Resolution Trust Corporation:

A More Flexible Contracting-Out Policy Is Needed

GGD-91-136: Published: Sep 18, 1991. Publicly Released: Sep 18, 1991.

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Gaston L. Gianni
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Pursuant to a congressional request, GAO reviewed the Resolution Trust Corporation's (RTC) contracting procedures, focusing on whether RTC uses an approach that allows it to select between contractors and RTC staff for the most advantageous approach to handle asset management and disposition.

GAO found that: (1) RTC does not justify decisions to hire private contractors based on comparison of in-house and contractor costs since the applicable law does not require it to prepare justifications to support its contracting procedures; (2) although the RTC policy to use only private-sector asset management and disposition contractors for real estate and problem loan assets may not be the most cost-effective approach, most RTC staff believe that a change in its contracting policy would divert the staff's attention from its primary goal of contracting for such services; (3) some RTC staff said that a more flexible approach for contracting decisions could be more effective than the current RTC policy; and (4) some RTC staff believe that in some situations, RTC staff could manage and dispose of assets more effectively than a contractor, particularly where RTC developed expertise on a complex asset or package asset, or expected to sell an asset through a RTC-sponsored bulk sale, auction, or other expedited selling technique.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: RTC revised its procedures to recognize that staff could be used as necessary rather than contractors. However, the procedures do not provide guidance to RTC staff on the information that RTC management needs to review and approve this decision. Without this guidance, it is likely that these decisions will not be made on a consistent basis. Yet, given that RTC has only 16 months until it terminates, GAO anticipates that such guidance will not be forthcoming and the level of contracting will be greatly reduced and the consequences of any inconsistencies will not be significant. Therefore, GAO is closing the recommendation at this time.

    Recommendation: RTC should clarify its contracting-out policy so that its staff clearly understand that they have the flexibility to use their staff instead of private contractors when in their judgment an in-house approach would be more practical and efficient for a particular need or situation.

    Agency Affected: Resolution Trust Corporation


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