[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2017
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
_______________
SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT
APPROPRIATIONS
ANDER CRENSHAW, Florida, Chairman
TOM GRAVES, Georgia JOSE E. SERRANO, New York
KEVIN YODER, Kansas MIKE QUIGLEY, Illinois
STEVE WOMACK, Arkansas CHAKA FATTAH, Pennsylvania
JAIME HERRERA BEUTLER, Washington SANFORD D. BISHOP, Jr., Georgia
MARK E. AMODEI, Nevada
E. SCOTT RIGELL, Virginia
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mrs. Lowey, as Ranking
Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees.
Winnie Chang, Kelly Hitchcock, Ariana Sarar,
Marybeth Nassif, and Amy Cushing,
Subcommittee Staff
_______________________
PART 5
Page
Consumer Product Safety Commission....
1
General Services Administration.......
75
Office of Personnel Management........
131
Federal Communications Commission.....
163
Outside Witness Testimony.............
263
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
U.S. GOVERNMENT PUBLISHING OFFICE
21-418 WASHINGTON: 2016
COMMITTEE ON APPROPRIATIONS
----------
HAROLD ROGERS, Kentucky, Chairman
RODNEY P. FRELINGHUYSEN, New Jersey NITA M. LOWEY, New York
ROBERT B. ADERHOLT, Alabama MARCY KAPTUR, Ohio
KAY GRANGER, Texas PETER J. VISCLOSKY, Indiana
MICHAEL K. SIMPSON, Idaho JOSE E. SERRANO, New York
JOHN ABNEY CULBERSON, Texas ROSA L. DeLAURO, Connecticut
ANDER CRENSHAW, Florida DAVID E. PRICE, North Carolina
JOHN R. CARTER, Texas LUCILLE ROYBAL-ALLARD, California
KEN CALVERT, California SAM FARR, California
TOM COLE, Oklahoma CHAKA FATTAH, Pennsylvania
MARIO DIAZ-BALART, Florida SANFORD D. BISHOP, Jr., Georgia
CHARLES W. DENT, Pennsylvania BARBARA LEE, California
TOM GRAVES, Georgia MICHAEL M. HONDA, California
KEVIN YODER, Kansas BETTY McCOLLUM, Minnesota
STEVE WOMACK, Arkansas STEVE ISRAEL, New York
JEFF FORTENBERRY, Nebraska TIM RYAN, Ohio
THOMAS J. ROONEY, Florida C. A. DUTCH RUPPERSBERGER, Maryland
CHARLES J. FLEISCHMANN, Tennessee DEBBIE WASSERMAN SCHULTZ, Florida
JAIME HERRERA BEUTLER, Washington HENRY CUELLAR, Texas
DAVID P. JOYCE, Ohio CHELLIE PINGREE, Maine
DAVID G. VALADAO, California MIKE QUIGLEY, Illinois
ANDY HARRIS, Maryland DEREK KILMER, Washington
MARTHA ROBY, Alabama
MARK E. AMODEI, Nevada
CHRIS STEWART, Utah
E. SCOTT RIGELL, Virginia
DAVID W. JOLLY, Florida
DAVID YOUNG, Iowa
EVAN H. JENKINS, West Virginia
STEVEN M. PALAZZO, Mississippi
William E. Smith, Clerk and Staff Director
(ii)
FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2017
---------- --
Thursday, February 25, 2016.
CONSUMER PRODUCT SAFETY COMMISSION
WITNESSES
HON. ELLIOT F. KAYE, CHAIRMAN, CONSUMER PRODUCT SAFETY COMMISSION
HON. ANN MARIE BUERKLE, COMMISSIONER, CONSUMER PRODUCT SAFETY
COMMISSION
Mr. Crenshaw. I want to welcome our witnesses, Chairman
Kaye and Commissioner Ann Marie Buerkle. This is your second
time before the subcommittee, and we appreciate you being here
today to testify. The Commission has an important job
overseeing tens of thousands of consumer products used by
almost all Americans every day. The success of the Commission
is not only measured in public safety and education, but in the
cooperation and engagement of all stakeholders, including
consumers, manufacturers, retailers and Congress. Therefore, I
would like to highlight the essential role that stakeholder
engagement plays in the Commission's mission.
It is critical that the Commission lives up to its mission
of protecting consumers through product recalls, educating the
public on public safety hazards and ensuring the safety of
consumer products; however, mission success means also engaging
in cooperative relationships with the private sector to make
sure that American commerce is not adversely burdened by
unnecessary regulations.
This Commission has engaged in a series of highly
controversial rulemakings without engaging impacted
stakeholders. While I am encouraged to hear that progress is
being made, particularly to address the issues surrounding
recreational off-highway vehicles in a manner that is
acceptable to all the parties, it concerns me that so often,
the Commission's efforts to involve stakeholders are ad hoc and
reactive in nature.
As I mentioned earlier, stakeholder engagement also means
engagement with Congress. I have been crystal clear on my
desire for the Commission to take meaningful steps to reduce
third-party testing burdens on small businesses. For two
consecutive years, this subcommittee specifically designated $1
million for third-party test burden reductions, yet, it
frustrates me that there has been no real tangible relief for
small businesses, despite the amount of resources the
Commission has been provided. Instead, and against the will of
Congress, the Commission continues to pursue changes to the
detriment of the Commission's highly successful voluntary
recall program.
The President's fiscal year 2017 budget request for the
Commission totals $130 million, or $5.5 million increase over
enacted. I would like to stress that in times of scarce
resources, it is the utmost importance that the Commission
prioritizes its activities to where the Commission has clear
authority to act, and, wherefore, the need for consumer
protection is the greatest.
However, I was encouraged to see the Commission re-evaluate
its proposal to create a commission-led nanotechnology research
center, and has, instead, formed a partnership with the
National Institutes of Health on nanotechnology research. This
seems to me to be a much more measured approach, and I am very
interested to learn more about this initiative and the $3
million requested for research into the chronic hazards of
nanotechnology.
Once again, the Commission's budget request includes the
authority to collect a user fee from importers in an effort to
expand the import surveillance product program. The committee
has rejected the Commission's proposal to collect an import fee
for the past 2 years, and I am curious to learn if anything in
your proposal has changed.
As you know, I represent JAXPORT in Jacksonville, Florida.
I know firsthand the importance of surveillance of consumer
goods, and I support the Commission's efforts to stop
noncompliant products from entering our Nation's ports. But I
have significant concerns with the lack of collaboration and
discussion with the importers in this monumental policy change.
Chairman Kaye, you have said that one of your top
priorities, when it comes to rulemaking, will be addressing the
question of public safety hazards, so I look forward to hearing
from you and Commissioner Buerkle on what the CPSC is doing to
prevent the tragic and regrettable injuries from consumer
goods.
So, once again, we welcome both of you all here today, and
I look forward to your testimony.
I would like to turn now to the ranking member, Mr.
Serrano, for any opening he would like to make.
Mr. Serrano. Thank you, Mr. Chairman, and thank you for
getting us this wonderful large room for our hearing today.
Actually, it looks very crowded, which is good.
I would like to welcome back with you, before the
subcommittee, the Consumer Product Safety Commission Chairman
Elliot Kaye, and my former colleague from the greatest
congressional delegation ever in the Congress, the New York
delegation, Commissioner Ann Marie Buerkle.
It is good to see you both, and I thank you for your
service to our country. The Consumer Product Safety Commission
is an independent agency responsible for monitoring the
products sold or imported into the U.S. The work is crucial to
ensure the safety, health, and well-being of the American
consumers against faulty and dangerous products. The CPSC is
requesting $130.5 million for fiscal year 2017. This request is
a $5.5 million, or 4.4 percent, increase from appropriations
enacted during the last fiscal year. This increase will be used
to expand imports surveillance efforts at our Nation's ports,
carry out important work regarding nanotechnology research and
development, and conduct hazard analysis and risk.
The risk assessments on the potential side effects of crumb
rubber, a surface product made of recycled tires, has become a
staple at playgrounds and athletic fields across our country.
In fiscal year 2015, nearly 80 percent of the consumer
products recalled were imported products. The CPSC currently
has the capacity to inspect 6 percent of U.S. ports and this
year's request would expand that to roughly 7 percent. This
means that the CPSC would be able to monitor roughly 65 percent
of all consumer product import entry. As more products reach
our borders from abroad, we must do everything in our power to
ensure this vital agency has every tool and resource necessary
to keep faulty goods and products away from our store shelves.
In addition, our colleagues in the House and Senate have
recently sent letters to the Obama administration asking for
answers on the safety of crumb rubber. Although a link to
certain illnesses like cancer has not been established, more
research must be conducted to ensure this product is safe for
our children and athletes. The Commission's funding request
will ensure more work is done to get these answers. I support
the Commission's request for a modest increase in funding to
address these issues, and I urge my colleagues to do so as
well.
These new investments are necessary to ensure we stay on
top of the challenges we face in our ever-changing economy. I
hope my colleagues will recognize the Commission's important
work during today's hearing. Our constituents have a reasonable
expectation that the products they buy are safe and do not pose
a threat to their families' health. We have a duty and an
obligation to ensure that those expectations are met.
Again, thank you for joining us today, and welcome to our
hearing, and for your service to Americans.
Mr. Chairman, I may add that you and I are the classic
example of two people who don't necessarily agree on
everything, but like each other. I mean----
Mr. Crenshaw. Speak for yourself.
Mr. Serrano. I could be nasty in two languages. If I was
you, I would be--just accept it as it is.
Anyway, we are living proof of that, notwithstanding your
comments.
But there is one thing here that I worry about, and that is
that there are cost-cutting measures that we take, there are
issues about the budget, and those are legitimate, and we may
disagree, agree, that is another thing. When it comes to the
products that come to our children's hands, to our store
shelves, I think we can all agree that it is not government
intervention; it is government making sure that another country
is not sending us stuff that is not good for us. So I think we
have to balance that as we look at the budget this year.
Thank you, Mr. Chairman.
Mr. Crenshaw. Point well taken.
Now we are going to turn to our witnesses, Chairman Kaye
and Commissioner Buerkle. If you all would limit your remarks
to 5 minutes, that will give us more time for questions, and
your formal statement will be submitted to the record.
So Chairman Kaye.
Mr. Kaye. Thank you, Mr. Chairman. Good afternoon, Chairman
Crenshaw, Ranking Member Serrano, and the members of the
subcommittee. Thank you for the invitation to speak again about
the work of the United States Consumer Product Safety
Commission and our budget for fiscal year 2017.
As I noted last year, CPSC's vital health and safety
mission touches every home in some way each and every day. We
believe we provide an excellent return on investment for the
American people. We run a very lean operation, especially
considering the thousands of different product categories in
our jurisdiction from hoverboards to laminate flooring. And we
cover them all with a budget in the millions, not the billions.
We are very appreciative of the continued bipartisan
support for the Commission and our work. We saw this support in
the overwhelming, nearly unanimous vote to pass the Consumer
Product Safety Improvement Act of 2008, and we see it in the
appropriation levels that Congress keeps providing.
These levels have allowed our dedicated staff to drive
standards development to make children's products safer, to
increase our enforcement effectiveness and to better educate
consumers about product hazards, especially drowning
prevention, brain safety, poison prevention, and TV/ furniture
tipovers.
Our proposed budget reflects our staff's continuing efforts
to carry out and enforce CPSIA-driven enhancements to consumer
product safety. Unfortunately, not all of these priorities and
requirements are achievable at our current funding levels. For
that reason, we are pleased to see the President include in his
budget certain important consumer product safety initiatives.
These initiatives, if funded, will absolutely advance consumer
safety, and, at the same time, provide real value to those in
industry making or importing compliant products.
First, we are, again, seeking sufficient funding to achieve
fully the intent of, and the direction in, section 222 of the
CPSIA. Section 222 called on the Commission to develop a risk
assessment methodology to identify, at our Nation's ports of
entry, likely violative imported consumer products.
In 2011, we created a small-scale RAM pilot that has been a
success. However, the pilot alone does not fulfill the
direction and vision of Congress, and without full
implementation, we will not be able to integrate sufficiently
the CPSC into the much larger U.S. Government-wide effort
coming online later this year to create a single window for
import and export filing of all products.
If the CPSC can be integrated into the single window, we
can transform Congress' vision of a national-scope, risk-based,
data-driven screening at the ports into reality--a reality that
would mean safer products in the hands of American consumers
and faster entry for importers of compliant products.
Our proposed budget also includes increased funding to
pursue a ``Healthy Children At Home, At Play, and At School''
initiative. This initiative includes research in two pressing
public health concerns: the first, exposure to potential
chronic hazards related to nanotechnology in consumer products;
and the second, which has already been mentioned, exposure to
potential chronic hazards in crumb rubber used in artificial
field turf and playgrounds. In fact, we were pleased to be part
of a recent announcement along with our sister agencies, the
Environmental Protection Agency, and the Centers for Disease
Control and Prevention to begin a comprehensive study of crumb
rubber in playgrounds and in artificial turf.
Chemical exposure to our children is a critical public
health concern, and providing meaningful answers to parents on
these questions is one of my top priorities. While the joint
agency crumb rubber effort that is now underway is a huge step
forward, we cannot solve this problem without Congress fully
engaging on this topic as well.
Finally, as I discussed last year when testifying before
you, one of the soundest investments we can make, and that I
can make as chairman of this agency, is to continue to foster a
culture of civility and dialogue both at the Commission and
with our stakeholders. As the current campaign season sometimes
reminds us, the political currents flow powerfully against
reaching out and attempting a collaborative discussion on
difficult policy questions.
Despite those pressures, and I cannot overstate how
intense, and I might add, counterproductive, they are, I am
pleased to work with a group of commissioners who share my
views that there is a better and more productive way to solve
challenging problems. There is no doubt that we have product
safety challenges that must be solved, and I look forward to
answering your questions about them. Thank you very much.
Mr. Crenshaw. Thank you, Chairman.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Crenshaw. And now we will hear from Ms. Buerkle.
Ms. Buerkle. Thank you, Chairman Crenshaw, and Ranking
Member Serrano. Once again, I am delighted to be here in front
of this committee and this subcommittee and talk to you about
the Consumer Product Safety Commission. I just want to say to
you that your close attention to our budget does make a
difference and can truly affect our agency's behavior.
Your influence is well-illustrated by the progress we have
made on Recreational Off-Highway Vehicles, known as ROVs. When
I was here last year before this subcommittee, the agency was
heading in the wrong direction, pushing ahead with rulemaking
towards a mandatory standard. That was in spite of strong
bipartisan congressional letters urging us to work with
industry to develop voluntary standards.
The power of the purse was harder to ignore. Once it was
understood that insisting on this mandatory standard was going
to cost serious money, our strategy changed. Including language
on this issue in our appropriation has just about clinched a
good result for everyone. The industry did its part and worked
hard to come up with a strong voluntary standard that will save
lives and prevent injuries in the years to come. I thank you
for your perseverance on this matter, and encourage you to
remain engaged on all of our CPSC issues.
I also want to thank you for devoting some of our last
appropriations to test burden reductions. I continue to be
dismayed at the extremely slow pace of our efforts, but there
does appear to be a glimmer of light at the end of the tunnel.
Specifically, some of the 2015 funds that we spent on test
burden reduction could finally produce some modest relief for
manufacturers this year. It looks like virtually all of our
2016 funds will be used in the development of instruments that
could test for the presence of phthalates more cheaply.
We are a country in fiscal peril. Our national debt is in
excess of $19 trillion. It is critical that every application
of appropriated funds be transparent, and that the Federal
agencies spending the American people's hard-earned tax dollars
are accountable for their actions.
Excessive government spending also contributes to our
Nation's woes in a second way. It feeds the regulatory state,
whose cost is estimated as $2 trillion annually, imposing an
immense handicap on our American companies. The growing morass
of regulation makes it more difficult and more expensive to do
business in this country. The negative effects of such policies
are felt throughout our American economy.
CPSC only accounts for a relatively small portion of our
Nation's spending. However, because we have jurisdiction over
approximately 15,000 types of consumer products, we have a
disproportionate impact on the regulated community, consumers,
as well as the marketplace.
I did not support the Commission's overall 2017 budget
request of $130.5 million, because, in part, it calls for a 5.5
percent increase--excuse me, $5.5 million increase over current
funding levels. I firmly believe our mission and our goals can
be accomplished at our current funding levels. The total amount
of the requested budget increase is not my only concern. I also
have reservations about how those funds will be spent. The
agency's request for doubling from $2- to $4 million in
nanotechnology research is of concern to me.
I respectfully submit that Congress should insist on
accounting for the huge sums of money that have already been
spent on nanotechnology across the spectrum of government
before allowing any increase. CPSC has moved towards a more
fiscally responsible approach to growth in the area of import
surveillance. In terms of port staffing as well as technology,
we are analyzing our needs more carefully and scaling back our
prior requests.
To be clear, even on the smaller scale, I remain staunchly
opposed to a user fee on imports. I believe that our operations
are very different from other agencies who have been authorized
to collect import fees. Given our more limited presence and
role at the ports, I continue to believe that our imposition of
fees could and would and should raise constitutional concerns.
Even apart from the fiscal year 2017 budget request, your
oversight is needed to make sure our spending follows
congressional intent. The Consumer Product Safety Act instructs
us to keep consumers safe from unreasonable risks of harm. Yet,
at times, our agency devotes our resources to risks that are
exceedingly low. And when we find we cannot justify a mandatory
standard under our statute, the agency sometimes can resort to
bullying tactics that circumvent protections built into the
rulemaking process.
The staff is vigorously pursuing the chairman's call for
higher civil penalties, resulting in a threefold increase in
penalties in fiscal year 2015 over fiscal year 2014. The agency
has never withdrawn its proposal to make voluntary recall plans
legally binding, and requiring some firms to admit their
products are defective and to weaken protections that help
ensure CPSC's statements are fair and accurate.
All of this creates well-founded uncertainty and anxiety
within the regulated community and, worse, the fear of
retaliation. They undermine the trust and cooperation we need
from these same firms. In closing, I know it is a challenge to
prioritize resources, especially when you have a large and
vital mission as CPSC does. We all want consumers safe, but we
must find solutions that avoid imposing unnecessary burdens and
wasting taxpayer dollars.
Thank you. I look forward to your questions.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Crenshaw. Well, thank you. And to the members before
you got here, we announced that, as you all may know now, we
are in recess, probably till about 3:00 or a little thereafter,
and we have a full house today, so we will observe the 5-minute
rule. So everybody will have a chance to ask their questions,
and I will start by asking a question about third-party test
burden reduction.
You mentioned, Commissioner, that you are seeing some
progress. I mentioned in my opening statement that I am
concerned that I haven't seen much progress. So it is
encouraging that there may be some progress being made. As you
all know, we have appropriated $1 million each year for the
last 2 years to help in that. This year, I notice you didn't
ask for $1 million to continue that. But maybe, Chairman Kaye,
can you tell us some of the things that you all have done to
reduce that burden.
One of the things we did in the omnibus, we asked you to
submit a report about that, and then I noticed not long ago, it
has been a couple of years, I guess, you wrote that you had
three ideas that would provide a substantial amount of third-
party testing relief. So if you could highlight those and tell
us the timetable. So just take a minute to tell us a little bit
about that.
Mr. Kaye. Sure, absolutely. Thank you, Mr. Chairman, for
the question. As Commissioner Buerkle mentioned, I do think we
are seeing progress. It has been slow for all of us, but we
also recognize that until the Congress stepped in in the last
fiscal year, which would have been December of last year, and
appropriated the $1 million, it was really running up against
our core safety mission to try to allocate the resources that
would have been necessary, and we are taking our lead from
Congress as well, which told us to keep our eye on our core
safety mission.
So getting that money has made a big difference. We
immediately turned it around, and we focused on two areas. The
first--and this is based primarily on stakeholder input,
especially from our small business ombudsman who,
unfortunately, recently left the agency, but who had done an
excellent job of really cataloging what would provide the most
relief to the small business community and give us the most
bang for the buck.
So the first area we have focused on is what we call
determinations, and that means trying to identify materials,
whether we are talking about wood or any other type of
material, cloth, that can be used without needing to be third-
party tested. Can we go out there and survey the marketplace
and get comfort that there will not be any type of the harmful
chemicals that we regulate at violative levels in those
products? Can we go out and tell the communities that are using
them, you are safe to use them without third-party testing
them?
So we have been working to expand our list of
determinations. We have done three rulemakings this year that
relate--well, two that relate to determinations, and one that
relates to textiles, to try to provide more clarity for the
regulated community.
The other area that we have focused on is screening
technologies. Right now, if you go to the ports, and I hope we
can do this in Jacksonville, you will see that our inspectors
have handheld XRF devices where they can zap a product and tell
immediately whether it has certain heavy metals in them. We
need a similar type of technology for screening purposes for
phthalates, the plasticizer that is added to make products
softer. There is no--that is the most expensive test,
phthalates testing, and right now it requires wet chemistry. It
involves grinding the product down, adding it to a solution,
and then putting it through a scanner.
We are working on getting out funds to try to accelerate
the development of a handheld device that would allow for this
similar type of screening, and I believe Commissioner Buerkle
was actually briefed on it recently and saw some of the
technology that is in play. If that can come online and if our
investment that you provide with that money can come online,
that would make a huge difference in driving the cost down.
Now, the last part of it is, Congress was clear, it said
reduce third-party testing costs consistent with assuring
compliance. So we have to remain vigilant in making sure that
any changes we make don't change the likelihood of the
underlying product becoming more harmful.
Mr. Crenshaw. Thanks for that.
Mr. Serrano.
Mr. Serrano. Thank you. Thank you, both of you, for being
here.
Chairman Kaye, your budget request, your $5.5 million
increase, how does the total request related to fulfilling the
Commission's mission? I know that the Republicans have a
concern about overregulating, but with the Commission having
to, first, go to voluntary standards I am very concerned about
underprotecting our consumers. So how does this budget play
with that?
Mr. Kaye. Thank you, Congressman Serrano. I don't think
that anyone should have concern that the Commission is
overregulating. My concern is that because of the limited funds
that we have been provided, we do not have the ability to
really stay on top of emerging hazards in particular. And to
answer your pressing questions, as I mentioned, such as crumb
rubber, and that is one of the reasons why we have asked, as
part of the President's budget, for additional funds to address
some of these emerging technologies.
It seems to me that this is the way the system is supposed
to work. And you look at something like nanotechnology, you
have a group of scientists across the scientific community,
especially in the government, who identify an emerging hazard
concern, nanoparticles that come off of consumer products, the
belief is that they appear to act like asbestos, and they get
embedded in children's lungs. When that has been identified
through this process, and we come to the Congress and say, this
is a concern that we have, it seems that is exactly why we have
these hearings.
Congress wants to hear what the community, the scientific
community, in particular, which doesn't have a partisan bent,
what are the scientific concerns that are coming online that we
should be addressing? It seems to me it is far more efficient
for Congress to allocate money at this juncture to address this
concern before it becomes a full-blown public health crisis,
and then, of course, it is much more expensive to address.
So I feel like us coming for the second year in a row to
ask for this nanotechnology money is exactly the way this
system should work, and it is consistent with us trying to do
our best to highlight those critical areas that we feel like we
need Congress' assistance to stay on top of.
Mr. Serrano. Now, both the chairman and I mentioned an
issue that is of concern. Then, of course, there is the issue
of, what is it, hoverboard? Which one is the--presents the more
immediate danger, or at least which one presents a more
challenge to you to figure out what the safety standards should
be or not be?
Mr. Kaye. So I think they both present different challenges
in different ways, and I will explain that. Hoverboards
clearly, at this juncture, appear to present an acute hazard,
you either are going to have a fire concern or a fall concern.
The injury is immediate. The concern with crumb rubber is a
concern about a chronic hazard, long-term exposure to children
over time. Both of them are extremely difficult, at our current
funding levels, to be quickly responsive to.
I would say hoverboards, because you are talking about
complex electronic systems, and though we, of course, have
excellent electrical engineers, we do not have a deep bench of
excellent engineers. We have small staff of electrical
engineers, and to pull them off of what they are doing, which
we had to do and have them work 24/7 to try to take these
devices apart, means other critical work is not getting done
that we had already planned on getting done.
Coin cell batteries, children swallow them; they end up
burning holes in their esophagus; they are fatal, our
electrical engineers are trying to get to the bottom of that.
We had to pull them off that type of work to address hover
boards. If we had a deeper bench, we would be able to be much
more responsive.
And, similarly, one of the reasons why we were so eager to
have a larger Federal effort on crumb rubber, we can't handle
that alone. We have got six or seven toxicologists, which is
what EPA can throw at a smaller problem. That is our entire
toxicology division. We are--our mission is more than 15,000
different types of consumer products. We are not built as an
agency, from a staffing perspective, and a research
perspective, to be on top of those in a way that the public
expects us to be.
Mr. Serrano. Very quickly, Mr. Chairman, to rule--in one
sense is, would it be unfair for me to ask this question,
because one country sends us more products than the other, or
percentagewise, what country presents our biggest challenge to
us in terms of having to return items or take them off the
shelf?
Mr. Kaye. So four out of five recalls come from imported
products and, not surprisingly, a very large percentage of
those are from China.
Mr. Serrano. Okay. So it is an unfair question in a way,
because it is a loaded question, but it is what it is, right?
Mr. Kaye. Can I just add a teeny bit to that? I think what
is counterintuitive is that the Chinese Government is actually
very helpful. When we approach them with actionable
information, they are very eager to try to stop manufacturers
from doing what they are doing. And so we have built up--we
actually have a presence on the ground right now in China. We
have full-time staff there, and we have built good
relationships to try to deal with these issues, but, again, we
don't have the type of depth and resources to really have that
much more of a relationship and attack that many more different
areas to try to prevent them from coming in the country.
Mr. Serrano. Mr. Chairman, using CIA agents on the floor,
it is kind of an overkill over in China, but anyway----
Mr. Crenshaw. Four out of five.
Mr. Serrano. Thank you so much.
Mr. Crenshaw. Mr. Graves, and then Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman. Mr. Chairman, good to
see you.
Mr. Kaye. Yes, sir.
Mr. Graves. Thanks for returning.
Chairman, I have a question. You have referenced several
times crumb rubber, and I want to talk about that just a little
bit. Quite frankly, I follow this with a bit of interest. It
seems somewhat of a coordinated effort between CDC, EPA, and
then your Commission to address these concerns. And you have
made several statements since the launch of this effort.
My concern more than anything is that as you go through
this process decisions are made based on science and sound
research and unbiased opinions, and I ask this question to just
get a commitment from you and the Commission. This issue is of
particular interest to me, because I come from a very, very
small town, only a handful of businesses in the town but one of
them happens to be a company which recycles tires. And then I
have three children in high school, a wife who teaches as well,
and in our district, there are many--many products that use
crumb rubber as well as manufacturers and businesses that
install them. So it is a little bit of an interest for me. It
is very important in a lot of different ways, and I know your
passion is for protection, and I respect that.
But I would like to have the commitment from you that as
you go through this investigation, that you are following all
the appropriate scientific protocols and not succumbing to
rhetoric or any other kind of biased opinion or hyperbole, that
you are involving all stakeholders and following the science
where it leads as you come to that conclusion.
So my question is really pretty simple, can we have that
commitment from you to the committee that the focus will not be
on the hyperbole and other rhetoric out there but on the
science?
Mr. Kaye. Absolutely, Congressman. That is an easy
commitment to make, because it is consistent with the way I
operate. You referenced decisions or statements that I have
made on the subject. I have never, and I would be surprised if
you can point to one, that has declared that these products are
unsafe or declared that there is a hazard. I have been very
careful to say that parents have raised concerns. I think--and
I am a parent as well, of two young boys, parents deserve
answers, but that doesn't, in any way, indicate that I believe
I know what the answer is. I don't.
And one of the reasons why I pushed to have EPA and CDC
take the lead on this and work with us is that we could
collectively come together and provide those answers. I have no
interest in hyperbolic rhetoric associated with this. I just
want to know what the answer is. But I think all--and, by the
way, the commitment extends to, of course, making sure that all
stakeholders are involved.
This has been one of the unique areas where I saw that the
House Commerce Committee had written, both the majority and the
minority, written to the EPA to say, we would like answers. And
even the industry has said they are happy that the government
is now studying this. I just hope that there is room that if
the science is legitimate, some side is not going to be happy
with the answers, because people have become very polarized--I
just hope that folks can accept whatever the answer is, as long
as it is fact-based, even if it doesn't come out the way they
hope it does.
Mr. Graves. And if I could just add one thing. I would love
your feedback on it, Commissioner. And I appreciate your
approach because it is important for everyone to recongnize as
you said, in your press release, that there has been no
determination of any harmful effects. And so I appreciate you
saying that, but there seems to be some effort to find harmful
effects. And, so thank you.
Ms. Buerkle.
Ms. Buerkle. Thank you. Thank you very much. I do want to
comment on this, because I think it is very important for the
record to establish that to date, there has been no change in
the science, that there is no causation between cancer and
crumb rubber. So we are starting where we left off.
And the NBC news report was what kind of, I think, got this
whole issue going. And I think it is important for us as an
agency not to react to the media. They are--they are trying to
sell stories. We need to base our--whatever we do on science
and facts, and make sure our approaches are reasonable, that is
course we follow. I do have an article I would like to submit
for the record on crumb rubber, and it lists a whole body of
research that has been done on this topic, because to date,
there has been no--nothing that establishes causality.
[The information follows]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Graves. Thank you. Thank you, Mr. Chair.
Mr. Crenshaw. Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman.
Let's talk a little bit more about hoverboards. The
Commission sent out a notice to retailers and manufacturers, I
think it was last week, asking to voluntarily recall
hoverboards off the market until they meet voluntary safety
standards. Obviously, you go to Wal-Mart or Toys-R-Us, they are
still for sale. What is next on the--in the timeframe and the
process here to look at these and decide if there needs to be a
mandatory recall?
Mr. Kaye. So what is next is that we have more work to do.
We have asked our technical staff to do what we call a product
safety assessment, or a PSA, to give us their unbiased
technical view to assess whether or not they believe that there
is a defect that poses an unreasonable risk of injury or death.
We are waiting for them to conclude that process. Once they do
that, what we did put in that notice was that we could deem
these products, or consider these products to present an
imminent hazard, and that would allow us, under section 12 of
the Consumer Product Safety Act, to go into court and, in
essence, ask for an injunction, or seek a mandatory recall.
So we have, at this point, kept all options on the table.
We have been aggressive in both trying to identify the issue,
working with Underwriters Laboratories which had come out with
the Standard 2272 of electrical components in self-balancing
boards, and we feel like so far we have been encouraged by the
action of many of the retailers, you mentioned two of them,
that actually have stopped sale in the last day or so. And we
think that is a responsible action to take at this point; stop
sale, have your products tested. If it complies with that
underlying standard, you are good. If it doesn't comply, then I
think it is incumbent upon those companies to begin to initiate
a recall process, come to us with a recall proposal.
Mr. Quigley. Did you say that Toys-R-Us has stopped selling
these?
Mr. Kaye. I have read that publicly. That is correct.
Mr. Quigley. And Wal-Mart?
Mr. Kaye. I have read that as well.
Mr. Quigley. I am sorry, go ahead.
Mr. Kaye. So we think that if you test it and it doesn't
comply, you should start to come to us with a recall proposal
to take these products off the market.
Mr. Quigley. Can you guesstimate a timeframe before your
folks are done with their analysis?
Mr. Kaye. I would say within the next week or two is my
hope.
Mr. Quigley. Okay. Do you have something else to add? I am
sorry.
Ms. Buerkle. No. It is just with regards to hoverboards, it
has been a complicated issue for the agency, because it may
have been that the first hoverboards that came into this
country were compliant and were safe, but as time has gone on
and the increase in popularity, a lot of the issues had to do
with component parts coming from many manufacturers; it was
difficult to trace back the products to the manufacturers, and
so it has been a complicated issue that the agency has really
dedicated a lot of resources to.
Mr. Quigley. Thank you. Last point, recalls, Consumer
Federation of America informed us that for all the recalls,
only about 30 percent of the products are actually recalled; in
other words, 70 percent of the folks are still out there with
using products we assume that they don't know. How do we do
better informing them about this? Or do they just not pay
attention if they do know?
Ms. Buerkle. I think looking and measuring the number of
products returned isn't really--it is one way to measure recall
effectiveness, but recall effectiveness is another complicated
issue. Because if a product is very inexpensive and it was, you
know, in a McDonald's lunch or it was just something that----
Mr. Quigley. McDonald's what?
Ms. Buerkle. In one of their Happy Meals, what a parent
will do is throw it out.
Mr. Quigley. Not so happy.
Ms. Buerkle. Not so happy. The parent will just toss it
out. They are not going to take that product and go back to
McDonald's. So the cost of the product, the age of the product,
being able to adapt that product and maybe comply with the
safety issue----
Mr. Quigley. But did you--what do you all do to try to
gauge what actually--how effective recall is or how many people
hear you?
Ms. Buerkle. Well, we are paying closer attention as an
agency to measure recall effectiveness. Yesterday in our ops
plan, I made a motion that we start to measure the progress
reports that a recalling company establishes as a part of the
recall so we can maybe look more scientifically--not
scientifically, but more systematically at the data coming in
to try to measure it. But I think there is a lot of ways to
measure recall effectiveness. One of them has to do with
injury. If you look at a product--and these progress reports
would help us do that. If there are no issues or no incidents
post recall, whether we get that product back or not, that is a
good indication to us that that recall was effective.
Mr. Quigley. Thank you, Mr. Chairman.
Mr. Crenshaw. Mr. Rigell, and then Mr. Bishop.
Mr. Rigell. Thank you, Mr. Chairman. And to our two
witnesses today, thank you. Thank you for your service. Let me
first say that the Consumer Product Safety Commission is
absolutely essential, and I think it is just right up there
with the FDA and other agencies, and I appreciate the work that
you do.
We are trying to--all of us are trying to get it right to
increase the efficiency and the effectiveness of the
Commission. And I want us to look at one particular aspect,
and, that is, how we are leveraging the private sector in this.
The compression that we are seeing on discretionary
spending is going to continue, as far as I can see, into
perpetuity, for a host of reasons that I won't get into here.
But even if we are at our very best from the administration and
Congress and the days ahead, there is still going to be
pressure on the discretionary side of the budget. So even
your--those who follow you will be--will be struggling with
this and those who follow us, I believe, will be struggling
with these very issues. But I was concerned, as I looked in
Commissioner Buerkle's testimony on page 4 of the current--CPSC
administration is taking other steps that damage relations with
manufacturers and retailers. And, first of all, look, I have
been in business a long, long time, and I know that there are
some business people who are--have ill intent, and if they can,
you know, kind of sell a substandard product and knowing that
we could hurt someone, they will do it.
And so, I am not saying--certainly not turn this all over
completely, but I have also seen examples where--and I have
been part of it too--of where industry has really leveraged--I
think it took a government dollar and maybe made it--stretched
it out to maybe $4- or $5. Because the industry itself, the
good people, the good men and woman who are in the right
companies, they really don't like the ones who are getting
things--an increase in their profits the wrong way.
So could you just unpack that just a little bit,
Commissioner Buerkle, about how--maybe we are not leveraging it
as much. It is not a gotcha moment here. I am just trying to
see if we can do a better job of leveraging the private sector
in all of this.
Ms. Buerkle. Thank you very much. So, my concern with the
way we treat industry's businesses, I have been at the agency
2-\1/2\ years, and I can honestly say to you, as I have
traveled and visited several businesses throughout the country,
all--across all industry lines, they want to comply with the
regulations. The regulations are complex, and the regulations
can be vague. So, for instance, we talked about burden
reduction. We have to assure compliance with reporting
responsibilities that the person reporting a possible defect or
violation of a regulation, if it ``could present'' a product
hazard, it is vague. So sometimes that is in the way of it. But
what we also have is some hostility inside of the agency in
terms of there is almost a supposition that a party is guilty
until they prove themselves innocent. Most companies want to do
right.
And I feel the Consumer Product Safety Commission should be
working with and engaging with companies showing them the way.
Complications, and it is not that they are just dealing with
our regulations; they are dealing with--their municipality,
their State, their county, and their State regulations, and
then our regulations. They have a maze of regulations to go
through, and we should be helping them. The threat of civil
penalties, higher civil penalties, is significant. It looms
large over anyone who has a reporting responsibility.
Someone can come to us with a Fast Track and we have the
benefit of 20/20 hindsight, we say no, that should have been
reported to the agency sooner, and so we are going to slap you
with a $4, $5-, $6 million penalty. That discourages, really, a
spirit of cooperation.
Mr. Rigell. Well, let me ask Chairman Kaye. In fairness,
you know, I don't see this as a part of an issue. Maybe it is,
but I don't really see it as such. I mean, is there a
demonstrated track record here? Have there been--can you look
back at the last year and say, well, look at what we have done,
we have taken this industry and we have leveraged their
strengths and brought them in, and maybe there is a working
group that is helping us on these different projects?
Is there evidence that we are better leveraging the private
sector and the good companies that are trying to put our good
products in, and at the same time, always knowing, it is not--
you know, you are not just in some type of real friendship
here. I mean, it is just collaboration, but you are always
watching over them, every company, at all times, I get that
too. So how does the past year look? I mean, have you got
evidence for us to look at and consider?
Mr. Kaye. I do. And I think a perfect example is what we
did, Congressman, on our proposed electronic filing of data
elements associated with the single window that I mentioned
during my opening statement. So the government is going to
have, across the board, 47 agencies at the ports, one window
for import and export as opposed to 47 different windows. All
the agencies that are participating in that are stress testing
their electronic filing systems. We originally proposed to have
10 data elements, 10 different sets of data, and by significant
stakeholder engagement with the type of companies you are
talking about, we cut that down to five, and they applauded us
for that effort. But I so appreciate the way you asked your
question, because it is so rare that there is an
acknowledgement that there actually are companies out there
that do have bad intent.
Mr. Rigell. No question. Right.
Mr. Kaye. And when we have civil penalty cases, I look very
closely at that. Is this a fair exercise of our jurisdiction
over those companies? And one of the areas that I have tried to
prioritize at the agency is doing a better job at discerning
those companies that are playing by the rules and those
companies that are not.
Mr. Rigell. Thank you for your testimony. And I thank the
chairman.
Mr. Crenshaw. Thank you.
Mr. Bishop, and then Mr. Womack.
Mr. Bishop. Thank you very much, Mr. Chairman, and thank
you, both, for your attendance here today. I want to touch on
two issues, one is the import surveillance program, and the
other one is import of hardwood. According to your request in
fiscal year 2017, you said that 80 percent of your recall of
consumer products was imported from outside of the country, and
you were requesting an increase of $3 million to support 15 of
staff, as well as equipment for the employees and related
costs, but you still project to only cover 7 percent of U.S.
ports, which comprise approximately 65 percent of all consumer
products import entry lines.
With your requested funding and staffing, assuming that you
got it, approximately how many consumer products would still go
unmonitored by CPSC at the ports of entry? And, of course, as a
follow-up to that, what do you think the resources, equipment,
personnel, would it take for you to be comfortable that the
majority of dangerous products were turned away at the ports of
entry?
And, finally, what are the most problematic ports of entry,
and do you have adequate resources to substantially assume the
full dangers to consumer products there?
Mr. Kaye. Thank you, Congressman. And I apologize you are
on our side of the table. I don't know what you did to end up
next to us, but we are pleased to have you on this side.
So, yes, we do currently cover far less than 100 percent--
--
Mr. Bishop. You are on the side of the consumer, so----
Mr. Kaye. I appreciate that. I definitely feel that we are.
We believe that it makes the most sense, it is far more
efficient to catch products at the borders before they get into
the United States, they are dispersed into the stream of
commerce, and it becomes much more challenging to try to
collect those via recall. And as Congressman Quigley mentioned,
recall effectiveness is not very high. So if we can get them at
the ports before distribution, we think that is far better, and
we think that is a good investment for Congress.
The way we screen right now, is we take the data that is
provided to U.S. Customs and Border Protection, the information
that has to be filled out by importers to identify which
consumer line of entries these products fall under. It is just
basically tariff codes. And we take those tariff codes, and we
run it through a pilot system that looks at the certain subset
that is likely to give us the highest risk products. It is not
everything, just the highest risk, and then we target off of
that, both nationally and at individual ports. As you mentioned
in your testimony as in your question, if we can get the
resources that we ask for as part of the next budget, we will
be able to get up to about two-thirds of looking at those
consumer product tariff codes that are in our jurisdiction. I
don't think that is good enough, and I don't think for the
American people that meets the expectation that the United
States Government is standing watch at the ports.
As our proposal indicates, we are seeking a permanent
funding mechanism to try to get up closer to that 100 percent.
My estimation is that we are talking about $36 million to--on
an annual basis to try to do that, and that would cover far
more personnel at the ports, and personnel on the back end at
our testing facilities to handle the samples that come in, as
well as the IT systems to be built to bring it all together.
Mr. Bishop. Thank you. Let me--do you have anything to add?
Ms. Buerkle. I do want to talk about import surveillance,
because it is important. However, I will say that currently,
our risk assessment methodology that we have is looking at all
of the product coming in at all of the ports. The issue we have
is not the technology so much as the people, and if we had
additional people to review the data, it would be far more
effective.
Mr. Bishop. Thank you. With regard to hardwood, you have
been investigating the formaldehyde emission levels in wood
flooring products, largely imported from China. And, of course,
you know one of those companies has been the center of the
issue, but any imported wood flooring products could
potentially come from any country anywhere.
The district that I represent in the southwest Georgia
contains millions of acres of forest land, a reduction of
lumber, and my constituent companies, including wood flooring
companies, dutifully comply with the strict standards regarding
product safety. So how is the Commission ensuring that safe
U.S. products are not supplanted by cheaper, imported
alternatives, which contain hidden dangers to our families
across the country?
Mr. Kaye. Sure, I am happy to take that.
So we, of course, try not to discriminate between one
company or another. And, in fact, there is no mandatory
standard, mandatory Federal standard yet, for hardwood
flooring. That is coming down the pike from the EPA in response
to a law that was passed by Congress. If that is, in fact,
enacted, that rulemaking, then EPA would be enforcing it.
Right now, we are approaching these products as being
potentially defective. There is the California standard, which
does set an emissions level, when we are using that as the
basis for our investigation into that particular company, our
belief is that if it is being produced by your constituents, we
don't have the concern that exists when it is coming from
China.
And this goes to what Congressman Serrano was asking about
earlier, is that the sourcing of the products makes a huge
difference, and so if we had the resources, and we had the
ability to get further up the supply chain, I think that we
could do a better job of making sure that those products that
are affecting your constituents are not supplanting their work,
basically, their sales.
Ms. Buerkle. If I could add one thing to that, because this
is consistent with the theme of our agency reacting rather than
being proactive. When it comes to that issue, once again, that
was an issue that was raised by CBS. It wasn't something that
we saw data, we saw science. And so the issue was brought up
within the media. And I think it is very important for us as an
agency, again, to look at our data and look at our science, and
not act in a reactionary way. And I think that goes to the
crumb rubber and several other issues. We can't be knee jerk.
We need to be scientific and data----
Mr. Bishop. You found that formaldehyde and that imported
wood flooring was toxic, did you not?
Ms. Buerkle. Well, we have not made our final findings at
the agency, but----
Mr. Bishop. You had some preliminary findings, right?
Ms. Buerkle. To date. It does not indicate that there is a
grave concern for a link to cancer.
Mr. Crenshaw. Thank you, Mr. Bishop.
The floor just announced we are going to vote at 3:15, so
we have three remaining questioners. We should have ample time
for one round of questions. So let's go to Mr. Womack, then Mr.
Yoder, and then Mr. Amodei.
Mr. Womack. Thank you, Mr. Chairman.
Mr. Chairman, Ms. Buerkle, it is good to see you again. You
said a minute ago, Mr. Chairman, that--and I don't want to put
words in your mouth, but something about the fact that you base
your research on data, on science, that is kind of what drives
the Commission to do its job and to do it effectively. But it
seems to me that there is a kind of a breach in your regulatory
process in that instead of relying on data or science, that
sometimes you and/or members of your staff, instead of working
with the manufacturers or the importers on product improvement,
that sometimes you end up at a retailer, and you ask, if I
could use that word, ask the retailer, to stop selling lawful
and legal products. Is that a tactic that is in play at the
Consumer Product Safety Commission? Is that what you do?
Mr. Kaye. So we absolutely do engage the retailers, and I
think hoverboards are a perfect example, because there is no
U.S. presence. There is no U.S. manufacturer that we can go to.
Mr. Womack. Okay. Well, let's stipulate to hoverboards.
Let's talk window coverings for a minute.
Mr. Kaye. Okay.
Mr. Womack. So do you, with a wink, encourage retailers to
stop selling corded window coverings?
Mr. Kaye. So there is no wink involved. I absolutely have
met the CEOs and talked to CEOs of major retailers, and I said
some of your colleagues, Target, Ikea, decided on their own to
only sell products that do not kill children. Are you
comfortable moving in that direction? And they----
Mr. Womack. Mr. Chairman, how would you call that anything
but intimidation? You are the heavy hand of government standing
in a retailer's office basically intimidating them to the point
where they stop selling a product that is on their shelves. How
do you justify that?
Mr. Kaye. Well, I don't know if many of them are
intimidated, because many of them have not stopped selling
their products. And so we have had conversations with them, and
some have decided to stop selling them, and some have decided--
in fact, none of the ones that I have talked to has actually
decided to stop selling it. Three of them have said that in 3
years, they will phase out certain products, and the rest have
made no determination whatsoever and continue to sell.
Mr. Womack. So let's go back to the science or the data.
What--what is the data telling us? Isn't it like from products
made, say, between the mid-'90s and, say, the end of the first
decade in the millennium that window covering, fatal
strangulation on corded window coverings was like 1 in 100
million? Is this an area--is that true?
Mr. Kaye. I don't remember exactly what rate is, but when
we look at----
Mr. Womack. Is it close?
Mr. Kaye. It could be, but can I actually explain how we go
about assessing risk?
Mr. Womack. Let me, because we have got limited time. Let
me just get to the essence of my question, is if, in fact,
science and data drive your agency, drive you, drive your
agency, then it would seem to me that this, on window covering
specifically, it has become more of a personal crusade rather
than a data or science-driven need for our country. And so that
is why I say, I just--I find it incredible that anybody
associated with the Federal Government would be in the presence
of a retailer selling a lawful product where some rule is not
in effect that would render a product unlawful to be sold on a
shelf like at a Wal-Mart or a place like that, and to be
suggesting that they don't sell it when it is the agency that
could eventually level civil penalties against them. And that
is--help me understand how that is a responsible way to conduct
business?
Mr. Kaye. So let's talk about the data. 30 years' worth of,
on average, a child, once a month, being hanged to death by
these products. That is data. That is very meaningful data to
me. When does that end?
Mr. Womack. Well, did the CPSC ever come with a standard, a
reasonable standard that could be applied to the window
covering market? And if it didn't, if it didn't because it
couldn't, based on the data come up with a reasonable standard,
then why would you tell a retailer to quit selling stuff?
Mr. Kaye. But we only started our rulemaking about a year
ago. We have been working for 30 years in the voluntary
standards process following Congress' direction to try to get
industry working with them collaboratively to address this
problem, and every time our technical staff, who have no dog in
the fight from a political perspective, come with their
suggestions to reasonably address this hazard, they are shut
down. I think after waiting 30 years of one child a month, I
don't think that is moving too quickly.
Mr. Womack. Does CPSC have the votes for such a rule?
Mr. Kaye. I have no idea. We voted 5-0 to start the
rulemaking. We haven't had a vote since.
Mr. Womack. Ms. Buerkle, let me appeal to you. I mean,
look, obviously, I have got a major retailer in my district,
and it is the source of thousands and thousands of jobs, and
they sell lots and lots of products, and I agree with you that
the last thing a company wants to do is be selling products
that are--that are a risk to the general public.
I mean, let's face it, they also have legal departments
that spend a lot of time and money trying to defend themselves
on these kinds of things, but is this--is this action by the
Commission that, I guess, the chairman has admitted to doing,
encouraging retailers not to sell lawful products, is that
something that you think is--is justified within the agency?
Ms. Buerkle. I do not think it is justified, and I think
one of the things the agency has to do is consider risk. And so
if we just pick and choose and assess without assessing risk,
we are going to find ourselves going down a lot of
inappropriate roads, and I think window coverings is one of
them. The risk is 1 in 100 million. That doesn't justify
rulemaking. That doesn't justify banning corded products.
I said this to the chairman, and then because he has been
frustrated with window covering companies, the manufacturers of
it, he has approached the retailers. And in my humble opinion,
I think what we are doing is we are circumventing the rule
process. The Administrative Procedure Act makes it clear. There
is a way to promulgate a rule, and this isn't it, but you
achieve the same end, and that concerns me greatly. The risk
doesn't exist here.
Mr. Womack. I know I have used all of my time on this
particular question, but I am gravely concerned about the
tactic that we have discussed. Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you. Mr. Yoder.
Mr. Yoder. Thank you, Mr. Chairman. Chairman Kaye, welcome
to the committee. Ms. Buerkle, good to have you back in
Washington with us, and, of course, the class of 2010,
colleague of ours that we know very well.
I want to ask you a little bit about off-road vehicles,
and, as you know, Mr. Chairman, Congress has required
independent scientific review by the National Academy of
Sciences, National Highway Traffic Safety Administration,
Department of Defense of the CPSC's proposed requirements for
recreational off-highway vehicles, ROVs.
Just what, if any, ROV rulemaking has occurred in 2016, and
if you assume the voluntary standard for ROV is accepted by
ANSI, when do you expect the Commission will terminate its
notice of a proposed rulemaking for ROVs, and if you anticipate
a referral after final publication, how long?
Mr. Kaye. So to answer your first question, zero work has
been done on finalizing the rule on ROVs because that is what
Congress said, do not do any work on it, and we have not, and
we have been very true to that.
Mr. Yoder. Okay.
Mr. Kaye. We have spent all of our time and effort and
resources working with the voluntary standards bodies. There
are two of them that have been moving forward with their
changes. It has been extremely encouraging. I anticipate and
hope that they will end up balloting those. They would do final
ballots and then publish them during the remainder of this
fiscal year.
Our process is, based on our statutes, that once they do
that, we will then have our staff make an assessment and send
up a recommendation to the Commission, and then we will vote
accordingly.
If it happens the way it seems to be happening, I know our
staff has indicated, to date, that they have been pleased with
the direction of the voluntary standards process has taken, and
I would imagine that we would proceed accordingly based on the
recommendation.
Mr. Yoder. Ms. Buerkle.
Ms. Buerkle. If I could add to that. When it came to the
ROV issue, I must say the engagement of Congress and your
oversight was extremely helpful and very effective, and the
industry worked extremely hard trying to get to a standard, and
they put in a lot of time and effort to make--to get to this
point where, hopefully, we will get to a voluntary standard.
I do want to talk about engagement, though, because what
added to the success of that was this engagement, this
technical-to-technical meeting of the minds. And when it came
to 1110 certificates of compliance rule that was brought up
earlier, yes, there were meetings, and yes, there was a lot of
discussion, but the proposed rule that was so very
controversial is what we ended up with essentially.
So engage--all engagement isn't equal. Some is meaningful,
some really achieves good results, and in some cases, it
doesn't. A meeting for the sake of a meeting, I don't think is
effective.
Mr. Yoder. Well, I appreciate that, and I think what we
have heard from Mr. Womack and some of the other questions
today is certainly that engagement matters when it comes to
ultimately getting a good result in which all the stakeholders
have input, and you know, we get a--we get a rule or we get a
voluntary standard in this case that is implementable and is
consistent with the products that you are regulating.
I was interested in the port fees issue, and I wondered if
you could talk a little bit about that. Does the CPSC have
authority to implement these fees? Is there constitutional
authority for this? Do you have legal authority to do this?
What's the status of this? Are you looking for authorization
from Congress?
What does that raise? And in terms of engagement, tell me
about the engagement with those who would be paying the fee,
and you know, in some cases, you know, the FDA, the folks who
are paying it, you know, want to pay it because they can see
better results and there is a relationship there. Is that the
sort of relationship you fostered here?
Mr. Kaye. Well, we do have--back to your first question, we
do have legal authority to collect the fees. We just don't have
legal authority to keep the fees, and that actually does
matter. We have to return them to the Treasury, and so what we
are seeking is that additional legal authority to actually use
them.
It has been raised that this is, per se, unconstitutional.
That is just flat-out wrong. If you look at the Trailer Bridge
case from the First Circuit last year, which is 797 F.3d 141,
for legal folks paying attention, the First Circuit went
through a very specific analysis on user fees, and if it is
unconstitutional, I don't know why they would have gone through
the analysis and declared it to be constitutional and to be
appropriate. That doesn't make any sense.
And so I think it is important that we actually focus in on
what we are asking for and not have red herring arguments about
this. Let's discuss it on the merits. We view a user fee
proposal that we would put out through normal notice and
comment, which would have full stakeholder engagement, as being
a very reasonable way to proceed, and we are talking about
pennies on the $1,000--per $1,000 of imports, which is much
tinier than FDA or anybody else ends up paying.
The benefit would be compliant trade would move through
much more quickly, and we would be able to focus on
noncompliant trade. Going back to the Congressman's questions
about there are some actors out there that are not playing by
the rules. We think that the compliant--the trade community
should want us focusing better on those actors that not paying
attention to the rules, and let compliant trade move through
much more quickly, so that would be the benefit.
Mr. Yoder. In terms of the engagement with the
stakeholders, you know, is this a situation where they are
coming to you and saying we want to do this and we are a part
of this, or is it something that is more adversarial?
Mr. Kaye. It has been entirely adversarial. There has not--
if there has been somebody out there who is in favor of this in
the trade community, I have not heard about it.
Mr. Yoder. Yeah, I mean, so that is an issue, because the
folks who might benefit from the advancements and the services
you could provide, they are not wanting to do it, and it
concerns me that you don't have that level of engagement that
you just expressed is important and you hope to have. I think
that would be a critical part of moving forward.
Mr. Kaye. I think we have the engagement. We just don't
like what we are hearing, and they don't like what we are
proposing. I think it is important that they are not opposed to
having us have a greater presence at the ports and having it be
through general appropriations. They just don't like the user
fee, and I think that is important. If Congress wants to
allocate the amount of money on an annual basis for us to run
this program, we would be very accepting of that.
Mr. Yoder. With limited time, Ms. Buerkle.
Ms. Buerkle. I understand. Thank you. My concern with the
user fee--and I don't consider the constitution a red herring,
I think that where--our assessment at the ports is very
different than USDA, so they look at every product coming into
the country that they have jurisdiction over. We don't do that.
We have a risk assessment methodology, so we apply that
risk. Some products are subject to that, some are not. And some
fall prey to--and they get pulled because they are high risk.
And so our benefit is only for some. All--every product coming
in and every one we have jurisdiction over will not receive--
and I put ``benefit'' in quotes--the benefit of us doing a risk
assessment.
So if everyone doesn't derive the same benefit, then what
we are looking at is a tax, and we do not have the power to
levy a tax, and I don't think it is a red herring.
Mr. Crenshaw. Thank you. And now let's turn to Mr. Amodei.
Mr. Amodei. Thank you, Commissioner, Mr. Chairman. As you
may recall from last year, I started out my questioning with
saying: Hey, I am a process guy.
So I am not going to get into, hey, you should have done
this, you should have done that. I am not saying that anybody
here did that, but I am looking at an inquiry that I got from
some folks who are in the bromine business and--which is an
additive for flame retardants and stuff like that, and they
have set forth a series of facts here that says, Hey, you got a
petition from some folks, and they met with the Commission, and
they said that the Commission said, Hey, we are going--we are
going to accept the petition and do some rulemaking, and I
haven't followed it that closely, but my initial concern is I
think you guys, at least to some extent, are a quasi-judicial
outfit. And so there are five of you, and so it takes three to
decide to do something, I guess.
And so I am wondering if I can come to you with some day
and go, hey, what do we need to do to gin up before you have
done formal action in terms of are you prejudging whether or
not to take it, what are the criteria? But I don't want you to
weigh in then yet. That is kind of a smaller one. My main one
is this:
When we talk about--and listen, bromine is toxic, so we
don't need to talk about, gee, how can you say it is toxic. I
mean, I think everybody says that. But when I am looking at
some of the stuff like the Administrative Procedure Act, which
I believe applies to you, and actually an executive order which
we think probably ought to be followed, you know that is kind
of a switch some days, which guides OMB that will ultimately
review your work product that says, Hey, agencies should not
and may not promulgate rules that are overlapping or
contradictory to rules created by or being discussed by another
agency, which brings us to primary EPA jurisdiction over toxic
rules.
The Senate has recently--be listening carefully. The Senate
has recently taken action on something that has to do with, you
know, the Toxic Substances Control Act, or whatever the
appropriate name is. So I am just wondering in terms of, hey,
resources are scarce, we have got some OMB stuff that applies,
I am not saying you should or you shouldn't, but as the primary
agency with control over toxic substances, is this something
that you are at least contemplating saying let's see what the
new stuff from the Congress is, which I know could mean we
would all be dead of old age before that happens, but the
Senate actually acted, so maybe we are going to get something.
But in terms of at least waiting until the EPA does their thing
to at least see when the dust settles, what, if anything, is
appropriate instead of duplicating, perhaps, sending mixed
messages. Help me on that process.
Mr. Kaye. So, first of all, I definitely remember our
exchange from last year, and I really appreciated it, and I--as
I mentioned to you when we spoke last year, I have the same
view of process, and so on the petition, all we did was docket
it, which means they just met the basic criteria for the
Commission to have it under consideration. We have done nothing
beyond other than have what was like an 8-hour hearing where we
had the world come and testify about these issues.
At this point, now it is--and we got 1,000 pages of
additional questions for the record, comments, and response to
that that we have to go through. We have taken no further
action, and it will take a long time for our staff to process
all that information and to provide a recommendation as to
whether we should grant the petition, whether we should defer
on the petition, or deny the petition.
Mr. Amodei. Okay. So deferral is an option?
Mr. Kaye. Deferral is definitely an option. It is always an
option when it is sent up by the staff. The issue that you
mentioned on chemicals is exactly why I was so pleased that we
were able to get EPA and CDC to work with us to have a
coordinated effort on crumb rubber, because I think that is the
better way to go. And as it turns out that there is conclusive
evidence that EPA is acting on a specific area that affects our
jurisdiction, there is no reason for us to waste the time to go
about and doing something about it.
So if that ends up happening and they clear the field and
do something, great. If they don't, though, and sometimes,
because it is a consumer product, and they may be looking at an
underlying chemical----
Mr. Amodei. Right.
Mr. Kaye. They are not looking at that interaction. It does
come back to us, and then we have a question that we do have to
resolve.
Mr. Amodei. Then it would be appropriate.
Mr. Kaye. Thank you.
Ms. Buerkle. I do want to say one thing about the petition,
and that is, it is unprecedented that petition was even
docketed, given the breadth and the scope of the chemicals and
what the petition is asking for--that we would classify
chemicals in a class rather than individually. That seems like
a very broad and inappropriate use of the petition, and, in my
opinion, it probably should not have been documented--docketed.
Mr. Amodei. Well, I guess, since my time is limited, and
the chairman manages, and I won't refer to it in speed dating
in this hearing because I came to regret that in the prior
hearing, Mr. Chairman. So please strike that reference from the
record. We will continue to watch and may ask you to come in
offline and just say, okay, just kind of keep us appraised of
how that is working with EPA, vis a vis, and your staff.
Mr. Kaye. Absolutely. If I can maybe just give you 3
seconds. It is not the staff's fault that somebody brought a
broad petition. It is an objective criteria. If it meets the
underlying criteria, the staff has to docket it. There is
nothing inappropriate about bringing a petition that we would
docket. It is somebody who is having to bring something broad.
Ms. Buerkle. But it is broad enough that if we are banning
classes of chemicals, which I think is--I don't think that
should have been docketed.
Mr. Amodei. We will look forward to more discussion. I
yield back, Mr. Chairman. Thank you for your indulgence.
Mr. Crenshaw. Thank you. And thanks to the witnesses for
your testimony today. I thank you for being here. As Mr.
Serrano said at the beginning, you have a very important job
protecting people that are using products, thousands of
products every day, so thank you for the work you do and thank
you for coming here today. This meeting is adjourned.
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Monday, February 29, 2016.
GENERAL SERVICES ADMINISTRATION
WITNESS
HON. DENISE TURNER ROTH, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION
Mr. Crenshaw. Well, we are going to get started. The
hearing will come to order.
Welcome to everyone. I would like to welcome General
Services Administrator Denise Roth to the hearing today.
Last year, you were here after just a month on the job.
Now, you have been on the job for over a year. So we are happy
to welcome you back.
Ms. Roth. Thank you.
Mr. Crenshaw. Everybody knows this is a Leap Year, right?
And so today is Leap Day. And with that in mind, I think we
should jump right in.
I wanted to see if Mr. Serrano was paying attention.
Mr. Serrano. Can you say that in Spanish?
Mr. Crenshaw. No.
The budget request today is for $10.18 billion for the
Federal Buildings Fund, which is less than 1 percent below
enacted. So that is less than last year. But while your request
appears to be flat, it spends $371 million more in rental
income from agencies than it did last year.
So I caution the GSA from growing overzealous in its
requests. In the 2016 omnibus, GSA received an unprecedented
215-percent increase for construction and acquisition for
numerous construction problems. And this was a significant
increase, but this level of spending should not be viewed as
the new norm.
Therefore, I look forward to discussing GSA's request for
new construction in fiscal year 2017.
This brings me to the administration's request for the FBI
headquarters consolidation. At last year's hearing, we
discussed GSA's proposal to exchange the FBI's current
headquarters at the Hoover Building for a new 2.1-million-
square-foot facility in the greater Washington area. It was my
understanding when GSA started to pursue such a complicated
property exchange of unprecedented size that GSA was convinced
that the value of the Hoover Building would be more than enough
to pay for a new FBI headquarters. However, as we all know, the
value of anything is whatever the market will bear. And the
market has spoken so far, and the value of the Hoover Building
is $1.8 billion less than what GSA expected.
So, today, in addition to the $390 million provided in the
omnibus, the administration is asking this subcommittee for
$759 million and another $646 million from the Commerce,
Justice, Science Subcommittee. So that concerns me a little bit
about the size of this request. And I still wonder whether GSA
has the expertise to execute such a complicated transaction. So
we will have a frank discussion about that today.
To date, the Congress has appropriated $1.6 billion for
full consolidation of the Department of Homeland Security
headquarters at St. Elizabeths. The request includes another
$267 million for 2017. As GSA moves forward with its enhanced
plan for St. Elizabeths, I hope to hear more about the GSA's
continued effort with the DHS to reduce construction costs and
increase project efficiency.
The President's budget also seeks to establish a $3.1
billion information technology modernization fund within GSA to
replace legacy IT systems all across the government.
Now, as the subcommittee that oversees the Office of
Personnel and Management, we know as well as anyone about the
numerous cybersecurity and operational risks that using an old
system poses. We have been continually supportive of funding IT
upgrades as part of the agency's annual budget request.
However, I question the proposed $3 billion in mandatory
funding and $100 million in discretionary funding--for what
exactly we don't know, because the administration has not
formally transmitted legislative language to the Congress.
What I do know is that agencies should be requesting
funding to refresh their IT systems on a regular basis as part
of their regular budget requests. The IRS is a good example of
an agency that chooses to spend less and less on rudimentary IT
and is experiencing more and more hiccups.
So, now, in the fiscal year 2016 omnibus, the committee
provided GSA with construction funding to address longstanding
needs and dire conditions at Federal courthouses all around the
country. The funding provided is important to maintain an open,
accessible, and well-functioning judicial system. Today, I hope
to learn more about how GSA will work with the Judiciary Branch
to ensure the courts' needs are best met while also
safeguarding the investment of the American taxpayer.
And, finally, I want to emphasize this committee's
commitment to shrinking the Federal footprint through
reductions in GSA's inventory of leased and owned space. Over
the past several years, this committee has provided significant
funding for GSA consolidation activities, and I hope to hear
today how GSA is using those resources to reduce space, lower
rental costs, serve your customers, and ultimately save the
taxpayers' dollars.
Once again, welcome, Administrator Roth. Appreciate your
service. Look forward to your testimony.
But, first, let me turn to the ranking member, Mr. Serrano,
for any opening remarks he might make.
Mr. Serrano. Thank you. And a happy 29th day of the month
to you. So somebody who is born today celebrates yesterday or
tomorrow?
Mr. Crenshaw. Don't ask me.
Mr. Serrano. Okay.
Mr. Crenshaw. But I do know that it takes 365.2526 days to
go around the sun.
Mr. Serrano. Mr. Yoder, you should have warned me not to
ask.
Mr. Yoder. I am taking notes.
Mr. Serrano. Thank you, Mr. Chairman. I would like to join
you in welcoming the Administrator of the General Services
Administration before our subcommittee.
You were confirmed by the Senate last year after our
hearing with you, so I really want to congratulate you on
transitioning to this role more permanently.
GSA plays a critical role in making sure our government is
running efficiently and effectively, that it is open and
transparent to our citizens, and that our Federal agencies have
the resources they need in order to succeed. You combine a
variety of roles in one agency: landlord, project manager,
procurement specialist, real estate agent, IT specialist. The
list goes on and on and on.
Although you don't see the GSA's name mentioned as much in
the media and the press, this variety of roles shows just how
critical you are to how our government operates. And I think
this subcommittee recognizes that, as well.
Last year, this committee included significant new funds
for the construction of new Federal buildings, including
several courthouses. I am interested to know how these projects
are moving forward and whether the large increase has been a
problem in terms of ensuring appropriate personnel to oversee
project management.
Your budget request this year is slightly smaller but,
really, only in comparison to last year's final numbers. Your
budget includes funding for several construction projects as
well as numerous important repairs and alterations which will
help reduce the Federal backlog in both areas. You also include
funding for several new initiatives, two of which I imagine we
will spend some time discussing today.
One project that GSA has completely changed positions on is
the FBI headquarters. Last year, this subcommittee was told
that the General Services Administration planned to use their
exchange power to raise funds to purchase a new FBI campus in
either Maryland or Virginia. We were specifically told at last
year's hearing that no appropriated funds would be needed for
this project and that this committee had no role to play. Well,
something has clearly changed, since your budget request this
year includes a request for $759 million in appropriated
funding for the construction of a new FBI building.
Combined with the FBI's request of $646 million for the
same project, we are facing the exact problem that Chairman
Crenshaw and I mentioned last year: the expectation that the
Appropriations Committee is going to clean up the mess when the
exchange authority doesn't raise the funds that are necessary
for this project.
The building hasn't even been sold yet, and this request
already tells us that, whatever the proceeds are, they won't be
near enough. On top of that, it has not been made clear to this
subcommittee what the scope of this project is and whether the
funds requested this year are sufficient to fully construct the
project.
It is also somewhat troubling to receive this request when
we appear to be years away from potentially breaking ground,
unless there is an imminent announcement that we are unaware
of. I expect we will have a lot of discussion about this issue
today.
A new initiative requested this year is the IT
modernization fund. I fully support efforts to modernize our
government IT systems, but this request has not yet been
authorized, leaving us with requests for money that GSA cannot
do anything with if we actually appropriate it. I would be very
open to conversations about how to make our IT procurement
system more nimble and responsive to changing technologies, but
I am not sure if this particular request is the way to do it.
That said, by and large, I support the numerous efforts GSA
is making to ensure the Federal agencies are accountable and
effective organizations. I look forward to discussing these and
more details with you today, and this should be a very
interesting hearing.
Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you.
Now I would like to recognize Administrator Roth for your
statement. If you could keep it in the neighborhood of 5
minutes. Your full statement will be inserted into the record.
So the floor is yours.
Ms. Roth. Thank you, sir.
Good afternoon, Chairman Crenshaw, Ranking Member Serrano,
and members of the committee. Thank you for inviting me to
today's hearing on the President's fiscal year 2017 budget
request for the General Services Administration.
First, I would like to thank the committee for the robust
funding provided to the General Services Administration in the
fiscal year 2016 appropriations bill. We will continue to
ensure that GSA utilizes these funds wisely and efficiently, as
befitting the trust you have placed in our agency.
Overall, the President's fiscal year 2017 budget builds on
last year's progress of prioritizing agency real estate
consolidations and infrastructure investments to maximize space
utilization, improve security, expand trade, and spur economic
development within communities across the Nation. In addition,
this budget request seeks to enhance the cybersecurity and
efficiency of the Federal Government's IT infrastructure by
modernizing IT legacy systems.
Within the Federal Buildings Fund, I would highlight three
important projects that will strengthen our national security
infrastructure and benefit the American taxpayer.
First, GSA seeks $759 million to support the construction
of a new headquarters facility for the FBI. This new facility
will consolidate FBI employees from 13 leased locations across
the national capital region within a new, modern, and secure
facility. GSA's fiscal year 2017 budget request, in conjunction
with the FBI's $646 million request, will allow GSA to award a
contract for design and construction of a new FBI headquarters
by the end of this calendar year.
Second, GSA is requesting $267 million to continue
executing the enhanced plan for the consolidated DHS
headquarters, which will bring FEMA to the St. Elizabeths west
campus, completing nearly 80 percent of this project. The
enhanced plan for St. Elizabeths, when completed, will reduce
the Federal footprint by nearly 10 million square feet and save
more than $4 billion through avoided lease costs.
Third, GSA is requesting $248 million for the second and
final phase of the Calexico West Land Port of Entry
modernization, which will improve the security of our Nation's
borders as well as promote expanded commerce and trade and
support local economic development.
All of these investments have a significant impact on the
communities in which these projects are located. GSA recognizes
its role as an economic catalyst in these communities and works
with stakeholders to align investments with local community
planning and economic development efforts.
We also must use the Federal Buildings Fund to support the
evolving missions of our partner agencies and combat the
growing cost of real estate. Through consolidation and
innovative space solutions, we have reduced the lease inventory
by more than 3 million rentable square feet since 2012, with a
projected reduction of 3 million additional rentable square
feet by the end of fiscal year 2017.
GSA has also partnered with agencies to accelerate the
disposal of excess property. In fiscal year 2015, we helped
agencies dispose of 172 properties, generating $56 million in
proceeds.
Beyond our brick-and-mortar infrastructure is our
information technology infrastructure, on which the government
and the global economy depends. Reliable IT is vital to all of
the services the government provides. However, many Federal
agencies are unable to effectively modernize IT infrastructure
and mission-critical systems due to large upfront capital
investment needs and the increasing share of costs that
maintaining these older systems occupy in technology budgets.
To address these issues, the budget includes a request to
establish a $3.1 billion Information Technology Modernization
Fund, which would be used to retire and modernize legacy
information technology systems, to improve cybersecurity and
the delivery of services, as well as to reduce costs.
In closing, GSA has made significant progress in fulfilling
our mission to deliver the best value in real estate,
acquisition and technology services to government and the
American people. The President's fiscal year 2017 request will
enable us to move forward along this trajectory of providing
more efficient and effective services at a lower cost so that
agencies can focus on their crucial missions.
Thank you for this opportunity to be with you today, and I
look forward to answering your questions.
[The information follows:]
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Mr. Crenshaw. Well, thank you very much.
And let me start the questions. I think you probably
figured we would ask some questions about the FBI. Mr. Serrano
mentioned in his opening statement, as did I, that when we met
last year we had a pretty lengthy discussion about the whole
concept of this exchange, swap.
And a couple questions. I guess to start with, what were
you thinking last year was going to be the value of the Hoover
Building? Did you have any idea what that might be? And did you
have any idea of what it might cost to build 2.1 million square
feet?
Ms. Roth. Sir, we did have ideas that we have been working
from. We have been avoiding talking about specific costs
related to both the value of Hoover as well as the project
overall, primarily because we are in an active procurement
process currently.
Mr. Crenshaw. How did you find out that the Hoover Building
is worth $1.8 billion less than you thought it might be?
Ms. Roth. Let me say, and just in stepping back, the
project itself and what we had before, both this committee as
well as the other committee from FBI, is really a reflection of
where the project is in terms of trying to achieve the full
consolidation as well as FBI's requirement. And I would say
that over the past year we have gotten a better understanding,
as the project is coming into its maturity, of what the costs
reflect.
And so we believe with the funding both we have received
from this committee in fiscal year 2016 as well as the request
that is pending, as well as with any cost offsets that we
receive from the Hoover Building's value, would be reflective
of what is needed for the project.
Mr. Crenshaw. Well, last year $291 million was appropriated
as part of the omnibus. We were told that that would be it from
the appropriations standpoint, that would get things started.
Now, if you add up those two, it is about a billion-eight.
So I guess you can understand why we are a little
surprised, can't you?
Ms. Roth. Absolutely. And this has been an evolving
project. And the part that I would point back to, in
particular, is really what we are going to learn both from how
the market values the cost of this project as well as the
further understanding of the requirements of the project.
We have received clear indication that full consolidation
for this project was supported and something that we needed to
ensure was a priority as we brought this project to bear, and
the requests are really reflective of that.
Mr. Crenshaw. Well, how confident are you that the
valuation of the Hoover Building is correct?
Ms. Roth. We have worked very closely with FBI in terms of
just--and this is really going to the requirements overall, but
in terms of the valuation itself, we are really looking forward
to what the market responds with.
And we have the responses due back from the developers by
this summer. That is really going to be the first indication of
how they are valuing the project. And we are going to----
Mr. Crenshaw. Well, I mean, how do you know today that it
is, like, $1.8 billion less than you thought?
Ms. Roth. Really because of the requirements. As we start
to build out what the costs of the requirements are and the way
that we have worked very closely FBI over the past year, that
really has given us a sense, as well as----
Mr. Crenshaw. So, do you have an appraisal of the Hoover
Building?
Ms. Roth. The appraisal we have on record is actually an
older appraisal. We will likely do appraisals as we go through
the process this year.
But, really, what we are looking for--what we have stood up
is really compared between where the requirements are today
from FBI and having worked closely with them, what we know
about the sites themselves and having gotten through the
environmental evaluation of them, and then what we will see in
June as we get those responses back from the developers. That
is really what we are lining up.
Mr. Crenshaw. So I guess there are two sides to the
equation. If you are going to do a swap or an exchange, you
have to say what the Hoover Building is worth, right----
Ms. Roth. Yes.
Mr. Crenshaw [continuing]. And then how much is it going to
cost to build this new 2.1 million square feet.
So it sounds like you didn't have a very good idea of what
that was if you missed it by almost $2 billion, right?
Ms. Roth. I believe that what--the effort was really about
an exchange to offset any request for appropriations. I mean,
ultimately, to use the tool of the exchange and be able to get
the full project would have meant that we didn't have to have
an appropriations request.
I think, really, with having a full consolidation on the
table, as well as the requirements as we understand them to
really meet the mission of FBI, is reflective of the change
that you are seeing.
Mr. Crenshaw. Well, did you ever think about just selling
the Hoover Building?
Ms. Roth. Sure. And one of the things that we know is, with
the exchange, we can assure that the proceeds from that project
go into the new Hoover location.
Mr. Crenshaw. But, you are going to do an exchange, right?
Ms. Roth. Yes.
Mr. Crenshaw. Did you think about the fact that if you are
going to exchange the building, then the developer is going to
have some carrying costs while he builds the building? Did you
think about whether you should just sell the building, put the
money in the bank, then go ask somebody to build a new one, and
use part of the proceeds for that? How did you decide it was
better to do a swap or an exchange than to just sell the
building and then hire somebody to build you a new space?
Ms. Roth. And oftentimes we have sold the properties and
used, then, our budget request to go forward with a new
project.
Ultimately, there are a couple aspects of this proposal
that are different and unique. One of them is the fact that we
are talking about the Hoover Building, which is on Pennsylvania
Avenue, a rare place to get an opportunity to develop. I think
that that was part of bringing developers to the table and
being interested in this project.
Ultimately, if we were to do a typical disposal, we would
have to come back and ask for a larger appropriations request,
certainly, as well as then go through the process of a new
building overall. And, really, having the exchange as a part of
this can offset what we have to ask this committee for.
Mr. Crenshaw. Is this the biggest exchange you have ever
done?
Ms. Roth. This would be the largest.
Mr. Crenshaw. Has GSA ever done any other exchanges?
Ms. Roth. We have done other exchanges of varying scales. I
think that those exchanges that we have been talking about in
the recent past are the largest that we have seen in some time.
Mr. Crenshaw. Do you have any idea of how many exchanges
you have done in the last 10 years?
Ms. Roth. In terms of this scale, we have not done an
exchange of this scale.
Mr. Crenshaw. So are you still comfortable that this is
something that you have in-house capabilities to do, or is this
something you are contracting with some outside folks? How are
you handling this?
Ms. Roth. Sure. As a part of all of our construction
projects, we will definitely bring in expertise to help with
various aspects, anything from evaluating the requests, the
proposals themselves, to doing traffic studies----
Mr. Crenshaw. For instance, last year, had you brought
anybody in to give you an idea of what numbers we might be
talking about? Because, again, we missed it by at least $2
billion.
For instance, and along that line, you asked for another
billion-four. How do you know what this new 2.1 million square
feet of office space is going to cost? I mean, do you know that
yet? Where do those numbers come from? And why is half of it
from GSA and half of it from FBI?
Ms. Roth. Well, what we do know is that, having worked with
FBI very closely over the past year, having a good sense of
their requirements, that is giving us a sense of what the costs
are, just really how they are programming the space and how
they plan to utilize it.
And this really has been very much a shared effort between
us and FBI, and we have worked intensely over the past year.
And it is part of the reason you are seeing the requests come
from both agencies, because this is a shared effort. As well as
just the number itself, as you point out, would be large
overall, and definitely didn't want to overburden either budget
request.
But at the end of the day, what is really going to tell us
what we have for the project are those various pieces. What the
requirements are is really setting the cost, ensuring that we
are achieving a full consolidation as a part of this request,
and then trying to, both with the appropriations and the FY
2016 funding and the offset of the value of Hoover, really
bringing the project to bear.
Mr. Crenshaw. How did you calculate the $1.4 billion for
the appropriation request this year?
Ms. Roth. Part of it is set by the requirements of the full
consolidation.
Mr. Crenshaw. And who looked at that and decided that it
was going to cost $1.4 billion?
Ms. Roth. We do use a team of experts to support our
efforts at----
Mr. Crenshaw. So you have that laid out. Is the 2.1 million
square feet, is that right?
Ms. Roth. Yes.
Mr. Crenshaw. So now somebody said that is going to cost a
little bit more than we might have thought. Because either you
missed it on that side or you missed it on the value of the
Hoover.
I mean, I hope you can appreciate our concern is when you
come in and say, look, if we had $300 million, we got a very
valuable piece of property downtown, we can exchange it,
somebody will build us a building, and that is going to be
great, and then we still ask you what is the value, and nobody
seems to know yet, other than the new estimate is we missed it
by $1.8 billion, it is going to be $1.8 billion less than we
thought, or somehow the office space is going to cost more.
I think, as stewards of the taxpayers' dollars, we got to
have a better handle from you on where the money is going to
go. So, I mean, other members might have questions, as well,
but I did want to bring that up because I think that is
something that we are going to have to really work through.
Ms. Roth. Sure, Mr. Chairman. And it is not that we don't
know what the project scope is. It really is a reflection of
not wanting to overburden our requests. I mean, ultimately, if
we had a project for full consolidation as we do now, it will
have a large burden on our other projects, as this will, but it
is still a high-priority project.
The idea was for the exchange to offset the cost overall
and offset what we would have to request and how we were
actually staging the project. But we are talking, in terms of
where we are today, full consolidation in requirements, very
much reflective of where FBI and where this project is today.
Mr. Crenshaw. Well, and the last question. Just, that was
your idea. It was a great idea. But it doesn't sound like it
was based on reality, unless we can find out more about where
these appraisals are and all those kind of things. So I think
we are concerned about that.
Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman.
You know, Administrator, some pundits would say that it is
very easy to confuse Members of Congress. Well, this may be an
example of one where we are innocent of being easily confused.
It is just very confusing, and we are trying to get to the
bottom of it.
Based on your budget request, it seems that, in addition to
the $1.5 billion in appropriations, GSA will still need to give
the Hoover Building to the developer.
In last year's hearing, you would not tell the committee
how much the Hoover Building was appraised for, but there is no
way for us to analyze your appropriation needs without knowing
what you and the developer are assuming the Hoover Building is
worth.
Can we get the current appraised amount today?
Ms. Roth. The current appraised amount is actually from an
old appraisal. As a part of this process, we will do an
appraisal of the project.
But in terms of both the estimates and costs that are--the
estimates that are going into the project, it is a much better
situation for the government to be in to wait for responses
from the developers before we are talking about any of the
numbers--and getting through awards.
I mean, ultimately, we have three developers that are
competing. They are running estimates on the various sites as
well as the overall project as well as the value they will give
us on Hoover, and to talk about those numbers in an open
setting really will undermine our efforts.
Mr. Serrano. Okay.
Except for the military, an open setting is a public
hearing, and we usually like to get the information. But I am
not going to press you on that.
Could you at least give an idea of the appraisal value to
our staffs at the minimum? I mean, they are sworn to secrecy.
Ms. Roth. We will definitely follow up with the staff. And,
again, it really is just the integrity of the procurement
process that I am focused on. We are right in the middle of the
procurement and really just want to make sure that we get the
best deal out of it that we can.
Mr. Serrano. I understand that. But, you know, the chairman
has to respond to people or to Members who, for their own
reasons and for their beliefs, don't believe in spending
certain amounts of money. I, on the other hand, want to be
helpful in investing in the future, as they are too.
So you don't help us by telling us, ``I can't tell you that
in public.'' And I am trying to be helpful here by saying,
could you at least tell us in private so we have an idea what
we are dealing with? Because that is what we do as
appropriators; we appropriate. But we are not going to
appropriate in the dark. No party is going to do that. And it
doesn't matter who the administration is, we are just not going
to appropriate in the dark.
We need to ensure that we are getting the best price for
the government for the Hoover Building, Administrator. Is there
a chance that the building is being undervalued as part of this
exchange and would bring in a higher price if sold on its own?
Ms. Roth. I think what is unique about this exchange and
this process overall and part of what has brought the interest
to the table is the fact that Hoover itself is on Pennsylvania
Avenue, and, you know, it is America's Main Street. And,
ultimately, to be able to have access to that property, I
think, is part of what makes the package overall attractive. So
taking the exchange out would have an effect, I think, on the
project overall.
Mr. Serrano. Well, there is one part I totally don't
understand, and it might be that I didn't pay attention to what
the chairman was asking. Why is the developer getting the
building?
You know, I come from a city where developers are always
getting--people think the developers are getting more than they
should. Why is the developer getting the building? Refresh us
again. What is the developer giving us in return for getting
the building?
Ms. Roth. Well, as a part of utilizing the exchange tool,
we are actually giving the building itself, the Hoover
Building, in exchange for a new building that will serve as the
headquarters for the FBI.
Mr. Serrano. Okay. All right.
And are the FBI and the Department of Homeland Security
headquarters being treated the same? Specifically, I want to
know what the GSA request is going to be used for versus the
agency's request.
My understanding is that GSA provided a warm shell and DHS
appropriation was used for the interior. Is that the same with
the FBI's headquarters?
Ms. Roth. It is the same, the requests that are before you,
and the FBI's request is for construction.
[The information follows:]
The FBI and GSA requests for Fiscal Year 2017 appropriations will
be used toward the construction of the new FBI headquarters.
In comparison to the GSA and DHS requests for Fiscal Year 2017, the
GSA request will fund construction, while the DHS request will fund
tenant build out.
Mr. Serrano. Okay.
I am sure Mr. Yoder has some questions.
I did learn something, Mr. Chairman. I thought America's
Main Street was River Avenue where Yankee Stadium is located.
But I guess not.
Mr. Quigley. Michigan Avenue in Chicago.
Mr. Serrano. Michigan in Chicago? I should have stopped
when I was ahead.
Mr. Crenshaw. Okay. I will turn to Mr. Yoder now.
Mr. Yoder. Thank you, Mr. Chairman.
Well, I actually do represent the Heartland, which is
really the Main Street of the whole country. So you are welcome
to come anytime.
Administrator, welcome to the committee. Appreciate your
testimony today.
I wanted to ask you about your understanding of the GSA's
role at the Bannister Federal Complex in Kansas City, which is
a former facility that is closed. And I want to know a little
bit about where it is going, but I first want to talk about
where it has been.
If you are aware, the Bannister Federal Complex in Kansas
City made a variety of things. They made airplane engines
during World War II, but later they shifted and began making
components for nuclear weapons. And after, you know, many folks
dedicated their career there, they became aware that they were
exposed to significant amounts of radioactive material.
There has been some $55 million actually paid out to these
workers at a former GSA facility, but the vast majority are
frustrated and they haven't been paid. And some live in my
district; some live in Emmanuel Cleaver's district, where the
facility is located in Kansas City, Missouri.
And the types of claims that have been uncompensated are
pretty significant. You have hundreds of people with skin
cancer, beryllium sensitivity, lung cancer, prostate cancer,
chronic beryllium disease, chronic obstructive airway, female
breast cancer, asthma, kidney cancer, bladder cancer. And the
list goes on and on and on.
And so I know this is a real tragedy that has occurred
here. And these constituents are coming to me asking why their
claims haven't been paid and only a fraction have been paid.
And so I guess I would first like to know, can you provide
me any information about what the GSA's role was in that
situation in terms of informing them of what they might be
exposed to? And what are the general policies on that today for
workers that may be being exposed to materials that could
affect their health?
Ms. Roth. Yes, Congressman. Thank you for the question.
This has obviously been an ongoing item for the agency and one
that we will continue to address as concerns are raised.
My understanding--and I have spent just a little bit of
time with this item--is that we did have situations in which
there were individuals who were concerned about illnesses
related to the environmental health of the location. At this
point, GSA has not found that there was a connection between
the environmental health of the footprint that is GSA's.
Obviously, there was another activity on this site overall. But
we continue to be open and listening to any requests that are
brought forward.
But, at this stage, we don't have any that we have
identified where there was an illness and, as a relation of the
illness, that it was connected to the environmental health of
the footprint managed by GSA.
Mr. Yoder. So you are saying that the facilities weren't
managed by the GSA.
Ms. Roth. In the footprint--no, the footprint that is the
part of GSA's footprint. There is another agency----
Mr. Yoder. So what was the portion that the GSA was
responsible for?
Ms. Roth. I don't know the property well enough, as I sit
here, to talk about specifics of the separation of the site
itself. But there is a portion of the envelope that is GSA and
a portion that is managed by another agency.
Mr. Yoder. And, to your knowledge, there is no overlap in
terms of individuals that would be exposed to this radioactive
material that would be GSA employees or GSA controlled space?
Ms. Roth. Not to my knowledge, as I sit here. But we will
definitely work with your staff and work very closely with any
concerns that have been raised to your attention as well. I
would like to deal with those----
Mr. Yoder. Yeah, I mean, I just have hundreds of
constituents in my district that feel like their claims aren't
being heard, many of them suffering from devastating cancers.
Five hundred fifty-four people are deceased, and some of their
claims have been denied. The approval rate for cases involving
former workers at the plant is particularly low at just 23
percent, less than half the national average.
So it is a problem that, you know--my heart breaks for
these folks, and I want to make sure the government is doing
them justice and doing them right. So I would just like your
help, to the extent that GSA can be involved in that, to
advocate for these workers to ensure that they are being
properly compensated.
And I guess my followup is--two followups. One, what are
the measures the GSA is going to take going forward to ensure
that these types of things don't occur in the future for
properties that GSA manages? You know, what are safety measures
that you yourself believe are in place?
And then there is a timeline for cleanup of the facility
for disposal--for the site for disposal and cleanup. Can you
clarify your agency's involvement in that process?
Ms. Roth. Sure.
And, just to be clear, there were items that needed to be
investigated by GSA, and we have done so, and we will continue
to investigate any items that are brought to our attention.
There are a number of things happening at that site. Because of
the size of the footprint, we actually are expanding some
presence there on certain parts of the site. And it would
probably be worthwhile for us to come back to the committee
staff and talk through the aspects of the site.
But, overall, we take the environmental concerns of our
properties very seriously. Obviously, we have a number of
properties that we manage, and, really, the environmental
health for the employees that work there and the safety of
those employees is something that is of high concern to us.
So we will continue to--and we deal with each of our sites,
watch and monitor closely, try to ensure that we have an
understanding of any vulnerabilities that are there, and follow
up as appropriately. But we will definitely ensure that
whatever steps are necessary here to respond to your
constituents specifically and the project overall, that we
continue to do that.
Mr. Yoder. I appreciate that.
And, Mr. Chairman, I will yield back, but I will just say
that, you know, examples like these, I think, have to remind us
that we have to be vigilant in making sure that Federal workers
who work at GSA facilities or other facilities that are exposed
to harmful materials, that we do everything we can to make that
doesn't happen and make sure that they are aware of it, protect
them, and then when things do go wrong and we do have health
outcomes that we do everything to compensate them and make it
right.
I yield back, Mr. Chairman.
Mr. Crenshaw. Thank you.
Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman. And I strongly agree
with Mr. Yoder's remarks.
Ms. Roth, I understand your concern about sharing the
appraisal numbers with the 17 people watching on C-SPAN right
now. Let's talk about something perhaps that we do want the
public to know about, the Federal Real Property Profile.
I saw that GAO had found issues with the database and
questions of reliability. Now, I understand--huge database and
conflicting information coming from different sources. But it
also raised questions about the property reductions and the
associated cost savings being overstated as a result of those
inaccuracies.
Can you talk about that, just how serious that problem is
and what you are trying to do to overcome?
Ms. Roth. Sure.
And just to separate the two, in particular, the real
property database, as you point out, Congressman, does have a
lot of sources that it pulls from. And there are steps that we
have taken to work with our Federal partners in terms of
improving the integrity and quality of that data, to the extent
of ensuring that very senior-level individuals in those
agencies are seeing the data as it is being submitted, as well
as doing some mandatory drop-downs, as well as smart
assessments of information that is entered into the database
from year to year. This is something we are rolling out this
year. If square footage, for example, in a property is
drastically different from one year to the next, the database
would actually flag the agency to deal with those
discrepancies.
When it comes to disposal itself, however, we have more
accuracy around the actual activity that is occurring. So when
we are actually going through a disposal process with an
agency, we are spending more time hands-on with that property
itself and so can confirm the disposal activity and what we are
actually disposing and the savings therein.
Mr. Quigley. But the data available in the Federal Real
Property Profile is not available to the public, not available
online. I guess there are summary reports, which are kind of
Excel spreadsheets.
You know, several of us have been trying to address these
issues of excess property. It is hard to know what we have. I
am not sure anybody in the government can put a summation on
all this and what their value is. I think we need to get that
in order and begin to talk about how to make it more available
to the public.
Ms. Roth. Yes, sir, and wholeheartedly agree. We have been
working with at least the properties that are under GSA's
management to enhance how we are making those data sets
available, even to the extent that we have now a Web site that
shows a map where you can sort of ``hover'' over the locations
and get a pretty good snapshot of data as well as click into it
and get more information.
We want to be a resource for Federal agencies as they work
to make data more available and have formats and platforms that
they can pull from pretty quickly. But we will continue to work
with OMB and the other agencies on that effort.
Mr. Quigley. Let me ask you to touch on one more thing
quickly. GSA has some responsibility or helps, to a degree,
helping Federal workers gain access to childcare facilities.
Especially here in D.C., we are hearing the availability,
especially on the Hill, is long waiting lists for such things
and exorbitant costs of this sort of thing, to the point where
we actually hear people making career decisions and family
decisions based on the fact that there is no affordable child
care.
Your thoughts on this?
Ms. Roth. Well, I will be happy to follow up with your
office regarding what role we play and if there is anything we
can do to support, even to the extent of information. As the
mother of a young child myself, the idea of not having child
care that is affordable or easily accessible is, I can
understand, very problematic. So we will do everything we can
to support that effort.
Mr. Quigley. In the meantime, have you heard at all from
staff workers, other people in GSA, just about what the lists
are, the costs and so forth here, especially on the Hill, from
my own staff, for example?
Ms. Roth. I can't say that I have directly, but I will
definitely follow up.
[The Department responded for the record:]
GSA staff have reached out to Congressman Quigley's staff
to provide this information.
Mr. Quigley. I appreciate that.
Thank you, Mr. Chairman. I yield back.
Mr. Crenshaw. Thank you.
I want to ask you about the $3.1 billion fund for the IT,
but let me just finish up with the FBI. Just so you will
understand, we are pretty much, as Mr. Serrano said, in the
dark. If you come in and say, we got a building that is worth X
dollars and we are going to build a new building that is worth
X dollars, that sounds like a fair trade. But I don't know--
somehow, we have to know where you got the numbers and where
you get the number to say we missed it by $1.8 billion.
Because if you say it costs $2 billion to build a new
building but we got a building that is worth $2 billion, then
that works, right?
Ms. Roth. Yes.
Mr. Crenshaw. But if somehow there is an almost $2 billion
discrepancy, that means either, A, that the building you had
wasn't worth what you thought it was or, B, the building you
are going to build--you can't build what you thought you could
build. And we have to know that, but, in particular, when you
walk in and say, we need another $1.8 billion to finish our
project but we don't have any other number.
So somehow we have to work through that, that we don't want
you to tell all the three developers what the numbers are, but
everybody has got an idea of how much it costs to build a
building and everybody has an idea of how much a building is
worth. So, as soon as we can get that, it will make it a whole
lot easier for us.
Ms. Roth. And I appreciate it, Mr. Chairman. And we want to
work very closely and will continue to work very closely with
the committee. Obviously, we are asking for your support and
want you to feel confident about this effort. So we will
definitely look forward to continuing to follow up with you and
have discussions.
Obviously, this is a difficult project with a different
scope at this stage, in terms of a full consolidation and
understanding the requirements, and that is really having an
impact. But, absolutely, sir, I understand the position the
committee is in.
Mr. Crenshaw. Well, thank you.
Now, the $3.1 billion, you propose $3 billion in mandatory
and $100 million in discretionary. Where did that idea come
from? Do the agencies request IT upgrades every year? Three
billion dollars is a lot of money all of a sudden. How does
that work? And why is that mandatory versus discretionary?
Ms. Roth. Well, let me say, this effort overall, the IT
Modernization Fund, really grew out of the Cybersecurity
National Action Plan that the President presented. You are
aware last year we had the Cyber Sprint, and out of that
discussion and out of that evaluation it was clear that part of
the major vulnerability or major need for Federal agencies was
in the area of legacy IT and supporting the replacement of
legacy IT.
And so, as such, the idea of this Modernization Fund
specifically is to support that effort. As agencies look to
replace legacy systems, the highest cost is really that initial
upfront cost. The idea is for this fund to be a revolving,
self-sustaining fund that agencies can apply to to pay back
over a 5-year period the costs of the investment overall.
But it also has the benefit of helping us see across
government. Sometimes agencies are trying to deal with a legacy
issue in a silo in terms of its agency, itself, when, actually,
the solution actually may be something that either multiple
agencies can utilize or multiple agencies have already solved.
So we are seeing it from both perspectives, both the
business enterprise perspective of how do we rationalize and
have smart investments around our IT that can support everyone,
as well as helping to succeed and support what agencies are
faced with on a regular basis. And the requests will reflect
that. And as you pointed out earlier, the legislation resolving
this request should be to you and your other members in the
next couple weeks, the next few weeks.
Mr. Crenshaw. There will be some authorizing language, I
assume. Are you going to have to hire some more staff to
administer this fund?
Ms. Roth. Yes. There would be additional staff. It would
have a program office. And the staff and the focus of the
office would be really to evaluate the investments themselves
to give----
Mr. Crenshaw. Is that all included in the $3.1 billion?
Ms. Roth. Yes.
Mr. Crenshaw. You know, the OMB oversees all the computers
of everybody in the Federal Government. I can't remember what
the number--it is billions of dollars we spend on computers all
across the Federal Government. And we had Mr. Donovan say that
if they coordinated all the, I guess, buying of computer
equipment, they might be able to save as much as 50 percent.
So is that something you have talked to OMB about, about
how all this would work?
Ms. Roth. Absolutely. This is actually an effort we have
been working very closely with OMB. This is an outgrowth of the
Federal CIO--obviously, a part of the senior team at OMB. So
this is very much in conjunction with them.
GSA's role is really, obviously, as an administrative arm.
It makes sense for this to be coordinated through GSA. But we
have worked very closely with other agencies on their IT needs
and----
Mr. Crenshaw. How do you decide we want $100 million from
discretionary but we want $3 billion out of mandatory?
Ms. Roth. It really goes hand-in-hand. And----
Mr. Crenshaw. How do you decide we want this $3 billion
that you are not really appropriating, so you can say, well, we
only asked for $100 million. How did you decide to put that as
a part of mandatory spending?
Ms. Roth. It was the preference of--and we worked closely
with OMB, in terms of how that request came through.
Ultimately, since it is a one-time request, I believe the
thought is that we can define it as a one-time request and have
it come forward and then have it as a revolving fund.
Mr. Crenshaw. Well, it just seems like it would be one way
you could use mandatory funding to circumvent the regular
appropriations process. Because you would have to be a little,
more strict about where you are going to spend the $100 million
than the $3 billion that came from mandatory.
Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman.
You know, it is amazing, Mr. Chairman, how we always end up
talking about computers and IT, you know. And I don't know if I
was being sarcastic or profound when I suggested during the
rollout of ObamaCare that all they had to do was go to a
college dorm and get a couple of kids who would have taken care
of the problem in about 30 seconds, you know, instead of doing
everything else that happened.
You know, one of my issues on this committee for years has
been purchasing versus leasing. I think our government spends
too much money leasing and, at the end of the day, owns
nothing. Maybe there are people much smarter than me--and I am
not being sarcastic--who could argue that leasing is much
better.
But has that changed at all? Because this committee made an
effort to get people to say stop leasing for so much money and
purchase some of the places that we need in our government.
Pretty soon, the government will be leasing and leasing and
leasing and no purchases at all. Has that changed at all?
Ms. Roth. Yes, sir. I will say that the committee's support
of consolidation funds has been a tremendous effort for our
portfolio overall. We have been able to see savings year over
year since the support of that effort, as well as a reduction
of our footprint in particular.
We have very much a value on the owned property. We believe
the owned property is the best use of the American taxpayer
dollars and want to maximize our presence in the properties
that are owned by the Federal Government.
So the funding that the committee has given us, I think,
over the past 3 years--in particular, we had--I had it written
down, actually--1.4 million square feet of reduction in square
footage, over $100 million in savings on lease avoidance. And
that is having a definite impact on the bottom line.
Mr. Serrano. Okay.
Let's move on to another area that is also of great
interest to me, and it is our territories. It seems that the
territories always get left behind. And I take personal
interest because I was born in one of them, and I represent the
Bronx, which has a lot of folks that were born in the
territories.
Does GSA make a special effort through staffing patterns
and programmatic patterns to make sure that the territories are
being treated as fairly as the Constitution allows, which is
totally fair?
Because, in many cases, you will hear where they are
waiting for a building for, you know, three or four times the
amount of time that one of the States has to wait. And you
wonder, you know, they are Federal buildings, they are being
used to render services to American citizens, so why not the
same time or something close to it?
Ms. Roth. Yes, Congressman. And I know that you have had
discussions and we have had discussions over the recent past
regarding projects, in particular, in Puerto Rico. And we have
needed to ensure--and we are in a much better place now--that
we have boots on the ground as well as hands-on efforts with
any of the projects in the territories. And I think that what
we have seen in the turnaround of the projects in particular
that we have discussed, that we can do that.
And so it has a matter of ensuring that we are staying
connected to any projects that we have in the territories and
that we are keeping the same discipline across our portfolio in
terms of expectation of turnaround as well as project
management and schedule.
Mr. Serrano. Well, I would appreciate that. And you would
be not surprised but you would be happy to know that this
committee does not disagree, that we want people treated
equally, and that sometimes, because they are not a State, they
don't get treated equally.
Let me ask you a question here. In the omnibus bill, GSA is
requesting 17 percent less for construction and acquisition
than was provided in the fiscal year--I am sorry, I have it
wrong. You are asking for 17 percent less than was provided in
the omnibus for 2016. That may be understandable, given that
you received over a billion increase in construction in fiscal
year 2016.
There have been concerns from some about your ability to
handle such large increases in 1 year. How are you managing
that many projects in the fiscal year 2016 bill? And did they
impact what you requested in 2017?
I believe we must invest in infrastructure across the
country and the territories, but I also don't want to set you
up for failure by not giving you the staff to manage all of
your projects.
Ms. Roth. Sure. And I thank you for that observation.
I would say that--well, first, let me start by saying that
we very much appreciate the committee's support in the fiscal
year 2016 budget. That has been a tremendous opportunity,
especially in the area of courts that was mentioned earlier,
for us to meet some of our partner needs. And we are gearing
up, we are working very closely with the courts, in terms of
evaluating their projects, the timing of those projects, and
ensuring that we are able to move forward and execute on time
and under budget.
Across the board, we have a volume of needs that really
exceed our resources. And so what we try to ensure is that we
are able to articulate to the committee where the needs are and
what is driving our programming going forward, and to ensure
that we have the staffing lined up to manage what we can see
coming forward.
So your support has been tremendously important. And we are
doing everything, from our perspective, to line up and ensure
that we have staffing and support in the places where that
funding is focused.
Mr. Serrano. Thank you.
I know we have touched on it, but how is your IT
modernization program going?
Ms. Roth. The IT modernization for GSA, overall, it has
been a tremendous opportunity for us as an agency in terms of
really rationalizing how we are managing IT. Now, in terms of
having had a consolidation that we did internally as well as
establishing what we refer to as an investment review board to
look at large-level IT investments, really is allowing for us
to support other agencies who are moving in the same direction,
especially the outgrowth of FITARA, which was an important
effort this committee was involved with.
So we are seeing the dividends from that consolidation
activity as well as being able to support other agencies as
well.
Mr. Serrano. Thank you.
And I apologize, Mr. Chairman. I was looking at my clock,
and I thought it was going down; it was actually going up. I
know, it sounds like a Federal budget, but I don't want to hear
that comment.
Mr. Crenshaw. No comment.
Mr. Yoder is recognized.
Mr. Yoder. Thank you, Mr. Chairman.
And I am going to not take that lay-up that my colleague
Mr. Serrano just gave me there, and I am going to go back to
the Administrator.
I note in your biography that you have a history of being
sort of tech-savvy, and I think you were in the top 50 women at
tech at one point. And I actually noticed the interview you did
at one time where you said you had an early Commodore 64 and
you actually used to code your own video games.
Ms. Roth. Yes.
Mr. Yoder. That is pretty neat. So you have definitely a
tech background. Obviously, you have a love of tech.
And so I wanted to talk to you about the Real Property
Profile. And I wanted to associate myself with the comments
from colleague Mr. Quigley. He and I have long been bipartisan
in our efforts to try to resolve the concerns we have, and that
continues to be that we have struggled to find ways to quantify
the property that the Federal Government owns, both within the
GSA and all of the property--which is a secondary issue, that
not all the property is with the GSA, so you have two separate
problems there--and that we really don't have the ability to
tell our public, you know, what we own, what is vacant, what
isn't vacant, what is idle, what is owned in their community in
a way that is usable.
And so I was just sort of looking at the
RealPropertyProfile.gov. Is----
Ms. Roth. Yes.
Mr. Yoder [continuing]. That the site?
So I was pulling that up on my phone here, and immediately
I note that it is password-protected, username and password,
and there are really no instructions on here on how someone
would go about getting a password or a username.
And, you know, when I go through something like this--and,
first of all, as Mr. Quigley brought up, there are billions of
dollars of property, tens of thousands of pieces of property
that the GAO has said before are idle, but we would really have
no way to verify that.
My checkbox would be, is there public access? Is there a
mobile app that would allow people, you know, constituents to
drive around once they have it and look at things? I don't know
because it is not accessible. Is it user-friendly? Is it
comprehensive? Is it fully implemented in a way that people are
using it today make decisions that are informed that will allow
taxpayers to save money?
And so, I guess, first of all, are there other standards I
should be looking at? But, in terms of those standards, have we
met those standards? And when will we, if not?
Ms. Roth. We have been working diligently to ensure we are
meeting those standards with the data that we are putting
forward for GSA, in particular, because of the dynamic nature
that you refer to, in terms of making it easily accessible,
being able to pull it up on your mobile devise. If that is not
working, I will definitely have----
Mr. Yoder. Well, the site--you can pull it up, but it is
username-and-password-protected, and there is no description on
here, it doesn't tell you--I guess you would email Chris
Coneeney or Stephanie Klodzen and ask them how to do it. But it
doesn't say--it just says if you forgot your password or you
are a GSA employee. But it doesn't say to members of the
public, on this at least, how you do it. And I completely could
be missing something you might pull up on a desktop.
Ms. Roth. And that is not as productive as we want to be,
right? We want people to be able to access our data in the way
that they are used to with all other data in the private
sector.
Mr. Yoder. Why is it even login/password-protected? I mean,
the whole point is to make this accessible to the public,
right?
Ms. Roth. Yes, absolutely. And so----
Mr. Yoder. When does that happen?
Ms. Roth [continuing]. The idea that it is password-
protected is surprising me, as I sit here.
Mr. Yoder. Okay.
Ms. Roth. And I could be thinking about two different
places where the data resides, which would be a challenge as
well. So I will ensure that we----
Mr. Yoder. Yeah, this is RealPropertyProfile.gov.
Ms. Roth. And we have a--we have, in particular in what I
am used to seeing, is a place where you can see both,
especially for GSA's data, the data itself as well as, like I
said, a map that is interactive. The database that is a
representation of all of government, I don't know if that is
password-protected, but we want to make it as accessible as
possible.
Mr. Yoder. Well, I have brought this up, I think, now 3
years going. I brought it up to, I think, yourself last year,
your predecessors. Every year, we are bringing this up on the
record, and we are still not getting there.
One thing I think that would help is if we engaged the
private sector. You know, if this was a Google project, you
know, I think this would be--or any company out there that was
trying to do a mapping product, I bet it would move more
swiftly.
And so, I guess, what has GSA done to bring out the best
mapping and geospatial knowledge base and expertise from the
private sector to help with this?
Ms. Roth. And we actually have been able to achieve
geospatial mapping with our GSA data in particular. It is
really the data that is the rest of the Federal Government
which is included in the real property database that is
currently not available in the same format.
Mr. Yoder. I know, but, just in general, has the GSA sought
advice and worked with the private sector to build the best
mapping system? Or is it doing this internally and not using
private----
Ms. Roth. We have consulted with the private sector. I am
not sure to what extent the break happens. And we did meet
with, I think, even some members, at your recommendation from
our last hearing. There was a sit-down with a team there, as
well. So we have engaged the private sector from an expertise
perspective where needed and are also managing internally as
well.
Mr. Yoder. Well, it seems like we have a long way to go.
And I just know, given your tech background, that if you were
on the outside of this looking in, you would say: Not
acceptable. You know, the private sector would have created an
app for this years ago, and we would be able to look at every
piece of property, we would be able to compare it. Policymakers
would be able to utilize it; the public would. And the public
could assist us by finding pieces of property that were
unutilized and maybe try to repurpose them, saving us money.
And I think, whether you are a liberal or a conservative,
none of us, hopefully, like to see idle property that could
either be put to use or sold. And so it is one of those rare
bipartisan things that everyone sort of wants.
And I guess I am just asking you again to consult the
private sector or do what you need to do but to build a really
solid system and an app here that people could use that would
be efficient and effective. And I know it is something that--
you know what I am talking about, what that would look like. We
are not here with this, particularly the fact that it is not
even assessable to the public.
And so I just hope that, if we meet in this committee
again, that we will have great news and that this will be
something that, you know, the GSA can accomplish that we can
tout, that, hey, government can get things done effectively and
efficiently; we have a tech-savvy leader, and she is going to
make it happen. So let's get it done.
Ms. Roth. Yes, Congressman.
Mr. Yoder. Thank you so much.
Mr. Crenshaw. Thank you.
Let me ask you about the Federal courthouses. We
appropriated, I think, $940 million to build nine new
courthouses around the country, and they are in different
stages of development. Some are probably ready to go; some are
in plan and design.
And so, when we ask questions about the Hoover Building and
the cost of new construction, it raises concerns about what
kind of handle does the agency have on building nine new
courthouses.
How do we help you make sure that those moneys at nine
different courthouses, nine different sites, different stages
of development, how can we be assured that there won't be any
cost overruns or that those numbers that you requested, that
those are pretty real numbers in terms of getting those
projects done on time within the budget?
Ms. Roth. What has been very important and will continue to
be important there is working very closely with the courts and
especially, courthouse by courthouse, the requirements related
to each of those projects.
There have been, as you point out, Chairman, some projects
that have plans that were currently pending, ensuring that we
are bringing those forward to see how current they are,
ensuring that we are focused on the requirements, and ensuring
that the requirements are really what is needed to meet the
mission.
But I think working closely with the courts to ensure those
dollars go as far as they can is really a priority for us. And
so your support, both around funding that as well as keeping
each of the projects in alignment, making sure that we get the
most out of each project, is very beneficial.
Mr. Crenshaw. Is there a prospectus on each of the
courthouses?
Ms. Roth. There will be a spend plan coming forward in the
next few weeks. I think mid-April is the timing. And that will
be the outline of each of the projects, what they entail, all
of those pieces.
Mr. Crenshaw. Where did you get the $948 million to start
with?
Ms. Roth. It was based on the original estimates for the
projects.
Mr. Crenshaw. Okay. So we will see these new prospectuses
on each one of them, and hopefully they will match up with what
the original estimates were.
Ms. Roth. Yes, sir.
Mr. Crenshaw. And then you will work with the Judiciary and
the U.S. Marshals to make sure they have the right space, the
right security, and all that stuff?
Ms. Roth. That is right.
Mr. Crenshaw. Let me ask as one last question about the $35
million that we provided in design money--I guess it was called
a Federal civilian cybersecurity campus. I know that has been
talked about, and, finally, we put $35 million last year. This
year, there is not a request for that campus. I don't see it
anywhere in the 5-year plan.
What happened to that $35 million? Where did it get spent
or will it be spent? And where does all that fit in long-range?
Ms. Roth. The cyber project is one that we continue to work
with the partner agencies to understand requirements. Again, I
feel like I have said ``requirements'' a few times today, and I
apologize, but they are a key part of us defining the scope of
our projects and what will be programmed as a part of the
projects. And that really has a strong impact on what is needed
and necessary, as well as the timing of it.
So we continue to work with those partner agencies. And
once we get a better sense of what the requirements are and the
programming for that activity, then we would be able to come
back with a request. Those funds that you have awarded at this
point would be held for that project.
Mr. Crenshaw. So are they being used now? What are you
doing with that $35 million?
Ms. Roth. Currently, what we are doing with the project
overall is working with the agencies to scope out the----
Mr. Crenshaw. Well, the project--but it is not in the 5-
year plan. I mean, there was going to be a campus, but--so you
got $35 million last year. You didn't ask for any more money
this year. And I thought that was the planning and design
money.
But then, if you don't need more money this year and you
don't have it in your 5-year plan and we are spending a lot of
money on the Department of Homeland Security and the FBI
building, where does this new cybersecurity campus fit in?
Ms. Roth. And we will have a better sense, going forward,
where it will fit in. The----
Mr. Crenshaw. But what are you going to do with the $35
million?
Ms. Roth. We would use it for planning of this project,
but, first--once we receive the requirements.
Mr. Crenshaw. Where do you get the requirements?
Ms. Roth. From the agencies, from the partner agencies that
would be present on the cyber campus.
Mr. Crenshaw. Okay. So who is that?
Ms. Roth. It is a number of agencies. I would hesitate to
name--I know that I can't name them all, as I am sitting here,
but we can definitely follow up with the staff. But it was a
number of agencies that would have a presence.
And part of it is really the question of what would need to
be there. And in light, in some respects, of the projects you
did reference, sir, those would obviously have an offsetting
effect, potentially, for the requirements and programming of
the cyber campus. But those are the pieces we are trying to
figure out.
Mr. Crenshaw. So in the planning and design, you are really
not there yet? That $35 million for planning and design, you
are not spending that yet because you haven't figured out
exactly----
Ms. Roth. We are not able to spend those dollars yet until
we nail down the requirements.
Mr. Crenshaw. Okay. It probably would be better to have a
project and then say, here is the project and here is how much
we need to plan it and design it, as opposed to say, we need
some money for planning and design on a project that we haven't
finalized yet.
Ms. Roth. And I believe that it has been some shifting
efforts that has given us--I believe that the project was in a
different place last year, which is what brought us forward
with the request. But as we get a better sense of the
requirements, then we would be in a position to go forward.
Mr. Crenshaw. Mr. Serrano, do you have any more questions?
Mr. Serrano. Just one more, Mr. Chairman.
After last year's massive breach at the Office of Personnel
Management and Department of the Interior, there is rightfully
more scrutiny regarding government's ability to keep
information safe. Efforts are still underway to strengthen
those systems, including in GSA's own budget request to start a
new IT fund.
I have some concern that in GSA's budget you want $5
million for 20 FTE to establish a unified shared services
management office that will promote consolidation of government
systems and information. Shouldn't we ensure these systems have
the highest level of security before we further consolidate
government? Government efficiency is a goal, but so is security
and information.
Ms. Roth. Yes, sir. And I appreciate the observation.
Security with our systems is very key. And the shared services
office was stood up to support both existing shared services,
offices that are providing shared services, as well as those
who may be seeking to go to shared services. So this team, in
particular, is really supporting, as we look to go to shared
services, all the requirements of any system is being met,
including security requirements.
And, obviously, as we have learned over the past year and
we continue to enhance from our learning, the security
parameters will and are changing on systems as well. And that
would be integrated in terms of the information that this
office would share with anyone seeking to go into shared
services systems.
Mr. Serrano. Now, that refers to your office, to GSA being
able to be involved with other agencies----
Ms. Roth. Yes.
Mr. Serrano [continuing]. In this sharing. Do you think, as
it stands now, you might have to hold back and wait for a while
before we go further, or do you think you are ready to go with
consolidating?
Ms. Roth. Just to be clear, GSA would not actually be the
ones consolidating any----
Mr. Serrano. Okay.
Ms. Roth. [continuing]. Of these systems or the services.
Our team would help with the analysis and evaluations and
recommendations of which shared service provider to meet the
need of any particular agency.
So we are looking--and GSA has provided shared services in
the past, as you know, such as our financial management
services, which we have divested from, as well as our HR
services. But this office, in particular, is looking at shared
services across Federal Government and making either
recommendations for agencies who are looking to go to a shared
service or, if there are shared service providers who are
looking to upgrade or divest from their efforts, supporting
those efforts.
What we have found is that our shared services has been a
place for savings for agencies, but having the support come
from a central place would be beneficial for everyone.
Mr. Serrano. Well, I have no further questions, Mr.
Chairman.
I just want to thank you for your service to our country
and for the difficult issues you deal with on a daily basis.
Ms. Roth. Thank you, Congressman, for your support and----
Mr. Serrano. I am not thanking you for having problems
every day; I am thanking you for dealing with them.
Ms. Roth. Yes. Thank you.
Mr. Serrano. Thank you, Mr. Chairman.
Mr. Crenshaw. Do you have any closing comments?
Mr. Yoder. I rest my case.
Mr. Crenshaw. He rests his case.
Well, let me close by thanking you, as well. And, in
particular, thank you, Administrator, and your staff for
personally getting involved in a project down in Jacksonville,
Florida, which was a Coast Guard-Customs and Border Patrol
project. It had been going on since 2007. There were lots and
lots of problems, but I am told that within the next couple of
weeks the building is going to open, the Coast Guard will move
in, the Border Patrol folks will move in.
I got involved in 2013, so I am just as excited as you are
to see this project come to fruition. So you are certainly
welcome to come down to sunny Florida and view the new project.
I plan on looking at it myself the first chance I get.
But, again, thank you for your commitment to making that
happen. And, again, thank you for being here today.
And this hearing is adjourned.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Monday, March 14, 2016.
OFFICE OF PERSONNEL MANAGEMENT
WITNESS
HON. BETH F. COBERT, ACTING DIRECTOR, U.S. OFFICE OF PERSONNEL
MANAGEMENT
Mr. Crenshaw. The hearing will come to order.
Good afternoon, everyone. And we welcome our witness,
Acting Director Beth Cobert.
Thank you for being here today to talk about the Office of
Personnel Management's budget request of $321 million for
fiscal year 2017. Last time you appeared before this committee,
you were on the job for approximately 3 weeks, right after OPM
was in the headlines for months for a pair of data breaches
that compromised the privacy and security of over 21 million
people. These breaches have been described as the largest
cybersecurity attack against the United States Government. Now
that you have been on the job for more than 8 months, I want to
hear how the agency proposes to use its funds to strengthen
cybersecurity and to assist the data breach victims.
Specifically, last year, this committee provided OPM with
$21 million to improve its IT infrastructure and security. Now,
this year, your agency is requesting an additional $31 million
for additional upgrades. We are well aware of your past
attempts to modernize the Federal retirement system. That has
dragged on for close to two decades now, and that has been at
the taxpayers' expense, and that was, as we understand it,
hindered by a number of weak management practices.
Critical to the success of any large IT project is
thoughtful planning, budgeting, and collaboration at the
outset. So we look forward to discussing with you how you plan
to manage these critical IT projects.
Now, the Inspector General has had some serious concerns
about the infrastructure improvements and how you fully
overhaul the agency's technical infrastructure. The IG says
that in 2015, he did an audit that said you failed to complete
the major business case plans for capital acquisition, failed
to provide the full scope and cost of the project, and failed
to explain how legacy applications that are critical to OPM's
operations will be updated and migrated into the new IT
environment.
The committee hopes that OPM will adhere to OMB's guidance
on planning and budgeting for large IT projects, and we look
forward to hearing how you have addressed the IG's concerns to
reduce the risk of project failure. We expect OPM to also
demonstrate measurable outcomes throughout the lifecycle of
this security upgrade.
Earlier this year, the administration announced that it
would establish a new government-wide service provided for
background investigations called the National Background
Investigation Bureau. This Bureau would be housed in your
agency, but it would be funded, in part, by funds appropriated
to the Department of Defense and, in part, by fees charged to
different agencies.
Now, in the course of setting up the Bureau, you would shut
down the agency's Federal Investigative Services Office that
currently conducts these background investigations. Now,
closing this office is a significant organizational change, and
that requires OPM to submit a letter to the committee under
Section 608 of the fiscal year 2016 omnibus bill. And I am
disappointed that it took numerous requests on our part to
provide the committee with a 1-hour briefing on the Bureau that
only occurred last week, and we have yet to receive the letter.
So, as such, this subcommittee and the Defense
Subcommittee, which I am also a member of, got a lot of
questions about the outyear funding for this proposal, lines of
authority between OPM and DOD and their IGs, and the potential
for fee increases for background investigations, which would
largely be borne by these agencies. I hope you can shed some
light on these concerns today.
Lastly, I would like to discuss OPM's role in creating a
first rate workforce for the 21st century. We have been reading
about the graying of the Federal workforce for years, the
demand for skilled workers, and the need to improve the USAJOBS
online application portal. I look forward to your thoughts on
how OPM will help recruit, retain, and develop a top-notch
workforce that enables the Federal agencies to carry out their
critical missions.
Likewise, your agency must act to build a cohesive senior
management team for itself that communicates effectively with
each other, with their IG, and with Congress. With many new
senior staff joining OPM as well as recent turnover in the
high-profile positions, your agency should seize this
opportunity to demonstrate to Federal agencies how to recruit,
how to develop, and how to strengthen an exemplary management
team. So, thanks again for taking the time to meet with us.
I would like to turn now to my ranking member, Mr. Serrano,
for any remarks he might make.
Mr. Serrano. Thank you, Mr. Chairman.
I would also like to welcome Acting Director Beth Cobert
back before the subcommittee. It is good to see you, and I look
forward to hearing your testimony shortly.
As we all know, the Office of Personnel Management has had
its fair share of issues arise over the past year, and members
on both sides have expressed serious concerns. And I want to
emphasize that, this is one of those issues where both parties
have agreed that it happened; it was bad, and it can't happen
again. Something has to be done.
But I believe it should also give us more resolve to
provide OPM with the resources it needs to protect the millions
of Federal employees from having their personal information and
records compromised. Acting Director Cobert, I am confident
that you are the right person to lead the agency and help
restore trust at OPM. Your appointment comes through in the
crucial remaining months of this administration.
As the Nation's largest workforce, the Federal Government
must continue recruiting, hiring, training, and retaining the
very best and brightest. We must also ensure that our Federal
workforce is as diverse as the American people that it serves.
Our Federal employees are on the front lines of providing the
services that countless Americans depend on each and every day,
and they must get the respect, compensation, and benefits they
deserve. We must also recognize our Federal retirees and
protect the benefits that they have duly earned for their many
years of service. That is why OPM is such a critical agency.
For 2017, OPM is requesting $321 million, which is nearly
50 million more than last year's enacted level. These
investments will help OPM carry out its agency priority goals
which include enhancing the quality of background
investigations, moving toward an electronic applications
process for retiring employees, improving health outcomes for
8.2 million FEHB enrollees, and continuing to bolster the
security of OPM's information systems.
As time and technology change, the Federal Government
should work to keep up with it. That is why I support the
President's budget request for OPM, as it represents a step in
the right direction in providing those necessary investments
that the agency needs to improve in performance and the
delivery of benefits to its employees. I urge my colleagues to
join me in supporting the request as well. Although, OPM
continues to work to meet its challenges, chief among them is
protecting the valuable information of Federal employees and
retirees and continuously monitoring for possible malicious
behavior.
Last year, the majority refused to fully fund your efforts
to comprehensively address many of the IT infrastructure
challenges that you are facing. And this year, you are formally
including these funding requests within your budget
justification. In my opinion, we must support these efforts and
stand with OPM in order to protect the personal information of
Federal employees.
I thank you again for joining us this afternoon. I wish you
the best of luck with your pending nomination, and I hope my
colleagues in the Senate will act quickly to ensure your
confirmation to lead OPM during the final few months of the
President's term.
Thank you, Mr. Chairman.
Mr. Crenshaw. Well, thank you.
Now I would like to recognize the Acting Director. If you
would keep your statement to about 5 minutes. Your full
statement will be included in the record, so the floor is
yours.
Ms. Cobert. Thank you, Chairman Crenshaw, Ranking Member
Serrano, members of the subcommittee. Thank you for the
opportunity to testify before you today regarding the U.S.
Office of Personnel Management's fiscal year 2017 budget
request. As you know, OPM's discretionary budget consists of
funds from two appropriated sources which are used to perform
OPM's fundamental roles as human resources agency, personnel
policy manager, and earned benefits program administrator for
the Federal Government. These funds, the salary and expenses
and trust fund transfers, represent 14 percent of OPM's total
operating costs of $2.1 billion. OPM operates several programs
that are funded on a fee-for-service basis. These fees are
charged to other agencies based on actual costs of services
provided, and are managed through a revolving fund.
These revolving fund programs include the Federal
Investigative Services, which provides investigative products
and services for Federal agencies to use as the basis for
suitability and security clearance determinations. This makes
up the largest component of the revolving fund. Human Resources
Solutions, under which OPM provides various human resource
services to agencies. This makes up a smaller component of the
revolving fund. And USAJOBS, the U.S. Government's official
Web-based job board for Federal jobs and employment
information, which is an even a smaller component of the
revolving fund.
OPM's fiscal year 2017 discretionary budget request builds
on the progress already made with a focus on management
discipline, ensuring decisions are made based on reliable data,
and delivering excellent customer service in accordance with
OPM's Strategic Plan. OPM's budget also looks to make critical
investments, including substantial additional resources for IT
operations, funds for implementation of a new financial system
to support administration of OPM's earned benefit trust funds,
and support of OPM's Retirement Services.
To fund these critical investments, the budget proposes an
increase of $44 million in appropriated funds. OPM is
responsible for operating and maintaining the IT systems used
to support the recruitment, hiring, and management of Federal
employees and administration of their benefits. OPM is also
responsible for the IT systems that support the background
investigations process.
OPM's fiscal year 2017 request includes $37 million to
enable OPM to continue the ongoing enhancement of the security
of OPM's current IT infrastructure and systems, while
simultaneously standing up a new infrastructure called the
Shell, that is starting to be deployed this year. OPM will use
the fiscal year 2017 funding to support migrating the existing
legacy systems to this more modern and more secure
infrastructure.
A dual environment of legacy systems and the Shell must be
maintained during the migration period to allow time to replace
or re-engineer the existing systems without affecting current
services. The funds we are requesting for fiscal year 2017 are
critical to ensure OPM can continue to make progress in
strengthening the cybersecurity posture of its systems and
modernizing those systems.
Each year, OPM receives about 100,000 new retirement claims
and handles post retirement services for 2.5 million Federal
annuitants, survivors and their families. While we are making
progress in our work to improve the timeliness and accuracy of
the customer service experience for the 1.8 million calls and
emails we receive annually, challenges remain. The fiscal year
2017 budget includes $1.5 million to increase the number of
Retirement Services staff that respond to these customer
inquiries.
In January, the administration announced a framework for
strategic and structural changes to modernize and fundamentally
strengthen how the Federal Government performs background
investigations. In conjunction with this effort, OPM will stand
up the National Background Investigations Bureau, or NBIB, a
government-wide service provider for background investigations,
which will be housed within OPM. It is important to note that
OPM is not requesting additional funding for this part of the
transition work, which will be supported by the revolving fund.
DOD will design, build, secure, and operate the NBIB's
investigative IT systems. We anticipate that the process of
transitioning responsibility for the IT support of our
background investigation systems to DOD will not be completed
in fiscal year 2017, and that OPM will continue to need funding
to support and secure these systems in fiscal year 2017.
I want to thank the committee for its support of our fiscal
year 2016 budget request. OPM will continue to strengthen our
cybersecurity and IT posture, stand up the NBIB, continue to
provide quality background investigations services, support
Federal retirees, and implement the initiatives that make up
the people and culture pillar of the President's management
agenda so that OPM may lead agencies in their efforts to
recruit, train, and retain a world-class workforce. Thank you
for the opportunity to testify today, and I am happy to address
any questions you may have.
[The information follows:]
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Mr. Crenshaw. Thank you very much for that.
Let me ask you, you mention the $37 million for
cybersecurity this year. Last year, I think, there was $21
million. Was that more just general IT upgrades? That was not
so much for cybersecurity? I remember that number was thrown
around, kind of informally, that is how much--but I think at
the end of the day, was it the $21 million, that was not so
much the new cybersecurity, that was just upgrades?
Ms. Cobert. Thank you, Congressman. There is a set of
funding that we are doing to upgrade our systems, including
cybersecurity, and part of the $21 million is for that.
Initially, that is the stand-up, this new infrastructure, which
we are calling ``Shell,'' which is a modern environment where
you can more easily and more effectively deploy the tools you
need in 2016 to have for your system.
So we are deploying Shell, and we will be then, with the
money from this year, continuing that deployment and starting
the migration of systems and the modernization of systems into
that environment. So we have got cybersecurity tools that we
are still using on our systems today that make them more
secure, the new environment, and the transition of the new
systems into that environment.
Mr. Crenshaw. The upgrade part, is there a way to identify
how much that is going to cost throughout its cycle? Is that a
separate program that you are upgrading? Can you tell us what
progress you have made there, and maybe what is the full
lifecycle of that kind of project?
Ms. Cobert. Congressman, as we are doing this, we are
thinking about going through the applications one by one and
saying, what does it take? What is the most effective path from
a security perspective to move this system? What is the most
effective and efficient way to do that from a financial
perspective as well?
So, for example, in 2017, in our budget request, there is
roughly $10 million to migrate some of the more modern
distributed systems. USAJOBS and USA Staffing will get moved to
the new environment. There is also funding, a few million
dollars, that is to do the planning on the more complex legacy
systems, the older and more complex ones, that are hard to
move. We want to do that planning in 2017 so that when we make
the investments to modernize those systems, we have a clear
plan in place; we know what it will take and the funding. So we
are doing planning for migration and actual migration in 2017.
Mr. Crenshaw. So, I remember since last year, in the middle
of all the problems, the number was thrown out, well, maybe we
need about $37 million to do all that. And then coincidentally,
this year, $37 million is requested. So I just wonder how--the
Inspector General kind of raised the question, where does the
number come from? We don't want to just keep spending more
money, which sometimes happens in government. If we spend more
money, we need to solve the problem. How did you arrive at this
$37 million? And what--I think you talked a little bit about is
that you got to have a plan, and that will be ongoing. But just
tell us briefly, how that is different than what you thought
about last year? Is it more refined this year in that you know
where that $37 million is going to go?
Ms. Cobert. Congressman, thank you for the question, and we
have been working to refine this plan as we move forward and as
we learn more. So the funds to operate--part of the $37 million
is the standing up of the new environment and the costs to run
that. That part is there. We also have continued to refine and
prioritize the order in which we go after systems and the way
we go after modernizing the systems so we can assure that we
are getting benefits as we go. We have worked this through. We
have completed the OMB Exhibit 300 in the fall, and reviewed
that with the Inspector General, and expect to continue the
ongoing dialogue we have with the Inspector General and his
full staff about how we are using this money. But we have a
more refined plan. There had been a thought about modernizing
the background investigation systems, but with the decisions
that have been made about NBIB, that is going to be done
through a different forum.
So we are now focused on the ones we can move most rapidly
and effectively. That is the one we are specifically requesting
the $10 million to move those today, and to do the planning on
some of the more complex systems. You want to have more
planning, so you know how to do those right in the next phase.
Mr. Crenshaw. I got you. And along those lines in the
budget request, $6 million is requested to help build the
systems to coordinate the OPM retirement system and the Social
Security Administration retirement system. How do you arrive at
a number like that? And did you develop a plan, or will you
need some more money? Will that be an ongoing thing? Give us
some background on what goes into those kinds of decisions.
Ms. Cobert. Sure. The $6 million with Social Security is a
somewhat unique piece. The money is intended for us to be able
to coordinate OPM systems and Social Security systems to reduce
the amount of improper payments for individuals with
disabilities. OPM will make a determination about disability
payments, so will SSA, and we need to get those done in a
timely and coordinated way so we don't create improper payments
and overpayments to individuals. That is the goal of the
system.
The system dollars here, per the way we were instructed to
do this through the Bipartisan Budget Act are funds requested
by OPM, but they are actually changes in SSA systems to work
with us, so we worked in this case with SSA to develop that
estimate.
Mr. Crenshaw. And so that is an estimate to get that up and
running. That ought to save money in the long run, right? Spend
$6 million today, and if you are making $48 million in
inappropriate payments, and if you cut back on that, then you
get your money back. Money well spent. Do you expect to set up
the system one time, or do you think that is something you will
come back next year and say, well, that is either working or
not working, we need some more money?
Ms. Cobert. Congressman, I don't have the details on that,
but I can get back to you on that. I know it is intended to do
what you said, which is to put the process in place so we can
both save the money and not create confusion for lots of
citizens out there who, when they get notices about the
improper things, it is not helpful to them.
[The information follows:]
Ms. Cobert: The request for $6 million in no-year funds
represents the initial costs SSA has currently estimated it
will need to implement the law. This includes SSA's costs for
business process development, the coordination of a data
matching agreement, and system updates. Costs will be ongoing
in future years because OPM is required by the law to reimburse
SSA for its estimated costs in implementing the law.
Mr. Crenshaw. We will have time for other questions. Let's
go now to Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman.
Director, once again, let me thank you for being here today
during such a difficult time. And part of the difficulty is
this statement by the IG that any action you take during the
period where you are waiting your confirmation may not be
valid. That could be something that people pay attention to or
not. But if people make it an issue, it could create problems
for a lot of folks. What is the administration's position on
this? What are they saying? What is the legal counsel saying to
this?
Ms. Cobert. Thank you, Congressman. The administration's
position, the view from the Department of Justice who provides
the guidance on this issue is very clear, and the guidance
indicates that I am acting fully within my authorities in this
role. It is consistent with precedent across multiple
administrations of both parties. I am serving at the direction
of the President. I am confident in the guidance from the
Department of Justice in my ability to serve, and I am coming
to work every day thinking about how I can help OPM deliver for
Federal agencies, for the Federal workforce, for the American
public.
Mr. Serrano. Am I correct in--or are people correct in the
rumors I have heard or the statements I have heard that this
would become an issue only if someone were to sue over the
decision you make?
Ms. Cobert. I believe that is correct, but I am not the
lawyer, so I, again, go back to the guidance from the
Department of Justice that says I can do what I am doing every
day.
Mr. Serrano. And I am glad you have that guidance, because
I have been here for 26 years, and I can not name you which
ones, but I do remember situations where people were serving in
a position awaiting the full confirmation. It has happened
before. So I don't see any problems with you deciding to
continue to do your work.
You are asking for an increase in nontrust-fund
appropriated resources of $24.2 million, not including an
increase for the Inspector General's Office of $707,000. What
will this increase allow you to do that you would otherwise not
be able to accomplish?
Ms. Cobert. Congressman, the increases that we are
requesting in our 2017 budget are vital for us to continue the
progress we make; to continue to enhance the cybersecurity of
our systems and the valuable data that they contain; to
continue to enable us to modernize those systems; to ensure
that we have the kinds of systems we need in the 21st century
and the era that we are operating in today. They will help us
make customer service improvements in areas in Retirement
Services where we know we have challenges that we need to
address.
It will enable the ongoing programs we have to continue to
help support bringing talent into the Federal Government. So
all those things, particularly the focus on cybersecurity, are
vital to our continued progress, and the funding we are
requesting is key to enabling us to do that.
Mr. Serrano. Now, this is a question that we ask--that
comes up at every hearing, because IT is something that changes
every day. You know, every gadget we buy, in a couple of
months, it is no longer the latest gadget. So, there are people
out there with better equipment than we have, is that part of
the problem? People out there who maliciously try to find the
better equipment? And what usually happens to information when
it is breached?
I mean, I want to be clear, I don't want people taking
information from anyone that they shouldn't be taking, but when
they do get into OPM, for instance, what would they use that
information for?
Ms. Cobert. Congressman, as you know, there is a
considerable amount of----
Mr. Serrano. Of course, I am asking you to think like a
criminal, you know.
Ms. Cobert. Yeah. And so I don't want to attest to what
they might use it for. I can tell you that our focus is on
preserving that information, and we have made progress with the
funding we have been given to increase the perimeter protection
so we can detect people coming in. We have better monitoring of
the information as it flows in and out of our systems. We are
very proud that we are one of the first agencies to put in
place the EINSTEIN 3A capabilities that DHS has deployed. We
have also changed, not just by adding tools, but by adding
processes and making sure that we are working as an agency and
with our interagency partners to have strong defenses, to have
strong reactions when attacks come, to make sure we have all
the kinds of procedures we had in place, and to put in place
tools that are modern, and to continue the process of
refreshing those and using those in a smart way.
Mr. Serrano. Well, with the committee's permission, I would
ask that you keep us informed, because this is something, like
I said before, that everyone on this committee and this
Congress agrees on. This is not a partisan issue. This is an
issue of what is correct.
One last question. The administration recently announced
that it will establish a new government-wide service provider
to be housed in the Department of Defense for the background
investigations that are currently housed in OPM. How is that
going? At what point are we at with that?
Ms. Cobert. Sure. We have announced a framework with the
goal of improving both the security and IT security background
investigations, as well as modernizing the way we conduct
background investigations building on work that has been done,
for example, following the Navy Yard tragedy. So that is what
the goal of standing up the NBIB within OPM is and having DOD
as its core provider of IT systems and responsible for the
cybersecurity of that system.
We are in the early days. We have put in place that
framework. We will have the transition team in place by the end
of this month as we committed, and we will then begin the
detailed work of doing that transition as we have NBIB assume
the operations of the Federal Investigative Service, and move
forward in a way that enables us to make progress in
modernization, make progress in enhancing cybersecurity but
also minimizes the disruption to the very important operations
that go on there every day.
Mr. Serrano. Thank you so much.
Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you.
Mr. Yoder is recognized.
Mr. Yoder. Thank you, Mr. Chairman.
I appreciate your testimony, and I want to follow up on my
colleague's questions regarding the NBIB. And it would be
helpful as we engage in determining whether it is doing its
work, just sort of look at the autopsy of the OPM exposure.
Ms. Cobert. Sure.
Mr. Yoder. So if you might just recap for the committee,
now that the dust has cleared, and you have had a commission of
13 folks, I think, or something that went through all of this.
What are the main findings? How many people were impacted? What
was the cost? Do we have a way to quantify the economic impact
to the country? Do we have any measures around that? What are
the key lessons learned? What are the specific things to help
ensure that doesn't happen again? So that is sort of the first
question. I have a few follow-ups.
Ms. Cobert. Sure.
So there were two breaches at OPM that compromised
personally identifiable information. There was the personnel
records breach, and then the background investigation breach.
In total, just over 22 million combined between the two of
those, most in the background investigation breach.
We have concluded the notification process for all of those
individuals and have provided to all of them identity theft
insurance, and identity restoration services. We have also
created the opportunity for those individuals to apply for
credit monitoring and identity monitoring services, and over
2\1/2\ million people have signed up for those services. That
represents somewhat over 11 percent of the individuals signing
up, and that compares to a private sector benchmark, if you
look at similar circumstances, of somewhere in the 2 to 3
percent range.
So we have made a very active effort to reach out to
people, and we continue to remind them of the services that are
available and to encourage them to apply. So we feel like we
have gotten to people with those services. Those are now in
place, and we are working to implement the extension of those
services as was directed in the omnibus for a 10-year period.
So we have services in place for individuals.
When we look at the cost, I can talk to you some elements
of it, but we have not completed an overall estimate of what
the cost is to the economy. There has been costs of providing
those services to individuals, which was around $140 million.
This year, it will continue at a somewhat lower level in the
coming years, sort of closer to the $100 million range as we go
forward, because you don't have the setup costs that you do in
the first year.
We clearly have costs at OPM to strengthen the
cybersecurity of our systems. That will be an ongoing cost,
that is a necessary cost. I can argue that we should be
spending that money, because of what we need to do to these
systems, whether or not they had been breached. I know in
agencies across the government, there is a need to improve the
cybersecurity of all of our systems, and so we will be making
those investments.
You also asked about lessons learned. A critical question,
and one I ask myself every day. Let me lay out a couple of
things, at least, as a starting point. One, we are operating in
an environment that has a level of threat around cybersecurity
that is just fundamentally different than what it was in the
past, and we need to accept that that is the environment. We
have to find a way to adapt.
As one of my colleagues from DHS quoted, the modern IT and
Internet world was designed for offense, not defense. And for
those of us who are in the posture of defense, we have got to
figure out a way to respond to that. So that is one piece.
That does mean, too, that we have got to find a way to
continually modernize and refresh our systems. We have to have
modern tools in place. We have to do that in a regular cycle,
so we are not playing catch-up.
Third takeaway for me is that when we think about
cybersecurity, we have to build it not just into tools that
protect the systems, we have got to build it into systems, and
we have got to build it into the mindset of every individual,
whether they are an IT leader, a human resources leader, it is
everyone's responsibility. It is your responsibility to know
not to click on an email that seems interesting, but you don't
recognize. We have got to recognize that we need to change the
way we work sometimes. I take my OPM computer home with me. I
didn't used to have to do that, you know, in other
circumstances. We have to do that now.
So it is everybody's responsibility to think about
cybersecurity, think about how we design our systems, to think
about how we come together.
And the last lesson I would take away is that an effective
response demands a whole-of-government approach, and that was
one of might have great lessons from when I arrived at OPM this
summer. We had, as you mentioned, we had much of the Federal
Government working in our basement. We had DOD; we had NSA; we
had DHS; we had OMB. We had all the sorts of people, and that
group really worked together effectively to address issues, to
understand what they were, to communicate and to help us
respond, and the power of that interagency response was
terrific. And so we need to figure out how we can continue to
leverage that. That was one of the reasons, as we went to think
about the NBIB, we wanted to build on that experience to create
the relationship we have created with DOD on the IT side.
So those are some of my lessons that I take away.
Mr. Yoder. Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you.
Mr. Bishop.
Mr. Bishop. Thank you very much, Mr. Chairman.
And welcome, again, Ms. Cobert.
Let me ask briefly about the replacement of the trust fund
Federal financial service system. The trust fund Federal
financial system is a 30-year-old system used to perform
financial management accounting for the retirement health
benefits and life insurance programs which command assets over
$975 billion. Apparently, the existing system is no longer
supported by the manufacturer, can't be migrated through OPM's
infrastructure as a service platform, and it is not integrated
with OPM's core financial system. Thus, you are requesting
funds to move to a more modern financial management
arrangement.
Could you discuss the components and the features of the
new financial management system that will replace the FFS, and
tell us about the timeline for the transition to the new
system?
Ms. Cobert. Congressman, thank you.
The replacement of the system is a critical need, as you
mentioned. We are currently operating on a system that is no
longer supported by our vendor. We need to move that to a
modern system that can be supported, and supported in a secure
way.
So making that transition is important, and we need to find
a way to do that and do that quickly. This is the first year of
what will be a multiyear plan, roughly 3-year plan to get that
done. We plan, to the extent we can, to leverage commercially
available systems, other things that can do that well and do
that efficiently, and leverage existing tools across the
government in the commercial field that can do some of the
functions, but this is a pretty unique set of requirements in
terms of the nature of those systems, and that is why we need
to get started on this now and make that investment over the
next several years.
Mr. Bishop. Thank you. One of your priority goals is to
process 90 percent of your Federal retirement cases in 60 days
or less. I understand that as of March of last year, 70 percent
of the cases were processed in 60 days or less. What specific
strategies will you implement toward utilization of the goal,
and how are you working to streamline the process
electronically?
Ms. Cobert. We have a number of strategies in place to
continue to meet the target of 90 percent within 60 days, and
we are making strides in that.
Mr. Bishop. Let me just----
Ms. Cobert. Yes.
Mr. Bishop. Add to that question, I have had a couple of
employees who have retired, and they have been working with
Federal employees and have been really frustrated in their
efforts to get their retirement benefits started.
Ms. Cobert. Congressman, I share your frustration, and we
are working on this.
We have a number of strategies that we are working on to
make this happen.
The first is to make sure that we can, as the claims come
in, and typically we get a big swell of claims in January and
February, to figure out how we can, for example, staff up
during those couple critical months of the year when the bulk
of the retirement claims come in.
This year, we expanded a program that we had started last
year to bring in detailees from DFAS, the Department of Defense
Financial Accounting Systems, and from the Postal Service, who
are the two biggest sources of claims. So we brought in
detailees from those two agencies to help deal with this surge
we get in January and February. That both enables us to get
those initial payments to people faster; it also creates a
great training ground, so when those individuals go back to
their day jobs and are preparing retirement claims before they
get sent to OPM, they are much more knowledgeable about our
systems; they can help coach their peers about how to have
claims arrive more error free so that we can get through them
faster. So we continue to look to educate agencies and educate
retirees with fewer questions coming in.
We also, in the budget, have a request, as I mentioned, for
$1.5 million to help us staff up to answer inquiries. Even when
we get things going, there are sometimes claims that have
questions; we need to be able to reach out to individuals and
get back to them. We need to answer your constituents'
questions. We need staff that can answer the phone, answer
email. We have added capability to enable people to make basic
changes on their own. You can now change your address online;
you can change your bank account online. But we still need to
respond to emails and questions. So that is one of the reasons
we are asking for the funding to increase staffing in 2017.
Mr. Bishop. Thank you. I think my time has expired.
Mr. Crenshaw. We will have time for another round of
questions, but now let us turn to Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman.
Good afternoon.
Ms. Cobert. Good afternoon.
Mr. Quigley. Thank you for your service.
My colleagues have taken two of my questions, but I still
want to ask, according to OPM's latest figures, only about 34
percent of all Federal workers at the senior executive level
are women, and only about 20 percent are minorities. So it
seems as though while we have made progress over the years, we
still have a way to go. What is OPM doing to promote more
diversity at senior levels throughout the Federal Government?
Ms. Cobert. Congressman, we are continuing to work on this.
We have work to do. There are a number of particular areas
where we are working to improve diversity in the senior
executive service.
A key element of this is getting more women and minorities
into the feeder pools that create senior executive services,
the career development programs. And we are working with
agencies to help bring diversity to their programs, and make
sure that they are reaching out to get those individuals in the
program.
We heard the other day a terrific example from the
Department of Agriculture, who has made a real effort, has made
significant strides on this score. We are working with employee
resource groups to create programs to pull people into these
trainings so we have more people in the pool of folks that are
ready. It is an issue that we are working on through the
Council on Diversity and Inclusion. We are working with
agencies on specific programs. We are working across agencies,
because we know that we have more to do.
Mr. Quigley. Is there a particular growth in recent years
at one level or another? In other words, women versus
minorities? Is one segment doing better or one lagging behind?
Ms. Cobert. They have all seen gradual increases, but we
like to see it go up more. One of the challenges, you have to
look at the pool of folks coming in, because the senior
executive core itself is pretty stable. So unless you make
progress with the new individuals joining the SES, it is hard
to move the mass. And so that is why we are so focused, for
example, on this issue of career development programs and
diversifying those programs, because that is the pool that
folks will come from, particularly as SES retire in coming
years.
Mr. Quigley. But the original pool is people we hire, and
suspect if we are concerned about hiring minorities, is there
more recruitment taking place at, for example, historically
black colleges and universities?
Ms. Cobert. We have those kinds of programs. We do see
greater representation at more junior levels than more senior
levels. So it is a matter of keeping that and growing it as we
go. But the pipeline, particularly, I looked at the women one
the other day, a fair number at the more junior levels, but it
tails off as you get more senior. So it is about keeping them
in the pipeline for advancement.
Mr. Quigley. Very good.
Thank you. I yield back.
Mr. Crenshaw. Thank you. Let me ask you a couple of
questions. We talked earlier about how you arrive at numbers
like the $21 million, the $37 million, and the $6 million. As I
understand it, the OMB has--they have a requirement, they call
it IT case justification or something like that. And I know I
saw where the Inspector General said in one of those, I guess
the Shell migration, which you mentioned, that they had not
submitted that so-called business case to OMB. Is that the
case? Has that been--was that--is that old news?
Ms. Cobert. Mr. Chairman, we have submitted an OMB Exhibit
300 this past fall as part of our budget submissions. In our
work with them, we revised that based upon what we have learned
from the experience in the breach and how that would have
changed our plans. So we have done that. We have reviewed it
with our IG. In my mind, when I think about this from my
private sector experience, you need to have that plan, but you
also need a process to continue to update that as you learn
more, and that is what we expect to do.
The IT team meets with the IG on a regular basis, in fact,
has a standing monthly meeting to talk about our progress and
our plans overall. And we found that to be an effective way to
have a dialogue with them as we go, and not just wait for
reports to get their input on what we could be doing better.
Mr. Crenshaw. But it makes sense that you just don't pull
numbers out of the air. You sit down, try to write a plan, and
come to us and say, this is what we need. So you are working on
that, and we all understand that change from time to time. But
you agree as an old management person, that is a good way to
plan?
Ms. Cobert. I very much agree with you, Mr. Chairman. We
need to have a plan, and then we need to review the plan. I
know we also need to come back to this committee once a quarter
to update you on our progress, and that is another good way of
making sure that we are being disciplined in how we deliver on
our plan and adjust the plan if there are new facts. So we look
forward to that part of the dialogue as well.
Mr. Crenshaw. When we are talking about planning, I think
it has been mentioned a couple of times this National
Background Investigation Bureau. I mean, that is--at first
glance, you say you are doing that now, but you are going to do
away with an old agency and create a new agency that is going
to be housed in your agency but funded and, I guess, worked on
by DOD. At first glance, you say--who came up with that idea? I
think that was the administration, wasn't it?
Ms. Cobert. It was the joint recommendation of the PAC and
approved by the President's national security team.
Mr. Crenshaw. I don't know, do you have a thought? Have you
looked at that? I guess you have to say yes, it sounds
workable. But doesn't it--I guess at first glance, people say,
well, okay. You are making these background checks, but you are
going to do away with that agency, and I guess that is a pretty
significant change. I don't know how you do that. You create a
new one, but you don't fund it; they fund it. The question is
like, well, who is ultimately in charge of that? If it is a
success, who gets to say, take a bow? And if it doesn't work
out, whose fault is it?
I mean, there are a lot of unanswered questions. I know
this is fast-moving, but talk a little bit about how you think
this is going to work. Because I know we want to find out a
little bit more. It took a while to sit down and give us a
briefing, because I guess it is all new. But, again, some
people would criticize us and say, well, this is just another
way the government moves everything around and somehow it is
all going to be better. Tell us a little bit about what you
think is going to happen.
Ms. Cobert. Thank you, Mr. Chairman. Let me try and frame
how we thought about this and why we do, and I believe that
this is an effective, and really a good solution for us going
forward.
We started the process with a fundamental examination of
how do we make sure that we modernize the way we do background
investigations? It is a critical function. And, how do we make
sure that the data and the information system that supports
that activity are secure? We needed to deal with both of those.
As we thought about what we needed to do, we wanted to
create and build on the work that was in place to have an
enterprise service provider that was really purpose-built for
background investigations. That is what the NBIB is. And what
it does is absorb the existing work of the Federal
Investigative Service, and supplement it with additional
specialized skills it needs to carry out its mission. Privacy
is a core issue. Might need some specialized procurement
services that are currently provided through OPM, but in a
different way, have that all in one place.
What we then asked, and so we have this purpose-built
entity, and its goal is to provide background investigation
services for the full Federal Government; it is a government-
wide services provider. OPM is a government-wide services
provider. That mission is very akin to ours. When it came to
the IT, what we looked and said, what is the best place, and
what is the best way to provide IT services? DOD clearly has
scale, expertise, tools on how to do IT in a secure way when it
is focused on a national security mission, so we wanted to
leverage that capability. They also happen to be the largest
customer of the NBIB. So they are now our core supplier as well
as our largest customer.
There are many other examples in government of relying on
agencies to provide an element of services. GSA is the landlord
for the entire Federal Government in most places, because they
have skills in being a landlord. The IT skills clearly we need
from DOD are a specialized order, but we wanted to get them
from there. And so we believe this does make sense, and I, as
the Acting Director of OPM, am responsible for those
operations. That is my responsibility.
Mr. Crenshaw. And I sit on Defense Subcommittee, so, I
guess, it will be part of our appropriations. But I think there
will be a lot of questions about transparency, about
accountability, and I know it is all being worked out. Maybe
you could--I think this committee would appreciate if you give
us kind of a monthly update, since it is brand new, tell us
what is going on, how it is going, because I think this is one
of those ideas that sounds great, but we want to see it kind of
work out practically.
And the last comment I will make is down the road, I know
DOD's going to provide some of the money to start with and then
the agencies are going to, you know, have to pay for these. And
so I can see some outyears where people are saying, gee, I
didn't know it was going to cost this much. So a lot unanswered
questions, but I appreciate what you are trying to do. Just
keep us abreast. We appreciate that.
Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman.
To follow up, $37 million requested for IT seems to mirror
what the majority rejected last year. It will allow you to
operate dual networks environments as you migrate systems from
the old, less secure, to the new more secure environment. Why
is this necessary, and how is it helping to protect the
employee data?
Ms. Cobert. Congressman, we know that we fundamentally have
to take what are many old, outdated legacy systems and put them
into a new context. We put in place tools on those systems
today that have increased the cybersecurity of those systems.
We put in place tools around the perimeter of our network, but
we fundamentally need to build in security by design.
To do that, we need to modernize many of these systems, and
for many, it is a complicated task because the systems are
large and complex, and the systems are outdated. So while we
are moving those, we have to keep the old system running as
well. So we have to have them running side by side. The goal in
getting the funding, and in particular, getting no-year funding
is to allow us to make that transition as efficiently, as
effectively, and as quickly as possible. The sooner we get
through this transition, the sooner we will be able to turn off
the old legacy systems, not have to have the funding that
supports that any longer, and to have the whole set of systems
in a more secure environment.
Mr. Serrano. I can't, again, stop telling you how important
that is, and how, unfortunately, this situation has brought us
all together. I say ``unfortunately'' because I wish we all got
together on a lot of other things that we don't. But this one
is one that makes a lot of people nervous. It makes me nervous,
makes all of us nervous. And it is not what our Federal
employees should be expecting.
Your CIO recently retired. Who is acting in that role right
now? And how far along are you in choosing her successor? What
type of experience do you expect the person to have?
Ms. Cobert. Dave Vargas, who is a member of senior
executive service in the CIO's office, he has been involved in
much of the planning, for example, on the modernization, is
currently our acting CIO. We are working to fill that position
on a more permanent basis.
Your question about what I am looking for and what we will
be looking for in that position, as we think about that, we are
looking for a number of things: One, we need a strong and
proven leader who understands both cybersecurity and
modernizing IT systems. Those are very important skills.
We also need an individual who is very effective at
building networks and collaborating across the government. We
know we will need that for our work with DOD on NBIB. We are
going to continue to need that with our work with DHS on
improving our cybersecurity. So someone who can do that well.
I am looking for someone who is a disciplined leader of
getting things done. We hope that we will have the opportunity
to invest the $37 million that we have requested in our fiscal
year 2017 budget, and we want to make sure that we are spending
that well.
So we have got a terrific team in the CIO's office. We have
recently brought on board four highly experienced members of
the senior executive service and four senior leaders, SL folks,
as well. So we have a strong team. They have built a plan that
they are working together on, and I know that they will
continue to carry forward in a very thoughtful way while we are
filling this position, but I also think we can bring in a
terrific person that will continue to help them and build on
the success.
Mr. Serrano. And is it your intent to fill it as soon as
possible, of course?
Ms. Cobert. Absolutely.
Mr. Serrano. Okay. Despite Congress establishing a phased
retirement back in 2012, a vast majority of agencies still have
not yet fully implemented or made this offering available to
interested employees. What can you do now to further encourage
agencies to actually offer phased retirement? And I am not
suggesting everybody should retire. I just want the
information.
Ms. Cobert. OPM has continued to work with agencies to help
put out the guidance to explain how phased retirement works.
Now that we have that guidance, we serve as counsel to
agencies, as they are thinking about the best way for their
specific agencies to put this program in place.
In each case, they have a different set of circumstances, a
different set of constraints about what they are looking for,
and so our role is to provide them examples of the way to
translate the guidance into their specific needs, to help
provide counsel to connect them with other agencies who may be
doing things. It isn't necessarily days, but we continue to
have these discussions through the Chief Human Capital Officers
Council and through other forums so we can make sure agencies
are educated about the program, and then can make the decisions
that each agency will make about how to implement it in their
particular operation.
Mr. Serrano. All right. That is my last question.
Thank you, Mr. Chairman.
Mr. Crenshaw. Mr. Bishop.
Mr. Bishop. Thank you very much, Mr. Chairman. My final
question has to do with advanced methods of authentication. As
the modern information security measures have evolved, the
well-known, simple-username-plus-password combination is slowly
being replaced with more secure methods in various contexts.
Even my Galaxy S6 smartphone and Apple ID--Apple iPad, rather,
can utilize biometric security through built-in fingerprint
scanners.
In addition to the biometric security methods, multifactor
authentication like short text code being sent to a
preregistered mobile device for verification, is also a
feasible option that would make it much harder for our
sensitive systems to be infiltrated.
How much time and money would it take for OPM to transition
to one of these more secure methods of user authentication or
alternative method, if available, and what are the obstacles to
implementation?
I am sure it won't be easy or inexpensive, but the cost to
our country's national security and the privacy of the
individuals that are directly affected would appear to be well
worth the expense to protect our computer systems from outside
threats.
Ms. Cobert. Congressman, using stronger authentication than
username and password is absolutely a principle that we are
committed to. We have achieved the goals of the cybersecurity
sprint from last summer, about two-factor authentication to OPM
networks. Everyone needs a PIV card as a form of that two-
factor authentication now. That is in place.
We are working on having that same kind of two-factor
authentication for all the applications inside the network, so
that is another piece we are working on. So, I don't have the
specific figures for that part of it. This is a piece of the
overall modernization of our systems is to have those systems
much more able, within the application layer, to do the kind of
two-factor authentication that you are describing. But it is a
fundamental principle. We have it in place for the network, and
we will continue to look to put it in place for the rest of our
systems at the application level.
Mr. Bishop. Given the fact that all of our Federal agencies
are being asked to do more with less, what is that going to do
for productivity in terms of your workforce having to go
through all of these additional steps in order to get access to
even begin working?
Ms. Cobert. Congressman, as we move to change our operating
practices, we can do it in a way that makes it simpler. When
you come in in the morning, at least when I come in every day,
I know I have to stick my card into my computer. That is now
part of the process.
Again, as you modernize systems, it is easier to be able to
do that in a way that becomes more timely or more part of the
business flow. But, I think we are living in a world where we
need to think about how we practice cybersecurity hygiene every
day, and it is necessary, just like today, we will put on a
seat belt when we get in the car without thinking about it. I
do remember when you didn't have to do that, and it seemed like
a pain, but now it is just part of what we do. We don't even
think any longer.
And I think, frankly, we have to get cybersecurity
practices to be built into our daily habits in that same way.
Mr. Bishop. Thank you very much.
Mr. Crenshaw. Let me just--let me ask you, finally, just a
couple of questions about the data breach. I know contacting 21
million people, it isn't easy to say just get in touch with
those 21 million people. That is a pretty big undertaking. So I
am just curious how many of those--have we tried to reach all
21 million of those people?
Ms. Cobert. Mr. Chairman, getting in touch with those
people was a big undertaking. We were fortunate to partner with
our colleagues at the Department of Defense in doing that. DFAS
actually printed the letters and mailed the letters, so we
worked very closely to get in touch with all those people. We
decided to do--for the background investigation breach, to do
it all by physical mail. It was more secure. It was the best
way to get it done.
We worked to update address records through the Federal
records, supplemented those with commercial addresses. I don't
have the precise number, but it is well over 90 percent of
people have gotten their letters, and I can get back to you
with the number.
[The information follows:]
Ms. Cobert: In mid-December 2015, OPM completed its initial mailing
of approximately 20,140,000 notification letters to individuals
impacted by the background investigation records incident. OPM is
working with the Department of Defense to process returned letters and
the Department of Defense estimates that 2.9 million letters were
returned.
We also put in place a verification center. So if you
thought you should have received a letter and were concerned
that you didn't get one, you could contact the vendor or go
onto the Web site, and we would then go check and see, gee, you
should have gotten a letter, here is your PIN to sign up for
services. So we made an extensive effort to reach people. It
was a lot of work, but I think it paid off in terms of our
being able to get to people with the information they need so
they are aware of the services that are being provided to them,
and can sign up for credit monitoring and identity monitoring
if they chose to.
Mr. Crenshaw. I would say that is pretty successful. If 21
million people are out there somewhere in--through regular
mail, you touched close to 90 percent of them, because I was
going to ask you, what kind of--you get a lot of letters
returned, address unknown, whatever, but it sounds like you
pursued that. Are you still, that last 10 percent or so, are
there are still efforts being made to--somewhere, I guess, you
can't keep on forever, but what is the status when somebody
isn't found, what happens, and how long do you try to reach
them?
Ms. Cobert. The verification center is one of the methods
we put in place for that, and so we did get some return mail
and do some checks on them, but as you say, Mr. Chairman, that
loop can go on.
One of the things we have done quite actively, particularly
at the late part of the fall, was to continue, as the mailings
wound down, was to reach out through the Federal employment
network. So we had agencies, senior accountable officials who
were helping us coordinate our response, and we sent out all
employee emails multiple times to Federal agencies saying, If
you have not received a letter and you think you should have
received one, here is what you should do.
We worked where the Federal unions to get the word out to
people. We worked with the contractor association. A
significant number of people affected by the breach were
cleared contractors, contractors who have security clearances.
So we worked with the Association of Contractors so that we
could reach people and say, If you think you should have
received a letter and you didn't, here is what to do, and then
we would then, when we--those folks would submit their
information, a current address, we would send them back a
letter that says either yes, you have been breached, here is
what to do about that; or no, you have not been breached, but
here is some good things you should do to protect your identity
because we all should be out there protecting our identity.
Mr. Crenshaw. Do they report that they are--that their
identity had been stolen? I mean, do you keep track of that?
Ms. Cobert. We get weekly reports now. They used to be
daily. We get weekly reports from the vendors about how many
individuals have contacted them for identity restoration
services, and so we are monitoring that situation. We also
continue to----
Mr. Crenshaw. You got any idea--like all that suite of
services you offered, you got any idea, like, out of the 21
million people, what number or what percentage of people might
have said we would like to take advantage of that offer?
Ms. Cobert. It is a very small number. We can get you the
information. When an individual calls and says, I think my
identity had been breached, we don't ask--we can't ask what was
the source of that. We just take care of them. The vendor takes
care of them. So some of those individuals could have had their
information taken in another context, but we do maintain an
ongoing dialogue with the FBI, with the IC, and others to see
if there are any broader trends in, you know, information so
that we are aware----
[The information follows:]
Ms. Cobert: As of March 31, 2016, approximately 25 percent of
individuals impacted by the personnel records incident and
approximately 11 percent of individuals impacted by the background
investigations incident have also signed up for credit and identity
theft monitoring services. It is OPM's understanding that the average
enrollment rate for a similar sized breach industry-wide is
approximately 3.5 percent.
Mr. Crenshaw. So not a lot of people have reported theft,
et cetera, and not a lot of people have said we would like some
of those protections. They have been offered those, but like,
for instance, you can't put a number in terms of dollars what
it might have cost in the last half a year, you know, what you
expect?
Ms. Cobert. Mr. Chairman, the way the services are
structured, if your information was taken in the breach, you
are automatically enrolled in identity restoration, in identity
theft insurance. You could contact us at any time, and if you
are covered, those services will be put to work.
To monitor your identity, you actually have to provide the
vendor with your information, with your Social Security number,
so you have to choose to do that. So everyone is covered. About
11 percent have chosen to take advantage of the monitoring
services.
Mr. Crenshaw. Do we know how much that cost?
Ms. Cobert. The contract for the whole suite cost roughly
around--and again, we can get you specifics.
[The information follows:]
Ms. Cobert: OPM expects the costs to be $138M in FY16 for services
to individuals impacted by both the personnel records and background
investigations breaches. In FY17 we estimate the amount will be
approximately $90M, though this number has not yet been finalized. In
FY18, we expect it to be similar or slightly less.
Mr. Crenshaw. Yeah, I am just curious.
Ms. Cobert. $140 million in the first year, it should be
closer to $100 million in the second year. There is no setup
cost in the second year. Everybody is enrolled. So it is sort
of around that order of magnitude that was paid for through
agency contributions to the revolving fund.
Mr. Crenshaw. And do we know how long that is going to be
offered?
Ms. Cobert. It will now be offered for 10 years based upon
the provisions in the omnibus, so we will find a way to extend
coverage. The maximum coverage is 3 years. According to the
provisions in the omnibus, we need to extend that to 10 years,
and we are in the process of figuring out the best way to do
that.
Mr. Crenshaw. Does it sound like it is going down year to
year? I mean, no way to know, but the first couple of years?
Ms. Cobert. We would expect that, but we are not sure, and
part of the process for competing the next round of services,
we would have to work that through.
Mr. Crenshaw. Got you. Do any other members have any
questions? Comments?
Well, again, thank you for being here today. Thank you for
the work that you do. I know it is a big job. The whole
modernization, I think your agency is really one of those
agencies where IT is so important, and I think, in terms of
what Mr. Bishop said, that I think that is an area where, as
you said, when you go down and everybody is sitting in the
basement, you know, turning papers as we get more used to using
all the modern equipment, then we can do things much, much more
efficiently, and thank you for the efforts you are making to do
that, and thank you for your service.
This committee----
Ms. Cobert. And thank you for your support.
Mr. Crenshaw [continuing]. Is adjourned.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Tuesday, March 15, 2016.
FEDERAL COMMUNICATIONS COMMISSION
WITNESSES
HON. TOM WHEELER, CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION
HON. AJIT PAI, COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION
Mr. Crenshaw. This hearing will come to order. We just
finished a vote, and so people will be coming from the floor,
and we will have another vote, right around 4:00, but I think
we will have time to get most of our work done.
So let me start by welcoming our witnesses, Chairman Tom
Wheeler and Commissioner Ajit Pai from the Federal
Communications Commission. This is your third time together
before the committee, and I appreciate your willingness to
testify. Welcome to you both, thanks for being here today.
The focus of today's hearing is the FCC's Fiscal Year 2017
budget request. Although, like me, I am sure our subcommittee
members will have other policy items to discuss, let's start
with the Commission's funding. The Commission has requested a
total of $358 million for fiscal year 2017.
However, the Commission is yet again requesting a transfer
of non-appropriated funding from the Universal Service Fund of
$9.5 million. So in total resources, the Commission is
requesting $368 million for 2017, which by all appearances
looks like a decrease of $25.7 million, or a 7 percent decrease
from last year.
However, most of the decrease is because the remaining cost
of the Commission's headquarters move are about one-third of
last year's cost. Excluding the moving costs, the Commission is
requesting an $11 million increase in salaries and expenses.
And while the FCC is fee-funded, these fees are directly passed
on to the consumers. Anyone who has a phone can see these fees
in their monthly bill.
For this reason, I believe the costs of the FCC's
operations are closely felt by consumers, and warrant close
scrutiny by this committee and this Congress. This committee
has held the FCC's operating level flat since fiscal year 2012
because we believe the Commission can and should do less with
less. I believe the regulatory system works best when we can
encourage innovation in the free market, so that the costs to
consumers stay as low as possible. The greater the amount of
competition, the less need for regulation.
It seems, however, that for the past few years, the
Commission has been putting forward solutions that do not
always address a problem.
Last year, this committee tried to codify what you,
Chairman Wheeler, had stated publicly and repeatedly, that the
Commission would not regulate rates for broadband service. We
agree with you. We thought codifying this was a reasonable way
to go, and would give some certainty to the market. My thinking
was: if you say you are not going to regulate rates, then why
not write it down?
However, when we reached out to your office for technical
assistance in writing the language, we hit a brick wall. This
was both surprising and disappointing. I will have a few
questions for both of you on this, and I understand our friends
at the Energy and Commerce Committee marked up a bill today on
this very topic.
On a similar note, I thought the committee took a
reasonable approach to the Commission's Open Internet Order.
Last year, this committee included a legislative stay in our
bill requiring the courts to determine the legality of the rule
before it was implemented.
A decision by the courts may be handed down any day now,
and I know we will all be looking closely at the verdict.
However, I believe both the Commission and the industry feel
certain of an appeal by one side or the other and, therefore,
this committee maintains a position that a legislative stay is
necessary until the courts have their final say.
We are also looking forward to seeing how the upcoming
incentive auction goes. The EWS auction at the end of 2014 was
one for the record books, just over $41 billion in revenue, and
we expect the upcoming incentive auction to generate billions
in dollars for deficit reduction. My understanding is the
incentive auction will end within this current year, so I am
interested to hear why the Commission thinks it needs an
addition $7 million, or $124 million total, for the
administration of the auctions in 2017.
The fiscal year 2016 omnibus included language
grandfathering the existing joint sales agreements, the so-
called JSAs, for 10 years. These are agreements between
broadcast TV stations in the same market who share advertising
and other resources. The committee believes these agreements
allow TV stations to better serve viewers in smaller markets,
and ensure that these communities continue to have access to
numerous free local programming options.
However, Chairman Wheeler, I am hearing concerns from my
broadcasters in my district, regarding the Commission's recent
actions relating to JSAs, so I will have a question or two
about that as well.
And finally, I know last Thursday the Commission proposed
consumer privacy rules for Internet service providers. Many
have expressed concern that these rules would not harmonize
with the regulatory privacy framework that is already in place.
I look forward to hearing from you both on your thoughts on how
you think the FCC should best move forward in this area. I am
eager to hear from both of you about your thoughts on the
future of the Commission. The FCC has significant work to do,
and I hope that we can talk today about how this agency can
operate more efficiently and more effectively.
So thank you both for the work that you do, and your staff,
and I look forward to your testimony. Now I would like to turn
to my ranking member, Mr. Serrano, for an opening statement.
Mr. Serrano. Thank you, Mr. Chairman. I would like to join
you in welcoming Chairman Wheeler and Commissioner Pai back
before the subcommittee. This is the third year we have had
this dynamic duo, with all due respect to Batman and Robin,
before our subcommittee, and I am sure we will continue to have
a stimulating discussion on the many issues facing the Federal
Communications Commission.
Last year, the FCC was a central point of debate on this
committee for both numerous funding and policy issues. The end
result is that the omnibus removed several controversial riders
and significantly increased funding for the agency for the
first time in several years. This year, your budget request is
for $358 million in funding, which is 6.7 percent less than the
fiscal year 2016.
The reason for this decrease is that we were able to
largely fund your efforts, to save costs in the long-term, by
transitioning to a location with a smaller footprint. I look
forward to discussing how these plans are going, and how this
year's request builds upon last year's funding.
It should come as no surprise that members often take this
opportunity to discuss issues that move beyond the budget
request. In fact, last year's hearing was devoted almost
exclusively to the one topic, the FCC's Open Internet Rule. We
recently celebrated the first anniversary of that rule, and I
think that it is safe to say that it has been a rousing
success. None of the fears that opponents of the rule advanced
in the lead-up to its implementation have come to pass. There
has been increased investment, continued expansion, and
increased profits for Internet service providers. I believe
that this is a settled issue. Net neutrality is good for
consumers, good for innovators, and ultimately good for
business. Although I do not doubt that we will have some more
discussion on it today, I think it is important to recognize
the positive impact these rules have already had.
Beyond net neutrality, the FCC is dealing with numerous
issues important to consumers. Local businesses and all that
affect our constituents. From privacy to expanding the Lifeline
program to include broadband, to opening up the set-top box
market, I commend the FCC for taking an active role to better
the lives of those we have been elected to represent. I hope
that we all keep consumers foremost in our minds as we discuss
these issues going forward today. Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you. Now I would like to recognize
Chairman Wheeler, for his opening statement. If you could keep
that in the neighborhood of five minutes. Your full remarks
will be made part of the permanent record.
Mr. Wheeler. Thank you very much, Mr. Chairman, Mr.
Serrano, members of the committee. There is attached to my
statement a set of Power Point slides, that we can run through,
and I will try and truncate as much as possible to save time
here. The executive summary on the first slide shows, as you
point out, Mr. Chairman, we are down $26 million from last
year, which as you say is principally as a result of the move
reduction.
[Slide]
We have the fewest FTEs in the last 30 years. We have had
essentially a flat budget since 2010. The IT investments that
you have authorized us to make are paying off, and I will talk
a little bit about that in a minute. And you referenced the
pay-go for universal service. We have heard clearly from
Congress your concerns about waste, fraud, and abuse in that
program.
I will review that in a little more detail shortly, but the
bottom line is that there needs to be a police force, and that
police force should be paid for by those that they are
protecting, not by broadcasters and others, and that is our
proposal.
Slide 2 is a quick overview where, on the left, you can see
the base budget frozen.
[Slide]
On the right you can see FTEs at their lowest level. And as
you said, Mr. Chairman, these are all non-tax dollars.
But let's get to the meat of the proposal here on Slide 3.
[Slide]
This is a waterfall chart that starts on the left with last
year's budget, ends up on the right with what we are proposing
for this year, and shows the major changes throughout. So let's
just walk left to right. There is $4 million for salary
inflation and contract increases that are beyond our control.
There is $5 million for moving legacy apps to the cloud, which
is the next logical step of what you have funded us to do in
the past. There is $2 million for a protective analytic
software package that allows us to catch inappropriate USF
claims, and I will talk more about that in a second. And then
there is roughly $10 million funding from the Universal Service
Fund to police the USF, and we will have more on that in a
minute.
But a question arises here, obviously. If that pay-go
component is not adopted, then there is a $10 million shortfall
on the budget. And since most of our expenses are fixed, we
have limited options in terms of where our variable expenses
could be cut.
So what are the kind of variable expenses that we are
talking about, beyond USF enforcement? And they are listed on
the right side, here. Field reinvestment, we have got out-of-
date equipment in our field offices, we are modernizing our
field offices, we need new equipment for the new challenges. We
need to improve our public safety systems. We are the only
repository for information on what is happening on networks.
If you want to apply big data to cyber challenges, if you
want to apply big data to what is happening with public safety,
et cetera, we are the only folks, and we need to modernize
those systems. We need to reduce the burdens for broadcasters
and mobile operators in their licensing systems, with new
systems there. We need to make our public filing process more
transparent.
And to add a couple of other things that are not on your
chart, we need mapping tools for rural programs. We are going
to be moving into a Mobility Fund Two that will deliver
broadband into unserved areas, and then an auction to deliver
fixed broadband into unserved areas. We have to be able to map
to those areas, and current capabilities are inadequate to do
that. We need to reduce the burden on those who are seeking
equipment authorization by giving them new automated systems.
And lastly, our report from FISMA on our cyber exposure says
that we are halfway there. We have got to get the rest of the
way there.
So those are the base fees that we are talking about. If
you go to the auction page, which is page four, and do a
similar kind of read from left to right, we are looking at a $3
million decrease in the broadcast administrator that you
appropriated last year because that has been done and paid for.
There is about $1 million attributable to auctions that are,
again, beyond our control. There is a $5 million number here
for current auctions. That is apparently confusing to some, and
let me be a little more specific about that.
The incentive auction, which starts two weeks from today,
is not the only auction that we are going to be running. We
have got to run a 3.5 GHz auction, which is going to be about a
half a million licenses re-auctioned every three years. We have
the re-auction of the AWS-3 that you referenced, Mr. Chairman.
We have reclaimed some of those licenses, and we have to
re-auction them. We have got an FM radio auction that we have
to run, we have got an FM translator auction we have to run. We
have got the Connect America Fund Unserved Areas auction that
we have to run. Those costs are frankly greater than the $5
million number that you see here. But again, we have been able
to move things around to make sure that we can do all of this.
The next number here is a $4 million software
modernization. We did that software modernization in the
auction for the incentive auction, but we have not been able to
do it for the other auctions. And then lastly is the Spectrum
Pipeline Act that you all passed at the end of the last
Congress; and we will be spending $4 million to raise what has
been booked in the budget as $4 billion. What is this, why
cannot this be done, and just, you know, fold it into the
cracks? Here we are talking about custom analysis of spectrum,
and how various blocks of spectrum overlap with each other, how
that can be mitigated, and how that can open up the spectrum
blocks that you have instructed us to go find. It is a non-
trivial undertaking, and again, it is something that you
mandated us to do.
In the middle of that chart are the kind of deliverables
that come out of this. But here's an important point, and you
raised this, Mr. Chairman, so let me answer it directly.
[Chart]
If the incentive auction is coming to a close, why in the
world do we need more money? It is a very legitimate question.
And the answer to it, and I do not mean to be flip, is that the
incentive auction is not coming to a close. The gavel may come
down on the bidding part, which will probably happen sometime
in early fiscal year 2017, but the work just begins then. The
bidding is the easy part.
There are about 2,200 broadcast television licensees in the
United States. Every one that remains will have to be repacked,
may involve new channel numbers, new location of their
antennas, and somebody is going to have to oversee and
coordinate that. Interesting, in one of today's trades--yes?
Mr. Crenshaw. We are running out of time. If you could wrap
that up, we can talk about that some other time.
Mr. Wheeler. Okay, talk about that in specifics, sure. Then
I will explain. Well, let me go back here. If we cannot deliver
on this second part, which is scheduled to last 39 months, and
which the broadcasters say is not enough time, and we say we
think it is--but we guarantee it is not, if we do not have the
necessary resources. And that is what we are asking for, are
those necessary resources.
It is also equally important to the wireless industry,
because they have to get access to that spectrum, so they can
begin offering services. So the heavy lifting: it is been a
non-trivial activity to get to this point, but when the gavel
falls, we need to make sure that we all recognize that that is
just the beginning of this exercise.
Mr. Crenshaw. Okay, okay. We will finish that up.
Mr. Wheeler. We can talk on about the budget and the other
stuff. I am happy to.
[The statement of Mr. Wheeler follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Crenshaw. Now I would like to recognize Mr. Pai for his
opening statement.
Mr. Pai. Chairman Crenshaw, Ranking Member Serrano, members
of the subcommittee, thank you for holding this hearing, and it
is a privilege to appear before you once again, with my friend
and colleague Chairman Tom Wheeler. Last year, I offered three
specific suggestions regarding the Commission's budget request,
and I am pleased the subcommittee and Congress generally took
these recommendations into account.
First, Congress provided the FCC with specific budget
authority for moving the agency's headquarters, instead of
including those funds in our general budget. This was the
fiscally responsible approach, and I applaud the Commission for
agreeing with this approach in this year's request.
Second, the subcommittee rejected the FCC's request to
transfer $25 million from the Universal Service Fund to the
Commission. I opposed this transfer request at the time because
it would have imposed a stealth tax increase on the American
people. I am therefore disappointed that the Commission is yet
again seeking to siphon money from the USF. In my view, USF
funds should be spent across this country, closing the digital
divide, not at the FCC's headquarters in Washington.
Third, the subcommittee prohibited the Commission from
regulating broadband rates. I was disappointed that Congress
did not enact this prohibition, but it remains important.
Supporters of Internet regulation disclaim any interest in
regulating broadband rates.
For example, Chairman Wheeler told your counterparts in the
Senate last year, and I quote, ``If Congress was to come along
and say that is off the table for the next Commission too, I
have no difficulty with it.'' But given past experience,
Congress should not just trust promises to avoid rate
regulation.
For example, two years ago, I raised concerns about the
effect that the FCC's new policy on joint sales agreements, or
JSAs, between television stations would have on a JSA in
Wichita that enabled Entravision to provide the only Spanish-
language news in Kansas. FCC leadership assured this very
subcommittee that JSA would not be impacted, saying, and I
quote, ``There is no way, shape or form that the kinds of
positive things that you--I--have been talking about here will
not be allowed under the process going forward.''
Yet just last month, the FCC's Media Bureau ordered that
this very JSA be terminated. Given this experience, the only
way to ensure that rate regulation does not happen is for
Congress to take a Reagan-inspired approach. Trust, but codify.
Additionally, as you begin drafting our appropriations bill
for fiscal year 2017, I would like to draw the subcommittee's
attention to three additional concerns. I urge this
subcommittee to prevent the FCC from using any appropriated
funds to impose a broadband tax. By reclassifying Internet
service providers as telecommunications carriers last year, the
FCC explicitly opened the door to a tax on Internet access for
every single consumer who goes online.
Unless Congress acts, I believe that the FCC will impose
that tax. Earlier this year, Congress overwhelmingly passed the
permanent Internet Tax Freedom Act, which made permanent the
ban on state and local taxation of Internet access. Having thus
protected consumers' pockets, it would be quite unfortunate if
Congress allowed the FCC to pick them with a nationwide
broadband tax in the stealthy darkness of the next Washington
winter.
Two, I am skeptical of the Commission's proposal to raise
spending on the auctions program to $124 million. The $117
million being spent this year is a record, and it is obvious
why. This year, in a couple of weeks, we are holding the
world's first incentive auction, an enormously complicated
endeavor requiring plenty of resources, but by fiscal year
2017, the incentive auction will likely be over, and there is
no comparable spectrum auction on the horizon. A $7 million
increase in auction spending thus seems unnecessary.
Three, I recommend that this subcommittee examine carefully
the budget request for the FCC's Office of Media Relations. For
fiscal year 2017, the FCC requests 15 full-time employees, or
FTEs, for this office.
By comparison, in its fiscal year 2017 budget request, the
Federal Trade Commission only requests 10 FTEs for its media
office. I do not know why the FCC's Media Relations Office
should be 50 percent larger than the FTC's, but I do know that
there has been a disturbing mission creep within the FCC over
the last couple of years when it comes to media relations.
Specifically, non-public information is often shared with the
press, while commissioners' offices are often left in the dark.
Consider what happened just last weekend, or last week
rather, when the chairman circulated his proposal to expand the
Lifeline program. My office learned about it, not from anyone
at the FCC, but from the New York Times. Moreover, following
the publication of the New York Times article, FCC officials
held a call with a large group of reporters to spin the
Lifeline proposal before giving commissioners a copy.
Yet, somehow, the FCC's rules bar me from sharing any
details about the plan, or even the plan itself, with you or
with the American public. If the FCC's Office of Media
Relations has the time and the resources to engage in
activities more suited for a partisan political campaign than
the rule-making process conducted by a multi-member
administrative agency, then I humbly submit that it is too
large and its budget should be cut substantially.
Chairman Crenshaw, Ranking Member Serrano, and members of
this subcommittee, thank you once again for holding this
hearing. As always, I appreciate the work that you and your
tireless staff have done over the past year, and I look forward
to working with you in formulating the FCC's budget.
[The statement of Mr. Pai follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Crenshaw. Well, thank you very much. And now we will
begin a round of questions. Let's use the 5 minute clock, which
means when 5 minutes is up, that means if you are answering a
question or you are asking a question when 5 minutes is up we
will need to move on. We will probably have another vote in
about an hour and a half, so we want to try to get at least one
round of questions in. So, if everybody would try to observe
that.
Let me start by asking Chairman Wheeler about what I talked
about in my opening statement, this whole question of
regulating rates for broadband service. As you know, a couple
of times, maybe several times, you had repeated publicly that
the Commission was not going to regulate broadband service. I
think there was some vagueness in the Open Internet Order about
whether that was going to happen or not, and so people were a
little uneasy. People just want to have certainty. If you are
going to invest a lot of money in infrastructure that is going
to be out for 10 or 15 years, then you want to know what the
future looks like.
And so, when we tried to kind of come up with a language to
put that in the bill, we actually contacted your staff and
said, ``Could you help us with some technical language to
actually draft this? And, as I said in my opening statement, it
was like a brick wall. We got no response. We asked back in
June. So, I guess my question is what was the reticence? What
caused this lack of response from your staff? Do you have an
answer to that?
Mr. Wheeler. Thank you, Mr. Chairman. I think there are a
couple of things there. First of all, you know, the statement
you cite has become somewhat apocryphal. I sent a letter last
night to the chairman and ranking member of the Commerce
Committee to try and lay out exactly what had been said. And in
that context, I think that it is important to answer your
question.
The question that I had been asked was about the
forbearance that we had put in for Section 201(b) of the Act,
and somebody said and questioned, ``Well, what about if the
next chairman comes along and decides to de-forebear? And I
said, ``I have got no problem if you prohibit de-forbearing, if
there is such a word.`` And that has, you know, morphed over
time to be some comment about general regulation.
Mr. Crenshaw. Well, let me ask you. Did you say you did not
say that? And just tell us.
Mr. Wheeler. No, I was talking about----
Mr. Crenshaw. Did you say that you did not think the
Commission ought to regulate broadband rates?
Mr. Wheeler. We have forborne from regulating broadband
rates.
Mr. Crenshaw. Is that the same thing?
Mr. Wheeler. Yes. We will not regulate broadband rates.
Mr. Crenshaw. Okay.
Mr. Wheeler. And the question to me was, ``Okay, the next
guy--we trust you, but the next guy comes along, or gal, what
happens?'' And I said, ``Fine, if you want to go ahead and
codify that de-forbearance.'' But then the whole issue became
something far greater, which was----
Mr. Crenshaw. Are you explaining why they would not help us
write the language to implement what you had said?
Mr. Wheeler. My hope, sir, and my understanding is that
implementing what I said was possible. The difficulty was that
there have been multiple efforts to go far beyond, to hit the
broader question, of regulation writ large and whether the
Commission knows----
Mr. Crenshaw. All I know is when we heard you say you did
not think that the Commission would regulate rates for
broadband service, we said, ``Why not write that down,'' and we
needed some technical assistance because that is what you guys
do, and we asked your staff, ``Could you help us write that
down,`` and they did not say, ``Well, it is too complicated''
or, ``The Chairman does not have everything that he needs.''
They just did not say anything. And so, I am just really
wondering. Because if you are not going to help us do that, we
will try to do it on our own. We were giving you the
opportunity to have your staff do that and, so you need to tell
us. Because if you are not going to do it, they just need to
say, ``We are not going to do that.''
We actually, I think, got some information some time--we
asked in June, I think, and received something after some time
in November, I think. But the proposed language that was sent
did not really answer the question. So, the question is if you
will do that, I mean, if you would agree to do that, just tell
us and then tell us you are going to do it within a reasonable
amount of time. If not, say, we are not going to do it.
Mr. Wheeler. We would be happy to assist in the development
of language if it fulfills what I said.
Mr. Crenshaw. Okay. Well, then, can you do that in the next
couple of weeks?
Mr. Wheeler. Sure.
[The information follows:]
The Federal Communications Commission shall not reverse the
forbearance granted in the Report and Order on Remand, Declaratory
Ruling, and Order that was adopted by the Commission on February 26,
2015 (FCC-15-24) to the extent that the Order forbears from
application, in all or part, of sections 201-205 of the Communications
Act of 1934 to broadband internet access service, as that term is
defined in 47 C.F.R. section 8.2(a).
Mr. Crenshaw. Okay. Well, we will follow up on that.
Mr. Wheeler. Yes, sir.
Mr. Crenshaw. Okay. My time is about up, so let's keep
going and let's turn to Mr. Serrano.
Mr. Serrano. Thank you, Mr. Chairman. Chairman Wheeler, for
the first time since fiscal year 2013, the FCC received an
increase of $44 million in the most recent bill. It was mainly
for a move out of your current space that will end up saving
around $119 million according to your estimates. Hopefully,
that will encourage the subcommittees to give you more funding
in the future, since they see the good things that come from
it.
Does OMB support it and has this been done? This year, you
are actually asking for a bit of a decrease, in part because a
large chunk of the move that we funded last year is a one-time
expense, and partially because your vast $9.5 billion in
recovery of U.S. oversight costs. You have requested this in
previous years, and the subcommittee has not agreed to it, but
this is significantly modified from your previous requests.
Please explain it to us and why it is necessary. And I am
sorry that I asked you the final part first, because I want to
be supportive, as has been done before.
Mr. Wheeler. Thank you very much, Congressman. Yes, OMB
supports this. We believe that we are going to hear from GSA in
the next couple of weeks as to what happens, and as we
discussed last year, this is a two-tranche project with--the
move is, with the big costs happening this fiscal year, and
this being the follow-on closing the expenses.
Insofar as the universal service police force, if you will,
what I have been saying about how do we make sure that we
target waste, fraud, and abuse: we have had a three-tier
approach to that. The first has been to put systems in place.
We now have the duplicate database which my predecessor
Julius Genachowski started. We will be voting on an order later
this month that ends what I call the fox guarding-the-henhouse
self-certification program, and establishes a national
verifier, rather than trusting others to do it for us.
Secondly is the software program that I mentioned that
actually looks for anomalies. You take all the data that you
get in, and you apply big data principles to it, and you can
sort through and look for statistical anomalies, and say,
``Hey, we have got to go put shoe leather against that.'' That
then leads to ``Okay, how do you have the shoe leather?'' And
that is what the $9.5 request is for. I heard your message loud
and clear.
Last year, what I was saying was I think that it makes
sense that all universal service program costs should be funded
as a part of the program. I heard you loud and clear saying no.
At the same point in time, I am hearing from members of this
committee and other members of Congress about what are you
doing to police the universal service program and make sure
that the peoples' money is spent as it is supposed to be spent.
And my point is, we have got this three-tiered process in
place, but I think that the policing ought to be paid for by
what is being policed, and not by broadcasters and cable
operators and ham operators and wireless carriers and others
who are tangential to the whole operation.
Mr. Serrano. Do I have no time left? Mr. Pai, do you
totally agree with him? Maybe it is a dangerous question.
Mr. Pai. Congressman, I take a somewhat different view on
the Universal Service Fund. Zooming out to 60,000 feet, let's
think about what the purpose of the Universal Service Fund is.
It is to make sure that all Americans in this country,
consistent with Section 1 of the Communications Act, have
access to cutting edge communications services.
And so for me, that $9.5 million or $25 million last year,
whatever that number is, every dollar we take from the fund is
one less dollar for low-income students to be able to access
the Internet in your district. It is one less dollar for rural
Alaskans to be able to get fiber to their village. It is one
less dollar for people in my home state of Kansas to be able to
participate in a rural healthcare program. That is why I think
it is critical for us to treat the USF for the purpose it was
originally meant for, which is closing the digital divide.
Now, the second part of that is, I completely agree with
the chairman, that we need to root out waste, fraud, and abuse.
But under our rules and under the laws set forth by Congress,
the regulatory fees that are paid for by the people we regulate
have to be related to the cost of administering our
regulations.
And so, for example, under the Universal Service Fund, if
there are particular costs to administering it, then those
should be passed on to the people who benefit from it, for
example, wire line and wireless carriers. If there are
broadcast regulations that need to be administered, then
broadcasters have to pay for it. That is the way, I think, to
attack that problem, not to take money from one pot that is
meant to benefit all Americans and transfer it to the
headquarters in Washington.
Mr. Wheeler. May I just say just one thing?
Mr. Crenshaw. Sure.
Mr. Wheeler. That this committee has done that in the past
with this program, specifically twice having targeted
appropriations for the Office of Inspector General for the
purpose of delivering the kind of thing that I have just been
talking about, and then those have not been funded in
subsequent years.
Mr. Crenshaw. Thank you. I will turn it over to Mr. Graves.
Mr. Graves. Thank you, Mr. Chairman. Chairman,
Commissioner, good to see you. It is timely you are here today,
given an issue that has been in the news recently about set-top
boxes and I want to talk about that in a minute, and feel free
to define that term also. It is an industry term, I assume.
But just knowing what interest you have taken as a
commission of recent, and then knowing how the industry over
the past several years have just been doing some amazing things
with new technology. In fact, bringing programming to
individuals, people, wherever they are, whenever they want to
watch something, and now understanding that the Commission is
moving into a new phase of wanting to regulate or mandate
various items within this sector.
So, for me, and I guess, for the committee as well, knowing
that your interest is always consumer protection in many
different ways. Generally things like this come from an outcry
somewhere, so Commissioner Pai, maybe you can just help us
understand, what is the problem that is trying to be solved
here, and where did it derive from?
Mr. Pai. Thank you for the question, Congressman.
Unfortunately, the problem to the extent there is one, in the
marketplace for navigation devices or set-top boxes, whatever
you want to call that clunky, expensive equipment that nobody
seems to want, is the fact that the FCC has had a highly
intrusive set of regulations to create the market that it
thought it wanted. The problem is that the marketplace, as
typically happens, has greatly outpaced where regulations are.
Twenty years ago, I used to watch Seinfeld using a set-top
box that would transmit information to my television screen.
Last night, I touched my smartphone, pulled up a Crackle app,
and watched Seinfeld's show with Steve Martin, Comedians in
Cars Getting Coffee, and this is just how different the
marketplace is. And so, for the FCC, it does not seem to me we
should be doubling down on this 1990's technology that nobody
seems to want. We should be encouraging an app economy,
something that is much more consumer friendly, that is more
flexible, that is more competitive, because in the future,
three years from now, which is the earliest point at which
these proposed regulations could possibly take effect, who
knows where the marketplace could be.
The Amazon Echo could be the navigation device, the set-top
box of the future, or it could be an app. So, I tend to think
we should focus more on some things that are actually
concerning to consumers, as opposed to trying to issue
backward-looking technological mandates that will not solve a
problem.
Mr. Graves. And so, what is the overarching problem,
though, that the Commission is trying to solve?
Mr. Pai. Well, the problem as stated by the FCC's majority
is that the marketplace for set-top boxes is not competitive.
And their argument is that the market share held by certain
cable operators for the set-top boxes is large, and that people
really do not buy competitive set-top boxes. But it seems to me
that if you talk consumers, especially younger consumers who
are often on the leading edge of the video revolution, they do
not think about, with any excitement anyway, the next set-top
box that the FCC is going to help them get into their homes;
they are thinking about ways to access video directly through
much more technologically-sophisticated means.
Mr. Graves. Right. And you referenced apps, and I know you
can pretty much go to any website, whether it is a--I do not
know, any sports website, and if you want to watch the sports
programming, you would log in under your login or preference
based on your provider of some sort.
So, access is currently there, and I guess my question, and
maybe, Chairman, you could help me understand this, how does
imposing a new mandate benefit the industry in any way or
consumers in any way? Because traditionally, I think, our
understanding is that mandates create barriers oftentimes, and
less access.
Mr. Wheeler. Thank you, Congressman. Excuse me. Yes, I
agree that the world is going to software and apps.
Unfortunately, the example that Commissioner Pai gave about how
you could tune your channel using an Echo is not possible,
because the cable operators do not give the information that
would be necessary for an Echo to operate. And therein lies the
rub.
This Congress has said, in Section 629 of the
Communications Act, that ``there shall be available to
consumers, competitive alternatives for navigation devices.''
And there has not been, for the last 20 years. We have now
gotten to a point where technology makes that possible. The
very apps that you are talking about, that kind of approach,
the very fact that you can protect copyright and watch things
on your iPad, your Android device, or your smart TV, is the
same kind of thing that opens up this opportunity.
And when there is a clear cut, black-letter mandate from
the Congress saying consumers shall--not may--shall have
choices and the Commission shall do this--that is what we are
following through on, because 99 percent of American VMVPDs--
the cable and satellite subscribers have no choice in what
their boxes are or their apps are. You take that which is
provided to you by the cable company.
All we are saying is we want to provide all the same
protections the cable operator has today, but just make sure
that they talk to these other devices, like the commissioner
mentioned, an Echo, or anything else, so that that can control
open access. And they need to make a decision, do I need to
have the $10 a month that I keep paying for this box? I mean,
the average home pays $230 a year for a box they really do not
need. And that they are told that they have to rent. It is like
the old days when we used to have to rent phones.
Mr. Graves. Mr. Chairman, if I could just follow up. How
does this differ from, in the past, paid programming? You know,
whether it be sports programming or movie programming,
Showtime, HBO, or any other programming? What is the difference
in that today and in the past, and why----
Mr. Wheeler. I am not sure I understand the question. If
you are saying, would there be--sorry. Thanks.
Mr. Graves. What is an equal access? At that time, you had
to go through a provider, you had to have paid.
Mr. Wheeler. And you still would under this proposal.
Nothing changes. What happens is that the cable operators
content, the tiers they have, the authorization as to whether
you can record, the protection for privacy--all of these kinds
of things remain the same. The information that they send
upstream today only talks to a device that they control. And we
are saying open up that so it can talk to other devices, just
like your smart TV talks to Netflix or Hulu, or whatever the
case may be, and allow for that kind of openness, so the
consumer has a choice between paying that $10 a month, every
month, month after month, or having an alternative choice.
But you know, let's be clear. We do not want to infringe on
the structure of the programming part that cable operators are
doing. This is a proposal, and if there are holes in the
proposal that they are concerned about, we want to hear from
them. But the fascinating thing is, this is also a proposal
that happens to track what they proposed in 2010, when they
came forward and said, Let's do something like this.
Mr. Graves. Under this proposal, it did allow cable
providers to have access to Netflix or other programming that
is outside of that set-top box.
Mr. Wheeler. Cable providers?
Mr. Graves. You mentioned broadcasters, cable--you were
talking about the box in which they----
Mr. Wheeler. So, today, what----
Mr. Crenshaw. Can you just give a ``yes'' or ``no'' on
that, because we have got to move on?
Mr. Wheeler. There is a flaw in the assumption.
Mr. Crenshaw. We will come back to that.
Mr. Wheeler. Okay.
Mr. Crenshaw. Let's go now to Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman. Let's stay on the
set-top box because it is what everybody at home cannot wait to
hear about. One of the concerns you mentioned was privacy.
Mr. Wheeler. Yes, sir.
Mr. Quigley. So, if you got third party people competing,
opening up this market to them, do you have the authority, does
the FCC have the authority to require these set-top box
manufacturers and app developers to meet the privacy
protections that we would be concerned about?
Mr. Wheeler. Thank you, sir. We have the authority to say
that you do not have to deliver those signals to a box that
does not meet the privacy requirements that we have. And then,
the FTC and the state A.G.s have the same kind of authority
that they have on the boxes that they have over smart TVs and
everything else.
Mr. Quigley. Do you think that still meets the same
concerns, having to do it that way?
Mr. Wheeler. I think that it is actually tougher privacy
than exists today. You know, you can access information on your
smart TV. You know, Samsung put out an alert a couple of weeks
ago, saying, ``Make sure, when you are talking in front of your
TV, that you are aware that we are listening to you, and that
we are going to be mining that information.''
Mr. Quigley. Well, let me just mention the other issue that
was brought up along those lines, and that is the copyright
protections.
Mr. Wheeler. Right.
Mr. Quigley. As you have gone forward with this rule, you
know, have you all been working with U.S. Copyright Office,
making sure that what we are seeing is accurate, as far as they
are concerned?
Mr. Wheeler. We want to maintain all the existing copyright
protections, and part of the whole process, obviously, is
working with the Copyright Office, sir.
Mr. Quigley. Okay.
Mr. Pai. Congressman, one of the things that I think is
remarkable about his proceeding is that dogs and cats, so to
speak, have come together: video distributors and video
programmers have spoken with a unified voice, saying that they
have great concerns, especially when it comes to copyright. And
one of the reasons why--one of the examples they give is
advertising. Nothing in the proposal the FCC adopted, over my
dissent and the dissent of one of my colleagues, would prevent
a third party set-top box manufacturer from taking the
programming stream, which includes certain advertising, and
either removing that advertising and inserting their own, or
layering their own advertising on the side.
And one of the concerns is that the third party set-top box
manufacturer would be monetizing their knowledge about what you
watch, when you watch, how you watch it, how often you watch
it, et cetera, and inserting its own advertising, and that is a
species of the privacy concern that they have.
Similar concerns have been voiced on the copyright side as
well. And so, I think it is remarkable for those two entities,
as I said, to unify on this, and it speaks to the fact that I
think the FCC really needs to proceed with great caution.
Mr. Quigley. So, we are in a hurry. Quick response. The
incentive auction, repackaging all these stations. We have set
aside $1.7 billion to the fund that cover the entire costs or
repackaging more than 1,400 TV stations. We are hearing that it
is going to be far more expensive. What do we do?
Mr. Wheeler. So, I think that we will know that later
because you do not know what the answer to that question is
until you know who is participating in the auction. We will
have a good feel of that within 90 days of the close of the
auction, and I will be--if there is not enough money, I will be
the first person to say so. I will be leading the parade to
come back up here and say, ``Yes. We need money in that pot.''
But the important thing, also, I just want to reiterate
what I said about the budget, is that if we cut the amount of
money that we are requesting in the auction, which is an
increase, it is going to have an impact on the ability to move
these broadcasters and to do the kind of coordination that is
necessary.
Mr. Quigley. And I guess if you want to comment, great.
Thirty-nine months, same thing. Is this enough, or are you
going to ask for an extension?
Mr. Wheeler. So, you know, we have studies, there are all
kinds of studies--the NAB first filed and said 30 months. Now,
they say it may be 10 years. I think we will know that, again,
when we know the scope of the challenge that we face. We have
also built into our 39 months a waiver process. So, if it does
not work for this station or that station, there is a waiver
that they can get. But again, that is something that we would
make an assessment of, when you know what the facts are, rather
than the hypotheticals.
Mr. Quigley. Given the limit of time, I just want to make
sure if you want to comment.
Mr. Pai. Thank you, Congressman. With respect to the
budget, the $1.75 billion that Congress allocated for the
relocation fund is all that we have got. And so, that is why I
proposed a couple of years ago that we treat that as a budget,
because otherwise, it comes out of the pockets of the
broadcasters who have to repack. I am not sure whether we are
going to exceed that number, but if we do, then I think it will
be ultimately up to Congress to make a determination.
With respect to timing, I think if we get credible
information that it will take longer than that, then we have to
consider what options we have at the FCC, the waiver process
the Chairman mentioned, or Congress may have to take action as
well to ensure that we do not have a train wreck.
Mr. Quigley. Thank you, gentlemen.
Mr. Crenshaw. Thank you. Mr. Yoder.
Mr. Yoder. Thank you, Mr. Chairman. Chairman Wheeler,
Commissioner Pai, welcome back to committee. It is always one
of the more interesting, entertaining hearings that we have
each year.
Mr. Wheeler. Could the record just show that we just agreed
on something?
Mr. Yoder. Yeah, that is right. Let's take a moment, just a
moment of silence there. Rod talked to you, Commission Pai. It
is March Madness.
Mr. Pai. Amen, Congressman, America's team.
Mr. Yoder. And we are the number one, number one. I do not
know if anyone noticed that or not.
Mr. Pai. Speaking impartially, I agree with you.
Mr. Yoder. Yeah, thank you, thank you. I want to ask you
both about the issue surrounding joint sales agreements. And as
we know, joint sales agreements have been credited with a lot
of positive things, saving millions of dollars in my state,
allowing for the only local Spanish language channel in Kansas.
It has even been credited with saving lives due to tornadoes
and such, where Doppler radar has been invested in in Joplin
and other parts of the country.
And in spite of bipartisan support, in 2014, the FCC made
significant changes to the ability for entities to continue to
have joint sales agreements, and effectively ended many, if not
all, of the joint sales agreements. And I understand that there
has been some concerns of bad actors, but it appears we have
thrown the baby out with the bathwater.
This subcommittee then, last year, included language in its
appropriations bill that superseded, grandfathered the
agreements that were in place, I think on March 31st, 2014, and
that language did not say unless the parties change hands, or
unless the legal entities change. It said that the agreements
themselves were superseded.
I know Chairman Wheeler, and Commissioner Pai, you have
seen the bipartisan letter from senators that range pretty far
across the spectrum. You have got Senator Blunt to Dick Durbin
to Mikulski to Chuck Schumer, Cory Gardner, Tim Scott, you
know. It is kind to get all those folks together and agree on
something, so you have got them to agree that they believe that
the FCC, in essentially prohibiting and unwinding those
agreements as violating not only in spirit but the letter of
the law that was passed through his subcommittee last year.
And so I guess, Chairman Wheeler, I give you a chance to
respond to those concerns, and then Commissioner Pai, to give
your perspective on it as well.
Mr. Wheeler. Thank you, Congressman. The precedent at the
Commission has always been that when a license is sold, and a
new license is issued to a new buyer, it is a new license, and
the terms and conditions that were once ascribed to the
previous license and the previous owner do not transfer. We
have held that for 30 years across a vast array of cases. And
that is the situation here that--you see, Congressman. All JSAs
at the date that you passed your rider are grandfathered. But
when the license goes away, and a new license is issued, the
terms and conditions of the deceased license do not transfer.
Mr. Yoder. Mr. Pai, do you agree with that? And then, what
are the practical results of that interpretation of the law we
just passed a couple months ago?
Mr. Pai. Thank you for the question, Congressman. I think
it is very disturbing that two years ago, in this very room,
the FCC committed to this very subcommittee that that
particular JSA would be protected. ``Nothing that we are doing
will make this go away,'' according to the chairman, back in
2014.
In the meantime, Congress overwhelmingly and in a
bipartisan way told the FCC, ``We want you to grandfather any
JSAs that are in existence.'' And as you pointed out, there was
not any wiggle room for license transfers, or the like. The law
was the law. And I would humbly submit to you that if the
agency is to be bound by the principle that ours is a
government of laws and not of men, then we need to respect the
bipartisan will of Congress, as expressed in the law, and as
recently as last Friday, reified by a pretty diverse group of a
dozen senators.
And I think we also need to think about the impact that
this is going to have on the industry going forward. If the FCC
is not bound by the law that is set forth by Congress, if it is
essentially left to its own whim, then we are going to be left
in the situation we were in before Congress said, which is--
before Congress spoke, which is that we have this inchoate
waiver process where a few favored parties might get a waiver
and the vast majority of them do not. That does not create a
lot of certainty for the industry. That is also not fair for a
lot of the parties who entered into these transactions years
ago and were explicitly told by the FCC they were okay.
So, I think Congress certainly needs to be much more
specific next time, if necessary, to make sure that this does
not happen again.
Mr. Yoder. Chairman Wheeler, I kind of agree with
Commissioner Pai here. And it seems like the intent of
Congress, regardless of precedent within the FCC was to protect
these agreements, and the practical realities of them are that
now they are being eliminated. How do you respond to that?
Mr. Wheeler. So, I guess I would just agree with Gray
Broadcasting, who was involved in this transaction, who filed
with us and said, The new law does not automatically
grandfather the KDCU TV JSA because Gray was not a party to the
KDCU TV JSA or any other JSA that was in effect. That has been
longstanding processes at the Commission in multitudinous kinds
of issues.
Mr. Yoder. Thank you, Mr. Chairman.
Mr. Crenshaw. Thank you. Mr. Bishop.
Mr. Bishop. Thank you very much, Mr. Chairman, and welcome,
Mr. Chairman and the commissioner. I want to talk about the
set-top boxes again. I have heard comments from minority
content providers that the FCC's proposed set-top box rule may
negatively impact revenue for these content providers because
set-top box manufacturers may be able to add layers of
advertisement that would de-value the advertising slots that it
incorporated into the program.
Have you commissioned any studies, internal or external, to
determine the impact--to project the impact of the set-top box
proposal on minority programmers, and the availability of
diverse programmers programming for consumers?
Mr. Wheeler. Thank you, Congressman. You know, the
interesting thing about minority programming is where you stand
depends on where you sit. There are approximately four African
American-owned cable channels in the 500-channel universe. They
have a good thing going. They like it.
Mr. Bishop. Right.
Mr. Wheeler. There are well over 100 who are seeking
access, have been denied access, and see this as an opportunity
to get access. You know, there is a division on this issue of
those that have, and those that have not. And what we are
trying to do is to see that there is a system that creates open
opportunity for everybody. And if you get locked out by the
cable operator, you are not sent over here into some
programming purgatory where nobody will ever see what we have
got, and that is what we are trying to accomplish.
Mr. Bishop. So, have you done a study on the----
Mr. Wheeler. On the advertising issue? I am sorry?
Mr. Bishop. No, on the impact that the rule would have on
those four.
Mr. Wheeler. That is what we are doing.
Mr. Bishop. Or any of those others who are trying to get in
who have not gotten in yet?
Mr. Wheeler. That is what we are doing right now. That is
what the process of this notice and comment.
Mr. Bishop. So, you are doing----
Mr. Wheeler. We are seeking the comments for everybody to
come in, both pro and con, and present, for the record, their
own information on which we can make a decision.
Mr. Bishop. Got it. Okay. With regard to the auction
repackaging, several broadcasters in my district met with me
recently to discuss some of their concerns regarding the
upcoming spectrum incentive auction, and they told me that a
39-month deadline for repacking spectrum may not give them
enough time because of the number of stations expected to be
moved, which is predicted to be well over 1,000. And the
limited availability of tower crews and tower manufacturers,
and even seasonal weather days. So, what considerations has the
FCC given to creating this 39-month deadline, and does the FCC
have any plans to extend the deadline, if it appears to be a
problem for a considerable number of stations in order to get
the job accomplished?
Mr. Wheeler. Thank you, sir.
Mr. Bishop. The available crews, and----
Mr. Wheeler. Yeah, it is a legitimate issue that has been
raised. I go back, again, to the budget. And if you cut the
auction budget, it is going to have a direct impact on our
ability to oversee this transaction. I hope that it is over
1,000 that are going to sell their licenses, but I do not know
what the answer is. And obviously, if 500 participate, it is a
different scaling challenge than it is with 1,000.
Again, I think Commissioner Pai and I are in accord on the
fact that, A, we need to have a waiver process, and B, if this
situation comes in, and it is so large that we have problems,
then we have to revisit that whole thing. But right now, you
know, there have been numerous studies. I mean, some people
say, 39 months is plenty.
As I said, the National Association for Broadcasters first
filed and said 30 months was plenty. Others say, ``No, you need
much longer.'' We really will not know until we know how many
licenses we are talking about.
Mr. Bishop. All right. My question is that, if it appears
as if more time is needed, will you be flexible enough to
extend the time so that----
Mr. Wheeler. Yes, sir. We have waivers, first of all. And
second of all, if there is this flood that needs to be dealt
with, then it would be irresponsible if we do not deal with it.
Mr. Bishop. All right. Do I have any more time left?
Mr. Crenshaw. Yeah.
Mr. Bishop. Okay.
Mr. Crenshaw. Four seconds.
Mr. Bishop. Oh, well.
Mr. Crenshaw. No, go ahead.
Mr. Bishop. Okay. The Internet is critical, obviously, in
today's society to facilitate education, work, and for keeping
in touch with loved ones, particularly in rural ones, like my
district. But to realize the benefits of some of the higher
broadband width applications like telehealth, faster speeds are
needed. The Commission recognizes, last January, when it
changed the definition of broadband to 25 megabits per second
and 4 megabits per second for download and upload speeds,
respectively, as well as by increasing the bandwidth
requirement for the receipt of Connect America funding.
Unfortunately, many rural Georgians still have speeds below
that threshold. Can you discuss the efforts that the FCC is
undertaking, as well as any future plans you might have to help
close the gap between rural and urban America to ensure that
this large segment of our population does not remain locked out
of education and business opportunities? And the follow up to
that would be, do you have any plans to increase minimum speeds
for Connect American Fund to a level on par with the definition
of broadband for the rest of the country?
Mr. Wheeler. Yes, sir.
Mr. Crenshaw. Mr. Wheeler, you got 10 seconds. He used up
all your answer time. So, quickly, if you can.
Mr. Wheeler. I am aware of everything he is talking about,
and I would love to exchange--maybe we can get a specific--we
can get an off sidebar here, we can talk about it. But yes, the
answer is I believe that there are solutions on both of the
things that you raised.
Mr. Crenshaw. Let the record reflect his question lasted
more than four seconds.
Now, recognizing Mr. Womack.
Mr. Womack. Thank you, Mr. Chairman. Good to see Mr.
Wheeler and Mr. Pai again. While I was out, I understand that
the ranking member asked a question of the chairman, and I want
to come back to Commissioner Pai on it for a response. Noting
the statement on page 4, the budget request, and I quote, ``In
addition, the Commission requests the transfer of $9.5 million
from the Universal Service Fund to the Commission to cover
costs related to the oversight of the USF programs for the
enforcement of bureau, and for the office of managing
director.''
Commissioner Pai, do you believe it is appropriate for the
Commission to operate outside the oversight of this committee,
and seek to use the USF, intended to the provided vital
telecommunication service to those who may not otherwise have
it, to support general operations of the Commission?
Mr. Pai. Thank you for the question, Congressman. I
absolutely do not, first and foremost, because the purpose of
the USF, as you pointed out, is to close the digital divide
across the country, not to administer programs here in
Washington, D.C.
Mr. Womack. Very good. Thank you. Chairman Wheeler,
focusing on the incentive auction, and its potential impact on
TV stations and viewers in my state, it is my understanding
that broadcast stations being repacked with their assigned,
specific dates by which they have to be operating on their new
channels. How will these dates be established?
Mr. Wheeler. So, again, we have to see what repacking is
necessary, and we will not know that until after the auction.
Again, it is a very complex issue. The reality is that every
station relates to every other station because it is a question
of how you avoid interference.
So what you do here in one station has an impact hundreds
of miles away, and so it is a very arduous process. It depends
upon how many stations there are in each market. It is why I
said, during my direct testimony, that the kind of request that
we are asking for in terms of auctions, it is crucial so that
we can deal with this, because it is going to be a big deal. It
has been no easy task to get to this point in the auction. But
when the gavel falls, the game is not over. It is just
starting.
And the broadcasters have the right to expect that we will
make decisions working with them and help them through their
problems. And yes, there are a limited number of tower crews,
there is a limited number of building times. There are all
kinds of limitations they face. And the wireless companies have
a right to expect that what they paid billions for, they are
going to be able to get access to now, not five years from now.
That is a very arduous process.
Mr. Womack. How do you take into account adjacent markets
and the potential interference in these dates?
Mr. Wheeler. How do you take them into account? You work to
reduce the potential interference.
Mr. Womack. I mean, there will be interference.
Mr. Wheeler. What we are trying to do is to build a program
that leaves them with an equivalent market to what they had
before they went into the auction. And that means protecting
them from interference. So I am not willing to stipulate to
that assumption, sir. Our goal is to make sure that we have put
together a package and, again, it is arduous, that makes sure
that this kind of interference does not happen.
Mr. Womack. Commissioner Pai?
Mr. Pai. I agree with the Chairman that it is arduous, and
I agree that software is going to be necessary. So this is
about getting software to structure that the remaining
broadcasters in such a way as to not cause interference. One
thing I would include as a caveat, however, is that there could
be interference by design. And what I mean by that is that the
band plan that the FCC adopted, over the objections of
virtually everybody in the industry, the broadcasters, the
wireless companies, and unlicensed advocates, would, for
example, place broadcasters, full-power broadcasters, in the
middle of the wireless band. In the duplex gap for example, you
could have a broadcaster that could cause interference to other
wireless carriers. And so that is one of the reasons why I
expressed concern along the way that this band plan would
essentially incorporate, potentially incorporate interference
into the remaining market, the resulting marketplace after the
incentive auction is over.
Mr. Womack. Good. Mr. Chairman, how much time do I have
left?
Mr. Crenshaw. Twenty-eight seconds.
Mr. Womack. I know that look on your face when I have only
got 28 seconds. There is not enough time to answer this. Maybe
we can do this for the record. But I have a privacy question,
maybe another round, we can come back to it. Thank you, Mr.
Chairman. I will yield back.
Mr. Crenshaw. Mr. Rigell.
Mr. Rigell. Thank you, sir. Thank you, Mr. Chairman. And
Chairman Wheeler, Commissioner Pai, thank you for being here.
It is one of the more interesting hearings that I attend, and I
always learn something from this.
So let me get right to it. Page 3 and page 4 of your
written testimony, Commissioner Pai, paints really a troubling
picture of--and it speaks for itself, but it is an increasing
level of distrust, if you will; and I do not want to
characterize it. It is here, it is written, but it is
troubling. And circumvention of maybe the more expected
communication methods from the chairman to the other
commissioners. And I am really going to direct the question to
the chairman because I think he needs to address it directly.
Bottom of Page 3, for example, indeed the trade publication
Communication Daily reported last December that, ``The FCC
stands out--'' not for exceptional performance here--that is my
words--``but for its extensive use of events where officials
speak on behalf of the FCC to groups of reporters, but the
officials cannot be identified by name or quoted verbatim.''
And on Page 4, the Lifeline program where Commissioner Pai
indicates that he did not learn about that from your office,
Mr. Chairman, but instead from the New York Times. So would you
please respond to that as to why that does not seem that things
are healthy in your agency.
Mr. Wheeler. Thank you, Congressman. You know, one of the
challenges we face is that the topics we discuss are very
complex. I think it is why you say that this is one of the more
interesting hearings that you have, or at least I hope it is.
And so, do we hold briefings so that people understand exactly
what we are proposing? Yes, sir. Insofar as the New York Times
article was proposed, I mean, you know, when we were before the
Senate Commerce Committee, several of us testified that we were
about to bring out a Lifeline order. Commissioner O'Reilly had
a blog talking about the Lifeline order we were shown before it
surfaced. It was not a great secret that we were working on a
Lifeline order.
Mr. Rigell. Well, let me just say that I think the
commissioner put it in because it is a sincerely and deeply
held assessment and a troubling one of the agency. And, you
know, to the extent that we serve as some type of board of
directors on this, and I know we are probably the last ones to
talk about how to work across the aisle here, but that needs
attention.
Let me pivot over to something that a local constituent on
the eastern shore of Virginia has brought to our attention. He
is concerned about whether repackaging or repacking, the sharp
increase and the demands on the supply chain, are really going
to stretch it beyond its breaking point. I guess if you are one
of those vendors, all good.
But could you put this in somewhat of a--some context for
us? Is it a 50 percent increase in the load, 100 percent
increase in the load? Is it going to roll out from East Coast
to West Coast? Can we ship in--like sometimes, you know, when
you have a storm, all the tree companies kind of come in, and
then you roll--how is that going to work?
Mr. Wheeler. Thank you, Congressman. And your constituent
has identified a very real issue. I mean, I was shocked to find
what the number of actual antenna erectors are. And we have to
think about it in a regional approach, for instance, because
you have got to represent whether you ought to be able to get
scale and move a team in there and hit this area and then move
on to the next area and that sort of thing.
Again, this is something we have to orchestrate. This is
why all of the incentive auction issue is over, ``You do not
need to spend any more money,'' is something I have been saying
to this committee. We need to make sure we have got the money
to address these problems because it is going to be hard. There
are going to be challenges. We cannot scope them right now
because we do not know whether it is 500 or 1,000 licenses that
are going to end up being repacked.
Mr. Rigell. All right. So I see. So you have really got to
have the auction to get a full grasp of just the physical
aspect of this.
Mr. Wheeler. Yes, sir. But Commissioner Pai and I are in
violent agreement on the fact that we need to have a waiver
process to take care of interim things, and if there is a need
to revisit it, because the realities--I mean, we are moving
from dealing now with, well, here is this study. Oh, but here
is this other study. You know, pick which study you want to go
with--we are going to have a real life study, and we are going
to know----
Mr. Rigell. Finally, until that light turns red right
there, I do want to ask you, you mentioned something that was
very troubling, not about the agency there, but about--Sandy
was saying about listening in. Was that----
Mr. Wheeler. Samsung.
Mr. Rigell. Samsung.
Mr. Wheeler. Yes, sir.
Mr. Rigell. Sorry. Okay, Samsung. In a literal sense,
what----
Mr. Wheeler. Yes, sir.
Mr. Rigell. Well, my time is up, but I would like to----
Mr. Wheeler. I will be happy to talk to you off the record
about that.
Mr. Rigell. Okay. Thank you, mister. Thank you.
Mr. Crenshaw. Well, we have had one round of questions. We
are going to vote very, very shortly, and it is about an hour's
worth of votes. So I think it would be hard to keep our
witnesses here and then turn around and come back an hour
later. So let's keep going and we will go as far as we can. And
real quick, my time ran out, and I did not get a chance to ask
Commissioner Pai to comment on this whole issue about rate
regulation. I think we got some interesting thoughts from the
chairman. Give us your take on this situation.
Mr. Pai. Thanks for the question, Mr. Chairman. This is a
pretty remarkable issue. President Obama, on November 10th,
when he instructed the FCC to adopt Title 2, said, ``But I do
not want you to regulate rates.'' The chairman said to this
committee and to others, publicly, ``The FCC is not going to
regulate rates.'' Congress proposed legislation saying, ``The
FCC shall not regulate rates.'' All of a sudden, simply
codifying that promise has thrown everybody into a tizzy about
the new--nitty-gritty of statutory interpretation, what the
meaning of ``is'' is.
To me, it is not that complicated. If the agency wants to
foreswear from ex-ante and ex-post rate regulation, which is
what everybody says is the case, then there is no harm, as the
chairman committed to you last year, to Congress simply saying
so. And I think the fact that we cannot reach an agreement on
something as basic as this portends a great deal of uncertainty
and regulatory activity, if not for this Commission, for some
future commission that is not going to show similar restraint,
either to Congress or to the American people.
Mr. Crenshaw. Thank you for that.
Mr. Bishop. Mr. Chairman, would you give me one more
minute?
Mr. Crenshaw. Yes, sir.
Mr. Bishop. The prison phone call issue, which you acted
on, and I think just over a week ago, of the D.C. Circuit in an
order blocking the implementation of that, on putting caps on
the rates. Will you guys consider, or continue to try to
provide some help so the families and inmates will not be faced
with these extraordinary rates that they had been prior to your
implementation of that rule?
Mr. Pai. That is a great question, Congressman. Back in
2013, when the FCC addressed interstate rates, this is before
Chairman Wheeler came onboard, I put a proposal on the table
because I thought that the agency's order was on shaky legal
foundations. A few months later, the D.C. Circuit unfortunately
stayed the interstate portion of our decision. The most recent
round relating to intrastate rates, I said, ``Look, we need to
find a bipartisan solution to this because the order we are
adopting is on similarly shaky legal foundation.''
Yet again, the D.C. Circuit stayed that decision. Now, the
question, it seems to me, is what is ultimately going to
benefit the people who are in prison and their loved ones? Is
it an agency that stakes out ground that, you know, is on
quicksand, or is the agency working together in a bipartisan
way within the confines of the law to provide relief? I would
humbly submit that it is the latter, but unfortunately, that is
not the way that this proceeding has gone.
Mr. Wheeler. There is a 30-second follow-up to that. If
this body, or any body, strips the FCC of its ability to
regulate rates, those inmate calling rates are gone. This was
the problem with what the proposal is. They go through the
roof, because what the proposal said was not what I said, which
was, if you want to prohibit de-forbearance on rates in the
future, go ahead.
Whatever happened, it suddenly became all about every rate.
And that means those rates go out the window. That means that
the judgment about rates for video relay services go out the
window. That means the judgment about paid prioritization,
which is inherently a rate activity, goes out the window. All
of these other ancillary things go out the window, if the FCC
is stripped of its rate-making authority, which is what the
proposal has been.
Mr. Crenshaw. You know, we went back and forth with your
staff over some of these issues, but I saw Commissioner Pai
shake his head. Maybe you could give us your 30 seconds on
this.
Mr. Pai. Mr. Chairman, just very briefly. Again, this is
not complicated. First of all, the legislation would not strip
the FCC of its rate-making authority in these other areas,
because those areas rely, for example, with respect to mobile
roaming rates, on our Title 1 authority to ensure commercial
reasonableness when these arrangements are forged.
Second of all, if indeed this kind of rate regulation is
off the table, then what exactly was it that the FCC committed
to last year? What exactly was it that President Obama was
telling the FCC to refrain from? All the Congress is doing--but
you would know better than me--is simply codifying the
commitment that the chairman and the President made almost over
a year ago. And this should not be that difficult. And I think
that the language that the House Energy and Commerce Committee
came up with was sufficient.
I think that, you know, the entire debate over this
appropriations language highlights the fact that rate
regulation is on the table. It is within the FCC's order, both
ex-post, and I would argue ex-ante potentially, and there is no
way to firmly shut the door on it unless Congress speaks
through legislation.
Mr. Crenshaw. Well, thank you for that. My time is expired
now. I was going to yield some time to Mr. Graves, but I do not
have any more time. So, Mr. Serrano, if you want to yield any
time to Mr. Graves, you can.
Mr. Serrano. I may. Your comment, Chairman Wheeler, got Mr.
Rigell to ask a question which I was going to ask. So the old
line that we used to hear when somebody was still asleep, and
you left them on the phone, or you are watching TV and said,
``No, the TV's watching me,'' is now for real? The TV is
watching you? The TV is listening to you?
And secondly, have you been called in, has the FCC been
called in, to the Apple versus FBI controversy? And lastly,
what role do you play in the privacy issue for consumers, if at
all?
Mr. Wheeler. So on the first issue of, have we been--I
guess it was second issue, if we have been called in on Apple,
no. That is above our pay grade here. We are not a national
security or anti-terrorism agency.
Mr. Serrano. Yeah, but the privacy issue.
Mr. Wheeler. I will come to the privacy issue in a second.
Mr. Serrano. Right.
Mr. Wheeler. The second issue of about what smart TVs can
do. Yes, I mean, there is a multitude of devices in your house
that can listen to what is going on. You know, the Echo that
Commissioner Pai talked about does that all the time, the
Amazon Echo. Samsung put out, I think appropriately, this
notice that people should not talk in front of their digital
television set because it can hear and store what they are
saying. And this goes to the heart of the privacy issue,
because last week, we proposed--and the Commission will vote on
a notice of proposed rule-making, hopefully later this month,
on the 31st, that consumers have the right to determine whether
or not their information is being used by the networks that are
carrying that information; that when I go to Comcast or AT&T or
Verizon or whomever, to take me to the Internet, they know
everything about what I am doing.
They know that I am going to health sites. They know that I
am going to financial sites. They know that I am, you know,
whatever the case may be. They know all the details about me,
and in many instances can actually look at what is inside the
message. And so what we were saying is that we think the
consumer has the right to say, ``Do I want that information
looked at?'' And this if they do, terrific. The company can go.
Because what they do is they package that information up, and
they sell it to advertisers, or they sell it to insurance
companies, or they sell it to others who--because, you know,
information is the currency of the 21st century.
Data is the currency of the 21st century. And so we are not
saying to the carriers, ``You cannot do that.'' We are just
saying, ``It is not your information, it is the consumers'
information, and the consumer ought to have the right to say
yes or no as to whether you do it.'' And so, I mean, that is a
key activity that we are going to be voting on, to open a
proposed rule-making later this month.
Mr. Serrano. But why would you not tell the company, ``You
cannot do that''? I mean, when people bought a TV set--we all
bought TV sets--we did not know that they were being watched or
listened to. You know, the old line, you know, ``What do you
have to hide?'' That is not the point. We were built as a
society, you know, that does not give you some privacy.
Mr. Wheeler. So two things. First of all, the TV set.
Mr. Serrano. I mean, I do not want that presidential
candidate that I have been saying his, you know, been recording
what I have been saying about him because he might get back at
me.
Mr. Wheeler. I do not want to get these two issues
conflated. The TV set is something that the FTC oversees. What
we have is the information in and out of the TV set, if you
will, and what the network does there. And I can think that,
yes, there are many consumers who will want to have this,
because they will want to have the ability for advertisements
to show up that say, ``Hey, I see you have been going to this
website looking at hotels in Paris. Here is Air France's
special airfare,'' or whatever the case may be. And the
carriers want to sell that. The consumer may want to have the
benefit of that, and that is terrific. I just think it is the
consumer who ought to say, ``Excuse me.'' It is the consumer's
information to decide, not the carrier's information, and that
there will be room for both of them to work things out.
Mr. Crenshaw. Mr. Graves has a quick question. We are
voting now. And as the members know, they do not leave the
board open as long as they used to. So if members have other
questions, please feel free to submit them to the record. We
will have them addressed.
Mr. Serrano. I have questions for the record.
Mr. Crenshaw. Mr. Graves.
Mr. Graves. Thank you, Mr. Chairman. First, I would like to
submit for the record, if there is not any objection, a letter
that was sent to the full committee and to this subcommittee
that very well states some of the concerns or objections to the
discussion we have had as it relates to set-top boxes by some
organizations that are strong advocates of taxpayers. So if
there is no objection, I would like to submit that for the
record, and then make an additional point or two that I think
brings clarity to it for me a little bit more, and that it
seems very clear that if this rule proceeds, that there will be
additional expenses or costs for consumers, that there will be
an additional device required potentially for consumers, and
that as well, Internet parties, third parties are not under the
same rules and regulations as current industries that you
currently regulate. Is that accurate in all cases, which I just
stated?
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Mr. Pai. That is, Congressman, accurate, too. And it also
bleeds over to the privacy as well, if I might, with your
indulgence, the FCC is proposing one set of privacy regulations
for Internet service providers. But if you are a consumer, you
have a ``uniform expectation of privacy,'' as the Chairman
aptly put it before the House Energy and Commerce Committee
last November.
Unfortunately, the FCC, has now caused a problem because
previously the Federal Trade Commission had a uniform set of
rules in this ecosystem. Now, we are going to regulate one
segment of the industry one way, the FTC presumably is going to
regulate the rest of the industry another way, and there is
going to be a hodgepodge of regulation.
Mr. Graves. Great. Thank you.
Mr. Wheeler. It is not correct that a second box is going
to be required. That was a proposal from 2010. Those who do not
like this have been trying to spread that--actually, what is
going to happen is you will have fewer boxes. You can have no
box, where you can buy your own box, where you can and do not
have to pay the $10 a month anymore. You can buy a box for $50
at Best Buy.
Mr. Graves. Is it possible that you will have to have a new
box? And if you did have a new box, that would cost the
consumer?
Mr. Wheeler. You will not have to have a new box. Let me
just be real specific. One, you can keep the box that you have,
and you can keep paying month after month after month on that
box, even after it is long paid off. Or, two, you can get your
own box, as I say, at Best Buy for $50, and pay once $50, and
then the sixth month be clean. There is not a need to have two
boxes to deliver one service.
Mr. Graves. Any other thoughts on that?
Mr. Pai. Congressman, I take a different view. I think that
the great likelihood is that you will have to have a second
box. And the reason is that if you were the existing MVBD, the
video programming distributor, either you will have to re-
architect your network in order to allow this third-party
device to connect with it, right, which will generate a
tremendous amount of cost that is going to be passed on to you,
the consumer, or, you will have to have all these additional
boxes that will have to be flooding into consumers' homes.
There is just no way around it, and that is part of the
reason----
Mr. Graves. More remote controls, too. Right?
Mr. Wheeler. We are going to go from multiple remote
controls to one remote control. I mean, your point is spot on.
The reason you have multiple remote controls today is you have
got a controller for your smart TV, and you have got a
controller for your cable.
Mr. Graves. The Chairman is watching the clock over here,
too.
Mr. Wheeler. But you understand what I am saying. If you
can take all of those and put them together into one box, one
box, not one additional box. One box. That is what we are
saying. The cable operators need to be able to allow their
data, not their programming content. That goes untouched. Their
data to operate another box so you can integrate them together.
There is no need for a second box.
Mr. Graves. Sounds like a presidential debate from years
gone by. Black boxes. All right. Thank you, gentlemen.
Mr. Crenshaw. Sounds like there is a difference of opinion,
there. But again, let me thank the witnesses for being here. I
appreciate the work you do. This meeting is adjourned.
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W I T N E S S E S
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Page
Buerkle, A. M.................................................... 1
Cobert, B. F..................................................... 131
Kaye, E. F....................................................... 1
Pai, Ajit........................................................ 163
Reardon, A. M.................................................... 264
Roth, D. T....................................................... 75
Stevens, P. S.................................................... 269
Wheeler, Tom..................................................... 163