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Needed to Improve Management of the Competitive Sourcing Program' which 
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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

January 2008: 

Forest Service: 

Better Planning, Guidance, and Data Are Needed to Improve Management of 
the Competitive Sourcing Program: 

GAO-08-195: 

GAO Highlights: 

Highlights of GAO-08-195, a report to congressional requesters. 

Why GAO Did This Study: 

Competitive sourcing is aimed at promoting competition between federal 
employees and the private sector as a way to improve government 
operations. Key work activities—those that are either inherently 
governmental or core to the agency’s mission—are generally exempt from 
competitions. In fiscal year 2004, Congress began placing spending 
limitations on the Forest Service’s competitive sourcing program 
because of concerns about how the program was managed. Also, like other 
agencies, the Forest Service must report annually to Congress on the 
savings achieved from any competitions it conducted. 

GAO was asked to determine the extent to which the Forest Service has 
(1) plans and guidance to help implement its competitive sourcing 
program effectively and (2) sufficient cost data to ensure that it 
complied with its spending limitations and accurately reported its 
savings to Congress for fiscal years 2004 through 2006. To answer these 
objectives, GAO examined the agency’s strategic plan, guidance, and 
available cost data for competitive sourcing and interviewed key agency 
officials. 

What GAO Found: 

The U.S. Department of Agriculture’s Forest Service lacks a realistic 
strategic plan and adequate guidance to help ensure that it can 
effectively implement its competitive sourcing program. For example, 
the Forest Service’s current strategic plan is unrealistic because it 
does not take into account the likely availability of personnel and 
funding resources needed to implement the plan. Furthermore, the Forest 
Service lacks sufficient guidance on identifying key work activities 
that should be excluded from competitions. Although Forest Service 
officials do not believe that inappropriate work activities have been 
included in competitions that it has held, without clear guidance the 
Forest Service remains at risk of doing so. The agency also lacks a 
strategy on how to assess the cumulative effect that competitions could 
have on its ability to fight wildland fires and respond to other 
emergencies. Outsourcing a large number of federal jobs to the private 
sector could, over time, reduce the number of available responders. 

For fiscal years 2004 through 2006, the Forest Service lacked 
sufficiently complete and reliable cost data to (1) demonstrate its 
compliance with statutory spending limitations on its competitive 
sourcing activities and (2) accurately report competitive sourcing 
savings to Congress. Regarding compliance with spending limitations, 
the Forest Service did not collect cost data on all activities related 
to competitive sourcing because it believed that some costs were not 
subject to the limitations. For example, the Forest Service did not 
collect data on employees’ salaries related to studying the feasibility 
of conducting a competition—a key component of its competitive sourcing 
process. GAO has interpreted the statutory spending limitations to 
generally apply to all costs attributable to the Forest Service’s 
competitive sourcing program. Moreover, because the Forest Service’s 
cost data used to determine compliance with statutory spending 
limitations were not reliable, the Forest Service cannot know if it 
exceeded the limitations. Regarding the savings achieved from its 
competitions, the Forest Service reported to Congress a savings 
totaling over $38 million between fiscal years 2004 and 2006. However, 
the Forest Service could not provide GAO with sufficient data or the 
methodology it used to calculate savings derived from competitions. In 
addition, GAO found that the Forest Service did not consider certain 
costs, which were substantial, in its savings calculations. As a 
result, Congress may not have an accurate measure of the savings from 
the Forest Service’s competitive sourcing competitions during this 
period. 

What GAO Recommends: 

GAO is recommending that the Secretary of Agriculture direct the Chief 
of the Forest Service to take certain management steps to improve its 
competitive sourcing program. In commenting on a draft of this report, 
the Forest Service generally agreed with GAO’s recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-195]. For more information, contact Robin 
M. Nazzaro at (202) 512-3841 or nazzaror@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

The Forest Service Does Not Have a Realistic Strategic Plan or Adequate 
Guidance to Effectively Implement Its Competitive Sourcing Program: 

The Forest Service Does Not Have Sufficient Competitive Sourcing Cost 
Data to Demonstrate Compliance with Its Statutory Spending Limitations 
or to Accurately Report Savings to Congress: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Limitations on Use of Appropriations for "Competitive 
Sourcing Studies and Related Activities" 

Appendix III: Comments from the Forest Service: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Forest Service's Completed Competitions, Fiscal Years 2004- 
2006: 

Table 2: Forest Service's Schedule for Conducting Feasibility Studies 
and the Studies' Status as of September 30, 2007: 

Table 3: USDA OCFO Guidance for Conducting Competitive Sourcing 
Feasibility Studies: 

Table 4: Percentages of Inherently Governmental and Core-Commercial 
Activities Identified by the Forest Service Compared with the 
Percentages Reported in the OMB-Approved FAIR Act Inventories, Fiscal 
Years 2004-2006: 

Figure: 

Figure 1: OMB Calculation for Determining Savings from Competitions, 
Fiscal Years 2004-2006: 

Abbreviations: 

CSO: competitive sourcing officer: 

CSPO: Competitive Sourcing Program Office: 

FFIS: Federal Financial Information System: 

FTE: full-time-equivalent staff: 

ICS: Incident Command System: 

IT: information technology: 

MEO: Most Efficient Organization: 

NWCG: National Wildfire Coordinating Group: 

OCFO: Office of the Chief Financial Officer: 

OMB: Office of Management and Budget: 

PWS: performance work statement: 

USDA: U.S. Department of Agriculture: 

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

January 22, 2008: 

Congressional Requesters: 

The 2001 President's Management Agenda includes a governmentwide 
initiative--known as competitive sourcing--that aims to improve 
government efficiency and reduce the costs of government programs by 
promoting competition between federal employees and private sector 
organizations[Footnote 1]. The competitions determine who should 
perform commercial activities--activities performed by the government 
that are also regularly performed in the commercial marketplace, such 
as information technology (IT), maintenance and property management, 
and logistics. These competitions compare the public and private sector 
costs of performing an activity and may result in outsourcing federal 
jobs to the private sector. In its competitive sourcing strategic plan, 
known as the Green Plan, the Forest Service, an agency within the U.S. 
Department of Agriculture (USDA), sets forth the agency's goal to 
conduct 14 precompetition studies in 5 years to evaluate the 
feasibility of subjecting nearly two thirds of its total workforce to 
competitive sourcing competitions. 

The Forest Service manages about 193 million acres of land--about 30 
percent of all federal lands--and has a workforce of about 37,000 full- 
time-equivalent staff (FTE). The employees are geographically dispersed 
throughout the nation. In addition to its headquarters in Washington, 
D.C., the Forest Service has 9 regional offices, 155 forest offices, 
and about 600 district offices. 

The Forest Service's competitive sourcing program is subject to the 
requirements of the Office of Management and Budget's (OMB) Circular 
No. A-76 (the circular) and the Federal Activities Inventory Reform Act 
of 1998 (the FAIR Act).[Footnote 2] Generally, the circular sets forth 
the competitive process an agency must follow to determine whether 
federal employees or private sector organizations should perform a 
commercial activity. The competitive process can be divided into three 
stages: (1) a precompetition planning stage that, among other things, 
determines the scope of the competition; (2) a competition stage that 
begins with a public announcement of a competition and ends with the 
selection of the competition's winner; and (3) a postcompetition 
accountability stage, which involves such activities as monitoring and 
reporting on the winner's performance. The circular also directs 
agencies to create a staffing plan--which creates an organization of 
agency employees that is known as the "Most Efficient Organization" 
(MEO)--to be used to represent the agency in the competition. After 
allowing for a transition period, the winner of the competition, 
whether the MEO or a private sector organization, is subject to the 
provisions of the postcompetition accountability stage. 

The FAIR Act, as implemented by the circular, requires federal agencies 
to compile and submit to OMB for approval an annual inventory of the 
activities their employees perform. The inventory must include the 
number of FTEs that perform each activity and designate whether the 
activity is inherently governmental or commercial. Inherently 
governmental activities--such as setting policy or spending funds--are 
critical to the role and function of government and, therefore, are 
exempt from competition with the private sector. In contrast, 
commercial activities--those that are not inherently governmental and 
could be performed by the private sector--are subject to competitive 
sourcing competitions, unless the agency exempts the activity. The 
agency may still exempt a commercial activity if, for example, it deems 
the activity to be core to the agency's mission (referred to as core- 
commercial). 

In addition, the Consolidated Appropriations Act, 2004, requires 
executive agencies to report annually to Congress on competitive 
sourcing activities.[Footnote 3] Among other things, the act requires 
agencies to report actual savings derived from implementing a 
competitive sourcing competition. While the act does not provide 
direction on how to calculate actual savings, OMB does provide this 
direction through annual guidance.[Footnote 4] The Forest Service, 
through USDA, reported to Congress that it saved over $38 million in 
fiscal years 2004 through 2006 as a result of competitive sourcing 
competitions. 

Because of concerns about how the Forest Service was managing its 
competitive sourcing program, Congress limited the funds that the 
Forest Service could spend on competitive sourcing activities during 
fiscal years 2004 through 2007. In fiscal year 2004, the spending 
limitation was $5 million; in fiscal year 2005, it was $2 million; in 
fiscal year 2006, it was $3 million; and in fiscal year 2007, it was 
also $3 million.[Footnote 5] The Forest Service initiated 171 
competitions in fiscal years 2002 and 2003, and it has acknowledged 
that this first experience with the competitive sourcing initiative 
fell short of expectations. For example, a congressional study noted 
that nearly half of these competitions involved three or fewer FTEs, 
and that, as a result, Forest Service officials acknowledged that the 
competitions were unrealistic, adding that holding competitions 
involving few FTEs often made it impossible for private sector 
organizations to compete effectively.[Footnote 6] Two of the most 
important lessons the Forest Service believes it has learned from this 
experience are that it should (1) centralize responsibilities for 
competitions to increase control and oversight and (2) plan 
competitions better by, for example, identifying the appropriate scope 
of the competition. 

The Forest Service has taken steps to improve the management of its 
competitive sourcing program in both of these areas. In fiscal year 
2003, it strengthened headquarters' oversight of competitive sourcing 
competitions. In fiscal year 2004, USDA issued guidance directing the 
Forest Service to perform studies to assess the feasibility of 
conducting a competition--known as feasibility studies--before 
committing to a competition. Although not required by the circular, 
feasibility studies are conducted during the precompetition planning 
stage and help determine whether to compete an activity. Also, some of 
the steps required by the circular during the precompetition planning 
stage are completed as part of the study. In fiscal years 2004 through 
2006, the Forest Service completed three feasibility studies. They were 
for communications activities (completed June 2005), the Geospatial 
Service and Technology Center (completed April 2006)[Footnote 7], and 
fleet management activities (completed May 2006). During this time 
frame, the Forest Service also completed three competitions, all begun 
in 2003 and completed in 2004. They were the IT competition (1,200 
FTEs, completed July 2004); the fleet maintenance competition (57 FTEs, 
completed January 2004); and the road maintenance competition (66 FTEs, 
completed January 2004[Footnote 8]).: 

As with the management of its competitive sourcing program in fiscal 
years 2002 and 2003, the Forest Service's most recent competitive 
sourcing activities have raised questions about whether the program is 
being effectively managed. In this context, you asked us to determine 
the extent to which the Forest Service has (1) plans and guidance to 
help implement its competitive sourcing program effectively and (2) 
sufficient cost data to ensure that it complied with its competitive 
sourcing statutory spending limitations and accurately reported its 
competitive sourcing savings to Congress for fiscal years 2004 through 
2006. 

To address these two objectives, we focused on the Forest Service's 
competitive sourcing activities between fiscal years 2004 through 2006. 
For the first objective, we examined the Forest Service's Green Plan 
and how the Forest Service scoped the three competitions it completed 
during this period. In doing so, we collected and reviewed pertinent 
OMB, USDA, and Forest Service guidance and documentation, including 
documentation related to the three completed competitions. In addition, 
we interviewed Forest Service officials familiar with the agency's 
competitive sourcing activities to better understand implementation of 
the program. For the second objective, we examined the appropriations 
acts for fiscal years 2004 through 2006 to determine which costs 
incurred by the Forest Service during that period were subject to the 
spending limitations. We obtained available Forest Service cost data 
for activities associated with its competitive sourcing program. We 
assessed the reliability of these data and found them unreliable as a 
measure of the costs and savings associated with the program. We 
conducted our work between October 2006 and January 2008 in accordance 
with generally accepted government auditing standards. See appendix I 
for a more detailed description of our objectives, scope, and 
methodology. 

Results in Brief: 

The Forest Service lacks a realistic strategic plan and adequate 
guidance to help ensure that it can effectively implement its 
competitive sourcing program. Specifically, the Forest Service's Green 
Plan does not identify the personnel and funding resources that are 
likely to be available to implement the plan. These personnel and 
resource demands are likely to be substantial because the plan proposes 
to subject all commercial activities--affecting about two thirds of the 
agency's FTEs--to feasibility studies. This includes a single "catch- 
all" feasibility study covering 15,000 FTEs that was not included in a 
draft of the Green Plan because the activities associated with these 
FTEs did not satisfy the Forest Service's initial screening criteria 
for identifying good candidates for feasibility studies. The Forest 
Service added the additional "catch-all" feasibility study to its Green 
Plan because it was directed by USDA to schedule feasibility studies 
for all eligible FTEs without taking into account resource 
considerations. Furthermore, although the Forest Service identified 
inherently governmental and core-commercial activities in its annual 
FAIR Act inventories, Forest Service officials responsible for planning 
the three competitions completed in fiscal year 2004 did not find the 
inventory data useful for identifying and exempting those activities 
because, among other things, the officials believed that the 
classifications used in the FAIR Act inventories did not capture the 
actual work activities Forest Service employees carried out. Although 
the officials said they received little guidance on how to supplement 
the FAIR Act inventories or how to identify inherently governmental and 
core-commercial activities, they do not believe that these 
inappropriate activities were included in the competitions because of 
the relatively small size and clearly commercial nature of these 
competitions. However, without clear guidance, and in light of its 
plans to examine the activities of two thirds of its workforce, we 
believe that the agency is at risk of subjecting inherently 
governmental and core-commercial activities to future competitive 
sourcing competitions. In addition, the Forest Service lacks a strategy 
on how to assess the cumulative effect that competing activities could 
have on its ability to fight wildland fires and respond to other 
emergencies. Forest Service employees play a prominent role in the 
nation's ability to fight wildland fires and respond to emergencies. 
Outsourcing substantial numbers of Forest Service jobs to the private 
sector could, over time, reduce this ability. 

For fiscal years 2004 through 2006, we found that the Forest Service 
lacked sufficiently complete and reliable cost data to (1) demonstrate 
its compliance with appropriations acts' spending limitations on its 
competitive sourcing activities and (2) accurately report competitive 
sourcing savings to Congress. Regarding compliance with the statutory 
spending limitations, the Forest Service did not collect cost data on 
all activities related to competitive sourcing because it interpreted 
the legislation narrowly--believing that some costs were not subject to 
the spending limitations. For example, the Forest Service did not 
collect data on the cost of employee salaries related to feasibility 
studies--a key component of its competitive sourcing process. However, 
in our view, the appropriations acts' spending limitations, with one 
exception, apply to all costs attributable to the Forest Service's 
competitive sourcing program--including, for example, the costs of 
salaries related to feasibility studies. The one exception to the 
spending limitations is the cost of activities incurred to carry out 
the FAIR Act, such as preparing inventories, because this act requires 
the Forest Service to perform these activities even in the absence of 
other competitive sourcing activities. (See app. II for our full legal 
interpretation.) Moreover, the Forest Service failed to ensure the 
reliability of the cost data that it did collect to determine 
compliance with statutory spending limitations. As a result, the Forest 
Service cannot know if it exceeded the appropriations acts' spending 
limitations, even using its own narrow interpretation of which costs 
are subject to the spending limitations. Regarding savings reported to 
Congress, the Forest Service could not provide us with sufficient data 
or the methodology it used to calculate savings derived from 
competitions, and, as a result, we could not verify the accuracy of the 
reported savings. In addition, we found that the Forest Service did not 
consider certain substantial costs in its savings calculations, and 
thus Congress may not have an accurate measure of the savings produced 
by the Forest Service's competitive sourcing competitions. Although OMB 
provides guidance on how to calculate the savings, the guidance does 
not specify all of the costs that should be included in the 
calculations, thus providing the Forest Service with some discretion on 
which costs to include. Some of the costs the Forest Service did not 
include in the calculations substantially reduce or even exceed the 
savings reported to Congress. For example, regarding the IT 
infrastructure competition, the Forest Service did not include the $40 
million that it cost to make the transition to the MEO. This amount is 
$5 million more than the $35 million in savings that the agency 
reported to Congress. 

We are recommending that the Secretary of Agriculture direct the Chief 
of the Forest Service to improve how the agency manages its competitive 
sourcing program to help ensure that it has a realistic strategic plan, 
excludes inappropriate activities from competitive sourcing 
competitions, maintains its capacity to respond to wildland fires, and 
has the cost data necessary to comply with appropriations acts' 
spending limitations and to accurately report savings to Congress. In 
commenting on a draft of this report, the Forest Service generally 
agreed with our recommendations but had concerns about some of the 
specific findings and conclusions in the report. The agency's concerns 
and our responses to them are presented in appendix III. 

Background: 

The Forest Service's mission includes sustaining the nation's forests 
and grasslands, managing the productivity of those lands for the 
benefit of citizens, conserving open space, enhancing outdoor 
recreation opportunities, and conducting research and development. To 
help fulfill its mission, the Forest Service devotes considerable 
resources to suppressing wildfires. To coordinate the firefighting 
efforts of the Forest Service and other federal land management 
agencies, the interagency National Wildfire Coordinating Group (NWCG) 
was established.[Footnote 9] This group adopted an interagency incident 
command system (ICS) and firefighting standards for responding to 
wildland fires. Federal employees in the land management agencies 
assume specific roles within the ICS, a command structure used at all 
levels of government and organized around five primary functional 
areas: command, operations, planning, logistics, and finance and 
administration. 

There are about 80,000 federal employees and retirees who mobilize to 
assist state and local organizations to fight fires and respond to 
national emergencies as needed. These employees must receive 
standardized training and be certified in specific ICS duties (e.g., 
communications, aircraft management, and dispatch) before being 
available to respond to wildfires and other emergencies. 

Approximately 30,000 permanent Forest Service employees are ICS- 
certified, with 10,000 to 12,000 of these employees holding fire- 
related positions. The remaining 18,000 to 20,000 employees are part of 
the "Forest Service militia." These are employees who are ICS-certified 
to fight fires but for whom the militia duty is a volunteer, collateral 
duty. These militia members will often leave their primary work duties 
and travel to the incident scene to provide assistance. A militia 
member may typically spend between 1 to 3 weeks each year fighting 
wildfires and responding to emergency situations. Militia teams that 
assisted the Federal Emergency Management Agency following Hurricane 
Katrina logged as many as 60 to 90 days of duty. As part of their 
militia duties, Forest Service employees often perform activities 
related to their regular work duties. For example, when responding to a 
wildfire, an employee whose regular duties involve IT support might 
provide this support at the scene of the fire. Employees may also 
perform militia duties that are unrelated to their regular work duties. 
For example, an IT employee who is ICS-certified in logistics might be 
responsible for providing food, supplies, and equipment at the scene of 
a fire. 

Competitive Sourcing Policy and Process: 

The federal government has had a long-standing acquisition policy that, 
when permissible and cost-effective, agencies are to rely on the 
private sector to perform activities that are regularly performed in 
the commercial marketplace, such as IT, maintenance and property 
management, and logistics. This policy was laid out in OMB's 1966 
Circular No. A-76, which was last revised in 2003.[Footnote 10] The 
circular's stated goal is to obtain maximum value for taxpayers' 
dollars by taking advantage of competitive forces. This policy, 
described in the 2001 President's Management Agenda as competitive 
sourcing, is one of five governmentwide initiatives intended to improve 
the federal government's management and performance so that resources 
entrusted to the federal government are well managed and used 
wisely.[Footnote 11] In addition, the circular provides agency 
management with a structured process to compare the public and private 
sector costs of performing an activity and to select the lowest cost 
provider through competition. This comparison may result in outsourcing 
federal jobs to the private sector. 

The first step toward competitive sourcing is identifying work 
activities that are suitable for competition. The FAIR Act, as 
implemented by the circular, requires federal agencies to annually 
inventory all of the activities that federal employees perform--the 
FAIR Act inventory. For the inventory, activities are classified as 
inherently governmental or commercial. Specifically: 

* Inherently governmental activities are those activities that are so 
intimately related to the public interest that they require performance 
by federal government employees.[Footnote 12] The circular exempts 
these activities from competition. 

* Commercial activities are those that are not inherently governmental 
and could be performed by the private sector. Commercial activities 
listed in the FAIR Act inventory are subject to the competition process 
detailed in the circular, unless they are placed in a subcategory of 
commercial activities that are exempt from competition. 

* Core-commercial activities are those in a subcategory of commercial 
activities that are identified to be essential, or "core," to the 
agency's mission.[Footnote 13] The circular allows agencies to exempt 
these activities from competition with sufficient written 
justification.[Footnote 14] 

To determine whether federal employees or private sector organizations 
should perform commercial activities, the circular establishes the 
following three-stage competitive process (referred to as an A-76 
competition): 

* A precompetition planning stage that, among other things, determines 
the scope of the competition. In this stage, the agency determines the 
commercial activities to be competed and the precompetition cost to 
perform that activity. It also appoints competition officials who will 
be in charge of developing, for example, the performance work statement 
(PWS), which specifies the work to be performed by the winning bidder. 
In addition, agency officials unaffiliated with the PWS create the MEO, 
which is generally a smaller, streamlined version of the government 
organization that is currently doing the work. 

* A competition stage that begins with a public announcement of a 
competition and ends with the selection of the competition's winner. 
During this stage, an agency develops and issues a solicitation, 
receives offers, and follows a process to select the winning bidder. 

* A postcompetition accountability stage that involves such activities 
as monitoring and reporting on the winner's performance, whether that 
winner is the MEO or a private sector organization. 

The circular also directs agencies to designate a competitive sourcing 
official (CSO) with responsibility for implementing the circular who, 
with certain exceptions, may delegate those responsibilities to other 
officials in the agency. USDA designated its Chief Financial Officer as 
its CSO. He and his office, the Office of the Chief Financial Officer 
(OCFO), provide oversight to USDA and its agencies, including the 
Forest Service. 

In 2002, the Forest Service established the Competitive Sourcing 
Program Office (CSPO) in its headquarters. The CSPO oversees the 
preparation of the FAIR Act inventory and provides written guidance to 
employees throughout the agency. In 2003, competitive sourcing 
responsibilities were further centralized in the CSPO to include 
oversight of A-76 competitions and postcompetition reporting. 
Supporting the CSPO are regional, national forest, and district office 
staffs. 

Forest Service Green Plans and Feasibility Studies: 

OMB requires that agencies develop a strategic plan--known as a Green 
Plan--for implementing their competitive sourcing programs.[Footnote 
15] OMB's guidance on how to develop a Green Plan describes it as a 
long-range plan to ensure that competitive sourcing is a carefully and 
regularly considered option for improving the cost-effectiveness and 
quality of an agency's commercial activities. According to the 
guidance, agencies should include in the plan a description of how they 
are going to take timely and effective advantage of competition, a list 
of activities being announced for competition, an overview of their 
decision-making process, and a strategy to limit potential constraints 
on competition. The guidance also requires that agencies update their 
plans as organizational conditions change. To comply, the Forest 
Service has periodically submitted its Green Plan to USDA for 
incorporation into the department-level Green Plan, which is then 
presented to OMB for approval. Since December 2003, the Forest Service 
has submitted at least five versions of its Green Plan to USDA. The 
Forest Service's most recent OMB-approved Green Plan was issued in 
December 2005 and covers fiscal years 2005 through 2009. 

In its Green Plan, the Forest Service proposes conducting a series of 
competitive sourcing feasibility studies before holding A-76 
competitions. Feasibility studies enable an agency to first examine the 
practicality of subjecting activities to a competition before 
committing to one. OMB recognizes the value of this step and has 
recommended in its guidance that agencies conduct feasibility studies 
to streamline the competitive sourcing process. The OCFO issued 
guidance in May 2004 on conducting feasibility studies that outlined 
USDA agencies' responsibilities and specific procedures to be followed 
during a feasibility study. 

The Forest Service typically assembles a team of six to eight employees 
to conduct a feasibility study. Each study usually involves one or more 
requests for data from field offices, which may require information 
from several hundred Forest Service employees. In addition to 
recommending whether to proceed with an A-76 competition, a Forest 
Service feasibility study can make other recommendations, such as to 
reorganize the way in which the Forest Service performs the activity 
being studied without engaging in an A-76 competition. When the 
feasibility study is completed, the Chief of the Forest Service reviews 
the study team's report and recommendations and decides on the best 
course of action, which may or may not be an A-76 competition. 

In fiscal years 2004 through 2006, the Forest Service completed three A-
76 competitions (see table 1). 

Table 1: Forest Service's Completed Competitions, Fiscal Years 2004- 
2006: 

Activity: Information technology infrastructure; 
FTEs: 1,200; 
Winner announcement date: July 2004; 
Competition winner: MEO. 

Activity: Fleet maintenance; 
FTEs: 57; 
Winner announcement date: January 2004; 
Competition winner: Private sector contractor. 

Activity: Road maintenance; 
FTEs: 66; 
Winner announcement date: January 2004; 
Competition winner: MEO. 

Source: USDA. 

[End of table] 

Competitive Sourcing Reporting Requirements and Spending Limitations: 

The Consolidated Appropriations Act, 2004, requires executive agencies, 
such as USDA, to report to Congress on their competitive sourcing 
activities for the prior fiscal year, including the total number of 
competitions announced and completed; the incremental costs directly 
attributable to conducting these competitions; and the total savings 
actually, or estimated to be, derived from such competitions. As an 
agency within USDA, the Forest Service must report this information to 
USDA for inclusion in USDA's report to Congress. 

Congress also limited the Forest Service's funds available for 
"competitive sourcing studies and related activities" in each year's 
appropriations act for fiscal years 2004 through 2007, because of 
concerns about how the Forest Service had implemented its competitive 
sourcing initiative. Specifically, the spending limitations were $5 
million (fiscal year 2004), $2 million (fiscal year 2005), $3 million 
(fiscal year 2006), and $3 million (fiscal year 2007).[Footnote 16] 

The Forest Service Does Not Have a Realistic Strategic Plan or Adequate 
Guidance to Effectively Implement Its Competitive Sourcing Program: 

The Forest Service lacks a realistic strategic plan and adequate 
guidance to help ensure that it can effectively and efficiently 
implement its competitive sourcing program. Specifically, the Forest 
Service's Green Plan proposes to subject all commercial activities to 
feasibility studies without identifying the personnel and funding 
resources that are likely to be available for the studies. Furthermore, 
Forest Service officials responsible for planning the three 
competitions completed in fiscal year 2004 told us that they did not 
find the FAIR Act inventory data useful for identifying and exempting 
inherently governmental and core-commercial activities, and that they 
received little guidance on how to supplement the inventory data or how 
to identify inherently governmental and core-commercial activities 
without using the inventory data. Nevertheless, Forest Service 
officials told us that the lack of guidance did not result in competing 
inherently governmental and core-commercial activities because of the 
small size and commercial nature of these competitions. However, 
without clear guidance, we believe that the agency risks subjecting 
inherently governmental and core-commercial activities to future A-76 
competitions. In addition, the Forest Service does not have a strategy 
on how to assess the cumulative effect that competing activities could 
have on its ability to fight wildland fires and respond to other 
emergencies, even though outsourcing a large number of federal jobs to 
the private sector could reduce the availability of certified 
responders in the long term. 

The Forest Service's Strategic Plan for Managing Its Competitive 
Sourcing Program Is Not Realistic: 

The Forest Service's December 2005 Green Plan for managing its 
competitive sourcing program is not realistic because it does not take 
into account the personnel and funding resources that are likely to be 
available to implement the plan, even though it proposes to subject all 
commercial activities--performed by approximately 24,500 FTEs--to 
feasibility studies during fiscal years 2005 through 2009. This is a 
significant increase over the activities it proposed to study in a 
draft of this plan issued 5 months earlier in July 2005. The July 2005 
draft Green Plan scheduled 13 feasibility studies for activities 
associated with 6,180 FTEs for fiscal years 2005 through 2009. The 
Forest Service selected these activities by identifying good candidates 
for feasibility studies and then selecting a level of effort the 
officials believed could be managed over the next 5 years. For example, 
in selecting the studies, the officials said they considered the 
complexity of the studies, the additional workload that would result 
from conducting them, and the personnel resources required in selecting 
these activities. The Forest Service used the following nine criteria 
as the basis for identifying good candidates for feasibility studies: 

* Potential for savings. An activity with greater potential for savings 
through more effective or efficient performance is considered a 
stronger candidate for a feasibility study. 

* Availability of private sector contractors. An activity performed by 
a large number of commercial companies is considered a stronger 
candidate for a feasibility study. 

* Severability. An activity that can be performed by an independent 
business unit is considered a stronger candidate for a feasibility 
study. 

* Preferred government performance. An activity that management prefers 
to be performed by a government position is considered a weaker 
candidate for a feasibility study. 

* Location. An activity that does not have to be performed locally is 
considered a stronger candidate for a feasibility study. 

* Fragmentation. An activity that is the minor responsibility of a 
large number of positions, while difficult to compete, may benefit from 
restructuring and is considered a stronger candidate for a feasibility 
study. 

* Centrality of performance. An activity that is typically performed at 
a central location is considered a stronger candidate for a feasibility 
study. 

* Potential for process improvement. An activity with a greater 
potential for improvement through modernization, reorganization, or 
some other means is considered a stronger candidate for a feasibility 
study. 

* Impact on incident support. An activity that supports emergency 
situations, such as firefighting, is considered a weaker candidate for 
a feasibility study. 

However, after reviewing the Forest Service's proposed Green Plan, USDA 
directed the Forest Service to revise its plan to include all 24,512 
commercial FTEs eligible for competition in either a feasibility study 
or an A-76 competition. In response, the Forest Service issued a 
revised Green Plan in December 2005, which OMB subsequently approved. 
The revised plan included a single "catch-all" feasibility study-- 
labeled "All Other Commercial B Activities"--which had 15,000 FTEs 
associated with it,[Footnote 17] nearly all of the commercial FTEs not 
already identified in the draft Green Plan. According to a Forest 
Service official, the additional feasibility study was added to comply 
with the USDA directive to include all commercial FTEs in the Green 
Plan, not because it included activities that might benefit from an A- 
76 competition. OCFO officials explained to us that USDA agencies have 
an option to perform feasibility studies to identify good candidates 
for more targeted feasibility studies, and that this was the purpose of 
the 15,000 FTE feasibility study. As of September 30, 2007, the Forest 
Service had not started this study. 

As table 2 shows, the Forest Service had completed only five of the 
nine feasibility studies scheduled to be completed by September 30, 
2007. The completed studies account for only 2,580 FTEs of the 
approximately 19,000 FTEs that were scheduled to be studied by this 
date. 

Table 2: Forest Service's Schedule for Conducting Feasibility Studies 
and the Studies' Status as of September 30, 2007: 

Activities subject to feasibility study: Communication; 
FTEs: 750; 
Proposed beginning date: April 2005; 
Proposed completion date: June 2005; 
Feasibility study begun: Yes; 
Feasibility study completed: Yes[A]. 

Activities subject to feasibility study: Aviation & Other Airborne 
Activities; 
FTEs: 500; 
Proposed beginning date: October 2005; 
Proposed completion date: March 2006; 
Feasibility study begun: Yes; 
Feasibility study completed: Yes. 

Activities subject to feasibility study: Fleet Management; 
FTEs: 135; 
Proposed beginning date: October 2005; 
Proposed completion date: March 2006; 
Feasibility study begun: Yes; 
Feasibility study completed: Yes. 

Activities subject to feasibility study: Geospatial Services & Tech 
Center; 
FTEs: 95; 
Proposed beginning date: October 2005; 
Proposed completion date: March 2006; 
Feasibility study begun: Yes; 
Feasibility study completed: Yes. 

Activities subject to feasibility study: Computer Application 
Development; 
FTEs: 750; 
Proposed beginning date: September 2006; 
Proposed completion date: March 2007; 
Feasibility study begun: No; 
Feasibility study completed: No. 

Activities subject to feasibility study: NEPA Information Collection & 
Analysis; 
FTEs: 1,100; 
Proposed beginning date: September 2006; 
Proposed completion date: May 2007; 
Feasibility study begun: Yes; 
Feasibility study completed: Yes. 

Activities subject to feasibility study: Dispatch/Coordination System; 
FTEs: 300; 
Proposed beginning date: September 2006; 
Proposed completion date: March 2007; 
Feasibility study begun: Yes; 
Feasibility study completed: No. 

Activities subject to feasibility study: All Other Commercial B 
Activities; 
FTEs: 15,000; 
Proposed beginning date: October 2006; 
Proposed completion date: February 2007; 
Feasibility study begun: No; 
Feasibility study completed: No. 

Activities subject to feasibility study: Fire & Aviation Training; 
FTEs: 300; 
Proposed beginning date: March 2007; 
Proposed completion date: September 2007; 
Feasibility study begun: Yes; 
Feasibility study completed: No. 

Activities subject to feasibility study: Fuels Management Program; 
FTEs: 500; 
Proposed beginning date: September 2007; 
Proposed completion date: March 2008; 
Feasibility study begun: No; 
Feasibility study completed: [Empty]. 

Activities subject to feasibility study: Technology or Service Centers; 
FTEs: 200; 
Proposed beginning date: April 2008; 
Proposed completion date: September 2008; 
Feasibility study begun: [Empty]; 
Feasibility study completed: [Empty]. 

Activities subject to feasibility study: Safety & Occupational Health; 
FTEs: 150; 
Proposed beginning date: September 2008; 
Proposed completion date: March 2009; 
Feasibility study begun: [Empty]; 
Feasibility study completed: [Empty]. 

Activities subject to feasibility study: Engineering Design & 
Development; 
FTEs: 900; 
Proposed beginning date: September 2008; 
Proposed completion date: May 2009; 
Feasibility study begun: [Empty]; 
Feasibility study completed: [Empty]. 

Activities subject to feasibility study: Fire Preparedness Program; 
FTEs: 500; 
Proposed beginning date: November 2008; 
Proposed completion date: May 2009; 
Feasibility study begun: [Empty]; 
Feasibility study completed: [Empty]. 

Activities subject to feasibility study: Total; 
FTEs: 21,180[B]. 

Source: Forest Service. 

[A] The Forest Service used a private consultant to perform the 
communication feasibility study. The study was completed but not 
accepted by the Forest Service because it did not meet OCFO 
requirements. 

[B] While the revised Green Plan states that the agency plans to 
conduct feasibility studies on activities associated with 24,512 FTEs, 
the plan actually scheduled only studies for activities associated with 
21,180 FTEs, with an additional 130 FTEs scheduled for an A-76 
competition concerning communication activities. The remaining 3,202 
FTEs are unaccounted for. 

[End of table] 

In our previous work,[Footnote 18] we found that effective strategic 
plans take into account the resources required to implement the plan, 
such as human capital, technology, and information. While Forest 
Service officials could not provide us with any documents showing 
resources involved in conducting feasibility studies, the effort does 
not appear to be insignificant. According to OCFO guidance, 13 separate 
steps are involved in conducting feasibility studies, with many of the 
procedures involving several additional subtasks. Table 3 shows OCFO's 
guidance for conducting feasibility studies. 

Table 3: USDA OCFO Guidance for Conducting Competitive Sourcing 
Feasibility Studies: 

Procedure: Business needs assessment; 
Description of activities involved: 
* Evaluate core public need for activity; 
* Identify key factors that affect performance of activity; 
* Align activity with agency's strategic goals and objectives. 

Procedure: Assumptions and constraints; 
Description of activities involved: 
* List all assumptions regarding the work performed for the activity; 
- For example, scope, timelines, workload requirements, necessary 
technology, customers, partners, stakeholders, funding, security, and 
outside support; 
* List all constraints regarding the work performed for the activity; 
- For example, time, budget, organizational, structure, and physical 
factors. 

Procedure: Market research; 
Description of activities involved: 
* Analyze capabilities of commercial marketplace; 
* Determine if alternative sources can satisfy the requirements of the 
activity; 
* Create inventory of all commercial firms that produce, distribute, 
and support products and/or services similar to activity; 
* Ensure that all market research complies with Federal Acquisition 
Regulation Part 10 requirements. 

Procedure: Current "as-is" assessment; 
Description of activities involved: 
* Describe "as-is" scope of current operations; 
- Discuss current workload, customers, partners, and stakeholders; 
- Describe pros and cons of current operations; 
- Describe workflow, required human capital resources; 
- Provide overview of how internal functions work with one another; 
- Describe potential effects on other USDA and non-USDA organizations 
should the activity be outsourced. 

Procedure: Future "to-be" assessment; 
Description of activities involved: 
* Present a "to-be" scope of operations; 
* Analyze expected workload, potential growth, future customers, and 
stakeholders; 
* Develop "most-efficient organization" model to accomplish the 
activity. 

Procedure: Performance gap analysis; 
Description of activities involved: 
* Define the gaps between the "as-is" and "to-be" scopes of operation; 
* Prioritize performance gaps from most-to least-critical. 

Procedure: Cost/Benefit analysis; 
Description of activities involved: 
* Compare cost and benefits of all options for performing the activity 
to determine the most cost-effective solution; 
- Calculate cost estimate; For example, labor, employee benefits, 
materials, facilities, contractor expenses, and miscellaneous costs; 
- Calculate benefits estimate; Estimate the overall public-value added 
(in dollars) of performing the activity; 
- Perform savings analysis; Compare "bottom line" of each performance 
option. 

Procedure: Civil rights impact assessment; 
Description of activities involved: 
* Identify and categorize the civil-rights impact of implementing 
competitive sourcing in accordance with USDA Office of Civil Rights 
policy guidance; 
* Identify any potential risk of violation. 

Procedure: Systems; 
Description of activities involved: 
* Provide an overview of all capital infrastructure systems and their 
relationships; 
- Current systems used to support activity; System-to-system 
interfaces; Planned or in-progress system upgrades; 
* Identify how the alternative options conform to the agency's IT 
architecture standards and guidelines. 

Procedure: Acquisition strategy; 
Description of activities involved: 
* Develop resource acquisition plan for competitive sourcing option; 
* Identify expected performance levels; 
* Develop oversight mechanism to ensure that minimum performance 
standards are met. 

Procedure: Project life-cycle schedule; 
Description of activities involved: 
* Identify major activities, milestones, and transition timelines from 
"as-is" to "to-be" system, including all necessary tasks and subtasks 
related to the activity. 

Procedure: Requirements; Description of activities involved: * List the 
items needed to complete the activity. 

Procedure: Recommendations; Description of activities involved: 
* Recommend future course of action based on feasibility study results; 
* If competitive sourcing is recommended, identify timelines set forth 
in the circular. 

Source: USDA OCFO, Guidance for Determining the Feasibility of 
Conducting Competitive Sourcing Competitions, Bulletin 2004-001 (May 
11, 2004). 

[End of table] 

According to a senior Forest Service official, while the agency 
considered personnel requirements when selecting the original 13 
activities for feasibility studies, it did not do so when it expanded 
the Green Plan to include all commercial FTEs. According to this 
official, there would be no practical way to conduct the 15,000-FTE 
study because it would include so many dissimilar activities. 
Consequently, FTEs would first need to be grouped into many separate 
activities, each requiring its own feasibility study, and as the number 
of studies increased, so too would the demands placed on Forest Service 
personnel. Several senior Forest Service officials with whom we spoke 
said that it is inconceivable that the schedule of feasibility studies 
in the OMB-approved Green Plan for fiscal years 2005 through 2009 could 
be met. 

Just as it did not take into account personnel resources in its OMB- 
approved December 2005 Green Plan, the Forest Service also did not 
consider congressionally directed funding limitations. While the Forest 
Service's July draft Green Plan acknowledged the fiscal year 2005 $2 
million statutory spending limitation on the Forest Service's 
competitive sourcing activities, the December Green Plan did not. In 
directing the Forest Service to include all commercial activities in 
the plan, USDA said to do so as if there were no funding limitations. 
Because Congress had placed limitations on the Forest Service's 
spending for competitive sourcing activities in the previous 2 fiscal 
years--2004 and 2005--factoring in the possibility of limited funds 
available in future years would have been appropriate. 

The Forest Service Lacks Guidance to Ensure That Key Work Activities 
Are Excluded from A-76 Competitions: 

Since an agency's FAIR Act inventory designates all of an agency's FTEs 
as inherently governmental, commercial, or commercial but exempt from 
competition (e.g., core-commercial), the development of an accurate 
inventory becomes the foundation for determining which activities 
agencies select for competition. As we have previously 
reported,[Footnote 19] other agencies have had difficultly in 
classifying positions when preparing their FAIR Act inventories, and 
the Forest Service is no exception. The Forest Service's difficulty is 
exemplified by significant fluctuations in the percentages of 
inherently governmental activities in its inventory data for fiscal 
years 2004 through 2006. In addition, there are differences between the 
Forest Service's initial classifications and those reported in the 
agency's OMB-approved Fair Act inventory. See table 4. 

Table 4: Percentages of Inherently Governmental and Core-Commercial 
Activities Identified by the Forest Service Compared with the 
Percentages Reported in the OMB-Approved FAIR Act Inventories, Fiscal 
Years 2004-2006: 

Fiscal year: 2004; 
Inherently governmental activities: Percentage identified by the Forest 
Service: 21%; 
Inherently governmental activities: Percentage reported in the Forest 
Service's OMB-approved FAIR Act inventory: 21%; 
Core-commercial activities: Percentage Identified by the Forest 
Service: 14%; 
Core-commercial activities: Percentage reported in the Forest Service's 
OMB-approved FAIR Act inventory: 0%. 

Fiscal year: 2005; 
Inherently governmental activities: Percentage identified by the Forest 
Service: 54; 
Inherently governmental activities: Percentage reported in the Forest 
Service's OMB-approved FAIR Act inventory: 21; 
Core-commercial activities: Percentage Identified by the Forest 
Service: 13; 
Core-commercial activities: Percentage reported in the Forest Service's 
OMB-approved FAIR Act inventory: 0. 

Fiscal year: 2006; 
Inherently governmental activities: Percentage identified by the Forest 
Service: 7; 
Inherently governmental activities: Percentage reported in the Forest 
Service's OMB-approved FAIR Act inventory: 7; 
Core-commercial activities: Percentage Identified by the Forest 
Service: 13; 
Core-commercial activities: Percentage reported in the Forest Service's 
OMB-approved FAIR Act inventory: 13. 

Source: Forest Service. 

[End of table] 

According to a Forest Service official involved in preparing the 
agency's FAIR Act inventory, the fluctuations in the percentages of 
FTEs designated as inherently governmental--ranging from a high of over 
50 percent to a low of 7 percent--were the result of changes from year 
to year in both the Forest Service's criteria for classifying 
activities, and the methodology it used to calculate the percentages of 
FTEs performing inherently governmental activities. In addition, the 
differences in the percentages of FTEs designated as core-commercial 
activities stemmed from disagreements between the Forest Service and 
OMB about what constituted a core-commercial activity. Specifically, in 
fiscal years 2004 and 2005, OMB did not approve the Forest Service's 
written justifications for core-commercial activities. Instead, it 
directed the Forest Service to reclassify all of the activities the 
agency had identified as core-commercial activities to commercial, thus 
making these activities eligible for competition. 

The Forest Service's lack of consistency in its classification 
methodology, coupled with disagreement between the Forest Service and 
OMB regarding activity classifications, call into question the accuracy 
and usefulness of the Forest Service's FAIR Act inventory data for 
identifying inherently governmental and core-commercial activities when 
planning specific A-76 competitions. Forest Service officials told us 
that the FAIR Act inventory represents only a "rough snapshot" of the 
inherently governmental and core-commercial activities within the 
Forest Service, and that much additional work must be done to identify 
specific activities suitable for competition. They raised the following 
concerns about using FAIR Act inventory data to identify inherently 
governmental and core-commercial activities: 

* Improper classification of activities in the FAIR Act inventory. 
Disagreements between the Forest Service and USDA regarding activity 
designations raise questions about appropriate classification. 
Furthermore, agency employees may be tempted to classify an activity as 
either inherently governmental or core-commercial to exempt it from 
competition. 

* Mandatory use of OMB function codes. The Forest Service is required 
by OMB to use OMB-assigned function codes for the FAIR Act inventory. 
Although the guidance allows the Forest Service flexibility in defining 
the codes, the officials told us that some of the codes were too broad 
to be of any use or did not capture the actual work activities Forest 
Service employees carried out.[Footnote 20] 

Because Forest Service officials did not find the agency's FAIR Act 
inventory data useful during the A-76 precompetition planning stage, 
those officials responsible for the three completed competitions--IT 
infrastructure, road maintenance, and fleet maintenance--said that they 
developed their own methodologies to classify inherently governmental 
and core-commercial activities. For each competition, agency officials 
collected additional work activity information from field offices and 
performed additional analysis beyond that conducted for the FAIR Act 
inventory. In doing so, officials said, they received little guidance 
on how to supplement the FAIR Act inventory data or how to identify 
inherently governmental and core-commercial activities during the 
precompetition stage of the completed competitions. 

Despite the lack of guidance, Forest Service officials involved in the 
three completed competitions said that they succeeded in identifying 
and exempting from competition inherently governmental and core- 
commercial activities by relying on intuitive knowledge and outside 
consultants. Officials were confident of their success because of their 
expertise in the activity being competed; the clearly commercial nature 
of the activities; and the small size of the competitions, especially 
the fleet maintenance and the road maintenance competitions. However, 
the three completed competitions may not be representative of future 
competitions. 

Since these competitions, USDA and the Forest Service have taken steps 
to better define inherently governmental and core-commercial activities 
for the purposes of completing the FAIR Act inventory.[Footnote 21] 
However, while we believe that the FAIR Act inventory data could be a 
useful tool for planning competitive sourcing activities at an 
agencywide level--for example, they can form the basis of the Green 
Plan--we believe that additional guidance will be needed on how to 
classify work activities during the precompetition planning stage of an 
A-76 competition to ensure that key work activities are excluded from 
the specific competition being planned. Without such guidance, the 
Forest Service is at risk of subjecting inherently governmental and 
core-commercial activities to A-76 competitions. This is particularly 
true as the Forest Service continues to implement its Green Plan, which 
could potentially subject up to two thirds of its FTEs to A-76 
competitions. 

The Forest Service Lacks a Strategy to Assess the Cumulative Effect 
That A-76 Competitions Could Have on Its Ability to Respond to Wildland 
Fires and Other Emergencies: 

For the three competitions the Forest Service completed--IT 
infrastructure, road maintenance, and fleet maintenance--officials 
responsible for planning the competitions told us they likely had a 
negligible effect on the Forest Service militia's ability to fight 
fires and respond to emergencies for the following reasons: 

* The three competitions affected a relatively small number of Forest 
Service employees--1,323--compared with the approximately 80,000 
federal employees who are ICS-certified. 

* Contract provisions required the winning organization to provide 
emergency incident support for activities within the scope of the 
contract. For example, the MEO that won the road maintenance 
competition was obligated to provide road maintenance, if needed, to 
support the response to a wildfire incident. 

* The largest of the three competitions--the IT infrastructure, which 
affected 1,200 FTEs--was won by the MEO. Because the MEO is still a 
unit of the Forest Service and staffed by Forest Service employees, the 
agency was able to direct the MEO to allow ICS-certified employees to 
volunteer to fight wildfires and respond to other emergencies by 
performing non-IT-related duties. 

While the Forest Service has thus far minimized the impact of A-76 
competitions on the availability of ICS-certified personnel to fight 
wildfires and respond to other emergencies, the following other factors 
may affect the availability of ICS-certified personnel in the future: 

* The Forest Service cannot realistically expect a private sector firm 
to provide emergency services unrelated to the activity being competed. 
For example, the Forest Service could not hold a competition for fleet 
maintenance and expect firms that specialize in fleet maintenance to 
provide unrelated services at the scene of the fire, such as providing 
food and supplies. 

* Whether an MEO or a private sector firm wins a competition, the 
availability of ICS-certified personnel could decline. As with any 
reorganization, competitive sourcing may cause some personnel to leave 
the Forest Service. These employees could retire or be hired by other 
federal agencies that participate in the NWCG, and thus they could 
continue to fight fires and respond to other emergencies.[Footnote 22] 
Other employees, however, may no longer be available if their new 
employment situation does not allow them to take extended leaves of 
absence to fight fires and respond to other emergencies. 

In its fiscal years 2006 and 2007 appropriations for the Forest 
Service, Congress required the agency, in carrying out any competitive 
sourcing competition involving Forest Service employees, to take into 
account the potential effect that contracting with a private sector 
organization would have on the agency's ability to fight and manage 
wildfires.[Footnote 23] For the only A-76 competition started since the 
law was passed--the communications competition--the 130 employees 
potentially affected by the competition were asked to report the amount 
of time they spent responding to emergencies during the previous year. 
However, the Forest Service did not collect information on what 
specific duties those employees performed during the emergency 
response, nor the ICS-qualifications they hold. Without this 
information, the Forest Service cannot assess the full impact of this 
competition on its emergency response capability. 

While it is important to know the impact of individual competitions, it 
is even more important to know the cumulative impact of multiple 
competitions. However, the Forest Service does not have a strategy to 
assess the cumulative impact that future competitions could have on its 
firefighting capability. The absence of such a strategy could prove 
significant if the Forest Service implements its plan to consider over 
24,000 FTEs--or nearly two thirds of its workforce--for A-76 
competition. 

The Forest Service Does Not Have Sufficient Competitive Sourcing Cost 
Data to Demonstrate Compliance with Its Statutory Spending Limitations 
or to Accurately Report Savings to Congress: 

The Forest Service does not know how much it spent on competitive 
sourcing activities and, therefore, cannot be assured that it stayed 
within the spending limitations or that it accurately reported savings 
to Congress. For fiscal years 2004 through 2006, we found that the 
Forest Service (1) narrowly interpreted the spending limitations to 
exclude certain costs and (2) lacked sufficiently complete and reliable 
cost data to demonstrate its compliance with the appropriations acts' 
spending limitations on its competitive sourcing activities. 
Furthermore, Congress may not have an accurate measure of the savings 
from the Forest Service's A-76 competitions because the agency (1) does 
not have complete and reliable cost data and (2) did not include all 
costs associated with its competitive sourcing program. 

The Forest Service's Interpretation of Costs That Are Subject to 
Statutory Spending Limitations Was Too Narrow: 

For fiscal years 2004 through 2006, the Forest Service did not attempt 
to collect cost data on all competitive sourcing activities because it 
believed that some costs associated with these activities were not 
subject to the spending limitations of $5 million, $2 million, and $3 
million, respectively, as established in its appropriations acts. 
Specifically, the Forest Service reasoned that it did not have to 
collect all the cost data because it interpreted the spending 
limitations as being intended to restrict the number of A-76 
competitions it conducted. It, therefore, asserted that the costs 
associated with the competition stage were subject to the spending 
limitations, while costs associated with the FAIR Act inventory; 
precompetition planning; and postcompetition accountability activities 
should not be included. 

However, we found that the Forest Service's interpretation of which 
competitive sourcing activities are subject to the spending limitations 
was too narrow. Specifically, we concluded that, with only a limited 
exception, the spending limitations apply to all costs attributable to 
the Forest Service's competitive sourcing program, including 
feasibility studies and other precompetition planning activities, the 
competition itself, postcompetition accountability activities, and the 
CSPO's costs to manage the program. Only the costs incurred to comply 
with the FAIR Act, such as those to develop the inventories of 
activities, are exempt from the limitations because the Forest Service 
is statutorily required to perform FAIR Act-related activities even if 
it makes no effort to conduct competitive sourcing.[Footnote 24] (See 
app. II for further discussion on our legal interpretation.) 

In April 2007, we sought the opinion of the USDA's General Counsel on 
whether certain Forest Service competitive sourcing activities are 
subject to the annual statutory spending limitations. Our 
interpretation of the costs that were subject to the spending 
limitations for fiscal years 2004 through 2006 is consistent with the 
interpretation that USDA's General Counsel provided to us. The USDA's 
General Counsel further stated that it believed that the Forest Service 
may not have complied with the spending limitations in fiscal years 
2004 through 2006. 

The Forest Service Did Not Ensure That Cost Data Used to Comply with 
Statutory Spending Limitations Are Reliable: 

Even when it used its own interpretation of costs subject to the 
spending limitations, the Forest Service still did not know whether it 
complied with the limitations because it did not have a cost accounting 
system sufficient to track costs related to competitive sourcing. 
First, the Forest Service failed to establish tracking codes, known as 
job codes, in its financial management system to enable it to 
distinguish cost data on the activities that it believed were subject 
to the spending limitations from other cost data.[Footnote 25] Forest 
Service officials could not explain why the agency had not established 
these job codes. 

Second, the Forest Service lacked guidance and management oversight to 
ensure that employees were accurately and consistently using the job 
codes that were established for competitive sourcing activities. In 
particular, Forest Service officials could not provide us with any 
guidance that employees could use to determine when to charge time to 
these job codes and when to charge time to codes associated with their 
regular duties. Officials acknowledged that without this guidance, 
employees probably continued to charge time spent on competitive 
sourcing activities to their regular job codes. For example: 

* In fiscal year 2004, Forest Service employees charged only 0.07 FTEs 
to the job code established to track costs with the IT infrastructure 
competition, even though competitive sourcing activities for the 
competition took place throughout the entire fiscal year. 

* In fiscal years 2005 through 2006, Forest Service employees charged 
only 0.22 FTEs to the job code established to track costs associated 
with the communications competition, even though competitive sourcing 
activities for the competition began in fiscal year 2005 and were 
ongoing at the end of fiscal year 2006. 

In consultation with Forest Service officials, we agreed that it was 
not feasible to reconstruct cost data for competitive sourcing 
activities between fiscal years 2004 and 2006 to determine if the 
Forest Service exceeded the appropriations acts' spending limitations. 
Forest Service officials told us it would require a significant amount 
of time and resources to query employees on their past work activities 
associated with competitive sourcing. Furthermore, it is unlikely that 
employees could reliably report the time they spent on competitive 
sourcing activities that took place months and years ago. Finally, 
officials told us that many employees involved with the competitions 
have since left the agency. 

Recognizing these shortcomings, the Forest Service has made some 
efforts to improve its policies and guidance on how to establish job 
codes and how employees are to use them to track competitive sourcing 
costs. In fiscal year 2007, the Forest Service issued general policy on 
when to charge time to competitive sourcing job codes. Among other 
things, it issued a directive specifying that the cost of performing 
some precompetition planning activities be charged to competitive 
sourcing job codes. However, the Forest Service has yet to provide 
details on how it intends to implement this policy, and thus we were 
not able to evaluate it. 

The Forest Service Could Not Substantiate Savings Reported to Congress: 

The Consolidated Appropriations Act, 2004, establishes a governmentwide 
requirement for each executive agency to report to Congress on the 
actual savings derived from the implementation of competitions for the 
prior fiscal year.[Footnote 26] In addition, OMB provides guidance on 
preparing the report, including how to calculate savings.[Footnote 27] 
According to the guidance, savings from completed competitions is 
defined as the difference between the cost to the federal government of 
performing the activity prior to the competition--the baseline cost-- 
and the cost to the government of performing the activity or paying for 
it after the winner of the competition has begun performing the 
activity. This is the postcompetition cost. Figure 1 shows how savings 
from competitions are calculated. 

Figure 1: OMB Calculation for Determining Savings from Competitions, 
Fiscal Years 2004-2006: 

[See PDF for image] 

This figure is an illustration of the OMB Calculation for Determining 
Savings from Competitions, Fiscal Years 2004-2006. The following data 
is depicted: 

Baseline cost minus Postcompetition cost equals Actual cost (Savings). 

Baseline cost at a minimum shall include: 

* In-house personnel costs (including benefits); 
* Contract costs; 
* Overhead costs (12 percent of in-house personnel costs). 

Postcompetition cost shall include: 

* Private Sector Contractor; 
- Contract payments; 
- Contract administration costs; 

* MEO; 
- Costs of in-house performance. 

Source: GAO representation of OMB guidance. 

[End of figure] 

While OMB guidance specifies the postcompetition cost to the government 
if a private sector contractor wins the competition, it does not 
provide specific direction on how to calculate the postcompetition cost 
to the government if the MEO wins the competition. Instead, the 
guidance suggests determining the cost of in-house performance using a 
methodology similar to that used to calculate the baseline costs. 

In its reports to Congress on the actual savings derived from the 
implementation of competitions, USDA reported that the Forest Service 
saved over $38 million between fiscal years 2004 through 2006 as a 
result of the three completed competitions--IT infrastructure 
(approximately $35.2 million), fleet maintenance (approximately 
$716,000), and road maintenance (approximately $2.2 million). 

For these three competitions, Forest Service officials at the agency's 
headquarters and in the regions could not provide us with the 
information necessary to fully substantiate the savings reported to 
Congress. Headquarters officials directed us to the regions responsible 
for the competitions, where officials were able to provide some cost 
data, but overall could not provide us with the information necessary 
to substantiate the savings reported to Congress. GAO's document 
entitled The Standards for Internal Control in the Federal Government 
requires that all transactions and other significant events, such as 
the Forest Service competitive sourcing costs and savings analyses, be 
clearly documented, and the documentation should be readily available 
for examination.[Footnote 28] Specifically, we found the following: 

* IT infrastructure. Officials could not tell us the methodology they 
used to determine postcompetition costs and did not have available the 
data they used to calculate savings. They reconstructed the personnel 
and overhead costs for operating the MEO, but could not reconstruct the 
cost of outside contractors that the MEO employed because these costs 
were not discernable from other cost data that the Forest Service 
collected. Ultimately, these officials could only speculate about what 
the contract costs might have been and how savings were calculated. 

* Fleet maintenance. As with the IT infrastructure competition, 
officials could not tell us the methodology they used to determine 
postcompetition costs and did not have available all of the data they 
used to calculate savings. Although officials provided us with the bulk 
of the postcompetition cost data--the payments made to Serco, the 
private sector organization that won the competition--they could not 
provide us with all of the costs. 

* Road maintenance. Unlike the other two competitions, officials 
responsible for this competition described the methodology. However, 
they were unable to provide us with baseline cost data for fiscal year 
2004, and, as a result, we could not verify the reported savings for 
that year. 

In April 2007, OMB issued guidance to help agencies substantiate the 
savings they have achieved through A-76 competitions. The guidance 
describes agency responsibilities related to tracking and reviewing 
cost data to ensure savings are being realized. It also requires all 
agencies to develop plans to independently validate a sampling of 
competitions to confirm projected savings. Among other things, the 
guidance requires agencies to assess the completeness and accuracy of 
cost data. Forest Service officials told us that the agency is working 
to implement OMB's guidance. USDA told us that it is directing the 
Forest Service to validate the savings from the IT infrastructure 
competition by the fourth quarter of fiscal year 2008. 

The Forest Service Did Not Include All Costs Associated with Its 
Competitive Sourcing Program When Calculating Savings Reported to 
Congress: 

While the Forest Service could not substantiate the savings it reported 
to Congress using OMB's guidance, the guidance itself allows agencies 
to exclude some costs associated with A-76 competitions, which, if 
excluded, may not provide Congress with an accurate measure of the 
savings produced by the competitions. Although Forest Service officials 
could not tell us all of the costs that were included or excluded in 
their savings estimates, they stated with confidence that some costs 
were excluded. Specifically, they said that transition costs associated 
with transferring responsibilities to the winning organization were not 
included in the savings calculations for the three competitions we 
reviewed. Transition costs include costs associated with decreasing the 
size of the workforce through buyouts and retirements, and costs to 
transfer employees who are being retained to other locations. These are 
not necessarily one-time costs because an agency is required to 
complete a follow-on competition for an activity, generally after about 
3 to 5 years. In the three competitions we reviewed, we found the 
following transition costs were excluded: 

* IT infrastructure. Forest Service officials told us that they 
excluded approximately $40 million in transition costs from the savings 
calculations that were reported to Congress.[Footnote 29] These costs 
exceeded by about $5 million the $35.2 million that the Forest Service 
reported to have saved during fiscal years 2005 and 2006 as a result of 
the competition. 

* Fleet maintenance. Forest Service officials told us they excluded 
about $670,000 in transition costs from the savings calculations that 
were reported to Congress, nearly equaling the approximately $716,000 
that the Forest Service reported to have saved since fiscal year 2005 
as a result of the competition. 

* Road maintenance. Forest Service officials told us they excluded 
about $320,000 in transition costs from the savings calculations that 
were reported to Congress. These costs are approximately 15 percent of 
the total $2.2 million in reported savings since fiscal year 2004. 

In addition to transition costs, there are also precompetition planning 
costs (including, as of May 2004, feasibility study costs). Like 
transition costs, OMB guidance does not direct that precompetition 
planning costs be included in the savings calculations. A Forest 
Service official told us that precompetition planning costs were 
excluded from the savings calculations for the three completed 
competitions. Forest Service officials could not provide us with 
estimates of these costs because they were not tracked. 

OMB guidance also does not direct agencies to include in their savings 
calculation other potential costs associated with the termination of a 
contract. To illustrate, 14 months after the private sector contractor, 
Serco, began performing fleet maintenance activities, the Forest 
Service terminated the contract. Under the terms of the contract, the 
Forest Service must negotiate with Serco on any costs associated with 
the termination itself. Forest Service officials stated that in March 
2007, Serco proposed a settlement amount that it contends would 
reimburse it for costs such as those associated with vacating sites as 
well as administrative costs and attorneys' fees. Serco also contends 
that the Forest Service owes it additional compensation unrelated to 
the contract termination. Serco's claim stems from a disagreement with 
the Forest Service over the terms of the contract. Finally, Forest 
Service officials also told us that the agency has incurred additional 
costs--exceeding its costs for fleet maintenance before the Serco 
contract--because maintenance work is now being performed by retail 
vendors. Officials told us that the Forest Service is precluded from 
returning the work to the agency for in-house performance.[Footnote 30] 
Because these issues are still pending, we did not include the dollar 
amounts of Serco's claims or the additional costs incurred by the 
Forest Service, and the Forest Service officials told us that they did 
not want to comment further on this issue. 

Conclusions: 

The government's goal is to obtain high-quality services at a 
reasonable cost, regardless of whether these services are performed by 
the public or private sector. Competition between the public and 
private sectors is an important tool in reaching this goal. The 2001 
President's Management Agenda has reemphasized the importance of using 
this tool as a means to deliver the best value to the American 
taxpayer. 

In keeping with the President's Management Agenda, the Forest Service 
established a competitive sourcing program and began holding A-76 
competitions. The agency now has plans to consider competing up to two 
thirds of its workforce against the private sector. This is a massive 
undertaking whose long-term success will depend on a realistic 
strategic plan, clear guidance to identify the key work activities that 
should be excluded from competition, and a strategy to assess the 
cumulative effect that outsourcing a large number of federal jobs could 
have on its firefighting capability. Unfortunately, the Forest Service 
has none of these in place. Because the Forest Service has just begun 
to implement its competitive sourcing program--having competed less 
than 5 percent of its workforce against the private sector--these 
problems have not yet had a significant impact on the Forest Service's 
competitive sourcing program. However, as the Forest Service implements 
its Green Plan and greatly expands the scope of its competitive 
sourcing program, the problems we have identified could, in the long 
term, severely impact its ability to implement this program 
effectively--jeopardizing not just the overall success of the program, 
but the nation's ability to fight fires and respond to other 
emergencies. 

More immediate is our concern that the Forest Service did not collect 
complete and reliable cost data related to its competitive sourcing 
program during fiscal years 2004 through 2006. As a result, the agency 
did not know how much it had spent on competitive sourcing activities 
and, consequently, whether it had complied with statutory spending 
limitations. We are also concerned about the usefulness of the cost 
savings that the Forest Service reported to Congress. The Forest 
Service could not provide us with sufficient data to verify the 
accuracy of the reported savings and excluded substantial costs from 
the savings calculations. Although the agency followed OMB guidance in 
calculating savings, we believe the guidance provides the Forest 
Service with the latitude to include the other costs we identified-- 
some of which were substantial. Including these costs would have 
provided Congress with a more realistic picture of the extent to which 
the Forest Service's competitive sourcing program is saving the 
American taxpayers' money. 

Recommendations for Executive Action: 

To improve the Forest Service's management of its competitive sourcing 
program, we recommend that the Secretary of Agriculture direct the 
Chief of the Forest Service to take the following five actions: 

* Revise the Green Plan to establish an implementation schedule that 
takes into account resource limitations. 

* Develop clear guidance on when and how to identify inherently 
governmental and core-commercial activities so they are excluded from 
competitive sourcing competitions. 

* Develop a strategy for assessing the cumulative effect of competitive 
sourcing competitions on the Forest Service's firefighting and 
emergency response capabilities. 

* Collect complete and reliable cost data on competitive sourcing 
activities to ensure that the Forest Service is able to comply with the 
appropriations acts' spending limitations. 

* Ensure that the savings reported to Congress are a realistic measure 
of the actual savings resulting from A-76 competitions by (1) verifying 
the accuracy of the data and (2) including costs such as planning costs 
and transition costs when calculating the savings. 

Agency Comments: 

We provided a draft of this report to the U.S. Department of 
Agriculture for review and comment. The Forest Service responded. It 
generally agreed with our recommendations but had concerns about some 
of the specific findings and conclusions in the report. We present the 
agency's concerns and our responses to them in appendix III. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution for 30 days 
from the report date. At that time, we will send copies of this report 
to interested congressional committees, the Secretary of Agriculture, 
and the Chief of the Forest Service. We will also make copies available 
to others upon request. In addition, the report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-3841 or nazzaror@gao. gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Signed by: 

Robin M. Nazzaro: 
Director, Natural Resources and Environment: 

List of Requesters: 

The Honorable Jeff Bingaman: 
Chairman: 
Committee on Energy and Natural Resources: 
United States Senate: 

The Honorable Dianne Feinstein: 
Chairwoman: 
Subcommittee on Interior, Environment, and Related Agencies: 
Committee on Appropriations: 
United States Senate: 

The Honorable Byron L. Dorgan: 
United States Senate: 

The Honorable Russ Feingold: 
United States Senate: 

The Honorable Herb Kohl: 
United States Senate: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report discusses the extent to which the U.S. Department of 
Agriculture's (USDA) Forest Service has (1) plans and guidance to help 
implement its competitive sourcing program effectively and (2) 
sufficient cost data to ensure that it complied with its competitive 
sourcing statutory spending limitations and accurately reported its 
competitive sourcing savings to Congress for fiscal years 2004 through 
2006. 

To address these two objectives, we focused on Forest Service 
competitive sourcing activities between fiscal years 2004 and 2006. For 
the first objective, we compared the Forest Service's Green Plan, 
including draft versions of the plan, with previous work that GAO has 
performed that identified the elements of effective strategic plans. We 
also reviewed the guidance that the Office of Management and Budget 
(OMB) and USDA provided to the Forest Service on how to construct its 
Green Plan. Furthermore, we examined how the Forest Service scoped the 
three competitions that it completed during this time frame. 
Specifically, we examined how the Forest Service ensured that it did 
not include inherently governmental and core-commercial activities in 
the competitions, and how it assessed the impact that competitions 
could have on the nation's ability to fight wildland fires and respond 
to other emergencies. Finally, we examined the guidance currently 
available to Forest Service employees responsible for scoping 
competitive sourcing competitions and interviewed Forest Service 
officials familiar with the agency's competitive sourcing activities. 

To respond to the second objective, we examined the appropriations acts 
for fiscal years 2004 through 2006 to determine which costs incurred by 
the Forest Service during those fiscal years were subject to the 
spending limitations. Appendix II explains this analysis in greater 
detail. We then asked the Forest Service to provide us with cost data 
for activities associated with its competitive sourcing program, 
including cost data we had determined were subject to the spending 
limitations. We assessed the reliability of these data and found them 
unreliable as a measure of the costs and savings associated with the 
program. Specifically, our review of cost data from the USDA's Federal 
Financial Information System (FFIS) and subsequent discussions with 
Forest Service officials, including the Chief Financial Officer, 
confirmed that the Forest Service had not issued formal guidance on 
which costs where to be charged to competitive sourcing job codes in 
FFIS, and that there was a lack of institutionalized policies and 
procedures to guide employees in tracking the time and costs associated 
with competitive sourcing activities. As a result, Forest Service 
officials, including the Chief Financial Officer, agreed that it was 
likely that employees used job codes inconsistently and that the 
accounting of competitive sourcing expenditures between fiscal years 
2004 and 2006 were unreliable and inaccurate. We also asked the Forest 
Service for data to substantiate the annual savings resulting from 
competitive sourcing competitions it reported to Congress in fiscal 
years 2004 through 2006. For the three competitions completed during 
this time frame, Forest Service officials either could not provide us 
with the methodology used to calculate the savings, or could not 
provide us with all of the data used to calculate the savings. As a 
result, we were unable to replicate the Forest Service's savings 
calculations, and thus we determined the reported numbers were 
unreliable because data reporting strategies were absent or 
inconsistent, there were no internal processes for verifying the 
accuracy of the data, and there was no documentation with which we 
could verify the accuracy of the data. Finally, in the course of our 
work, we identified categories of costs that were not included in the 
Forest Service's savings calculations. We include examples of these 
costs in this report to show their magnitude relative to the savings 
reported to Congress; however, we did not independently verify the 
accuracy of these costs. We conducted our work between October 2006 and 
January 2008 in accordance with generally accepted government auditing 
standards. 

[End of section] 

Appendix II: Limitations on Use of Appropriations for "Competitive 
Sourcing Studies and Related Activities" 

The Forest Service relies on both federal employees and private 
contractors to perform commercial activities--activities performed by 
the government that are also regularly performed in the commercial 
market place--such as data entry, photocopying, and other 
administrative support services. To determine whether to convert the 
performance of such activities from federal employees to private 
contractors, or vice versa, the Forest Service follows the competitive 
process set out in Office of Management and Budget (OMB) Circular No. A-
76, Performance of Commercial Activities (May 29, 2003), as revised, 
which establishes executive branch policy for the competition of 
commercial activities.[Footnote 31] The Forest Service is also subject 
to the requirements of the Federal Activities Inventory Reform Act of 
1998 (FAIR Act),[Footnote 32] which mandates agencies to develop 
inventories of their activities, and the President's Management Agenda 
(PMA), launched in 2001, which includes a governmentwide "competitive 
sourcing" initiative to increase and to make more efficient and 
effective agencies' use of the circular's competitive process.[Footnote 
33] To implement these requirements, the Forest Service established a 
competitive sourcing program that is administered by the Competitive 
Sourcing Program Office.[Footnote 34] 

A provision in each of the annual appropriations acts funding the 
Forest Service for fiscal years 2004 through 2006 limited the amount of 
appropriated funds available to the Forest Service for "competitive 
sourcing studies and related activities" to between $2 million and $5 
million (spending limitations). Five members of the U. S. Senate 
requested that we determine which costs incurred by the Forest Service 
in fiscal years 2004 through 2006 were subject to the spending 
limitations. In our view, these spending limitations apply to all costs 
under the Forest Service's competitive sourcing program, except for 
costs incurred to carry out the FAIR Act. 

Background: 

OMB Circular No. A-76 includes, in appendix B, detailed guidance on the 
competitive process a federal agency should follow to determine whether 
an activity should be performed by a public or private source.[Footnote 
35] The process is divided into three stages: (1) a precompetition 
preliminary planning stage, consisting, at minimum, of nine specified 
steps; (2) a competition stage that starts with a formal public 
announcement of a standard or streamlined competition[Footnote 36] 
between private and public sources and ends with announcing a 
performance decision; and (3) a postcompetition accountability stage, 
which mandates such actions as transferring performance of the 
activities to the winning entity, maintaining a database to track the 
execution of competitions, monitoring performance, and submitting 
reports to OMB. To avoid the mistakes it made during earlier 
competitions, the Forest Service has supplemented this process since 
2004 by first conducting studies to determine the feasibility of 
carrying out this competitive process (feasibility studies) for each 
activity.[Footnote 37] In 1998, Congress enacted the FAIR Act, which 
requires federal agencies to submit to OMB their annual inventories of 
commercial activities and, after a period of review and consultation 
with OMB, transmit the final inventories to Congress and make them 
available to the public. Appendix A to OMB Circular No. A-76 (Inventory 
Process) implements the FAIR Act. 

In August 2001, the Administration launched the PMA as its reform 
agenda for improving management and performance in the federal 
government. The PMA includes a competitive sourcing initiative to 
simplify and improve the process for choosing private or public 
sources. To implement the PMA competitive sourcing initiative, the 
Forest Service stated in its fiscal year 2004 budget justification that 
it planned to conduct competitions for activities associated with a 
total of 11,000 full-time employees or their equivalent (FTEs), and 
that competitive sourcing costs were expected to rise.[Footnote 38] 
Concerned about how the Forest Service had implemented the PMA 
competitive sourcing initiative,[Footnote 39] the House and Senate 
appropriations committees included language in the appropriations bills 
for fiscal year 2004 that led to the enactment of the following 
spending limitation: "Of the funds appropriated by this Act, not more 
than $5,000,000 may be used in fiscal year 2004 for competitive 
sourcing studies and related activities by the Forest 
Service."[Footnote 40] The Forest Service's appropriations acts for 
fiscal years 2005 and 2006 included spending limitations with identical 
language, except that the maximum amount available for this purpose was 
$2 million and $3 million, respectively.[Footnote 41] At issue here is 
determining the range of Forest Service activities that are covered by 
the appropriations acts' spending limitations on "competitive sourcing 
studies and related activities." 

Discussion: 

Construing the meaning of a statutory provision starts with the 
statutory language.[Footnote 42] The appropriations acts for fiscal 
years 2004 through 2006 define a "competitive sourcing study" for 
purposes of the spending limitations as: 

"a study on subjecting work performed by Federal Government employees 
or private contractors to public-private competition or on converting 
the Federal Government employees or the work performed by such 
employees to private contractor performance under the Office of 
Management and Budget Circular A-76 or any other administrative 
regulation, directive, or policy."[Footnote 43] 

Unfortunately, by defining a "competitive sourcing study" as a "study," 
albeit in the context of private versus public source 
performance,[Footnote 44] the appropriations acts do not clearly 
indicate the breadth of Forest Service activities that fall within its 
meaning.[Footnote 45] At the very minimum, however, the phrase includes 
the competition stage (the second stage) of the OMB Circular No. A-76 
process because it represents the formal structured process of 
soliciting and evaluating proposals from public and private sources. 
The Forest Service takes the position that the annual spending 
limitations apply only to costs attributable to the competition 
stage.[Footnote 46] We disagree, as does the U. S. Department of 
Agriculture's General Counsel, who provides legal assistance to the 
Forest Service.[Footnote 47] Even if we were to read the word "study" 
as narrowly as the Forest Service apparently does, the additional words 
"and related activities" in this context make clear that the statutory 
language includes more than simply the competitions. 

The statutes do not define "related activities" or set out specific 
criteria for identifying them. While a broad range of activities are 
"related," in the sense of having some logical connection to 
competitive sourcing studies, we believe Congress intended to focus on 
those activities that the Forest Service performs as part of its 
implementation of the President's competitive sourcing 
initiative.[Footnote 48] In other words, "related activities" are those 
activities the Forest Service performs if it is considering whether to 
conduct a public-private competition. Under the Forest Service's 
competitive sourcing program, no competition is conducted until the 
completion of a feasibility study, the objective of which is to 
evaluate whether an activity should be subject to the A-76 competitive 
sourcing process. Likewise, no competition is conducted under OMB 
Circular No. A-76 until the completion of the precompetition stage (the 
first stage), which also includes tasks such as conducting market 
research and developing an acquisition plan. Feasibility studies and 
precompetition planning activities are thus prerequisites to a 
competition and, therefore, in our view, "related activities." 
Similarly, the postcompetition stage is a required consequence of 
conducting a competition. The Forest Service's Competitive Sourcing 
Program Office supports and manages these and other activities in the 
Forest Service's competitive sourcing program. Because these activities 
further the Forest Service's objective of conducting competitions under 
the competitive sourcing initiative, we view them as "related 
activities" subject to the spending limitation. 

While it can be argued that the words "and related activities" include 
activities the Forest Service performs to carry out the FAIR Act, such 
as preparing inventories and reporting to Congress, we think the better 
view is that these costs are not encompassed in this limitation. 
Congress by law expressly requires these activities, even absent any 
other competitive sourcing program activities. Moreover, complying with 
the FAIR Act does not further the Forest Service's progress on the PMA 
competitive sourcing initiative, and it was the Forest Service's cost 
to implement this initiative to which the congressional committees were 
reacting.[Footnote 49] Our interpretation is consistent with the 
interpretation provided to us by the USDA Office of General 
Counsel.[Footnote 50] 

Conclusion: 

Accordingly, we conclude that the spending limitations on "competitive 
sourcing studies and related activities" included in the appropriations 
acts funding the Forest Service for fiscal years 2004 through 2006 
apply to all costs attributable to the Forest Service's competitive 
sourcing program, including the following: 

* conducting feasibility studies to evaluate which activities should be 
subject to the competitive sourcing process set out in OMB Circular No. 
A-76; 

* engaging in the competitive sourcing process set out in OMB Circular 
No. A-76, including activities related to precompetition planning, 
competitions between sources, and postcompetition accountability; and: 

* managing the agency's competitive sourcing program. 

The appropriations acts spending limitations, however, do not apply to 
costs incurred for complying with the FAIR Act, which the Forest 
Service must do even if it applies no efforts to competitive sourcing. 

[End of section] 

Appendix III: Comments from the Forest Service: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

United States Department of Agriculture:
"Caring for the Land and Serving People" 
Forest Service: 
Washington Office: 
1400 Independence Avenue, SW: 
Washington, DC 20250: 
		
File Code: 1310-1/1420: 

Date: December 31, 2007: 

Robin Nazzaro: 
Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Nazzaro: 

Thank you for the opportunity to review and comment on the draft 
Government Accountability Office report GAO-08-195, "Forest Service: 
Better Planning, Guidance, and Data Needed to Improve Management of the 
Competitive Sourcing Program". 

Although we have some concerns about some of the specific findings and 
conclusions in the report, the Forest Service generally agrees with the 
GAO recommendations. See the enclosure to this letter for specific 
Forest Service comments on the draft report. 

The Forest Service appreciates this opportunity to comment on the draft 
report. If you have any questions, please contact Ronald Ketter, 
Director of Strategic Planning and Performance Accountability at 202-
401-4470. 

Sincerely, 

Signed by: 

Abigail R. Kimbell:
Chief: 

Enclosure: 

cc: Ronald Ketter, Jacqueline Myers, Clarice Wesley, Robert Rinaldi: 

Forest Service Comments On Gao-08-195: 

Forest Service: Better Planning, Guidance, and Data Needed to Improve 
Management of the Competitive Sourcing Program: 

The Forest Service response to the draft report, provided below, is 
grouped under general categories to which agency comments relate. 

1) Forest Service Guidance and Strategy for Planning and Conducting 
Competitive Sourcing Studies: 

The GAO report states that the Forest Service lacks guidance to ensure 
that key work activities are excluded from A-76 competitions, and it 
lacks a strategy to assess the cumulative effect that A-76 competitions 
could have on its ability to respond to wildland fires and other 
emergencies. The report suggests that the agency may be at risk of 
subjecting inherently governmental or core commercial activities to 
competition. [See comment 1] 

Although the Forest Service agrees with the GAO recommendations, it 
does not concur with this finding. The Forest Service believes its 
current process offers sufficient safeguards to avoid these risks. The 
Forest Service FAIR Act Inventory, which forms the basis for 
identifying commercial activities for future feasibility study, 
excludes inherently governmental positions from study. The feasibility 
study process further identifies whether a public-private competition 
of certain functions or activities is feasible. The Chief of the Forest 
Service must approve its recommendations before any competition can be 
considered further. Finally, should the Forest Service proceed to a 
public-private competition, a senior management team prepares a 
performance work statement for a competition that describes the 
specific work to be performed. The Forest Service believes that these 
various steps offer sufficient safeguards to prevent inadvertently 
subjecting inherently governmental or core commercial activities to 
competition. 

The agency acknowledges that it lacks an overall strategy to assess the 
cumulative effect that A-76 competitions could have on its incident 
response capability, but it does consider and address potential effects 
on a study by study basis. 

2) Forest Service Ability to Report Costs and Savings: 

While the Forest Service recognizes its need to improve documentation 
for competitive sourcing costs and savings, it is concerned with 
several statements in the GAO report related to this topic. The Forest 
Service is committed to following government-wide directions for 
providing reliable data on competitive sourcing costs and savings to 
Congress. The GAO report raises concerns that certain costs were not 
included, but these concerns may be in conflict with current OMB 
guidance on what costs should and should not be included in these 
reports. The Forest Service believes that it complied with OMB guidance 
on whether to include certain costs such as the costs of planning, 
phase-in, or transition. We also are concerned over differing direction 
related to whether incremental or full costs of studies should be 
reported. [See comment 2] 

Costs related to termination of the Serco contract are still being 
negotiated. Due to the ongoing negotiations, the Forest Service 
believes discussion of this topic in the report should not include
mention of additional costs incurred, amounts of contract claims, or 
proposed settlement amounts. Upon completion of all negotiations, 
consideration will be given to the appropriateness of including any of 
these costs in savings calculations. [See comment 3] 

3) Forest Service Compliance with Legislative Spending Limitations: 

The GAO report states that the Forest Service interpreted the 
legislative spending limitation too narrowly. While the Forest Service 
interpreted feasibility studies as outside the spending limitation, the 
total amount it budgeted for competitive sourcing and feasibility 
studies during this period did not exceed the total spending 
limitation. Therefore, it does not believe that it exceeded the 
spending limitation, even under the broader interpretation. [See 
comment 4] 

Although cost data prior to fiscal year 2007 was less reliable, there 
was so little competitive sourcing activity during 2004 to 2006 that 
the agency firmly believes it did not violate the respective 
appropriation caps for these fiscal years. A system of project specific 
job codes was instituted in FY 2007 and full costs were tracked for all 
studies, including feasibility studies. 

This series of job codes has been further refined for the purposes of 
more accurately obtaining those CS costs which should be applied 
against the spending limitation which we believe should include support 
for the post competition accountability review and independent 
validation processes. Cost tracking excludes only the FAIR Act 
Inventory workload. 

[End of enclosure] 

The following are GAO's comments on the Chief of the Forest Service 
letter dated December 31, 2007. 

GAO Comments: 

1. We believe that the Forest Service's comments misstate our position 
regarding its guidance for ensuring that key work activities are 
excluded from A-76 competitions. Our report does not state that the 
Forest Service has no guidance, but rather that it lacks clear 
guidance. Without clear guidance, we do not believe that the Forest 
Service's current process can offer sufficient safeguards to ensure 
that key work activities are excluded from A-76 competitions, 
especially in light of the agency's plan to examine the activities of 
two thirds of its workforce. For example, regarding the FAIR Act 
inventory, we found significant fluctuations in the percentages of 
inherently governmental activities in the inventory data for fiscal 
years 2004 through 2006, suggesting that the Forest Service had 
difficulty classifying positions when preparing the inventory. In 
addition, Forest Service officials told us that the inventory data 
represents only a "rough snapshot" of the inherently governmental and 
core-commercial activities within the Forest Service, and that much 
additional work must be done to identify specifics activities suitable 
for competitions. Finally, the Forest Service officials responsible for 
the three completed competitions--IT infrastructure, road maintenance, 
and fleet maintenance--told us that they developed their own 
methodologies to classify inherently governmental and core-commercial 
activities because they did not find the agency's FAIR Act inventory 
data useful and received little guidance on how to identity inherently 
governmental and core-commercial activities. Nevertheless, these 
officials were confident that they successfully identified and exempted 
from competition inherently governmental and core-commercial activities 
because of, among other reasons, the clearly commercial nature of the 
activities. However, the three completed competitions may not be 
representative of future competitions, particularly if the Forest 
Service proceeds with its plan to examine the work activity of two 
thirds of its workforce. 

2. As we state in our report, OMB guidance on how to calculate 
competitive sourcing savings reported to Congress does not specify all 
of the costs that should be included in the calculations, thus 
providing the Forest Service with some discretion on which costs to 
include. Although the Forest Service followed OMB guidance in 
calculating savings, we believe the guidance provides the Forest 
Service with the latitude to include the other costs we identified-- 
some of which substantially reduce or even exceed the savings reported 
to Congress. Including these costs would have provided Congress with a 
more realistic picture of the extent to which the Forest Service's 
competitive sourcing program is saving the American taxpayers' money. 

3. At the Forest Service's request, we excluded from our report much of 
the information we received related to termination of the Serco 
contract because negotiations between the Forest Service and Serco are 
ongoing. However, excluding all mention of the types of possible 
additional costs would provide the false impression that the savings 
already reported to Congress resulting from the fleet maintenance 
competition have been realized, when in fact they are being called into 
question. 

4. Although the Forest Service does not believe it exceeded the 
spending limitations, even under the broader interpretation, we found 
that it does not have the data to substantiate this claim. 
Specifically, as we state in our report, the Forest Service did not 
collect complete and reliable cost data related to its competitive 
sourcing program during fiscal years 2004 through 2006 because it did 
not have a cost accounting system sufficient to track costs related to 
competitive sourcing. Furthermore, in consultation with Forest Service 
officials, we agreed that it was not feasible to reconstruct cost data 
for competitive sourcing activities for these years because doing so 
would require a significant amount of resources and would not likely 
provide reliable data. Because the Forest Service was unable to provide 
us with complete and reliable cost data and it was not feasible to 
reconstruct the data, neither the Forest Service nor GAO can determine 
with an appropriate degree of certainty if the Forest Service exceeded 
the appropriations acts' spending limitations. 

In addition, we acknowledge in our report that the Forest Service has 
made efforts to improve its policies and guidance on how to establish 
job codes and how employees are to use them for tracking purposes, 
including a directive specifying that the cost of performing some 
precompetition planning activities be charged to competitive sourcing 
job codes. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Robin Nazzaro, (202) 512-3841 or nazzaror@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Andrea Wamstad Brown, 
Assistant Director; F. Abe Dymond; Charles T. Egan; Lauren S. Fassler; 
Peter Grinnell; David Perkins; Aaron Jay Shiffrin; and Carol Herrnstadt 
Shulman made key contributions to this report. 

[End of section] 

Footnotes: 

[1] The Executive Office of the President and the Office of Management 
and Budget, The President's Management Agenda (2001). 

[2] OMB Circular No. A-76, Performance of Commercial Activities (May 
29, 2003), and Pub. L. No. 105-270, 112 Stat. 2382 (Oct. 19, 1998). 

[3] Pub. L. No. 108-199, Div. F, Title VI, § 647(b), 118 Stat. 3, 361 
(Jan. 23, 2004). 

[4] OMB memoranda, M-07-01 (Oct. 5, 2006); M-06-01 (Oct. 7, 2005); and 
M-05-01 (Oct. 15, 2004). 

[5] Department of the Interior and Related Agencies Appropriations Act, 
2004, Pub. L. No. 108-108, § 340(d)(3), 117 Stat. 1241, 1316 (Nov. 10, 
2003); Department of the Interior and Related Agencies Appropriations 
Act, 2005, Pub. L. No. 108-447, div. E, § 332(a)(3), 118 Stat. 2809, 
3100 (Dec. 8, 2004); Department of the Interior, Environment, and 
Related Agencies Appropriations Act, 2006, Pub. L. No. 109-54, § 
422(a)(2), 119 Stat. 499, 554 (Aug. 2, 2005); and Revised Continuing 
Appropriations Resolution, 2007, Pub. L. No. 110-5, § 104, 121 Stat. 8, 
9 (Feb. 15, 2007) (operates to retain the spending limitation imposed 
on the Forest Service in the fiscal year 2006 appropriations act). 

[6] USDA, Forest Service, Report to Surveys and Investigations Staff, 
Committee on Appropriations, U.S. House of Representatives, 
Implementation of the Competitive Sourcing Initiative at the U.S. 
Forest Service (March 2004). 

[7] The Geospatial Service and Technology Center is a Forest Service 
facility primarily located in Salt Lake City, Utah, that provides 
geographic data and mapping services to all departments within the 
Forest Service. 

[8] There was a fourth competition completed during this time frame 
that considered 8 FTEs. We excluded this competition from our analysis 
because it was conducted using the streamlined competition process, 
which is faster and less complex than the standard competition process 
that was used for the other three competitions. 

[9] The NWCG draws on employees from the Forest Service and from the 
Department of the Interior's Bureau of Land Management, Bureau of 
Indian Affairs, Fish and Wildlife Service, and National Park Service. 

[10] OMB Circular No. A-76, Performance of Commercial Activities (May 
29, 2003). 

[11] See The President's Management Agenda (2001). The five initiatives 
are strategic management of human capital, improved financial 
performance, expanded electronic government, budget and performance 
integration, and competitive sourcing. 

[12] The FAIR Act, Pub. L. No. 105-270, § 5, 112 Stat. 2382, 2384 (Oct. 
19, 1998). 

[13] OMB guidance for use of commercial exemption justifications states 
the following: "As a general matter, a function should be considered 
core to an agency's operation only if--and only to the extent that-- 
loss of in-house performance of the function would result in 
substantial risk to the agency's ability to accomplish its unique 
mission." See OMB, 2005 Inventories of Commercial and Inherently 
Governmental Activities, M-05-12 (May 23, 2005). 

[14] Besides core-commercial, there are four other subcategories of 
commercial activities that are exempt from competition. Commercial 
activities are exempt if they are (1) subjects of an in-progress A-76 
competition, (2) performed by government personnel as the result of an 
A-76 competition within the past 5 years, (3) involved in agency 
restructuring, or (4) performed by government personnel due to a 
statutory prohibition against private sector performance. 

[15] The name Green Plan is derived from the July 2003 OMB standards 
for evaluating federal agencies' progress in implementing PMA 
initiatives. These standards describe the degree of each agency's 
progress as red, yellow, or green, where green is considered fully 
successful. One OMB standard requires federal agencies to develop a 
competition plan as a requirement to earn green status for the 
competitive sourcing initiative. 

[16] See footnote 5. 

[17] Commercial B activities are commercial activities suitable for 
competition--they exclude inherently governmental and core-commercial 
activities. 

[18] GAO, Congressional Review of Agency Strategic Plans, GAO/ GGD-
10.1.16 (Washington, D.C.: May 1997); Transforming the Civil Service: 
Building the Workforce Of the Future, Results Of a GAO-Sponsored 
Symposium, GAO/GGD-96-35 (Washington, D.C.: Dec. 20, 1995); Managing 
for Results: Experiences Abroad Suggest Insights for Federal Management 
Reform, GAO/GGD-95-120 (Washington, D.C.: May 2, 1995); Managing for 
Results: State Experiences Provide Insights for Federal Management 
Reforms, GAO/GGD-95-22 (Washington, D.C.: Dec. 21, 1994); Government 
Reform: Goal-Setting and Performance, GAO/AIMD/ GGD-95-130R 
(Washington, D.C.: Mar. 27, 1995); and Executive Guide: Improving 
Mission Performance Through Strategic Information Management and 
Technology, GAO/AIMD-94-115 (Washington, D.C.: May 1994). 

[19] GAO, Competitive Sourcing: Greater Emphasis Needed on Increasing 
Efficiency and Improving Performance, GAO-04-367 (Washington, D.C.: 
Feb. 27, 2004). 

[20] As we have previously reported, the inapplicability of the OMB- 
assigned codes has been a problem for many other federal agencies. Our 
prior work on this issue includes GAO-04-367 and Competitive 
Contracting: The Understandability of FAIR Act Inventories Was Limited, 
GAO/GGD-00-68 (Washington, D.C.: Apr. 14, 2000). 

[21] See, for example, U.S. Department of Agriculture, Office of the 
Chief Financial Officer, Office of Competitive Sourcing, FY07 Guidebook 
for Inventories of Commercial Activities and Inherently Governmental 
Activities (March 2007). 

[22] Retired employees who are ICS-certified are eligible to be hired 
on an hourly basis to fight fires and respond to other emergencies. 

[23] Pub. L. No. 109-54 § 422(e), 119 Stat. 499, 554-55 (Aug. 2, 2005); 
and Pub. L. No. 110-5, § 104, 121 Stat. 8, 9 (Feb. 15, 2007) (operates 
to retain this requirement in fiscal year 2007). Section 422(e) states 
the following: "determine whether any of the employees concerned are 
also qualified to participate in wildland fire management activities; 
and take into consideration the effect that contracting with a private 
sector source would have on the ability of the Forest Service to 
effectively and efficiently fight and manage wildfires." 

[24] For fiscal year 2008, the Forest Service is prohibited from using 
any fiscal year 2008 funds for "competitive sourcing studies and 
related activities involving Forest Service personnel." Consolidated 
Appropriations Act, 2008, Div. F, § 415(a), Pub. L. No. 110-161 (Dec. 
26, 2007). 

[25] The Forest Service uses job codes to track its competitive 
sourcing program costs, which are established in its Foundation 
Financial Information System. The job codes are used to track costs 
related to things such as salary, travel, consultancy services, or 
supplies. 

[26] Specifically, the Consolidated Appropriations Act, 2004, requires 
agencies to report on "actual savings, or a quantifiable description of 
improvements in service or performance, derived from the implementation 
of competitions" for the previous fiscal year. Pub. L. No. 108-199, 
Div. F, Title VI, § 647(b)(7), 118 Stat. 3, 361 (Jan. 23, 2004). 

[27] OMB provides this guidance annually. The guidance did not change 
substantially for fiscal years 2004 through 2006. See footnote 4. 

[28] GAO, The Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[29] The Forest Service reported that the savings accrued over a 20- 
month period between February 2005 and September 2006. 

[30] According to the circular, work performed by a commercial source 
cannot automatically revert to government (in-house) performance. 
Specifically, before the government may perform the work currently 
being performed by the private sector, an A-76 competition must be used 
to determine whether the government should perform the activity. 

[31] OMB Circular No. A-76 may be accessed at [hyperlink, 
http://www.whitehouse.gov/omb/circulars/index.html] (last visited Oct. 
22, 2007). 

[32] Pub. L. No. 105-270, 112 Stat. 2382 (Oct. 19, 1998). 

[33] Executive Office of the President and OMB, The President's 
Management Agenda (2001), available at [hyperlink, 
http://www.whitehouse.gov/results/agenda/index.html] (last visited 
Sept. 6, 2007). 

[34] USDA-Forest Service, Report to Surveys and Investigations Staff, 
Committee on Appropriations, U.S. House of Representatives, 
Implementation of the Competitive Sourcing Initiative at the U.S. 
Forest Service, at i, 3, 4, 9 (Mar. 2004). 

[35] The circular was first issued in 1966 and last revised in 2003. 
See OMB Cir. No. A-76, ¶ 4 (June 14, 1999), ¶ 2 (May 29, 2003). 

[36] When 65 or fewer full-time employees or its equivalent (FTEs) are 
required to perform the commercial activity being evaluated, OMB 
Circular No. A-76 permits a federal agency to perform a streamlined 
competition, which is faster and less costly to conduct than a standard 
(i.e., regular) competition because of the abbreviated and less complex 
procedures required. Under older versions of the circular, the 
"competition" held under stage two was called a "cost comparison." See 
OMB Cir. No. A-76, ¶ 7; app. D at D-3 (definition for "competition"). 

[37] USDA OCFO, Guidance for Determining the Feasibility of Conducting 
Competitive Sourcing Competitions, Bulletin 2004-001 (May 11, 2004). 
The bulletin lists 13 categories of information that are needed to make 
this determination, such as Business Needs Assessment, Market Research, 
Cost/Benefit Analysis, Acquisition Strategy, and Requirements. 

[38] USDA Forest Service-FY 2004 Budget Justification, at 1-6 (Feb. 3, 
2003), available at [hyperlink, http://www.fs.fed.us/aboutus/budget/] 
(last visited Oct. 22, 2007). 

[39] H.R. Rep. No. 108-195, at 107 (2003); S. Rep. No. 108-89, at 8 
(2003). 

[40] Department of the Interior and Related Agencies Appropriations 
Act, 2004, Pub. L. No. 108-108, § 340(d)(3), 117 Stat. 1241, 1316 (Nov. 
10, 2003). 

[41] Department of the Interior and Related Agencies Appropriations 
Act, 2005, Pub. L. No. 108-447, div. E, § 332(a)(3), 118 Stat. 2809, 
3100 (Dec. 8, 2004); Department of the Interior, Environment, and 
Related Agencies Appropriations Act, 2006, Pub. L. No. 109-54, § 
422(a)(2), 119 Stat. 499, 554 (Aug. 2, 2005). 

[42] As the U.S. Supreme Court has stated: "There is, of course, no 
more persuasive evidence of the purpose of a statute than the words by 
which the legislature undertook to give expression to its wishes." 
United States v. American Trucking Associations, Inc., 310 U.S. 534, 
543 (1940); see Mallard v. U.S. District Court, 490 U.S. 296, 300-02 
(1989); B-302973, Oct. 6, 2004; B-288173, June 13, 2002. 

[43] Pub. L. No. 108-108, § 340(f); Pub. L. No. 108-447, § 332(b); Pub. 
L. No. 109-54, § 422(b). 

[44] The term "competitive sourcing" originated with the Department of 
Defense in the late 1990s. GAO, DOD Competitive Sourcing: Results of 
Recent Competitions, GAO/NSIAD-99-44 (Washington, D.C.: Feb. 23, 1999), 
at 2. Its use in connection with the spending limitations, however, 
appears to have its origins in the 2001 PMA. Prior to 2001, the term 
"competitive sourcing" does not appear within the commercial activities 
executive guidance, such as the 1999 version of OMB Circular No. A-76, 
or statutes, such as the FAIR Act. However, the term appears in related 
executive guidance and statutes after the launch of the PMA, such as 
the 2003 version of OMB Circular No. A-76 (e.g., "competitive sourcing 
quarterly reports" and "competitive sourcing officials") and the 
Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 647(b), 
118 Stat. 3, 361 (Jan. 23, 2004) (e.g., "report on the competitive 
sourcing activities" of the agency). 

[45] For example, in the context of OMB Circular No. A-76, a study 
could reasonably include or exclude the postcompetition stage 
activities, such as performance monitoring and reporting. In this 
regard, the circular appears to include them in its description of the 
competitive sourcing process. See OMB Cir. No. A-76, app. B, fig. B1, 
at B-4; fig. B2, at B-6. On the other hand, the spending limitations' 
statutory definition of a "competitive sourcing study" is similar to 
the definition of a "competition" under the current version of OMB 
Circular No. A-76, or a "cost comparison" under older versions. The 
current version of OMB Circular No. A-76 defines a "competition" as a 
"formal evaluation of sources to provide a commercial activity that 
uses pre-established rules (e.g., the FAR, this circular) . . . 
includ[ing] streamlined and standard competitions performed in 
accordance with this circular." The supplement to the 1999 version of 
OMB Circular No. A-76 defined a "cost comparison" for the "activity 
under study" as "the process whereby the estimated cost of Government 
performance of a commercial activity is formally compared, in 
accordance with the principles and procedures of this Circular and 
Supplement, to the cost of performance by commercial or ISSA 
[interservice support agreement] sources." 

[46] Memorandum from Chief Dale N. Bosworth, Forest Service, to Charles 
Christopherson, CFO, USDA, Revised USDA Forest Service Competitive 
Sourcing "Green Plan": FY 2005-2009, Dec. 23, 2005; Letter from L. 
Benjamin Young, Jr., Assistant General Counsel, USDA, to F. Abe Dymond, 
Assistant General Counsel, GAO, June 14, 2007 (Young Letter). 

[47] Young Letter at 3. Because the Forest Service, a USDA agency, 
receives legal assistance from the USDA Office of General Counsel 
(OGC), we solicited the General Counsel's legal views. 

[48] For example, in 2004 the House committee noted its concern about 
how the Forest Service had implemented the competitive sourcing 
"initiative" because it "has looked into this issue in detail and found 
a number of cases of mismanagement of this effort" and thus addressed 
"this issue" in bill language by "limiting the use of funds for 
competitive sourcing efforts." H.R. Rep. No. 108-542, at 111 (2004). 
The fiscal year 2004 conference committee report stated that the 
committee was concerned about the failure to budget adequately for the 
cost of implementing the competitive sourcing initiative and that 
"significant sums" were being expended on the competitive sourcing 
initiative "at the expense of critical, on-the-ground work." H.R. Conf. 
Rep. No. 108-330, at 85-86 (2003); see also H.R. Rep. No. 108-195, at 8-
10. 

[49] H.R. Rep. No. 108-195, at 8-10, 107. According to information the 
Forest Service provided to GAO, the cost of complying with the FAIR Act 
is negligible compared to the costs of conducting the other activities 
associated with the competitive sourcing program. 

[50] According to the USDA OGC, the spending limitations do not apply 
to activities required by the FAIR Act but do apply to competitions, 
postcompetition accountability activities, and "all activities leading 
up to a determination of whether a competition of a commercial activity 
identified by a FAIR Act inventory should be conducted." Young Letter 
at 3. 

[End of section] 

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