Enhancing Productivity in the U.S. Federal Government

In the past fifty years, discussions surrounding the productivity of the U.S. federal government have been ongoing. Following significant expansions during Franklin Roosevelt’s New Deal, successive administrations have sought methods to enhance governmental efficiency. From Richard Nixon’s focus on productivity as a solution for economic challenges in the early 1970s to Ronald Reagan’s executive order in 1988 aimed at improving agency productivity, the conversation continues into today.

Fast forward to the present, and the United States government is once again reassessing its size, role, and effectiveness, particularly in light of a national debt that has escalated to $36 trillion. The efforts by recent administrations, including the establishment of the Department of Government Efficiency under Donald Trump, are part of a broader directive to review federal spending. With a deadline set for end of the fiscal year 2025, agencies are preparing plans for reorganizations aimed at enhancing performance.

Understanding the Productivity Landscape

Measuring productivity within the public sector poses unique challenges due to the absence of straightforward metrics for output. A collaboration between McKinsey research and estimates from the U.S. Government Accountability Office (GAO) suggests a potential productivity savings of up to $1 trillion, which could represent nearly 15 percent of the fiscal year 2024 enacted budget of approximately $6.8 trillion. This figure encompasses:

• Fraud, waste, and abuse estimated between $233 billion and $521 billion;
• Improvements in service delivery potentially saving $400 billion to $450 billion.

However, exploring these savings will require nuanced and strategic decisions, as the government strives to maintain its critical functions while trimming excess. Historical trends reveal that 80 percent of significant government change initiatives fail to meet their objectives. Thus, a deliberate and analytical approach is essential.

Addressing Fraud, Waste, and Abuse

Medicare and Medicaid reported approximately $85 billion in improper payments in fiscal year 2024 alone. Moreover, pandemic-related support programs such as the Economic Injury Disaster Loan and the Paycheck Protection Program may have issued over $200 billion in fraudulent claims. This persistent issue of fraud is aggravated by the lack of risk mitigation skills among agencies and varying levels of leadership commitment.

To combat fraud effectively, lessons can be drawn from successful practices in the private sector, such as:

• Cross-agency data sharing;
• Real-time customer information verification;
• Auditing high-risk sectors;
• Enhancing compliance monitoring.

For instance, the National Association of State Workforce Agencies has implemented a comprehensive integrity center to share valuable data about unemployment insurance fraud, preventing about $5 billion in fraudulent claims.

Enhancing Productivity in Service Delivery

The government is recognized for its critical role in service delivery, yet the associated costs are frequently questioned. Focusing on productivity requires agencies to comprehensively assess how resources align with their mission outcomes. Many traditional budgeting methods fail to promote efficiency and often neglect the true costs involved in program delivery.

To drive productivity improvements, agencies should:

• Adopt radical financial transparency to clearly align resources with mission objectives;
• Implement a robust process redesign, emphasizing efficiency at every level of service delivery;
• Utilize five key operational levers: process enhancement, organizational optimization, smart sourcing, demand management, and technology-driven automation.

Process Enhancement: The Zero-Based Approach

Zero-based process redesign requires agencies to rebuild operations from the ground up, addressing inefficiencies and streamlining workflows. For example, the U.S. State Department has developed entirely online passport renewal processes, significantly improving user experience while reducing operational burdens.

Organizational Optimization

Successful transformation requires moving beyond traditional organizational structures. Key tactics include:

• Aligning mission-critical activities with future objectives;
• Eliminating redundant roles across the organization;
• Improving spans of control and reporting hierarchies;
• Integrating advanced technologies for greater productivity;
• Prioritizing strategic workforce planning to adapt to evolving mission requirements.

Smart Sourcing Strategies

With annual expenditures surpassing $750 billion on contracts, the federal government has ample room to enhance sourcing strategies. Implementing strategic category management and demand management can yield savings of 10 to 15 percent, while integrating IT and business processes might achieve even greater efficiencies.

Demand Management and Asset Utilization

Effectively managing existing assets can further streamline costs. By reconsidering the use of government-owned properties and employing capital charges for usage, agencies can incentivize optimization. Past initiatives, such as the Base Realignment and Closure Act, demonstrate the potential savings achievable through centralized asset management.

Digitization and Automation: Modernizing IT

IT modernization is crucial for improving federal productivity. Often, significant IT projects exceed budget projections due to poor initial planning and lack of alignment with organizational needs. Agencies can benefit from establishing product management functions that incorporate user perspectives to enhance technology outcomes.

As society evolves, the conversation around government productivity will continue. While there are no immediate solutions, employing the strategies outlined above can enhance mission effectiveness, optimize resource utilization, and restore public trust in government institutions.

At the time of publication, global tariff and trade policy revisions are underway, presenting uncertain implications for government operations. Monitoring these developments will be crucial for ongoing assessments of government productivity.