Performance-Based Organizations

The administration has proposed the creation of performance-based organizations, modeled after the British Next Steps agencies. According to the British government, the aim of the Next Steps initiative has been to improve the delivery of government services, obtain better value for the taxpayers' money, and give staff more satisfying work and working conditions. The proposed U.S. performance-based organizations would seek to separate service delivery functions from policy functions. In exchange for freedom from certain government requirements, the head of the agency would be held directly accountable for the agency's performance. This testimony (1) provides an overview of the Next Steps initiative, including the number and size of British agencies participating in the program and the reported performance of those agencies; (2) discusses lessons learned from the Next Steps initiative that GAO believes are most relevant to performance-based organizations; and (3) highlights some of the major issues that Congress may wish to examine as it considers the administration's proposal to transform the Saint Lawrence Seaway Development Corporation into a performance- based organization.

GAO noted that: (1) the administration has proposed the creation of PBOs modeled after the British Next Steps agencies; (2) PBOs, like Next Steps agencies, seek to separate service delivery functions from policy functions; (3) in exchange for flexibilities from some governmentwide requirements, the head of the agency is to be held directly accountable for the agency's performance; (4) Next Steps agencies are the British government's predominant form of service delivery; (5) these agencies have reported that, over the years, performance has improved, in some cases substantially; (6) some agencies have reported significant cost savings; (7) the British government has confronted some difficult and continuing issues Congress may want to consider as it considers the PBO concept; (8) these issues include a lack of clarity in the relationship between agencies and their parent departments, an uncertainty concerning who is accountable for performance, and difficulties in developing and setting performance goals; (9) the British have found that the roles of the Next Steps agencies and their parent departments often remain unclear because of the problems inherent in trying to delineate responsibilities; (10) management decisions made by Next Steps agencies can have impact on policy choices made by their departments; (11) lack of clarity in roles between agencies and departments affects accountability; (12) it is sometimes difficult to tell if a poor result was due to policy or inadequate implementation of that policy; (13) British evaluations identified three areas of concern regarding performance measurement: (a) goal setting does not always reflect what is realistic as much as adding incremental improvements to prior results; (b) it can be difficult to determine exactly what to measure; and (c) it is important to ensure that performance information is put in a proper context and used to improve performance; (14) GAO reported to Congress in May 1997 on the administration's proposal to convert the Saint Lawrence Seaway Development Corporation to a PBO. GAO found that such a conversion would result in significant changes in the Seaway's management structure, funding mechanism, and relations with Congress; and (15) however, since PBOs must be created through enactment of enabling legislation, Congress has an opportunity to define its role with regard to the Seaway or any other PBO.