With the din of the 2004 election fading, President Bush heads into his second term with the stabilization of Iraq under a democratic government as his top policy goal. At the same time, he is likely to continue and even expand his federal management reform agenda in his second term. Even with those all-consuming projects, the president will have one more, arguably higher priority, item that will affect all government managers: cutting federal spending to reduce the deficit.

As a result of these objectives, government managers can expect the following events over the next four years.

Defense:

• Defense Secretary Donald Rumsfeld wasted no time after the presidential election in launching the Bush administration’s next major review of military strategy and hardware for 2005, called the Quadrennial Defense Review. In addition to the QDR, Rumsfeld has set the stage for a massive round of base closings, with a new commission to start meeting early next year. Also expect Rumsfeld to stick around for the next four years, although wholesale changes to his subordinates are likely.
• The impact of Darleen Druyun's conviction, new admissions by the Air Force and the defense industry, and the acquisition reforms she championed likely will be felt for years. Her case has touched off a scandal that could rival the one that followed the Defense Department's Operation Ill Wind investigation in the late 1980s. That probe ended with more than 60 convictions and a new law (the 1988 Procurement Integrity Act), which established tight ethics rules for federal procurement officials.

The Hill:

• One of the most fascinating dramas to watch over the next two years will be what Republicans will be able to do with their unexpectedly large majority in the United States Senate. While most observers anticipated that Republicans would hold on to their majority, or maybe increase it by a seat or two, a four-seat gain—halfway to a theoretical filibuster-proof majority—was an outcome few contemplated. Conservatives are already making great plans for an aggressive agenda.
• Most politicians shied away from reorganizing government, but in the last year we’ve had major change (TSA, DHS, 9/11 commission recommending single Intelligence lead in the EOP). Reorganization is a device that is being used more frequently. The president also has a vested interest in ensuring that one of his primary management reform projects—the formation of the Homeland Security Department—is deemed a success.

Human Capital Management:

• Civil service reform will likely continue. For a preview at the state level, look at Texas, Georgia, and Florida, all states that eliminated their civil service systems. At the federal level DHS, DoD, NASA, and GAO all have brand new authorities in the past few weeks in the human capital area. Look for OPM to push for all agencies to have increased freedom in human resources management—extraordinary flexibilities on hiring/firing/performance metrics and pay—all moving to a more performance-based system tied to the mission of the agency. For more details, see “OPM's Guiding Principles for Civil Service Transformation. (www.opm.gov/Strategic_Management_of_Human_Capital/documents/merit)
• President Bush is likely to continue, and even expand, his focus on competitive sourcing. The administration plans to take 850,000 federal civilian jobs that could be performed by private contractors and require that they all be put out to bid. This will be the major issue for Federal Unions and they will continue to fight to make sure federal employees get to compete to keep their jobs and the competition process is fair to federal employees.
• Originally separate parts of the President’s Management Agenda (PMA), personnel reform and competitive sourcing will become more interconnected. For instance, OPM will push agencies to analyze workforce trends and develop a broader human capital plan before embarking on competitive sourcing.

Finance and Budget:

• While President Bush is continuing his federal management reform agenda, he’ll also have to give high priority to cutting federal spending to reduce the deficit. The president pledged during his re-election bid to cut the deficit in half within five years. The PMA, particularly the goal to better integrate budgets and agency performance, could go a long way toward that effort.
• Bush’s plan to overhaul Social Security will be a key issue throughout the next four years. This overhaul involves transforming the Social Security Administration from a check-writing operation to a money-management colossus. The effort, estimated to cost as much as $2 trillion over 10 years, would mark one of those rare occasions when "privatization" would actually result in the creation of a much larger and more intricate federal operation. How to pay for this massive change given the administration’s goal for deficit reduction is a conundrum that will affect every area of government.
• The PMA’s original goal for improving financial management—pursuit of clean audited financial statements—will no longer be enough. OMB, supported by FASAB and GAO, will push for significant error reduction, more timely information that program managers can use for real-time decision making, and savvy control of asset management for the near certain fiscal crunch. CFOs will scramble to meet these expectations.

Bush first shared his vision for management reform during his 2000 campaign, when he promised a government that would be "citizen-centered, results-oriented and, wherever possible, market-based." Upon taking office, he translated those principles into five government-wide reform initiatives, outlined in the PMA, and asked agencies to work toward concrete goals in each area.

The agenda items—personnel reform, opening federal jobs to private sector competition, improving financial management, expanding electronic government and linking budget decisions to program performance—were not groundbreaking. But Bush's agenda brought attention to a set of clear, focused set of management reforms. Expect this focus to continue as Bush looks to build on progress and institutionalize the agenda, especially as budget are stretched over the next four years.