Competitive Contracting:

Agencies Upheld Few Challenges and Appeals Under the FAIR Act

GGD/NSIAD-00-244: Published: Sep 29, 2000. Publicly Released: Sep 29, 2000.

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Pursuant to a congressional request, GAO reviewed agencies' handling of appeals and challenges within the broader context of the initial implementation of the Federal Activities Inventory Reform (FAIR) Act of 1998, focusing on: (1) the 24 Chief Financial Officer (CFO) Act agencies' inventories and the number of challenges and appeals that interested parties filed; (2) issues raised in challenges and appeals by interested parties and agencies' responses to them; and (3) six agencies' plans for reviewing or using their inventories and how agencies could use information contained in the inventories to help ensure that activities are effectively aligned and efficiently performed.

GAO noted that: (1) the 24 CFO Act agencies identified about 900,000 full-time equivalent (FTE) positions in their inventories as performing commercial activities, but over one half were exempted from consideration for competition at the time that the inventories were compiled; (2) these agencies received and responded to a total of 332 challenges and 96 appeals to their 1999 FAIR Act inventories from interested parties; (3) of those submitted, 20 challenges and 3 appeals were successful; (4) private companies or industry representatives filed most of their 145 challenges and appeals at civilian agencies, while employees and labor unions filed most of their 283 challenges and appeals at the Department of Defense (DOD); (5) for example, industry challenged agencies that indicated that they did not plan to consider many of the commercial activities on their inventories for competition; (6) in contrast, almost all of the employees' challenges and appeals were within the provisions of the act because they concerned the inclusion of activities that the employees contended should have been omitted because they were inherently governmental; (7) although the challenge and appeal process did not result in significant changes to agencies' inventories, the process served a broader purpose by identifying the need for greater clarity in agencies' inventories for use by both interested parties and agencies; (8) the civilian agencies have begun to review their inventories to identify ways to improve their inventories or to use the information on them to make more informed management decisions; (9) in contrast, DOD has used its inventories of commercial activities to identify activities, currently performed by federal personnel, for possible competition; (10) it will require a sustained leadership effort on the part of the Office of Management and Budget (OMB) to help ensure that agencies review their inventories and identify opportunities for better using agency resources by subjecting activities to competition; and (11) inventories only provide a portion of the information that agency management could use in making decisions about how all of its activities are carried out and whether the activities are being performed in the most efficient and cost-effective manner.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Under competitive sourcing, federal agencies open their commercial activities to competition among public and private sector sources, and under the FAIR Act, this process starts each year with agencies developing inventories of their commercial positions. However, civilian agencies reviewed by GAO in 2000 were not using their annual inventories to inform decisions about improving efficiencies and yielding savings by using the results to identify commercial activities currently performed by federal personnel for competitive sourcing. To better ensure that civilian agencies would start using their annual FAIR inventories as a basis for competitive sourcing and not miss opportunities for savings, GAO recommended that the Office of Management and Budget (OMB) undertake a sustained effort to improve the clarity of inventories and help ensure that agency heads use the results in a reasonable time to support competitive sourcing of positions that could be open to competition. In part in response to GAO's recommendation in this report, as well as the Administration's August 2001 inclusion of competitive sourcing as one of five governmentwide initiatives, OMB has undertaken a sustained effort to improve and maintain the governmentwide commitment to develop useful FAIR Act inventories. For example, consistent with GAO's recommendation, the May 2003 revision to OMB Circular A-76 clarified guidance in Attachment A to assist agencies in performing inventories of commercial activities. Also consistent with GAO's recommendation is the more detailed guidance that OMB's Office of Federal Procurement Policy (OFPP) writes each fiscal year in a memorandum to agency heads. Through this annual guidance memorandum for example, OFPP has been providing standardized, approved function codes that must be used, which makes it easier to track and compare commercial functions that are open to competition across the government. OFPP's annual inventory guidance memorandum has also been used to tighten up agency annual FAIR Act inventory requirements for justifying reasons to deem any commercial activities as unsuitable for competitive sourcing. Finally, OFPP's annual FAIR Act inventory guidance memorandum, such as the one sent in May 2005, requires agencies to provide up-to-date "point of contact" web-site and name and phone number of primary and/or alternative contact person(s), which should facilitate transparency and accountability to the American public for identifying those positions that are not inherently governmental and could be open to competition. In another action that is consistent with the GAO recommendation, as of May 2005, OMB is in the process of developing a new FAIR Act database, "Workforce Inventories Tracking System" (WITS). When completed in time for fiscal year 2006 FAIR Act inventories, WITS will be an OMB-managed web-based system, which should enhance OMB's oversight of agencies' efforts and speed up the cycle time and move forward on competitive sourcing efforts. Finally, to further improve the clarity and competitive sourcing outcomes from agencies FAIR act inventories, OMB plans to soon post a best practices guide developed by a working group of the interagency Chief Acquisition Officers Council. The combined effects of OMB's actions to improve agencies' annual inventories of positions that could be open to competition--in part in response to GAO's recommendations, as well as the August 2001 placement of competitive sourcing on the Administration's management agenda--have led to increases in the number of completed competitions in fiscal years 2003 and 2004. Moreover, according to OMB, governmentwide progress in expanding competitive sourcing efforts has saved agencies more than $2.5 billion in fiscal years 2003 and 2004 for redirection to higher priorities.

    Recommendation: Consistent with OMB's ongoing efforts, but in light of the historical difficulty of maintaining a governmentwide commitment to consistently develop useful inventories of commercial activities, the Director, OMB, should undertake a sustained effort to help improve the clarity of agencies' FAIR Act inventories and lead efforts to help ensure that agency heads review their commercial activities within a reasonable time, as required by the FAIR Act.

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


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