Arlington, Virginia

Wednesday, May 3, 2000

Mr. Lawrence: Good evening, and welcome to The Business of Government Hour, conversations with government leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. To find out more about the endowment visit us on the Web at www.endowment.pwcglobal.com.

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our guests tonight are D.J. Lavoy, director of HUD's Real Estate Assessment Center.

Mr. Lavoy: Thank you.

Mr. Lawrence: We are also pleased to welcome Barbara Burkhalter, deputy director of REAC. Welcome Barbara.

Ms. Burkhalter: Hi. Thank you.

Mr. Lawrence: Joining me tonight is Barry Dennis, also a partner at PricewaterhouseCoopers. Hi, Barry.

Mr. Dennis: Hi, Paul.

Mr. Lawrence: Why don't we begin this first segment by talking about REAC and your careers. I guess we'd be interested in finding out more about REAC.

Mr. Lavoy: The government always likes acronyms. REAC stands for the Real Estate Assessment Center. And what is the REAC? It is an organization that was created by Andrew Cuomo, secretary of HUD, with the sole purpose of looking across all of HUD’s program areas and assessing the property and the management of the property across that entire portfolio — new concept in government, not so in the private sector. Basically, cross-matrix management is the model.

Mr. Lawrence: Barbara, any thoughts?

Ms. Burkhalter: Well, I think we had some problems, and REAC was set up to solve a lot of those problems, and to achieve a more efficient, streamlined, centralized government.

Mr. Dennis: Each of you I know has had a really diverse career path. Each of you has gotten to the positions you're now in following a different path. Could you each tell us something about how you got to where you are?

Mr. Lavoy: Sure. The goal that has brought me to this point, or to this post, has been an interesting one. My career started out a long time ago as an aviator in the Marine Corps. I also had a background in finance and a background in management that has brought me to numerous reorganizations and building of organizations. This has been somewhat the poster test, if you will, for 25, 28 years of government service.

I left the Marine Corps a few years back, and at the invitation of the secretary came in to build this organization. The background of being in leadership positions, of being involved in change management, building IT systems, and being involved in the change dynamic are things that I have been fortunate enough to be involved with.

Just by beautiful coincidence I think, and probably the secretary's insight, those four criteria or qualifications are what I brought to the game. I'm sure Barbara can tell you that she has similar ones, which she will in a minute.

This has been probably a textbook case of being able to take an organization that didn't exist and bring it into an operation capability as a function of having those unique backgrounds. Barbara?

Ms. Burkhalter: My background is primarily as a financial manager. I started out working for the budget office in the state of Wisconsin. After that, I went to a large public accounting firm for 12 years as a financial manager. So the whole financial assessment business was one of the things that HUD saw from me to put me in this position.

I’ve also spent about 8 years with public housing programs, another piece of the puzzle and knew how the programs actually operate. Then the third piece was designing systems. One of the things I had done at HUD was design a large financial management system, install it and implement it for hundreds of users. I think all of those pieces together were why I was plucked out of the program and put in this position.

Mr. Lawrence: This is an interesting combination. D.J., you had no HUD experience, as I understand it.

Mr. Lavoy: None.

Mr. Lawrence: Barbara, you had a lot.

Ms. Burkhalter: Yes.

Mr. Lawrence: I'm wondering the pluses and minuses of having people from both outside the organization and inside the organization starting REAC.

Mr. Lavoy: It has proven to be extraordinarily complementary, and I'd have to defer to my partner here to see if she had the same opinion. In my view it has been, because I brought a fresh view and the background that saw the change that was required as an outsider.

I would offer that Barbara has for some time been frustrated, as are many of the managers within government, at not having the opportunity to put change in place. I think that, in itself, was one of the things, because an opportunity came, and when the stars align and everything looks right, then those opportunities are rare, and that's what I think the REAC is all about. We've had that kind of opportunity.

Ms. Burkhalter: I guess the way we've divided up the work, in some ways, is I focus on the financial work and D.J. focuses on the construction side because those are our two prime businesses. The other way was I handle a lot of the internal work of the REAC and he handles a lot of the external work of the REAC. So we have those talents. Also, I'm much more interested in dealing with the people, the contractors, building systems, and I like that role. And he likes the role -- I hope he likes the role, because that's role he has -- that deals with the constituents and the politics and the external side of the business.

Mr. Lawrence: Did you both come as a package, or who was hired first? How did this come about?

Mr. Lavoy: Barbara had been here, as she said, for 8 years.

Ms. Burkhalter: I was at HUD for 8 years, and I was brought in to kick the REAC off. It was a little but staggering at the time, and they needed new people. So I was brought in first, probably a month to two months ahead of D.J.

Mr. Lavoy: Right. One day the secretary called me in and said you've done quite a few things for me already, but I think there's one more thing you can do that will make a big difference to this country and to the future of HUD. Then, he asked if I would mind being in charge of an organization called REAC. He explained to me what it stood for, and the two of us met each other there the next morning, Barbara and I. And here we are today.

Mr. Dennis: It sounds like the secretary specifically wanted to bring in the diverse backgrounds you have.

Mr. Lavoy: Yes, without question.

Ms. Burkhalter: New people that had no real connection with even the thought. It was a new thought that had been set up say 6 months earlier, but we were there to implement it, to make it happen.

Mr. Lavoy: In Washington (and many people will smile to themselves in acknowledgement) people appreciate, and my own experiences amplify this for me, the mantra that you should get things done quickly and you do them as accurately as you can to get the 80 percent solution and then refine. You can say, anecdotally, that's to fire, ready, then aim, if you will.

And that all comes about because many people don't want to see change. And it's not because they are bad and you're good, it's just that they're comfortable with the way business works, i.e., HUD and some of the things that were working and not working, and the Secretary being the visionary he is, I think quickly understood that.

As Barbara said, 6 months prior to REAC there had been a lot of looking at what had to be done to fix a "troubled agency" that had been in fact declared so, and that's what his success story and what I think his legacy is. He has turned around an agency that was basically on its knees into something now of a benchmark, and the REAC has been a big part of that. His vision, him being able to take the players, myself, Barbara and other key people, and put us together, to say this is what needs to happen, then give us the resources to do it has helped us be successful.

Mr. Dennis: Again, you each do bring a very different background to the job. I know you've worked very effectively together. It's clear you guys have taken different roles but meshed well in accomplishing what you have. What in each of your backgrounds has prepared you to do that so well?

Mr. Lavoy: Good question. I'll ask Barbara to answer that one first.

Ms. Burkhalter: In other words, to be compatible?

Mr. Dennis: To take a jet fighter pilot and a financial analyst in different roles and to do it so seamlessly.

Ms. Burkhalter: Well, you know what? We're actually having fun. I have to tell you that it's been the best job I've ever had. It's been the most fun I've ever had, and I think it's because things happen every single day. Every single day we're able to make a difference and we're able to make something happen. So that's part of it. I think both of us just enjoy that process.

Mr. Lavoy: I'd concur with that. I think that philosophically we both, as do most of, in fact all the people that are there, believe in good government. That may be a high-sounding statement, but you have to have that understanding or philosophical underpinning. We believe that this project is important. There are 6 million people who depend upon the housing provided by HUD. And the look of satisfaction on the faces of almost everybody who sees the things we've been able to accomplish is probably one of the real drivers for us. There is a definite outcome; people's lives are affected, and we are making change.

More personally, we both are committed to excellence and we both believe in making things happen. And that is probably the real strong point that enables us both, from different backgrounds, diverse if you will, work together; that philosophical point is the one that I think really gives us the most symmetrical application to this.

Mr. Lawrence: Well, great, and it’s time for a break. We'll be right back with more of The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with D.J. Lavoy, director of HUD's REAC, and Barbara Burkhalter, the deputy director, and joining me is Barry Dennis.

Well, we know that REAC is an E-business, and you've won an award from Government Executive magazine. Could you tell us about that?

Mr. Lavoy: Happy to. The award recognized our excellence in creating a system by which we electronically record the condition of properties. That sounds kind of technical, but the E-business in a bigger perspective is one that really tells the story of the new HUD and the REAC specifically.

As in many parts of government, what the problem has always been is that we've known how to do the job, but we basically have done it using paper, and paper by virtue of the volume and handling and logistics makes information retrieval less efficient. Picture a warehouse full of material provided every year. Say then you have a question and you have to go back and retrieve from this warehouse full of material an answer.

Knowing that was a problem and knowing what business areas we had to be in as assessors, we decided from the very beginning to build our entire REAC using the E-commerce model, in which everything is done on the Internet using electronic medium. As a result, we are able to take data, reams and reams that has now been put into data warehouse format for us, and do incredible amounts of analysis, including accurate, reflective, portfolio management, et cetera.

Let me defer to Barbara at this point just to add to that, but this has been the part that has been the most successful for us is creating this environment.

Ms. Burkhalter: I guess I was thinking back to the very beginning when we first started looking at the systems. At various times, as the system didn't seem to be working perfectly, we were tempted to use paper. I think several times along the way someone would have wanted to use a piece of paper to do an inspection or to take the financial statements, but we had to resist that at every turn because the volumes and the management of that would have been impossible. We had to insist on the electronic even if it was harder than maybe we were able to handle at the time and really push for it.

Mr. Lavoy: That's certainly true. We have been tempted, but we have been able to avoid those temptations for the most part. The volumes I speak of and the data? Just to make it relative for the audience; we perform 40,000 physical inspections of 6 million units and produce 22,000 financial statements, many, many pages in each provided by CPAs, IPAs, et cetera. Taking that in a standardized format and then coalescing it to get integrated risk analysis is what we're all about. Just to look at it from the logistics side, it has to be electronic or it can't be done.

But look at where it takes us in the future in terms of government. REAC is really the model for what the future HUD needs to look like, and other agencies of government as well. That same physical inspection that we won the award for is the same one that the Department of Agriculture is getting ready to partner with us and start all their properties. And we are in consultation with the U.S. Marshall's Service to start doing all of their properties using this electronic medium, and the IRS and their tax credit program as well.

What does that say? It's a successful program and all of government is understanding the importance of E-commerce in doing all of their transactions, in this case really E-business, business-to-business, using the electronic medium and all the things that it brings to the table.

Mr. Lawrence: How did being an E-business change the work? I get a sense obviously that it went faster and easier, but how else did it change the work?

Mr. Lavoy: The quick answer is, it has enabled us for the first time to be able to do real-time analysis by enabling us to have visibility of the key factors.

Ms. Burkhalter: In the past, the employee would receive a hard copy or paper version of a set of financial statements. They would probably, in turn, create some ratios; typical to the banking industry, they might record a quick ratio or current ratio. And then they would do something about that, all at their desk with paper, but people in headquarters wouldn't know anything about the results of that work if they even did it or how they did it, because it was all in different formats. The opposite is everything electronic. The computer does the math and the employees then do the specialized innovation to solve the problem. Intervention to solve the problems. That's the big change in the work product.

Mr. Lavoy: I have to bring in an additional point to go with that. You asked, how does it change the work. Well, that is really the fundamental piece and I kind of glossed over it, and I shouldn't have because it is the first time a government employee, or any employee for that matter, has been able to have all of the base line analysis done for them. So all they have to do is focus on what are the problems.

We have basically removed all of the cursory work and gone down to hard analysis with all of the individual efforts being focused on that. And you can truly, for the first time, do good risk analysis because you can remove those non-problem areas and focus your efforts on areas that are, in fact, in need of more human intervention.

Ms. Burkhalter: Even with a reduced work force, if you're focusing on just the problems, you can actually have a reduced work force and get more done.

Mr. Lavoy: Right.

Ms. Burkhalter: If that 5 percent of the problems is your focus as opposed to the 100 percent.

Mr. Lavoy: True risk analysis. Yes.

Mr. Dennis: REAC is implementing an E-business approach that is a new approach for everyone, private sector or public sector. Do you see any challenges that you're facing implementing it within a government context that are special to the government contexts that you don't see in the private sector? Do you think it's pretty much the same exercise?

Mr. Lavoy: By no means. We do a lot of benchmarking, and I'm a member of CAMI, the Consortium of Advanced Manufacturers International and two or three other professional organizations. In the private sector, it usually takes 6-8 weeks from the time that you want to institute a change to the time you have to put the change in place. You meet the pace of business, and I'm talking modifications here, and a bill is a little bit longer.

In government, because of the contracting issues, because of the existing infrastructure, because of the requirements for efficiency and broad application, there's a much more difficult problem you encounter. You have an existing structure, if you will, a large moving train, and to get it to change directions you have to put an incredible amount of personal effort into it to make it work.

Ms. Burkhalter: On the people side, on the technology side, I'm not sure it is different. I suspect the private sector has the same problems with the Internet access. That's one of the problems we have is our constituents are only moderately able to use the Internet. So we have to help them acquire an Internet service provider to use our data. They're coming of age with us. The technology is very new, so we experience problems with its stability in terms of application and software development.

Then the infrastructure, I suspect a lot of private-sector companies have mainframe systems that are still a little slower, a little older, a little more cumbersome to use, just like we do. So, they may have the same problems too.

Mr. Lawrence: It's time for a break. We'll be right back with more of The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with D.J. Lavoy, director of HUD's Real Estate Assessment Center, known as REAC, and Barbara Burkhalter, the deputy director. Joining me is Barry Dennis, also a partner at PricewaterhouseCoopers.

We understand, Barbara, that REAC is very young, only 2 years old, but you've been able to successfully meet several aggressive deadlines. Could you tell us about that?

Ms. Burkhalter: I think D.J. mentioned before the 80/20 rule, and that's really what we follow constantly as our overriding principle. We try to get 80 percent done in 20 percent of the time and then move on because technology moves that fast. If we put all that extra time into that extra 20 percent of value, technology has gone beyond us and we've lost our edge. So we're very aggressive about how much, and when we call it quits and move on to the next one.

One of the ways we've been able to move fast is we have a very flat, simple organization. Everyone works directly for the two of us. We just have business product lines, and we have support lines. Everyone knows what their job is and they're all empowered to produce what they have to produce. They understand a very simple business of a production business with a system to support it.

We have very common business processes. We collect data, we process it, and we report it, and we don't change that. We make everybody follow the same model. We've even named all of our business systems with common-sounding names, except we changed the first letter. I think a lot of that simplicity is what's helped us keep going fast.

Then there is the issue of our contracting. We have very aggressive, flexible contracting so we can move contractors in and out as our business needs changed. Those were my thoughts on meeting aggressive deadlines.

Mr. Lavoy: The aggressive deadlines in themselves are interesting. They make for sometimes working beyond the traditional 8-hour day and the other things that go with it. But as you've heard from our previous comments, it has been a challenge that we enjoyed in our team, and I mean that in every sense of the word.

At REAC, we have a lot of government employees that are people very knowledgeable in resources and in programs in the traditional areas who are perhaps not completely up to speed on some of the latest uses of technology and all the enablers that go with it. On the other hand, we have a gifted bunch of young people who are very, very up to speed on the use of computers and all the tools that are provided via that medium.

Our approach is that we team these two constituencies together, sitting side by side in an open environment, team arrangement the program individual, knowing the subject, is enabled and assisted by a contract individual many times, and then many times government people. But in both cases they work together as a team, work to come to that same conclusion that Barbara is speaking.

That has been something on the visible side. Many times you walk into an office and you'll see government employees who are sequestered in an area and you'll have people who are providing contract support almost sitting on the floors, trying to do the job, and that is exactly the waddle that we would never follow. What we want to see happen and what does happen in our case, is that everybody sits side by side, everybody in the same equal compartment, everybody working on the same type of problems, putting those two very strong skill sets together and coming to the same joint solutions.

As to the timing of it, yes, we've done an awful lot in 2 years, and once again, it gets back to the fact that this is a secretary with a mandate who is looking to be able to accomplish this during this administration.

We know that the fire, ready, aim rule is alive and well and the 80/20 guides us to that point. I think that compression is probably in combining with the individual talents that we've been so fortunate to have with us here in the REAC, has enabled us to get to where we are so far.

Mr. Dennis: You mentioned several times and I think appropriately that to accomplish what you've accomplished in such a short time period has rested on the people you have and being able to use them effectively. Looking at it from their perspective, you've implemented an E-commerce model that is very different from the typical government model. What implications does that have for the employees in the way they do their work?

Ms. Burkhalter: I think this has been hard for our employees. Coming from the other government sectors as well as from HUD, they're used to being policy specialists, they're used to attending meetings, and they're used to advising and guiding somebody else, and we are totally not about that. We are about production, output, and outcomes. We're not as interested in they attended the meeting, but what did they go to that meeting for and what are they going to do with that information in terms of bringing it back to their business and producing a better product.

We're not interested in them showing up every day. We're interested in them actually producing a result. So I think it's been hard for them in some ways, but I'm actually happy, and I think they are too, once they change because this is a more job satisfaction type of a work environment.

Producing something every day is much more valuable I think to a person than just sitting waiting for the phone to ring, coming up with a policy or a thought. I think that after about a year and a half of doing this now, most of our people are pretty happy with what they're doing, and succeeding at it.

Mr. Lavoy: In the dynamics of change, as we all know, the cultural change is the hardest. This has been the real gratifying piece, I think, for both Barbara and myself because we have seen a very, very observable cultural change. Where people used to answer the phone and do the traditional perception of government, everyone now understands that they are part of a team which is different, that they are accountable and will be held accountable to a set of specific metrics. And they're all focused on an outcome that is an outcome that affects an awful lot of people.

I think it's that combination that has enabled us to be able to make the changes we've accomplished so far. People want to succeed and be part of a winning team.

Mr. Lawrence: REAC is a new organization, relatively speaking. Where did the employees come from?

Ms. Burkhalter: I took a look just roughly, and I'd say about half of them are HUD employees and the other half are either private sector or another government agency, and that's really helpful too. Not just private sector, but another government agency having people come to us really brings some new ideas as well. It's probably half-and-half, internal/external.

Mr. Lavoy: Department of Defense, Treasury, Department of the Navy, Interior, and Agriculture¼ . I mean, smatterings here and there. As Barbara said earlier, what we're about is we collect data, we analyze it, and we create knowledge and disseminate it. That's our core competency. It's about financial, about physical, about many other subject areas, we are bringing in people with basic skill sets, financial analysts, engineering analysts, et cetera, and then team them so that we can get to those outcomes.

Mr. Lawrence: Were they aware of the changes that were going to take place, or were you all aware?

Mr. Lavoy: I don't think so.

Mr. Lawrence: For example, I understand there are but two offices in your organization that you both have and the rest --

Mr. Lavoy: Are open.

Mr. Lawrence: Are open?

Mr. Lavoy: Correct.

Mr. Lawrence: Was that because there was no space, or was that by design?

Ms. Burkhalter: Actually we had the luxury, and I'm not sure very many people have this in their career, of being able to design the space to suit the business. We looked at several pieces of property in the city and we picked the one that was totally empty. It was cement blocks, wires hanging from the ceiling, and we designed it from scratch to suit the way we wanted to do business, which was open.

We could have put up walls if we wanted to, but we put the money into the furniture and the aesthetics of the building, and everyone has light, everyone can see a window, and the managers are not up against a wall. The managers are away from the wall, and the employees are close to the windows. We completely turned it around. I can't say that we've had people come in and say they hate working there because most people love it.

Mr. Lavoy: The open environment, when I was working with the Department of Defense doing programming which is interesting work where you're looking at the 5-year budget all the time, and teaming was something that I really saw the value of. You'd bring together 15 to 20 people looking at diverse programs and have to make hard decisions. But being able to communicate real time and work together, everybody rose to the highest common denominator of the team.

I've seen that work and I have used it in two other models, so that is kind of where I wanted to start.

As Barbara said, we were very fortunate. We are in a building that it was hard-wall cement and nothing there. We were able to acquire that property and have it built out so that we enabled teaming with communication built to an E-commerce model. That is a unique opportunity, where you can start from scratch and build your environment to your business model. Because, as you know, in most cases you have to adopt, and if it's going to be established government offices, you're going to have the traditional honeycomb. That just does not enable real-time communication or individuals to be able to do real-time knowledge sharing which is part of the strength of our organization.

Mr. Dennis: You both have mentioned lack of walls organizationally, I think, essentially, lack of walls physically to facilitate teaming within the office.

Mr. Lavoy: Right.

Mr. Dennis: I've witnessed that you've done, also, an unusually good job of developing teaming among the REAC employees and the contractors you use. That's not that normal in the government or anywhere else that I'm aware of. How have you accomplished that strong teaming between the contractors and your employee?

Ms. Burkhalter: I think one of the things we did, again, we build systems as our primary business, building automated systems to collect and process data. We put programmers right in the work areas alongside of business people. Just think of what that does. Typically you'd put your computer programmers in a wall-less, windowless cell some place.

Mr. Lawrence: That's where we'd put them. Yes.

Ms. Burkhalter: Right. You hide them because --

Mr. Lavoy: They look at little different sometimes.

Ms. Burkhalter: You might think that that's the best way to do it. We have them right out in the open and we watch programming as it's occurring. D.J. and I can walk through these hallways through their work areas and we can watch what they're doing so we know that they're actually working.

Secondly, if they have a question about the requirements, am I programming this correctly, all they have to do is spin their chair around and talk to a business analyst and ask "is this what you meant?" Or come over and look at the screen. Does this look like a screen that would work for you to do your business. Just think of the power of that real-time programming and systems development in production support.

Mr. Lawrence: It's time for break. We'll be right back with more of The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's guests are Director D.J. Lavoy and Deputy Director Barbara Burkhalter of HUD’s REAC. Joining me is Barry Dennis, also a partner at PricewaterhouseCoopers.

You spent some time so far talking about the data you collect and the analysis you do, and I'm just curious looking out, what do you think the potential uses and additional analysis are for such information, both within say HUD and other organizations as well?

Mr. Lavoy: Let me just take a stab at that first and then defer to the rest of the table here because I know there's going to be a lot of good opinions on this. And it's really what the future of the government is about and, I believe where the current administration is heading.

Having the responsibility to the citizens of the country and to account for the dollars that are spent is an awesome responsibility. And it's one that is a lot of times not really understood by even government employees in terms of what you really do with your dollars and where they go.

The recipients, on the other hand, are expecting services. In this case, the mission of HUD is to provide housing. Traditionally we serve the lower one-third of our social stratum that need that hand up, that first start, that FHA starter house, that public housing for those that are going to transition into our economy.

Being able to actually do good risk analysis so that we can look at those providers that are doing what we are requiring of them as a government agency has been something that has been elusive at best in the past. Our data, we believe and know already, just by virtue of being able to do projections and risk analysis, trend analysis, et cetera, can tell us how many of all the properties we've inspected are in good shape. For example, 85 percent of the 6 million properties may be in good condition, another 10 percent are in need of very immediate repair, and 5 percent are in desperate shape. And in fact, the individuals managing them probably don't need to be in the business with the government any longer. The residents there certainly need to have their lives amended quickly so that their standard of living can be better.

I think, in short, the future is that credible government is based upon having good information so that government can make good decisions and that we can provide the services that we, in fact, are responsible for providing and that the Congress intends and provides the funds for.

Ms. Burkhalter: I was thinking about some specifics that our data could be used for — and we're not yet ready to do it — but as soon as our data is fully collected we'll be able to predict defaults on certain loans. With good data and with correlation, we can maybe do some things like that as opposed to reacting after the fact. Can we be on the front end of business decisions?

The same applies to income verification. Our families have to pay rent based on their income. Wouldn't it be nice to be able to report on the front end whether someone was eligible before they get into the program and then have to evict them or collect back rents from them. To the extent we can use our data up front because we have good predictive early-warning systems, I think that would be really valuable to the government and to the taxpayers.

Mr. Dennis: You're collecting large amounts of data that HUD has never had before, allowing HUD to do a much better of ways than they've been able do in the past. But a lot of this data has also never been available to the private sector. Do you see applications or uses for the data in the private sector as well as in the government?

Mr. Lavoy: Without question. Of course, we have to be very careful of the data and we want to make sure that all the particular applicable laws are applied in terms of privacy, et cetera. Barbara touched upon one that really points this out, income verification. There are 6 million families living in HUD housing and those people are deemed eligible by a congressional formula.

One of the things that's been problematic in the past is being able to determine on the front end that they are eligible and that they're paying the right rent. So, we want to make sure that when we use the information provided to us by the Internal Revenue Service and the Social Security Administration we're protecting the rights of the individuals and getting to that end point.

Now, that's kind of round circle to your question, what does the future show. As I said in an earlier comment, working with three agencies already, they are looking at these same models of taking data and using it to be proactive in making sure that we are accomplishing the intent of the Congress. From the business perspective E-commerce side, the private sector, we are in frequent conversation with the lender industry, with the mortgage bankers, with the inspection industry and with the appraisal industry. For the first time we have put electronic inspections together and now the entire industry is going in that direction and using our model unique for government, but it's good for HUD and I it's to show that we are a benchmark organization.

The appraisal industry, we're getting ready to go the same direction where we're going to be developing an electronic appraisal that will be then used in value estimations and conditions of the property and going the same direction with it. So there's a lot of future to this and it's once again collecting data in an effective way so that we can utilize it.

Ms. Burkhalter: We have lots of claims on our data. Everybody wants it, and we have to constantly balance that with Privacy Act issues as well as just pre-decisional. Not everything is releasable as raw data until it's been through all the process for follow-up refinement, quality assurance. We don't just release raw data to the public or even to our partners.

Mr. Lawrence: In an earlier segment we talked about REAC being an E-business. Seems to me, that everybody would say that all government would be an E-business one-day. But I'm curious, from your perspective, what are the special challenges the government faces in this area?

Mr. Lavoy: Many. The ability to exchange information and, more importantly, to provide to the public that information in a timely basis. Let's just use what's happening with the IRS right now with filing taxes. The IRS has seen, I think, a tripling of the amount of people electronically filing.

What does that mean? That means that our country is becoming much more E-commerce aware. Look at our ability to share with a reporting entity the results of their financial physical analysis giving them the remedy electronically, and then in a real-time fashion being able to monitor that. It portends much more efficiency. It portends better communication. It portends a government that is truly responsive to what individual taxpayers and regulated people and entities are expecting from government.

Mr. Lawrence: How about the special challenges to government managers?

Ms. Burkhalter: I think the special challenge with anything electronic is technical support.

Mr. Lavoy: Amen.

Ms. Burkhalter: We all have really lofty ideas. In fact, we haven't even tapped some of the things that we want to do. We have backlogs of ideas. What is holding us back is technical support and the infrastructure and the attitude toward making technology efficient, fast, and user friendly. It has to be easy for the users on all ends to get at it, and reliable. If it's not reliable, I think we're going to have more problems than we need. So, we're held back at the moment from all the things we want to do by the technical support that we need to keep it moving.

Mr. Lawrence: If it's challenging to get good employees, it's even more challenging to get good technology employees. So I'm curious, how do you get around that, or what special challenge does that pose to the government?

Ms. Burkhalter: We advertise in the Wall Street Journal. We do the best we can to hire and tempt people to come. I think we have to be more innovative though just like everybody and perhaps even provide our own training. We might have to train and grow some of our own people in that area.

Mr. Lavoy: We do face challenges just like everybody. The fastest-growing segment I think in the job market is probably people who are technologically proficient and have people skills. That's quite a combination.

We have been very fortunate in that we have acquired as part of our team, some key individuals who bring that to the table. But in the end, most people will tell you and I think most studies will carry out, that it's not so much the dollar that an individual receives because the private sector can reward more in terms of dollars. I think the big thing that brings everybody and keeps him or her there is job satisfaction.

As I think you can tell by our tone, is that the REAC is about job satisfaction. The environment, the way that we treat people, the ways that we team build. It really pays off for us because we have a lot of individuals who give us 110 percent, are always there, and provide incredibly good advice, and their credibility in the industry is such that it gives us a very strong position.

Mr. Lawrence: I'm afraid we're out of time. So, I want to thank you very much, D.J. and Barbara for joining us. Barry and I have very much enjoyed our conversation. This has been The Business of Government Hour, conversations with government leaders. To learn more about the Endowment's programs and research into new approaches to improving government effectiveness, visit is on the Web at www.endowment.pwcglobal.com.