You got any job? Can I just say that? How that? I, uh, I love friends who reach out to me from the administration, uh, saying that they really needed help doing really looking at IRS modernization.
It's one of the worst managed IT projects in the government. Uh, maybe second only to the VA is attempt implementing electronic health records system. That's about $15 billion over budget. It was actually started right around the time I was born and it's still ongoing.
It's still five years away. It was five years away in 1991. It's still five years away. So they said they really needed somebody to look into this and see if we could fix it.
So, um, I, I always wanted to do government service. It's a thing that has been important to me. I care a lot about the future of the country, especially national debt, but I kind of, it's going to be a thing that I would do in my 50s after I'm retired, um, but my, my wife really encouraged me to, uh, to give this a go. So about six months ago, I made the plunge and here I am.
Well, you, I'm, uh, I'm the chief information officer of the Treasury Department. That's my official role. What's that mean? What's that mean?
What's that? So the chief information officer in, in private companies, usually the CTO is the, the primary technical leader in the government as chief information officer. Um, it's an interesting one. I think a lot of what I've learned is tracking history of a lot of these things can be interesting.
So the chief information officer really stems from, if you go way back, it stems from when it was effectively a librarian, we're all thinking like all that where it, the, the legacy of chief information officer is when things run fine on cabinets. Where's the information? How do you track it and stuff? And it's slowly evolved into what it is today.
But part of the challenge that I've seen in Toronto's government is that most of the chief information officers, at least before this administration were non technical. And the main reasons there's no technical standards or requirements for the role. And so you can kind of see how you got there where when it's a librarian role, it's not, there's no requirement to really know how computers work. And if you never update the standards, you just sort of fall into the situation.
Is that prescience? Not only would it be something that even the job title wasn't, I think it's, it's less the job title is more than qualifications for the job. We have standards for being like the chief counsel of an agency have to be a lawyer. I think most people think that's reasonable.
We just never updated that for technology or never really call it IT. That's a, that's a more common way they would do it. It's just like an outdated time. Yeah, for sure.
How technically me? I'm, I've been a software developer for more than 10 years. In my most recent role, I was the CEO, so I didn't do as much coding as in the early days. I actually put around my, you know, a few months ago, I contributed about a million lines of production code.
So I'm not the best engineer that I know, but I don't know a lot of it. That's not the H&X for engineers competitive economics. Yeah, it is definitely something that if you, if you optimize for it, it becomes useless because it's very easy to just like create a whole other play code and pretend like you did it, but it's, it's much less correlated. What's your relationship?
Don't you? I was originally brought in through Doge in March. So that's when I started. I was putting in at the treasure department with my primary focus being the IRS, trying to figure out how to blame the plane on this, on this IRS modernization program.
What did you think you were looking into? I really didn't know. I've read a lot of things. I've heard stories from friends might have been in the government in the past.
Some of those things turned out to be true. Some of them turned out to be true. I think my, the thing that I was really encouraged by, which is an expectation that I had to me in this that my friends told me that this administration is willing to make changes that have never been on the table before. When it requires significant structural changes to an organization, it requires a lot of courage that historically we've been shuffling things around that people are willing to make those changes now.
That for the most part has been true. Which is been very exciting. I think one specific example, which when I was about, when I was about a month, then I started to recognize that the IRS and that we had a major problem with the, uh, the technical background of the leadership team at IRS IT, which is to say there were not enough people in leadership that knew how computers work. And that was the upstream problem of a lot of the other issues that we have because if you don't know how, if you don't even know what the words are in this field that you're responsible for, it's very hard to make good decisions.
And these are not insignificant decisions. These are multi billion dollar technology decisions made by people who don't understand it. So I sort of been in April, so really peak tax season. I made the recommendation that we put effectively the entire leadership team of IRS IT, which is about 50 people on administrative leave, which we can get into what all these terms mean, which effectively means we're moving them from the rules and not firing them, but we're putting them on leave and we're replacing them with the people who are not going to do the job.
And that requires a lot of courage. Nothing I've got ever been done before as I know. You said, uh, you would be interested that going in, people will write the change. I have to predict that the 50 people who are not administrative leave will probably not sucking on the changes that were being made in the regard.
So it sounds good for me outside. We're ready for change. It's been enough to be done. People are sick of the authentication and the slow lumbering the keynote that is internal government systems and the data.
Yeah. That can't be everybody. And maybe it's not even most of the most. It's some key decision makers.
So that power struggle between move fast break things, doge agents and existing government policy to schedule the job. I mean, any of this work in an office in the sense of navigating politics in the office is difficult. You're not in politics. So what are the politics of politics like when it comes to that power struggle?
So the specifics, the interesting thing about all the specific examples. So a lot of the folks I talk to, some of the people we ended up putting on in this would have leave. I had a lot of empathy for them because a lot of them really didn't intend to be in that role. They were put into that role and several of them, I think some specific conversations that I had, they knew that they were not technical enough to be in this role.
And they knew that they were not a good decision and they felt some guilt about it. And they were put into that position for just as largely, for most of the larger tender bases, just by being around long enough and not in these roles. That's a whole set of problems in the government is that almost everyone in the performance or almost everyone is a four or five, no matter what. And so it's very hard to make sure that people in these roles are actually the ones you know what they're doing.
So some of these folks are really hard working with people. They're just putting in a position where they cannot be successful. And I thought some of them afterwards and they're obviously not happy. They lose their jobs and they're just not a misread leave so we can shuffle things around.
But a lot of them really understand why this is happening and they know deep down that this is for the best, but it is not comfortable. Just lingering on your appointment first. What is the role that this executive order thing plays in what you do and how you arrive in this? I think the Doge executive order sets up the ability to create the office.
I was actually never, I think this is a common question. It's like what even is Doge and it's an office in the executive office of the USO service. I've never been part of that organization. I was brought in directly as employee up treasury.
I get my deliverables and my instructions from the treasury team. I coordinate a lot with the Doge people and people. There's a lot of core documents that's driving us. Doge affiliate.
So you're doing those days. Yeah. So like, whatever these definitions are, it's kind of a more of us. But it's allowed us to, there's specific authorities in that executive order that give us the ability to review contracts and to make sure that we have a review on a lot of the things that are being done in these agencies.
Are you different as a political point to you rather than a three public seven? Functionally, there is not a huge difference. I think the only big difference is that you can be more easily fired as a pointy. It's very hard to get fired as a career.
Right. Okay. I think obviously, I'm pretty politically divided. I'm still in the other member.
What made you feel comfortable with that? That means you're in a political position. I mean, it's technically called a political pointy, but the reality is everyone wants the IT systems to be good. Everyone wants the government to work better.
I did a, I didn't use things with Secretary Johnson a while ago and there was some concern that I had that there would be negative repercussions from that. But I was surprised that really bipartisan way people that I know on any side of the spectrum were just really glad that somebody who knows what they're doing is trying to fix this stuff. So I think it depends a lot on what it is that you're doing. In my case, I'm really just there for some viewers.
America's the fifth highest government expenditure in the world. Is that a good thing? I did not know that. That's probably not.
I think in theory, it's fine if there wasn't such a large deficit. If we were, if we were not going into such debt in order to pay for this, I think it would be fine. But the national debt is reaching a critical point where we will never just like some runaway effect that we need to get down under control. I want to know how to go.
There we go. This is the usdesklock.org. And all of the numbers are massive. What sounds out?
Yeah. I mean, the $37 trillion was that right over there? That's really the top line number. It's just a astounding large number.
We have $100,000 in debt per citizen. I'm not going to be about $100,000 a second. Yeah, pretty much. That's really the intent of Joe's.
I don't actually know. I think that's maybe counting the amount of money saved from Joe's. Maybe the based on the goals of the organization. I'm interested in how the government operates internally.
What's it like inside of everything about this? You hear the stories of this sort of how the holes, the chest-scale self is the sort of cigar lounge time. I'm actually going to be in the British. What is being inside of the government?
Like how slow and classified as it? How keen people to change? So sat back with that feature, not doing any work. I'll give two different examples that show how it can go.
So it's kind of ties back to what I mentioned around. From the conversations I've had with friends, I'm going to previous observations. Things are slow, decisions I've made. Everyone, the whole name of the game is cover your ass.
Everyone is like, every decision is made by committees. I'm no one can be blamed. That's the whole game. It's all about optics.
At least in my limited experience, I've only been in government for six months. And I've only really been in Treasury. We're lucky, I think many of the other agencies are that we have a secretary of somebody who's leading the organization who's willing to make car calls. Oftentimes everyone knows what needs to be done, but there's just a lack of willingness to do it.
So the example I get before, putting those people on the leave, that was a decision that the secretary has to make. And after we did it, there was about a week of everyone panicking and then everything was immediately got better. And then better than it was even before. As in our things that were separate years, it started getting delivered in weeks because we put decision makers, technical decision makers in technical decision making roles.
So we were able to make decisions way faster. And I remember one of our best engineers who's been there for more than 10 years. This is right after we made the strange. I don't know if this is good yet, but it's definitely the most different it's ever been here.
And so the willingness to make that hard decision that comes from the top, and there's a lot more of that than it is. And so in the case, I'll give you a totally different example of the thing that I have been stuck on for a long time and starting a nuts, which is I'm trying to get to the bottom of why the IRS does so many things like facts. I'm working on trying to get the customer service software to be better. And I'm listening on these calls.
I'm working with the reps to try to improve these cycles. Often times when you're a taxpayer and you get to send a document, we say, okay, here's our facts number. And this is the most common response is I don't have some facts. And like, well, it's the only way that we can receive data as a fact.
So you have to figure out how facts is to us. And I ask why are we doing this in my facts? And the answer is, well, there's a policy, there's a belief. There's some reason why we do this, which there may be people who believe that facts are.
The only thing is the most secure way to send information. And that email is not the internet is not its facts. That's like the gold standard of information security. And I talked to the federal so I talked to a whole bunch of people in cybersecurity in the government saying, am I missing something?
Or is this crazy? And this might have been true 25 years ago, but it's definitely not true now. And I've been trying to get to the bottom. We received 60 million facts per year at the IRS.
We have only 50,000 active facts lines. And the struggle that I have is trying to figure out why are we still receiving facts. What policy says that we need to? How do I change this?
And it's like, talk to somebody. They say, oh, the opposite tax policy is responsible for that. So it's a way to hire us. I just cannot for the life of me still right now.
I'm actively working on this. I cannot figure out where are the levers? Who makes this decision? And then how do we implement this change?
There's just so much inertia. And I guess you would call it bureaucracy. I don't think this is unique to government. I imagine it might be similar in very large corporations or whatever.
Yeah, that's a great point. How much of this is a unique issue that is to do with government? And how much of this is when you get an organization of the size, this economy is a scale of the right of change is equal. I think most of it is probably the same as you would see in a legacy large corporation.
I think the added complexity is the fact that you have a staff that you have very limited leverage to change. So there was one guy who came in, I forget which agency. And he was brought in to make some pretty significant changes to the agency. And he asked me like, all right, so how do I do this?
Like my experience is going to see you go for a company. My experience is coming. You find the good people. You find the bad people.
You fire all the bad ones and you promote all the good ones. Okay, well, you're not going to have to figure out how to do this without any of those things. Because you can't fire the people who are not good. You just can't.
It's not. Well, this is a whole long conversation about civil service and what it means. There is a reason why it exists. We have to go back to like 1880.
It's when why this exists. And it exists for reasons that makes sense. We may be at a point where we over-indexed. But back in the day, this has been like Andrew Jackson era.
These are called the spoil system where when your party would win an election, you would fire basically the whole government and you would install all of your buddies. And there was a lack of continuity. So like major government functions just stop working because we have these new people and we don't know how any of these things work. They would make all of our money and then they would leave when they lose an election.
So this is not good. So the civil service reforms, I think it was 1983. They created this concept of like a permanent civil service where there's some class of people who are able to go who you cannot just willingly fire all these people just because you want an election. They have certain protections.
I think it's generally a good thing because you do get continuity of service for these functions. It is now the case that I think there's roughly roughly a couple million people who are civil servants and you have something like 4000 bodies. So we might have too many people that have these sorts of protections. And in theory, you can fire them.
But there's a whole process to do. So they have to get a poor performance review. It's three times in a row. It's multiple times in a row.
And they're safe operating. If you ever give somebody a poor performance review, the unions come after you. And it's a ten times more work to deal with it. So a lot of people just give everyone five and just move on.
So the most common way that I've heard from inside of government people in the very long time, the most common way to get a poor performance after team is to promote them. Yeah. Yeah. Absolutely ubiquitous.
Like everyone, you guys have to pass it up. You guys just like give them a promotion, move them to another team and we can keep this. There are some people who are really diligent about doing performance reviews and keeping quality teams, but they are few and far between. I think a lot of people seem to come and play as a lazy or incompetent, most people who are experienced with that.
What's the proportion of people who are fit to that? I think there's, there are, there are some people who are really excellent. Most of my exposure has been at the IRS. We have, when I came in, we had about 8,500 people in the CIO office, which is a product design engineer.
Mostly, I'll send some place in the engineering. I'm going to be a lot of people. We have, from the folks that I talked to, at least, at least a couple hundred good engineers. There might be more, but from the people I talked at least a couple hundred.
There are a lot of people who just, they don't pass the, what would you say to do here? You ask very basic questions about the role and they can't even answer the simplest questions. If you are, if your job is your engineer responsible for data integrity and I ask you a basic question of like, okay, so how does data go from here to here? I don't know, we should ask that, I don't know.
Is that just your answer for everything? What do you actually do other than set up meetings? There's a really good book about the bullshit jobs. No, but I have not yet about what it is.
Yeah, there's a lot of that. And because you can't really, fire these people because you can't really give them negative performance reviews, they just sort of, they're just sort of there. As like, maybe a data point, and most software companies that I've worked out for exposure to, the ratio of engineers to non-engineers within like a product design engineering function is something like five engineers to everyone, non-engineer. Or if you're like a really tech company, they might be 10 to one.
We're basically the inverse of that. It's like one to 10. There are so many people whose job it is. It's like manage managers of managers of contracts of managers.
There are some really good people, but it is not the majority. And so finding those good people is really the name of the game. Quick side, if you struggle to say sleep because your body gets too hot, too cold tonight, this is going to out. Just released that brand new pod five, which includes the world's first temperature regulating due, they compare it with a smart mattress cover, which cools at once each side of your device, by a two 20 degrees and you now got a climate controlled cocoon built a deep, uninterrupted rest, new base even comes to the built in speakers, so you can fall asleep to white noise or stay awake, listen to me, and upgraded by natural sensors, quietly, and helps you get every night, spend normal patterns, heartbeat, distributed breathing, or some changes in each other, even starts warming up, cooling up, and out before you get in.
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I'm too eight sleep.com, so I'm using the code modern wisdom. I can't see you sleep.com, so I'm going to see some modern wisdom. How hard is it to get changed to happen then? Just across the board.
It seems like there's a protection in place. There is this odd tenured professor thing going on very procedural. There is a disincentive for starting that process because you're going to get against the unions. There will be social pressure as well to hear about Sandra.
How much of an assault have you been able to be with these new public powers to set it in an actual match up? Yeah, I would say there are certain things that are relatively easy to get the first step in. This is one of the biggest surprises for me is specifically having to see you before one of the things that you learn. You have to be very careful with what you say to the team because if you suggest an idea, it might just become the new company.
You probably already have to realize that people just immediately action this thing. It is about as far the opposite of that as you can imagine in the government. You can say what everyone people just continue on these things. The president puts out an executive order that says this is a new priority.
The secretary says the whole organization says this is a new priority. Then you check in a couple weeks later. And I'm like, what? The number of times that I have to decide how people get these done, you can often find these.
Sometimes you have this thought of what you really have. We should have this policy in place. But nobody is doing it. We should write this policy.
That's actually been the policy for 15 years. Somebody 15 years ago had this idea. But it didn't actually happen. Do you have any example of something?
Do not pay. Do not pay. It's a list of whenever there's a fraudster using a particular bank account. Before you send out money, do that bank account.
You want to check it against a list of known fraud or bank accounts. That's a thing that makes sense that you want to do. That's been a thing that was supposed to be implemented in 2013. So this is a new.
But the, I would say, if I was to say concisely, the biggest surprise is that executive orders are not self actualizing. Just having the policy is a very small part of the amount of work that actually needs to get done to get these implemented. And under the hood, you really have to have the hound people. I think if I was to say the one thing that those people are particularly good at, it's knowing what the priorities are and making sure they get done.
It's an infillance. Sometimes it's doing it. There's a lot of times when there's not the talent or capacity in house to get it delivered. And the process for outsourcing into a contractor is so cumbersome and onerous that sometimes you just have to do it yourself.
Have you spoken to Don K He was Boris Johnson's Enforcer, right hand, during COVID. He was also the guy that Benedict Cumberbatch played in the movie about Cambridge Analytic. So technically proficient has a sub-stack. He's like modern DJ and there's a podcast where they spoke.
Anyway, I think he interested me to enjoy the documentary. But he famously brought a bunch of stories. I'm going to just give you a few that will maybe make you feel a little bit less bad about your situation. During COVID, there was no way to keep the figures centralized.
So they were written on pieces of paper and then he would write on a whiteboard. And Boris apparently was just shooting from the hip. They saw new papers opening from that day. And that's where the policies came from.
There was a need to find a way to have cloud document storage that people could live work on at the same time. But they didn't know if Google Docs was sufficiently secure or the same for Microsoft Teams and stuff like that. So they engaged a consultant company who I think spent multiple years and multiple millions of pounds to tell them that we need to do it. We'll bootstrap ourselves.
Most impressively until 2020, a good chunk of the NHS was still around Windows XP. And there was a special ransomware virus that got released at the fact that it's 1% of NHS and 1,000,000,000 of patient data, pages and factoring machines. So quite heavily used the rail system in the UK. So famously, I use these factoring machines and can't be explained why or how to get on ground.
So I guess it's not just you. We do have a much older country. We have a little bit more than we do. But when it comes to building tech inside of government, does it happen to do that?
What does building software and tech inside of government look like? The interesting challenge about building software in the government is that my vantage point is a little bit skewed because the IRS is basically technology. And a lot of other government organizations, technology is very much a secondary consideration for them. But for the IRS, almost everything we do, ultimately, is downstream of technology.
If you want to do enforcement of techs, you have to use computers to figure out who is non-compliant. If you want to pull up some of these things information on the phone and customer service, do resolve an issue, you need the IT system to be good in order to do that. Virtually, everything we do is based on IT systems. So a lot of our systems are internally built.
A lot of other systems are built with vendors. And these vendors are, I think the biggest challenge you have is there's a core incentives alignment issue that you have with vendors where because the people making the decisions on whether to sign contract or not, it's not their money. You have this very large budget. This is one of the other, I'm not sure I would call it a misconception, but it's commonly people say all the budgets are so tight.
I can tell you firsthand, especially with an IT at the IRS, the budgets are not tight. We spend so much money on these things, but nobody cares. Nobody's paying attention. We would gladly spend hundreds of millions of dollars with some vendor to build a thing over the next five years.
But we won't pay our engineers slightly more money because of some weird, such thing where you can't compensate engineers that even close to market rates, some serious or international. So I'll give you a very specific example that I'm dealing with right now. There's a vendor that we wanted to work with to build a particular system. And it's an agenda with me.
A vendor is like a extender, a lawyer to boost out on Hamilton, a lie goes to the calendar. There's a whole list of companies that are contractors that work commonly with the government. I'm sure there are thousands of them, but there are some that are bigger and more well-known than others. I think boost out on Hamilton is something like 97% of the revenue from the government.
They're one of the quintessential vendors. One of these I'm talking to now, there's a previous vendor that we were using. And they were really taking advantage of the government on pricing. And so I talked about one of the new vendors that said, can you do this for us?
How much would you charge? And there's a much lower rate. I think it was something like $2 million a year because they offered. And it's a great, but that's the price.
So I want to make sure that that's going to be the price that we pay. You know, we're not like those other guys. It's 2 million and there's a couple other projects that we're going on as well. The first six months went really well.
Great. Then the contract comes up for a renegotiation. And now the $100 million a year. And I'm asking them, I thought we talked about $2 million for this, $250,000 for that.
But that was a pilot pricing. It's like if I had known that you were going to raise your price arbitrarily by 20x for no reason whatsoever, I would not have agreed to this. But now we're in a position where we can't just stop because now they're in our systems. And so now there's going to have to be this whole.
We can either come to terms with like a more reasonable price or we're not going to find a million. We're going to start with a new vendor or we're going to bring it in house. And it's just so tedious. Is that not what happens with a business though that you use a party?
They come in, they call it a little bit. Is it unique to a government? So the only reason why it's unique to a government is that historically nobody in my seats doesn't know. Right.
You've seen it's a soft touch. Yeah. This is how you negotiate with government. Yeah.
Basically, normally they would come back with a price like $100 million. And they just check that was within our budget. Yes. All right.
So I know. But I'll say where did you come up with these numbers? How are you defining this price? It was just a change in scope.
It's like, no, the price is 20 times more. And then they come back. It's actually happened. Like, what if it was like $50 million?
You can just like arbitrage early change the price like that. What do we do? This is crazy. And there's nothing that they said directly.
They said, well, you know, usually when we talk to government, they don't negotiate on price. People government entities usually prefer fixed price. I don't see that's a completely irrelevant to me. I want to know what it is that we're paying for.
And what we're paying for seems to be something completely arbitrary. So I think there's a use to not be willing to this because actually this maybe ties into a broader problem. Which is that I'm in this role for some limited duration of time as a chief information officer of treasury. This role, I'm responsible for something in the range of $10 billion this year.
This role is paid at $160,000 a year. And you're not allowed income from any other source. There's like, there's a rule against like, I can't do consulting, I can't do anything else. You also have public and disclosure finances.
There's all these limitations that come with it. And so historically these people are not like super experienced people who have run large technology organizations before. It's historically been a role where you can promote it internally from some role, usually non-technical role. And then you end up with the CIO and you're responsible for making these decisions.
And I think over the last several decades IRS is a lot of very bad decisions. What have you got to give up to take on this role? Well, the simplest one is money, but you can make money later. I think the hardest selling point for this is that it's not just that you make less money.
That's fine. But for the types of people that they want to run on, the pitch that you have to tell them is like, I hope you have a lot of money in savings. Because as a result of taking this job, you're probably burned down a lot of your savings. And so I've been trying to advocate for just make it.
These are called a lot of these leadership roles. SES, the general's GIS, which is like most government plays. And there's the SES, which is the executive leadership group. There's about 8,000 SES members.
Just make the compensation average. It's like industry average, I think the role that I'm in should probably be compensated something. And the range of like a VP of engineering the Walmart would be probably a reasonable comp. But this role, the CIO often makes less than the engineers on the team.
And I think that it leads to a lot of challenges when it comes to both keeping people into actually care. Like this is I found myself struggling with this where there's some contract. There's one that comes to mind that was a couple weeks ago. $35 million for some set of new toys that we really didn't need.
But it's technically in the budget. And I just said no, we don't need this. And a lot of people were upset. And I found myself in the fact that I had going like, why do I care?
It's not my money. I could just say yes. And then this problem goes away. And no one will care.
It's not a single person. That will care. Why do you say no? There are only people who are upset.
And there's ambiguous women for the taxpayer. Of course, they still just say no. But you can feel that in the back of your head. And you're thinking you really need people in these positions to care enough to be willing to make those hard calls.
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I would say why should they trust people with substantial relevant industry experience. Versus people who oftentimes stumble their way into these leadership roles. I think that's probably the way that I would frame it. And it's not even like trust is in.
They're going to do anything nefarious. It's just when you work in an organization you want your leaders to make good decisions. And I think especially within technology you want people to make good decisions in these roles. And one of the consequences of not having this is just this contractor bullet.
And like a very specific and relevant example is the amount of money that we were sending at the IRS on cybersecurity contractors. And we were doing a contract review and we asked all of the leaders of these groups to justify their contracts. Which of these are mission credit, which of these are not? Which can we do scope?
The cyber team came back said 100% of their spend was mission credit. Now a single thing to be changed. We moved on during that administrative leave portion. We put those leaders on the we brought in the cyber engineers who really understood what these contracts do.
And we just went line by line and I would guess about a third of them. We hadn't even used this under in years. And we were still paying them $10, $30 million a year. And does nobody cares.
And when it's not your money. There is some non zero risk that if you can't still contract something got my hand. And there is zero amount of it. I can't say for you.
There's zero amount of it. You just ask for one money and you will probably get it. So finding people who are willing to make those calls and it's kind of ties into the industry comparison. It's the IRS where a private company it would have gone bankrupt many, many years ago.
Because people would stop buying the service because of that. You have some feedback where people recognize these problems and they stop funding it. Government contractors have been pretty defined. I think by doge and other people over the last few months.
What is it specifically about the contractors that have got the IRS out on turnaround? And there are many things. I think the biggest one is this core incentive and selling problem. Which is the pricing is often arbitrary.
And they will claim that it's not. It's not. It's firm fixed price. It's firm fixed price.
Which is the same price as everyone. It's just a soak change. It's like okay. But we're not getting anything different and it costs more.
So what's going on here? A lot of the contractors. Some of us are not even specifically default of the contractors. So I'll give you a specific example of a type of problem that you experience.
So if you want to do something simple like hey, I want to sign up for this online service and it's $10. There might be some threshold where you can do it. But in general, it's great. We need to set up a contract vehicle which would take a year.
And you have to go through this whole rigable role of like competitive bidding processes. The procurement systems that we have to do the process that we go through to procure things is totally and utterly broken. And it leads to disasters and bad outcomes. So like if you wanted to do that, you have to do this competitive bid.
And this is at least the case for IRS. I know from other discussions in case a lot of other agencies as well. Which is that the, if you are in technology and you need a specific piece of software, you'll write up the RFP, the proposal for what you need. And that then goes to the procurement team.
At that point, it's basically a black box. Usually the engineer has no further input into what is elected, who selects it's what. No offense and that was a random vendor for something that is somewhat related to what they asked for. And then they just have to make a new.
The other challenge is that because we have these salary caps for most, for all roles really, but for a lot of the very specialized technical roles, we can't really be competitive with hiring some of these roles. So in the early to mid career, we can actually be reasonably competitive. We can pay engineers something like 160, 180 to cap this 226. So you can be reasonably competitive for those roles.
Once you get into like mid to late career, which is when people really specialize, there's just no way to pay $800. It does not just, and so there are some, I think there's a special thing where there are a total of 800 people in the government that can exceed that number. And it requires a whole process to do. The only way you can hire that 250,000 person, the way that you would do it is you would hire some contractor, one of these large entities I mentioned before, you pay them $500,000 to funnel 250,000 to the person that you actually want to hire.
And then they'll draw it off the top. And then they'll draw it off the top. And this whole system incentivizes those kinds of things. How important is getting able to 25 to the technical talent that you need to run the government?
Well, this is the interesting thing is that for the most part you don't, but there are some that are crucial ear horns. The IRS that I mentioned has when I arrive at about 8,500 people in IT, it's now about 6,000 plus another I think 6,500 contractors. Yeah. And so the numbers are often misleading.
It's hard to really go handle on who's doing what and how many people are there. There are maybe 100 of those roles in total where you would really like to be able to pay up to maybe $300,000. And it would make such an impact on the organization to be able to retain your really technical high contacts people that they're already and to be able to bring in people. You have a lot of experience with this stuff.
If you fix the contract you probably will improve. Well, I'll give you another specific example of the contract that the procurement process generally is we have this big initiative for to eliminate paper processing at the IRS. So, ballpark with like labor and all this ballpark half a billion dollars a year on paper processing. We want to use external vendors.
This is what people in the commercial industry all the time. They're vendors. They take in paper. They use robots to digitize them.
And they basically just like JPI requests. Technically, you're a senior paper. Your organization doesn't even need to know about that. It's just you don't need to buy a house.
You don't need to know that. We have this in China, we're housing Kansas City. I'm going to show you pictures like there's papers back to the ceiling. And some of these things are months, sometimes even years back long just like sitting there because it's so long to process these things.
So, the, when I first started, I said this is really obvious. It's way less expensive to use it under its sales way better. There are far fewer issues using these vendors. So, we should just do that.
We started the process. We had to write up the proposal. We do competitive and process together vendors. We get a bunch of vendors who sign up.
Cool. We pick a couple of the vendors. Then it gets contested, which is a thing where if you believe you're one of the other vendors and you believe the process is unfair. One of the other vendors was elected unfairly.
You can test it. You can test it. You can do it. And then the process stops for 30 years.
And then there was some situation where you could get it. Which then takes another however, 30, 60 days. Then you have to do a new analysis. And then it gets contested again.
And then it's just like, we started this process of zero paper in April. We don't even have the contract awarded yet to start on the project. And this cost us more than a million dollars a day that we don't have this implement it. And nobody cares because we have to follow the process because we don't.
And it can be overturned and it can get contested. And it's just like, it's just, it's a million dollars a day. And I'm trying to make this point. We need this done.
We need this done. I don't care which vendors we need to start moving on this project. And it's like, well, we have to wait for another 30 days before we can do anything because of this rule. And then if you can also see how this exists for a reason, which is you don't want people to just choose their bodies coming.
Right? That's, I'm sure this is the balance of you need some checks and balances. And you can kind of see how you got here, which is I'm sure there was a time when as soon as people got into government, they just like trade the favors with all the people in the past or they trade the future favors. I'm like, hey, company X, I'm going to get you all these contracts.
And then as soon as I leave government, you're going to give me this good job. So you need some checks and balances there. It feels like we are way over indexed on process and on like competitiveness to the point where a given other specific insert example, value added resellers. So this is the thing because everything has to be a competitive process for the most part.
If you want licenses for some generic product, the kind of thing where you could just go online and sign it for right now. You're like, I don't think licenses for Adobe or licenses for Figma or licenses for any like web application that you would use on any SaaS product. Right? When you're looking for the thing, you're not looking for any similar tool.
You need this one specific license, right? But you can't compete that because you might end up with some different license, which doesn't actually serve your purpose. So what you have to do is a common thing is you have to create what's effectively a fake option where you find a value added, you find three or four value added resellers who are all reselling that license and they're competing on the price for that license. So they all just take a cut off the top.
They don't do anything. But they're there to provide cover for it looking like a competitive process. And I think this is one of the things that the people over at GSA or the Federal Service Administration is responsible for procurement process broadly. This is one of the things that we think is a good effect because they just take money right off the top and they almost always do nothing.
It's a strange contrast going on here to people say the budget is tight, in government. But you seem to be saying the opposite at the same time, which one's true. Are there any exceptions about how much money you go in a sense? I think the...
If I'm going to steal them out the way that people are in the government and they say about just their types. I think probably the fairer is a way to describe it. He is they're saying that for the things that are important that we want to spend money on, we are not allowed to. I think that's probably the fairer is a way to describe it.
It's not that there's a lack of money overall, but the overall budget. Yeah, the overall budgets are sounding large. But when they say, hey, we'd like to spend $10,000 on this thing. It's like, what would contract with people?
Are you going to use? Oh, we don't have one. Okay, well, we need a competitive bidding process. Maybe in a year and a half, you can get that.
And we will have spent a million dollars to try to come up with some contract with people so that you can spend $10,000. So the amount of overhead I've described it to you are in a million years in government. Everything is at least medium-hard. There is no...
Oh, yeah, that's not what I'm going to say. You can handle that. Everything requires so much time and overhead to do, especially with all this contract nonsense. That's...
If you want to do something very simple, if you hire good people, the problem is you can't spend money on things that are useful, because there's so much overhead to do all these things that you're trapped. And so the amount of... I don't want to call this machinery. But it's really like the...
If you know what's important, it's like the paper initiative I mentioned. I could argue about just our types because we can't get money for this thing. But we have money for this thing. We just can't do it.
So legislation is tight, budget is wide. You can say that. Or you can say the rules are tight. The rules are cumbersome owners.
Most of the stuff for it's called far federal acquisitions regulation that you're going to see. I don't think hardly any of that involves legislation. It's just like compounded rule making from GSA and other groups that just make it really hard to do these things. When it comes to the big spending government, how much of this is negligence, fraud, incompetence, waste.
Like how culpable is anybody here? Because it sounds like everyone has laws of liability. Yeah. I think one of the things that's been a strange observation is the term waste raw abuse.
Drop in this first campaign, right? This has been a long-standing campaign role. I think what was most surprising was discovering how gray boundaries are between these concepts of... what is waste, what is fraud, and what is abuse.
I'll give you a very specific example. This is not our agency, but I was talking to another CIO who's dealing with this. They were doing contract review. And they just got...
They found the contract for a piece of software. That's like $20 million a year. That has been on the books for like five to ten years. And one of the doge initiatives was matching the number of licenses that we pay for with the number of licenses that are in use.
And they discovered that we've been paying for these licenses. And not only is nobody using it now, but nobody has ever used it. Not a single license that's ever been activated for this product. And it was effectively auto-renew.
And every time they look enough for renewal, people say, oh yeah, mission critical. because nobody really knew what it was for, who used it. So is that waste? Is it fraud?
Is it abuse? I think we could say it's wasteful at a minimum. But you start looking into like, oh, well, who runs the company? That's interesting because the guy used to be in the government.
I wonder if there's anything there. But nobody really looks into it. These boundaries get very fuzzy. It's really hard to know what's going on.
I would say in terms of abuse as well. This ties into some of the other procurement problems like that. There's a whole program within the small business administration. There's some requirements on how many of your contracts go to small business.
And there's this as the A-A program. And there's something called the small business business. And if I just assume the, if you get a contract to a small business, you can basically skip the whole procurement process. You can skip the competitive thing process.
You can pick the vendor that you want. It's like you get the fast lane, but it's capped. For some of these groups, it's capped at $25 million. So this is one of the things I was in contract with you.
And you see all these things at $24.9 million, $4.9 million, $4.9 million. Something's going on here. And you can skip it. And these contractors, these work around.
They will often take 10, 20, 20, 20, 50% off the top of a contract to do actually nothing. On the books, there's supposed to be 51% of the work in the system. But they never do 51% of the work. I should say, almost never.
I have yet to find examples. Having looked at the tables. I've yet to find an example where they do any of the work really. And they just follow money.
I think when I was talking to somebody who's investigating this, they estimate that this might be as much as $80 billion a year. You can just graph it. My estimate was about $30 billion. We'll get back to talking about the first moment of the moment of this make the highest quality supplements.
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How's that feel from the inside? And how's that feel American? I'm extremely inside. It's obviously very frustrating.
I think it's in some ways being in the role that I'm in, I feel encouraged because you can see how to fix it. I think they got any problems. Yeah, it's both concerning and encouraging at the same time because you can see how bad it is. But also, you have such an impact on being able to change this because you have the willingness and authority to do it.
And you can have, you know, $10 million swings with very little effort because people haven't really looked at these things before. So I think the biggest surprise to me has been for so many of these things just the scale of how problematic a lot of these contracts are. I think everyone kind of knows that the government is efficient. We all know that.
But we all think these things might be two X or three X inefficient. But you find examples of things are 100 X thousand X beyond what you pay in the commercial sector. And it's just a, there's just no excuse for it. It's crazy.
Is there anything in addition to the technical talent problem that's contributing to disfunction of IT systems and government? I think upstream of all of these things is leadership. And I would separate out the political leadership from administration administration and much more the career civil servant leadership. There are some examples of entities that are within my career that are pretty well run.
FinCEN, which has a lot of, they do a lot of international finance investigations. They have their CIO and any Taylor who's technical system for a long time and she runs a high chip. And you can see downstream of good leadership, tensile, good teams. They tend to have technical talent.