Looking for cheaper ways to run a government. Reagan team taps the Grace Commission report for ideas on how to save money

Let's say the federal government needs typewriter ribbons. It's buyers can't simply go over to the nearest K-Mart and pick up a couple of dozen. Instead, they write down exactly the kind of typewriter ribbons they need -- and get bids. That's where the trouble sometimes begins. Typewriter ribbons. It sounds simple. But one official testified last week at a Senate hearing that in one instance, a typewriter-ribbon specification contained ``nine pages of details, plus a five-page amendment.'' That kind of verbosity scares away bidders -- and raises prices.

The Grace Commission, appointed by President Reagan, came up with what it claimed were 2,478 such practices that it said were wasting taxpayer dollars. If federal policies were only changed, said commission chairman J. Peter Grace, the government could save $424.4 billion in just three years.

Mr. Grace's proposals -- like most reports by presidential commissions -- could ordinarily be expected to fade quickly from public debate. The Grace Commission's 47-volume study, covering 23,000 pages, would under normal circumstances collect dust on some obscure bookshelf in Washington, and eventually be discovered 50 or 60 years hence by a historian, who would make it a minor footnote in a future Reagan biography.

There are indications, however, that the Grace report -- which has been highly controversial -- could be different.

For one thing, there are those $200 billion deficits. Everyone's looking for an answer.

For another, the President is still ``enthusiastic'' about the Grace report more than a year after it was first issued, says a White House official. Further, the Office of Management and Budget (OMB), as well as other major departments, is tapping the commission's report for money-saving ideas in the 1986 budget, which will be released early next month.

OMB director David A. Stockman reported several months ago that a process had been set up to ``ensure that each one of the 2,478 Grace Commission recommendations is thoroughly reviewed.'' Further, Mr. Stockman reported that ideas from the commission that could save as much as $103.3 billion had already been implemented or had been given the go-ahead for future budgets.

All this has made some Democrats angry and bemused. They see President Reagan -- armed with the Grace report -- tackling the problem of the federal deficit with a plan that looks risk-free for the White House.

As New Republic magazine puts it, the President's agenda for battling the deficit can be summed up as ``Grace 'n' Growth.'' Get rid of ``fraud, waste, and abuse'' by saving billions of dollars with Grace report recommendations, and watch the rest of the deficit melt away as a result of economic growth.

Democrats, such as Rep. Pat Williams of Montana, complain that this approach is based on three myths that somehow have been swallowed by Americans.

Myth No. 1: Just pare away a bit of waste and fraud in Washington, and the big deficits will go away. The only real problem in Washington, according to this myth, is a recalcitrant Congress, which is unwilling to cut the fat.

Myth No. 2: Government ought to be run like a business. The fact is, Mr. Williams says, business relies even more heavily on credit than government, and business executives have American consumers ``on a credit-card tightrope.''

Myth No. 3: No one will have to pay for the Grace report's savings. In fact, the Grace report would shift many burdens now shouldered by government onto the middle class with higher rates for just about everything from electric power to college loans, Williams says.

The Democratic Study Group (DSG) of the US House adds a flurry of complaints to those of Congressman Williams. The DSG charges that the Grace report exaggerates the level of savings. The claim of $424 billion of savings over three years ``is taken seriously by virtually no one,'' the study group insists.

The DSG also charges that the Grace report, which was supposed to find areas of waste, fraud, and abuse, actually went into broad and controversial policy areas that have nothing to do with its mandate. Some of Grace's biggest savings, for example, would come from changes in federal pension policy for civilian and military employees.

Tightening civilian retirement rules, for example, would save some $30 billion over a three-year period, the Grace report claims. Savings from a leaner military retirement system would be nearly as great -- $28 billion.

Democrats, however, complain that this has nothing to do with waste. Nor is it clear what such sweeping changes in retirement policy would do to morale, the quality of the government work force, and retention rates. Cutting back on pensions could mean higher turnover, poor workers, and new, unexpected costs.

Mr. Grace counters that ``the Civil Service and military-retirement systems provide to participants three times and six times the benefits, respectively, of the best private-sector plans.''

DSG has a further gripe. It charges that the Grace Commission's work was done by more than 2,000 corporate executives -- many of whom may have investigated areas where they had a conflict of interest. The Grace task force that investigated the Agriculture Department, for example, included a number of officials from agribusiness companies.

The DSG pointed out: ``The project manager [for the agriculture report] was a former chief executive of Armour & Co., a large meatpacker, and the task force included employees of Quaker Oats, General Foods, Deere & Co., Cargill, Continental Grain, Archer-Daniels-Midland, several large agricultural lenders, and at least one Washington lobbyist who represents agribusiness clients.''

Some of the recommendations of this group, the DSG notes, included such things as ``reduce the intensity'' of federal meat inspections and allow industry personnel to conduct their own post-slaughter poultry inspections.

Despite the complaints heard on Capitol Hill, however, the Grace report is alive and well. Sen. William S. Cohen (R) of Maine, chairman of the subcommittee on oversight of government management, notes that Washington will spend nearly $600 billion over the next three years buying everything from ``paper clips to tanks.''

Grace estimated $34.5 billion of that $600 billion could be saved with better procedures. Senator Cohen concedes there is a ``healthy debate'' over the level of cost savings. It may be less. The Congressional Budget Office (CBO) and the General Accounting Office, after reviewing some of the Grace recommendations, said the actual savings would be ``much smaller'' than stated. But Cohen notes: ``If only one-tenth of the Grace Commission's procurement savings were feasible, we still could save more than a billion dollars a year'' in that area alone.

How can such savings be made? That brings us back to typewriter ribbons.

Rather than spelling out in great detail the specs for a ribbon, government buyers could use what is known as a ``commercial item description,'' or CID, for products in widespread use.

The CID for a typewriter ribbon, for example, would take about two-thirds of a page, says Allan W. Beres, assistant administrator of the Office of Acquisition Policy in the General Services Administration (GSA).

Simpler descriptions, GSA buyers have found, lead to more bids. Presumably, that would lead to lower prices, although proof is sketchy.

Another possible route for savings: upgrade the government's computers. Mr. Grace noted that 60 percent of the federal government's 17,200 computers are obsolete. The government could save $4 billion over three years by upgrading these systems and using modern software, he said.

While the Grace report has gotten support for many of its ideas, others have hit a political buzzsaw. For example, Grace would make a fundamental change in the federal role in health care. Spending would be capped, with growth in the health-care budget to reflect only an increase in the US gross national product.

When the annual budget for health care was set, then that figure would be divided by the number of beneficiaries.

Although the details are not absolutely clear, apparently, each medicare participant would then be free to shop around for the best health-care plan available for the ``X'' number of dollars he or she received from medicare. The federal money could be supplemented with one's own resources to buy a better plan, if desired.

Savings under such a plan, according to both Grace and the CBO, would be about $29 billion over three years. It would move federal health care toward a system that relied more heavily on the private sector -- a change central to many Grace proposals.

Mr. Reagan wants to move the US that way, too. Now we will see whether Congress will gracefully go along.