of them are using the most
sophisticated 2012 data.
It is just a matter of resources of what they
have available to them.
So they are going to want to identify technology tools that
are readily deployable across all of the states.
And they are going to focus a good bit on training.
Since most of this work is done by live human beings, once you
have the requisite data, they are going to focus on training
staffs on fraud solutions and integrity strategies.
I just want to spend one second on why we did a state
led initiative.
We are, the US system looks more like Medicaid than it does like
Medicare in this regard.
Medicare, the checks are cut at the federal level.
Medicaid, they are cut by the states.
In UI, we don't cut the checks at the federal level.
53 different state systems using 53 different sets of rules cut
the checks for varied reasons, at varied levels according to
different caps.
It is very complicated.
So the idea of putting a fraud center in a labor department,
sort of dealing with, addressing Danny's question of data
analytics being integrated with the actual decision making, the
claims processing system, it made no sense.
Because we don't do any of the claims processing --
Speaker: Oh, I am sorry to interrupt.
But to use your own analogy, you do have CMS doing Medicaid
fraud in HHS.
Seth Harris: Well, but they are focusing on how to get the states
involved and how to address that fraud problem.
Having a, having a centralized system would have required them
and us to have data taken out of the existing systems that
operate in processing in the states and sent
to us for analysis.
It is not only inefficient, it wouldn't have worked.
Speaker: Right.
Seth Harris: It wouldn't have worked.
You would have to build a whole new system in order for,
to help.
It wouldn't have been very helpful.
So the idea was and again rather than having a, having 53 states
try to do it or having an organization try to organize all
53 states, we want to have a vanguard state working with a
small number of other states and then working with the National
Association of State Work Force Agencies which is the Trade
Association of the state government agencies that do
this work, be responsible for proliferating the knowledge out
through the various states.
So that will be the mechanism by the which we get into each --
Speaker: The end state is each state will have it's own center.
Seth Harris: No. No.
We are going to have the one center that is going to be a
knowledge center essentially and a testing ground.
And New York will be the guinea pig for a lot of the work that
we are going to do.
And that knowledge -- and those decisions will be made, I will
talk about the Steering Committee in just a little bit.
With a small group of other states and us participating
in the decision making.
And then the National Association of State Work
Force Committee agencies and the Steering Committee will be
responsible for getting that knowledge out to everyone.
So rather than having, spending $750 million on 53 of these,
we are going to have one.
And they are going to share the knowledge that they develop and
they will be the guiney pig.
They will be the testing ground.
Speaker: So two points in response to that.
One is, you know, Seth referenced earlier state
that applied and had a high error rate.
The notion is because New York is a leader, they are going to
help that state.
And then hopefully all of their centers can proliferate, but not
50 or 53 and we'll have to figure out what the optimal
amount is.
Seth Harris: Right.
Speaker: But back to, I think you raised a really good question
about you know the Medicaid analogy.
Because I think there is an open question for the -- that we want
to look very closely at the Labor Department is, what is the
right thing that they should be doing with the states to insure
that the analytics program is thriving?
Now, CMS has this, has a certain even different or unique role
than labor, because they are doing all of this Medicare work.
Seth Harris: Right.
Speaker: They are learning about doctors that are stealing
licenses or you know the types of services that occur in which
you know they reimburse.
I was at a presentation recently and they were showing one of the
fraud things that comes up is they reimburse for
ambulatory services.
But they were able to find that some of these ambulatory
services aren't connected with an actual visit to a doctor.
So someone is over billing on the ambulatory services.
That has relevance to the states --
Seth Harris: Right.
Speaker: -- in their Medicaid efforts.
So it all feeds in.
Seth Harris: So we don't, so we don't have a Medicare analogue.
Although, the reason that we are integrating this process with
Treasury's Do Not Pay is that is the closest analogy.
That is the closest analogy.
So when there is information that we gather from the Do Not
Pay Process, that will be fed through the integrity center to
provide that information.
Speaker: Makes more sense. Thank you.
Seth Harris: So let me talk actually since we just picked up,
let me talk a little bit about the government structure.
We are going to have a Steering Committee that will include
obviously New York State which will be the lead.
They will also do the staffing.
We will be on the Steering Committee, the National
Association State Work Force Agencies will both sit on the
Steering Committee and they will help to identify a small number
of additional states to sit on the Steering Committee to help
New York in it's decision making and to help to disperse
the learning.
So they will be involved in things like RFP's and they will
be involved in development of metrics.
They will be involved in assessing the progress of
New York State.
We will be involved in that process and I am going to talk
a little bit about how we want you or are hoping you will be
in involved in that process.
So what is the center going to do?
And what are our priorities of what the center is going to do?
Again, following on to your advice.
We are not going to try and boil the ocean.
We are going to try and focus on the biggest priorities first.
And the places that we think are going to deal with effort most
quickly, and that is going to be our big push.
The Labor Department's big push.
And so one of the requirements is that they are going to
establish a strategic plan that is going to identify project
deliverables for every priority that we identify, that the
Steering Committee identifies under our advice.
And then we are going to have time lines and we are going to
have metrics for each of those pieces of the project.
Standardizing data elements and related process to facilitate
efficient data use.
This is one of the biggest problems in UI's.
As I said, 53 systems, 53 different technology
applications, there is -- it understates the case to say that
standardization of data is a big issue in this area.
So we are going to try and go after that.
That is going to be a very complicated problem.
The goal being to get to a data analytics and data mining model
that can proliferate across all of the states using whatever
technology they have.
So what we want to do there is identify fraud, but we also want
to identify those folks who will likely do something that may not
be fraud.
Just inadvertently considering to receive UI benefits for
example after they go back to work.
And then we want to be deeply involved in getting the states
to clearly identify responsibility and organization.
We'll set up systems of organizational accountability.
We have succeeded in getting every state to establish a UI
Integrity Task Force in the state that brings together all
of the folks, the State Tax Agency, the state
work force agency.
They are not all working together, but we want to make
sure you don't end up by diffusing responsibility by
bringing everybody together but making sure that you have
clearly defined responsibility and held each part of the
organization accountable.
And also we have to take our share of the responsibility as
Danny was saying.
We are not out of the loop here.
We have to take responsibility for the system as a whole.
And Danny holds us accountable for the numbers that we produce
every year on the UI rate.
So that was slide number, I should have said that was slide
number 23 that I just walked you through.
Slide number 24, let me talk about where, where we are going
and where I am hoping you are going to be,
continue to be involved.
So we have to finalize the organizational structure for
both the Steering Committee and the center itself.
The cooperative agreement which is the mechanism that we are
using here between US DOL and New York DOL, will be executed
we think in the next, sometime in the next six weeks.
So it is a fairly complicated drafting exercise whenever
we do business.
And we have to have a charter for the Steering Committee that
is going to govern membership and responsibilities for the
Steering Committee.
So we are hoping that will be done in the next six weeks.
We are going to conduct an organizational staff assessment
for the center.
The deadline for that is March 31st of 2013.
Then we want to identify strategies that will engage
all of the states.
I mentioned that NASW will play a role and that the Steering
Committee will play a role.
That is the level of depth that we have on exactly how we are
going to proliferate this knowledge.
We have to have a plan that is going to get the knowledge out,
sharing products, deliverables, and knowledge with the
other states.
So that is going to be developed.
So let me talk about how we are hoping that you will remain
involved in this process.
Gail McGovern: Seth, can I ask a quick question?
Seth Harris: Sure. Go ahead.
Gail McGovern: Is your end state that the, that you stand up
a few of these centers for excellence for each type of
improper payment and they become the centralized location that
the states use and they share the resource?
Or how, how does it look at the end?
Does every state stop doing everything they were doing?
Or --
Seth Harris: That is a terrific question.
And the answer is we don't know yet.
Gail McGovern: Okay.
Seth Harris: I think we need to stand up this center and see
how much they can bite off.
Gail McGovern: Right.
Seth Harris: Before we decide whether, whether we proliferate centers.
And if so, how many we need.
And what their focus is going to be.
I don't want to be too glib about this, because this is a
big, complicated problem, and we are -- and I'm going to tell you
a little bit about how we're seeing a response to effort,
we're seeing an ROI so far, but we don't know yet what the
barriers are.
Gail McGovern: And the states don't mind ceding all this
responsibility to another state, are they okay?
Speaker: Well, the other states know that we competed this.
Gail McGovern: Um-hmm.
Speaker: And they know that we're making a big push on
improper payments.
What we're offering is lots and lots of help.
Gail McGovern: Got it.
Speaker: So what this does is this will reduce, for the other
states, this will significantly reduce transaction costs and
knowledge acquisition costs, and maybe technology testing
and identification costs.
So what we're hoping is that we're going to get -- this is
all voluntary on their part.
We're hoping we're going to get them involved because it's the
path of lease resistance.
Gail McGovern: Got it.
Speaker: So let me add to that.
I think our assumption probably recognize that we don't need a
lot of centers for geographic purposes.
Speaker: Right.
Speaker: We don't need a north -- the world has changed
to the point that California could just as easily leverage
New York, they don't need a west coast version.
What I'm hoping to see is that the centers, to the extent we
need more than one, develop expertise around solutions
that are proving effective.
So I'll give one example.
Right now, on a separate work stream we're piloting
an approach with a few states where they're partnering with
financial institutions, banks, to figure out whether they can
get information on, pay this is now direct deposit
for this individual.
This individual is receiving direct deposit and wasn't three
weeks ago, this is an indicator they might be back at work.
That might be helpful information to the state.
Now, maybe the New York center develops expertise in that.
Maybe we need a center in Florida or something like that
to develop that type of expertise.
And so I'm California and I'm interested in knowing this,
about this bank thing.
I go to that center and they give me the corporate cookbook
on how do it.
Speaker: Right.
Speaker: So that could be a model that that we're interested in.
Speaker: I mean, I completely agree with using factual services.
But the employer knows.
You are catching it at the bank level, why aren't employer more
involved in helping this whole process?
Speaker: That's an excellent point.
There are two different employers involved, right.
There's the employer who is the payor of the UI benefit, which
is paid through taxes directly to the state.
Then there's the new employer.
Speaker: That's what I'm saying.
Speaker: Right. So there is a system that we, through our grant making
process, have incentivized and really required every state to
adopt called sides, which is exactly about, it's about the
reason for separation and then there's a second system called
the NDNH which tells you when people are newly employed.
The problem is there's a significant data lag.
You don't get that information immediately.
Speaker: Sorry, the bank knows?
The bank knows because the employer, the person making
the payment, is actually kind of at the bank.
Speaker: Right.
But the employer then, the employer then at some later
point not right away notifies the NDNH which is the national
directory of new hires. So.
Speaker: So why not require them to it sooner.
Speaker: Right. Right away.
Speaker: They're trying --
Speaker: There's a process.
So what happens in direct payment, right, is the employee
says I want direct deposit.
Speaker: Right.
Speaker: The company that's actually going to issue the check says,
okay, I'll set that up.
Isn't that, I mean --
Speaker: Right.
Speaker: The answer to that question is the same reason,
like we have a much bigger overpayment problem than an
underpayment problem.
Because, you know, if we -- if we underpay an employee's
salary, we learn about it really quick, okay.
Speaker: Absolutely.
Speaker: So going to your point, I'm an employer.
Speaker: Right.
Speaker: And I have paperwork to do, I have to do the sides
thing or this national -- I get to it, but I might not
get to it eventually.
But the notion that the employee's starting and the
paperwork's going to be done an exactly how they're going to get
paid and how that pay is going to transfer, that typically
happens very consistently and very quickly.
So for the UI issue is really is that time lag.
And we get burned on that --
Speaker: And there's no way to force employers to do it.
Elizabet Smith: Right. I was going to say why don't you put -- why don't you
put the burden on the employers?
I mean, because --
Speaker: Well, right now, the only thing we have the authority
to do right now is to -- let me tell you where we are.
That's the ideal state.
Most states, we're not using the NDNH at all.
So we're trying to get every state now to use the NDNH and
we're close, we're getting there.
Then we have to get employers to give their
information more quickly.
We would have to have a law that required them to file within a
certain period of time.
I'll just give you my own political assessment,
that law will never pass.
So --
Jeff Zients: Whereas, you can go to the banks and get the data.
Speaker: Exactly.
Jeff Zients: You can do that administratively.
Speaker: Where you don't -- now we don't --
Speaker: Human behavior dictates that that --
Jeff Zients: Right, right, but you can get access to that
data without a law.
Speaker: Right. But let me also say, it's a pilot in three states.
Speaker: Right.
Speaker: We don't know yet whether or not it's going to work.
And also, we're hearing from worker advocates that they have
concerns about privacy.
So there's still a lot to work through.
What Danny's point is, there's a lot of different pieces of this
and we want to learn a lot about each of the pieces and so the
idea of having several different centers, which we're not there
yet, but we're thinking about it, where you have different
places that are expert, like the three pilot states, if it works
in one and it works really great, they may now be the
new center for excellence with respect to working --
(simultaneous speaking)
Speaker: -- the treasury, don't you have to fill out this thing
for the treasury that's like W-2?
Don't I have to actually go out and say, as I become employed.
Elizabet Smith: Taxes come out.
Speaker: That information is protected.
Speaker: Right. I'm legally prohibited from collecting that.
Jeff Zients: So that would require -- I know that requires law, right?
Speaker: Yes. Also not going to pass.
Speaker: We don't have the ability to access that information.
Speaker: I see.
Jeff Zients: So that's a bigger issue.
If you said suddenly, and this violates all sorts of privacy
things and all the rest.
But just as a government we could have access to all the
government information, we would have a huge ability to impact
this situation.
Speaker: Yes.
Speaker: But all I'm saying is the W-2, all you -- I fill out W-2s,
this was going to happen with the taxes.
Treasury knows I'm employed.
Elizabet Smith: But they can't talk to --
Speaker: They can't tell the labor department.
(simultaneous speaking)
Speaker: That's protected under section 6103 of the tax bill.
Speaker: Some of that stuff -- we're not giving up on that.
Speaker: Exactly.
Speaker: 103.
Speaker: What paragraph, what paragraph?
(simultaneous speaking)
Speaker: You are apparently not employed right now, you've bragged about
that over and over.
Speaker: Thank you.
Speaker: We know your status.
Speaker: Exactly.
Debra Lee: So why can the bank, I mean, are you asking the
bank to volunteer to give you that information and why would
that success rate be better than asking employers to give
you that information?
Speaker: It's one smaller group of people you've got to talk to.
Speaker: It's a -- we historically across government -- and again,
this is still being tested in many different
ways but has success in having banks report to us
on information that's relevant to our payments.
We have a whole program, the Social Security department is
an example, where they have partnered with financial
institutions to figure out whether individuals are not
reporting all the assets.
So, for example, asset total is relevant to whether you get a
Social Security benefit.
And let's say you reported a $5,000 savings account at bank
of America and so that's relevant.
Well, what happens is, is that bank of America can network with
sun trust and figure out if that same individual had another
account that they didn't report on.
And it just so happens that so far, this bank reporting
relationship, the banks tend to be more sophisticated --
Elizabet Smith: Much more.
They have so much regulation, so many regulations.
Speaker: They have an unbelievable data network that's very modern,
versus the states.
Elizabet Smith: Right. Or even individuals.
Speaker: One other point.
The end is a lot smaller, right.
For employers, you have to have every employer involved.
For banks, it's a much smaller number of institutions so it's
just easier to deal with them.
Speaker: If we are independent -- so if we pay less
improper unemployment insurance, don't businesses benefit?
Wasn't that one of the discussions we had in one
of our steering committees?
Speaker: We talked about it last time, yeah.
Speaker: Right, that's what you said to us.
Speaker: Right.
Speaker: So businesses are incented to make this accurate because
they will pay less in --
Speaker: Pay it forward, because if you do a good job as
a new employer, you're helping out the previous employer.
Speaker: But it's more -- you're right, at a very high
level of abstraction.
But in any individual case, the connection is more attenuated.
So individual employers pay taxes into the trust fund.
The trust fund then pays benefits out to
the beneficiaries.
That's the connection.
Now, different employers have different rates, depending upon
what their experience is.
If you lay off a lot of folks, you are at a higher rate than
if you lay off very few folks.
That's the nature of every unemployment system
in the country.
So you're saying more quickly to the NDNH I just hired Danny
Worfol, NDNH, don't give him any more benefits.
That will generally benefit the trust fund.
But it doesn't necessarily directly benefit you in that
particular case.
So there's an attenuated incentive structure.
That's a big part of why we're in this problem in the first
place is states don't really have an incentive, a direct
incentive, an obvious incentive.
And individual employers don't have an incentive.
And let me just say, the UI beneficiaries don't have much of
an incentive to say, hey, I'm working now, stop paying me.
Jeff Zients: Danny and Seth, we've got to get to do not pay, right?
Speaker: Yeah.
Jeff Zients: And you've got to navigate us to a ten-minute close.
Speaker: Right. So I think that I wanted to make one additional
point about (inaudible) role.
Speaker: Yes, that's where I was going.
That's where I was going.
So we have this steering committee.
Rule number one that we're hoping you're going to agree
to is to continue to advise the labor department in its capacity
as a member of the steering committee, and we will be the
conduit for you in providing that private sector knowledge
into the steering committee.
Second is, if you're willing, and to whoever would like to
participate, we would like to engineer a very early meeting
between the steering committee and the leadership of the
center, once it's identified, and the members of PMAB so that
you can directly convey your --
Speaker: Or members of your team.
Speaker: Right. Who'd ever like to participate.
So those are the two next steps that we'd particularly like you
to agree to, if you're willing.
Speaker: Great.
Jeff Zients: Any questions or concerns before we -- all right.
Speaker: And get a better word for integrity.
Speaker: Yes.
Speaker: Call it ice.
Call ice, call the integrity center of excellence, ice.
Put them on ice.
Speaker: Somebody's copied that already.
(simultaneous speaking)
Speaker: In New York, they put them on ice.
Jeff Zients: All right. Do not pay. Ten minute run.
(simultaneous speaking)
Speaker: First of all, thanks to the advisory board for all
your help on this.
I went with Danny up to Aetna, and that was an incredible day.
One of the things when you get into this is that you've got to
remember what you don't know, and there's a lot
that we don't know.
But I think from the private sector, we have learned a lot.
I also participated in the briefing from someone who
used to work at e bay but set up their processes.
And that, too, is an incredible briefing.
And the thing that I came away from there is that what they
were dealing with and what they're dealing with on ebay
is more difficult than the payments world.
So but the processes, sophisticated software and you
said it's all math, and then the people behind it were the keys
of making this work.
He also said that his CFO said, well, you know, what can you get
my losses down to.
He said anything you want, which goes to the point of how much do
you want to invest, and that's return on investment, to make
this worthwhile.
And that's something that, you know, as we go through this, how
many resources will be put into this versus what the return on
stopping improper payments.
On page -- on slide 25, do not pay is of course a centralized
data matching service, and the key is centralized.
I think that way too often in the federal government we have
set up each agency having their own thing.
And I think that the do not pay is really a key to assisting
agencies like labor and others to help them do a better job.
We have access within treasury to numerous databases that are
listed on that slide.
There's some others that we don't have access to yet and
it's one of those things that Danny and Seth alluded to is
that there's pretty strict laws on what you can obtain and what
you can't obtain.
And so for one part of my organization, we have access to
the new hire database.
We don't have access to it for this purpose.
So -- and that just gives you an extreme example of
the challenge.
We also, since we're treasury, we make 85% of the payments.
So we have, you know, the databases for excluded parties
for death master file, and we have the information on 85% of
the government payments.
So we have access to a lot of information that we can match
and help determine whether or not payments should be going
out the door.
The do not pay in some ways is similar to what we've done in
treasury on debt collection.
10, 12 years ago, a little bit longer than that, the law was
passed that gave treasury responsibility for collecting
delinquent debt.
And you say, well, why would you do that?
Well, the reason is, is that because we make 85%
of the payments.
And so what we do today is we run all of our payments through
just before they go out the door, through the
debt master file.
And if there's a hit, we take, assuming, you know, every agency
has a little bit different rule, but we may take -- we may take
all of a tax refund payment and take part of a Social Security
payment and that works very well.
What we want to do is get do not pay where we can identify
payments that are questionable or we're quite certain are
erroneous before they go out the door.
We know what it's like to chase people after the payment's out
the door and how difficult that is but we really want to be able
to help agencies identify, these are potential payments that you
need to look at further and maybe in some cases we can stop
them ourselves, depending on the type of payment.
Speaker: Just a quick question.
You make 85% of the federal government payments but not
related to what Seth was saying on the UI side of the states.
Speaker: Right.
Speaker: And what's the linkage, if any, between what
you are doing at the federal level on all this and what's
happening at the state level?
Speaker: Well there's a couple of things.
There's, when we announce do not pay, the states are very
interested because when the president directed to us create
the do not pay list, that came about because we were getting
these different IG reports or GA reports and payments were going
to prisoners, incarcerated payments are going to
dead people.
States have the same challenge.
Because you want a payment to someone who's dead --
Speaker: So I'm just asking about the sharing between --
Speaker: So the key for us, and we haven't yet figured out,
because all of this is in motion, is how do we establish a
do not pay center at the federal level so that the department of
health and human services knows who they're paying at the same
time that that benefits states.
And that's a relationship that potentially, the UI center can
help us explore for a particular segment of state payments.
Speaker: I'm just -- all I'm saying is Neil's got the thing he's
describing here, maybe I'm wrong.
Why isn't it as simple as the state of New York saying I want
to be able to match my payment name, I'm paying Enrique Salem,
I'm going to match it to Neil's database.
Is that a privacy issue?
Speaker: I think the potential is there.
Because in the debt collection area that I mentioned, we do a
lot of work for the States in collecting state tax debt.
We collect child support payments.
And so I wouldn't rule out the potential --
Jeff Zients: I think it's absolutely a quick second generation.
Right now we're getting do not pay for the 85% that's federal
while we're piloting how do we work better with the states.
But I think you're right.
As soon as possible, we should bring those two together.
Speaker: I hate to always have the bureaucratic answer.
But the answer is, is that there are constraints.
So for example for HUD to tap into do not pay, they -- and
they don't automatically get all the data in do not pay.
The more data they want into do not pay, they have to sign
memorandums of understanding.
Jeff Zients: You're doing HUD at the federal level.
(simultaneous speaking)
Speaker: So we have to establish to get, to comply are
relevant privacy and data security issues,
state to federal --
Jeff Zients: But I think what you're saying is pure logic.
Speaker: It's an overcomable barrier, but it's not something that
can happen like that.
Speaker: These are all linked together.
Because Seth mentioned the New York state example.
They were one of the early states that partnered with us
on the debt collection and we've collected quite a bit of money
from fraudulent unemployment payments that went out the door.
Now, we want to stop them before they go out.
But it's all -- it is all linked together.
Let me just quickly jump to slide 26.
One of the things that we're also going to be doing is doing
some pilots, because I think it's important for us to kind of
test some of these areas quickly and see what the potential
return is.
You know, we have really appreciated PMAB's emphasis
on risk analysis and we have -- we're in the process of
developing some new data analytics approaches and
to measure the risk.
I think that's key in going back to the return on investment.
And we've also been working and have well underway an effort to
standardize the data so we can do computer matching a
lot more readily.
So there's a lot going on.
This is a new program for us.
We stood it up quickly, but we also are at a point now where I
want to kind of step back a little bit and say, all right,
do we have a right, what can we add, what kind of analytic tools
do we need, what kind of people do we need to make sure that
we're really hitting this and hitting it hard.
Speaker: And let me just summarize the bottom line on do not
pay from my perspective.
I think there are two critical (inaudible)
input points that are being integrated into the work.
The emphasis on standardization and then the primer on risk
analytics that we're using to build the analytic dates.
Going forward, I think one of the big challenges that we have
is figuring out the type of information to provide to the
agency that is most helpful and relevant.
You know, so if I was back at Aetna, as an example, where I
want to pull back some additional onion layers is
around the trade of information between the analytic center that
they have and the business line.
How is that information presented.
Because we're not confident that if we just give them a
(inaudible) material that that's going to have an impact.
And if it's too summary level, as well, we're trying to kind
of figure out what that right report that treasury sends back
to the agencies that has the largest impact.
So there's some, I think there's some additional corporate best
practices that we want.
Speaker: So the first thing that we do is we are
very anti-copies of data.
We really work hard to not have this central repository get
replicated out for everybody that needs it, because then you
create a synchronization nightmare.
And that's something that we're very focused on.
Then we say what are the interfaces that all of the
data users are going to need.
But it's centralized data with the appropriate interfaces.
Once you start making replicas --
Elizabet Smith: Yeah, one data warehouse.
Speaker: One data warehouse.
Elizabet Smith: Not many.
Speaker: With the interfaces that are needed and the
interfaces don't proliferate, you have a process for adding
new interfaces.
Meaning, you can't just say we'll add whatever anybody
wants, because that becomes unmaintainable.
Speaker: And with the improvement of the (inaudible) payment system,
the HCH, those are easily next day, you know,
you can make payments the following day.
So we can build in some time to have maybe a day to do analysis
and really put the red flag up on those where we think that
they shouldn't be making payments and maybe the yellow
for them to, either us to review initially and then
for the agency.
Gail McGovern: It also seems to me like there's some 80/20 rule in
here some place, you know.
And if you go all the way back to the chart on page 18, there's
probably -- yeah, the strategic sourcing chart, I'm not in the
improper payments group, so this is a little bit
out of my bailiwick.
But if there was a snapshot of something that looked like chart
18 but the categories of improper payments by state,
you'd know what to go after.
Speaker: (inaudible)
Gail McGovern: Okay.
Speaker: And particularly UI, we're trying to (inaudible).
(simultaneous speaking)
Speaker: But we also have the state by state,
but like we can tell you --
Gail McGovern: Because by state.
Speaker: -- this is Michigan's rate.
Gail McGovern: And that's the key.
You want the worst state with the biggest opportunity.
Speaker: Right.
Gail McGovern: And is that right with that first.
But I'm sure you figured that out already, okay.
Speaker: We already had that posted on our website by state,
by cause and whether or not they have taken the ten steps that we
figure necessary to bring (inaudible).
And that was the goal there.
Gail McGovern: Dunce cap is a powerful thing.
Jeff Zients: So when you think about it, it's a $10 million or so investment.
Speaker: Yeah.
Jeff Zients: The ROI initial investment, the ROI here is hugely off
the charts.
So what, I mean, you guys are already on this.
But what you need is some early wins.
Gail McGovern: Absolutely.
Speaker: When you start showing states and agencies --
Gail McGovern: Right.
Speaker: -- the return on investment here, this thing is going
to -- you're going to have people giving you money because
they're going to see a dollar spent has a 20, 30,
40 to one return.
So you just need to make sure that you move to quick pilot
and early results and I think you'll have --
Speaker: Absolutely.
Jeff Zients: You know.
Anything before we leave improper payments?
Sorry if we missed part of that.
Speaker: Okay.
Speaker: You're on the right stuff.
Speaker: Definitely on the right things.
Good luck with it.
Speaker: Thank you.
Speaker: Scott, do you want to close the meeting just as to what's
happening in the next couple of months here?
Speaker: Exactly.
Speaker: Page 27, we just -- (simultaneous speaking)
Speaker: Please. That's fine. What does it say?
Let me just go ahead and kind of take us to the end of the open
portion of the meeting.
PMAB, page 27 inside the slides, we'll have a meeting
in early 2013.
I think we already alluded to the fact that that would be put
on the calendar.
We just haven't picked a date as of yet.
Speaker: Are we talking the first quarter?
Speaker: Yes, first quarter, definitely.
And what we'll be doing is both updating and discussing the
initiatives that we've been talking about as well as looking
at and choosing focus areas to focus our time and effort on
across the course of 2013, and really looking for continued
engagement between now and then, and then on into 2013, as you
heard, both the folks on the improper payment side as well
as strategic sourcing, as well as the 2011 initiatives would
greatly benefit from your continued involvement and
your continued engagement, both in personally as well
as your teams.
Provide some guidance to the labor department and the states,
New York state in particular, and provide some guidance to
Joe in the strategic source and leadership council.
And with that, we will close this meeting.
So thank you very much.