Agencies Need Better Guidance for Choosing Among Contracts, Grants, and Cooperative Agreements

GGD-81-88: Published: Sep 4, 1981. Publicly Released: Sep 4, 1981.

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The Federal Grant and Cooperative Agreement Act was passed primarily because the failure of Federal agencies to distinguish among procurement and various assistance relationships led to inappropriate use of grants to avoid the requirements of the procurement system and the unnecessary administrative requirements in grants. GAO has monitored the implementation of this Act and reported on actions needed to accomplish the Act's objectives.

The purposes of the Act have not been fully achieved. Although the Act was intended to curb the misuse of assistance instruments in procuring situations, Federal officials sometimes misinterpret the Act and select assistance instruments where GAO believes procurement contracts are appropriate. As a result, Federal procurement requirements designed to protect the Federal interest and ensure competition may not be applied. Due to vague guidance and a less-than-aggressive effort to implement the Act by many agencies, assistance relationships are often not reviewed to ensure that: Federal involvement is consistent with congressional intent and the agency's experience with a recipient; the legal instrument used matches the intended relationship; the terms and conditions of the instrument selected are the minimum necessary to assure that Federal funds are spent efficiently and for authorized purposes; and these terms and conditions clearly establish the roles and responsibilities of the Federal Government and the recipient. The Office of Management and Budget (OMB) needs to clarify its procurement guidelines and promote more aggressive implementation by Federal agencies. There is a need for better definitions of grants and cooperative agreements. Both OMB and the Federal agencies need to establish better coordination and oversight mechanisms to ensure that Federal officials' awareness of the Act is increased, different practices and procedures are identified and resolved, and policies conform with the objectives of the Act.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should renew, without a time limit, the OMB authority to except individual programs or transactions from the provisions of the Act.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OMB should: (1) direct Federal agencies to develop administrative systems necessary to implement and monitor compliance with the Act, identify emerging problems so that revisions to policies and procedures can be considered, provide adequate staff training and technical assistance on the Act and OMB guidelines, and develop systems of records on their operating experiences in implementing the Act; (2) actively monitor the implementation by Federal agencies to assure that OMB policies and guidelines are carried out uniformly and in a timely manner; (3) establish an effective, ongoing system to document and respond to problems identified during monitoring activities; and (4) revise the OMB guidance to provide more insight into how agencies can avoid unnecessarily increasing Federal liability under cooperative agreements.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OMB should revise its guidance on the Act to: (1) more clearly define the terms "direct benefit and use" as they relate to the selection of contracts and "accomplishing a public purpose of support or stimulation" as it relates to assistance; (2) require Federal program officials to base instrument choices on the Federal purpose in the relationship established after reviewing their authorizing legislation to determine their authority to procure or assist and reviewing each proposed transaction in light of the Act's criteria; and (3) clearly state that section 7(a) of the Act does not create new authority to make assistance awards independent of program legislation.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OMB should take the lead in establishing clear operational differences among contracts, grants, and cooperative agreements.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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