Competitive Contracting:

The Understandability of FAIR Act Inventories Was Limited

GGD-00-68: Published: Apr 14, 2000. Publicly Released: Apr 14, 2000.

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Pursuant to a congressional request, GAO provided information on the implementation of the Federal Activities Inventory Reform (FAIR) Act of 1998, focusing on: (1) the overall initial implementation of the FAIR Act; (2) the clarity and understandability of five agencies' FAIR Act inventories; (3) the extent to which these agencies exempted commercial activities from competition; and (4) supplemental information that enhanced the understandability of agencies' inventories.

GAO noted that: (1) 98 executive agencies developed and published inventories of their commercial activities under the FAIR Act's first year of implementation, identifying about 904,000 full-time equivalent employees performing commercial activities; (2) compared to prior efforts to inventory commercial activities, the initial implementation of the FAIR Act increased the number of agencies identifying and reporting on their commercial activities and increased the amount of information about agencies' commercial activities that is publicly available; (3) however, the clarity and understandability of the five FAIR Act inventories GAO reviewed was limited; (4) Office of Management and Budget's (OMB) June 1999 list of function codes used by agencies to characterize the types of commercial activities they perform was incomplete; (5) because OMB allowed agencies to use an expanded list of function codes for their FAIR Act inventories that was not contained in OMB's June 1999 guidance, it may have been more difficult for interested parties who did not have the expanded list to identify the activities agencies are performing; (6) function codes on both the official and expanded lists are vague, and OMB has not defined them; (7) agency officials said that OMB's function codes were not adequate to clearly categorize the commercial activities that their employees perform; (8) the five agencies exempted a range of from 37 to 99 percent of the commercial activities they identified from consideration for competition; (9) interested parties may challenge the omission of a particular activity from, or the inclusion of a particular activity on, an agency's inventory; (10) however, since the FAIR Act does not require that commercial activities be competed, it does not provide for challenges to agencies' decisions to exempt commercial activities listed on the inventories from competition; (11) some of the supplemental information that the five agencies included enhanced the understandability of the FAIR Act inventories; (12) for example, although the FAIR Act does not require agencies to identify their inherently governmental activities, the General Services Administration's (GSA) inventory listed both its commercial and inherently governmental activities; and (13) including this information provided a fuller perspective about the range of activities that GSA performs.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On April 27, 2000, OMB issued implementation guidance to agencies on the preparation and submission of their FAIR Act inventories. In the guidance, OMB expanded and revised the list of function codes and required that agencies use only the codes listed in the guidance unless approved in advance by OMB. The guidance and the entire list of function codes was also posted on OMB's official website.

    Recommendation: In order to enhance the clarity and understandability of agencies' FAIR Act inventories, the Director, OMB, should reexamine the function codes appearing in appendix 2 of the Circular A-76 Supplemental Handbook. This reexamination should include: (1) revising the codes to more accurately capture the activities agencies are performing; (2) defining the codes to ensure they are clearly understood; and (3) ensuring that OMB's official guidance and its website list all of the codes that agencies are authorized to use, including codes that are specific to individual agencies.

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

  2. Status: Closed - Implemented

    Comments: An OMB official said that they had been reexamining the codes used in the FAIR inventories as part of their ongoing consultations with the Defense Department's Defense Management Council, which oversees many of the Department's efforts to improve its business practices and consolidate its activities.

    Recommendation: Because OMB may lack the necessary time and resources to accomplish this reexamination on its own, the Director, OMB, should consider collaborating with agencies--through such approaches as task forces and interagency councils--as a strategy to gain consensus and consistent follow-through on such reexamination efforts.

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

  3. Status: Closed - Implemented

    Comments: In a letter dated May 31, 2000, OMB's Acting Deputy Director for Management instructed OMB staff to review agencies' FAIR Act inventories in accordance with the guidance contained in OMB's budget procedures memorandum originally issued on July 12, 1999. The budget procedures memorandum states that while reviewing each agency's inventory OMB staff should "seek to ensure comprehensiveness and consistency within an agency and across the government."

    Recommendation: The Director, OMB, should reinforce the principles established in OMB's budget procedures memorandum for OMB staff to enhance the consistency of the inventories within and across executive agencies.

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

 

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