Spending Grant Funds More Efficiently Could Save Millions

PSAD-80-58: Published: Jun 30, 1980. Publicly Released: Jul 15, 1980.

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In fiscal year 1979, the federal government spent over $95 billion funding grant programs in areas such as health and welfare, education, transportation, and environmental protection. A substantial portion of the grant funds were used to purchase goods and services. GAO identified a number of areas where procurement improvements by state, local, and nonprofit organizations could result in substantial savings and more effective use of federal grant dollars. Such areas include: adhering to competitive bidding requirements, requiring public notification of procurements, obtaining and recording informal price quotes on small purchases, using brand name purchase descriptions properly, insuring that only the minimum quantity and quality of items are purchased, adopting safeguards and controls to protect against favoritism and collusion, and eliminating local purchase preferences which increase costs by unduly restricting competition. Additional federal grant dollars could be saved if state and local recipients took greater advantage of centralized purchasing, commercial warehousing and distribution systems, and federal excess and surplus property.

GAO found that grant recipients were unduly restricting competition to personal preference items through improper use of brand name purchase descriptions, splitting purchases to avoid competitive bidding requirements, and making unnecessary and excessive purchases. Attachment O to Office of Management and Budget Circulars A-102 and A-110 established standards and guidelines for procuring supplies, equipment, construction, and services for federal grant programs. GAO believes that revisions to the guidelines could contribute to better procurement practices.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Director of OMB, through his liaison with state and local governments, should make the findings and observations of this report available to them and encourage adopting appropriate improvements. To reduce procurement abuses among high risk grant recipients, the Director should develop a guideline for grantor agencies to use in defining and dealing with such recipients. To encourage and insure more effective federal grant procurements, the Director should amend Attachment O to Circulars A-102 and A-110 to: (1) permit discretionary grantor agency review of negotiated purchases over $100,000, change orders over $10,000, and purchases over $10,000 where no price competition is expected; (2) require, to the extent feasible, the listing of multiple acceptable brand names when a brand name purchase description is used; (3) require a written record of informal telephone quotes; (4) encourage the use of federal excess and surplus property; (5) and discourage the use of state and local purchase preferences particularly when such preferences increase cost by unduly restricting competition.

    Agency Affected:


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