(PDF provides a complete and accurate display of this text.)
Calendar No. 502
105th Congress Report
2d Session 105-269
FEDERAL ACTIVITIES INVENTORY REFORM ACT OF 1998
R E P O R T
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
TO PROVIDE A PROCESS FOR IDENTIFYING THE FUNCTIONS OF THE FEDERAL
GOVERNMENT THAT ARE NOT INHERENTLY GOVERNMENTAL FUNCTIONS, AND FOR
July 28, 1998.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, JR., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Counsel
Ellen B. Brown, Counsel
Leonard Weiss, Minority Staff Director
Deborah Cohen Lehrich, Minority Counsel
Behn Miller, GAO Detailee
Lynn L. Baker, Chief Clerk
C O N T E N T S
III. Legislative History..............................................4
IV. Section-by-Section Analysis......................................8
V. Regulatory Impact Statement......................................9
VI. CBO Cost Estimate...............................................10
VII. Additional Views................................................11
VIII.Changes to Existing Law.........................................14
Calendar No. 502
105th Congress Report
2d Session 105-269
FEDERAL ACTIVITIES INVENTORY REFORM ACT OF 1998
July 28, 1998.--Ordered to be printed
Mr. Thompson, from the Committee on Govermental Affairs, submitted the
R E P O R T
[To accompany S. 314]
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Federal Activities Inventory Reform
Act of 1998''.
SEC. 2. ANNUAL LISTS OF GOVERNMENT ACTIVITIES NOT INHERENTLY
GOVERNMENTAL IN NATURE.
(a) Lists Required.--Not later than the end of the third quarter of
each fiscal year, the head of each executive agency shall submit to the
Director of the Office of Management and Budget a list of activities
performed by Federal Government sources for the executive agency that,
in the judgment of the head of the executive agency, are not inherently
governmental functions. The entry for an activity on the list shall
include the following:
(1) The fiscal year for which the activity first appeared on
a list prepared under this section.
(2) The number of full-time employees (or its equivalent)
that are necessary for the performance of the activity by a
Federal Government source.
(3) The name of a Federal Government employee responsible for
the activity from whom additional information about the
activity may be obtained.
(b) OMB Review and Consultation.--The Director of the Office of
Management and Budget shall review the executive agency's list for a
fiscal year and consult with the head of the executive agency regarding
the content of the final list for that fiscal year.
(c) Public Availability of Lists.--
(1) Publication.--Upon the completion of the review and
consultation regarding a list of an executive agency--
(A) the head of the executive agency shall promptly
transmit a copy of the list to Congress and make the
list available to the public; and
(B) the Director of the Office of Management and
Budget shall promptly publish in the Federal Register a
notice that the list is available to the public.
(2) Changes.--If the list changes after the publication of
the notice as a result of the resolution of a challenge under
section 3, the head of the executive agency shall promptly--
(A) make each such change available to the public and
transmit a copy of the change to Congress; and
(B) publish in the Federal Register a notice that the
change is available to the public.
(d) Competition Required.--Within a reasonable time after the date on
which a notice of the public availability of a list is published under
subsection (c), the head of the executive agency concerned shall review
the activities on the list. Each time that the head of the executive
agency considers contracting with a private sector source for the
performance of such an activity, the head of the executive agency shall
use a competitive process to select the source (except as may otherwise
be provided in a law other than this Act, an Executive order,
regulations, or any Executive branch circular setting forth
requirements or guidance that is issued by competent executive
authority). The Director of the Office of Management and Budget shall
issue guidance for the administration of this subsection.
(e) Realistic and Fair Cost Comparisons.--For the purpose of
determining whether to contract with a source in the private sector for
the performance of an executive agency activity on the list on the
basis of a comparison of the costs of procuring services from such a
source with the costs of performing that activity by the executive
agency, the head of the executive agency shall ensure that all costs
(including the costs of quality assurance, technical monitoring of the
performance of such function, liability insurance, employee retirement
and disability benefits, and all other overhead costs) are considered
and that the costs considered are realistic and fair.
SEC. 3. CHALLENGES TO THE LIST.
(a) Challenge Authorized.--An interested party may submit to an
executive agency a challenge of an omission of a particular activity
from, or an inclusion of a particular activity on, a list for which a
notice of public availability has been published under section 2.
(b) Interested Party Defined.--For the purposes of this section, the
term ``interested party'', with respect to an activity referred to in
subsection (a), means the following:
(1) A private sector source that--
(A) is an actual or prospective offeror for any
contract, or other form of agreement, to perform the
(B) has a direct economic interest in performing the
activity that would be adversely affected by a
determination not to procure the performance of the
activity from a private sector source.
(2) A representative of any business or professional
association that includes within its membership private sector
sources referred to in paragraph (1).
(3) An officer or employee of an organization within an
executive agency that is an actual or prospective offeror to
perform the activity.
(4) The head of any labor organization referred to in section
7103(a)(4) of title 5, United States Code, that includes within
its membership officers or employees of an organization
referred to in paragraph (3).
(c) Time for Submission.--A challenge to a list shall be submitted to
the executive agency concerned within 30 days after the publication of
the notice of the public availability of the list under section 2.
(d) Initial Decision.--Within 28 days after an executive agency
receives a challenge, an official designated by the head of the
executive agency shall--
(1) decide the challenge; and
(2) transmit to the party submitting the challenge a written
notification of the decision together with a discussion of the
rationale for the decision and an explanation of the party's
right to appeal under subsection (e).
(1) Authorization of appeal.--An interested party may appeal
an adverse decision of the official to the head of the
executive agency within 10 days after receiving a notification
of the decision under subsection (d).
(2) Decision on appeal.--Within 10 days after the head of an
executive agency receives an appeal of a decision under
paragraph (1), the head of the executive agency shall decide
the appeal and transmit to the party submitting the appeal a
written notification of the decision together with a discussion
of the rationale for the decision.
SEC. 4. APPLICABILITY.
(a) Executive Agencies Covered.--Except as provided in subsection
(b), this Act applies to the following executive agencies:
(1) Executive department.--An executive department named in
section 101 of title 5, United States Code.
(2) Military department.--A military department named in
section 102 of title 5, United States Code.
(3) Independent establishment.--An independent establishment,
as defined in section 104 of title 5, United States Code.
(b) Exceptions.--This Act does not apply to or with respect to the
(1) General accounting office.--The General Accounting
(2) Government corporation.--A Government corporation or a
Government controlled corporation, as those terms are defined
in section 103 of title 5, United States Code.
(3) Nonappropriated funds instrumentality.--A part of a
department or agency if all of the employees of that part of
the department or agency are employees referred to in section
2105(c) of title 5, United States Code.
(4) Certain depot-level maintenance and repair.--Depot-level
maintenance and repair of the Department of Defense (as defined
in section 2460 of title 10, United States Code).
SEC. 5. DEFINITIONS.
In this Act:
(1) Federal government source.--The term ``Federal Government
source'', with respect to performance of an activity, means any
organization within an executive agency that uses Federal
Government employees to perform the activity.
(2) Inherently governmental function.--
(A) Definition.--The term ``inherently governmental
function'' means a function that is so intimately
related to the public interest as to require
performance by Federal Government employees.
(B) Functions included.--The term includes activities
that require either the exercise of discretion in
applying Federal Government authority or the making of
value judgments in making decisions for the Federal
Government, including judgments relating to monetary
transactions and entitlements. An inherently
governmental function involves, among other things, the
interpretation and execution of the laws of the United
States so as--
(i) to bind the United States to take or not
to take some action by contract, policy,
regulation, authorization, order, or otherwise;
(ii) to determine, protect, and advance
United States economic, political, territorial,
property, or other interests by military or
diplomatic action, civil or criminal judicial
proceedings, contract management, or otherwise;
(iii) to significantly affect the life,
liberty, or property of private persons;
(iv) to commission, appoint, direct, or
control officers or employees of the United
(v) to exert ultimate control over the
acquisition, use, or disposition of the
property, real or personal, tangible or
intangible, of the United States, including the
collection, control, or disbursement of
appropriated and other Federal funds.
(C) Functions excluded.--The term does not normally
(i) gathering information for or providing
advice, opinions, recommendations, or ideas to
Federal Government officials; or
(ii) any function that is primarily
ministerial and internal in nature (such as
building security, mail operations, operation
of cafeterias, housekeeping, facilities
operations and maintenance, warehouse
operations, motor vehicle fleet management
operations, or other routine electrical or
SEC. 6. EFFECTIVE DATE.
This Act shall take effect on October 1, 1998.
Amend the title so as to read: ``A bill to provide a process for
identifying the functions of the Federal Government that are not
inherently governmental functions, and for other purposes.''.
The purpose of S. 314, the Federal Activities Inventory
Reform Act of 1998, is to provide a process for executive
agencies to identify activities that are not inherently
The Office of Management and Budget Circular A-76
establishes administrative policy regarding the performance of
activities that are not inherently governmental functions and
sets forth procedures for determining whether such activities
should be performed under contract with private sector sources
or in-house using government facilities and personnel. The
policy embodied in OMB Circular A-76, that the Federal
government will rely on the private sector for goods and
services that are not inherently governmental, is more than 40-
years old. This policy first was promulgated through Bureau of
the Budget Bulletins in 1955, 1957 and 1960. OMB Circular A-76
was issued in 1966 and revised in 1967, 1979 and 1983. In 1996,
the Supplemental handbook to the circular was revised.
However, there continues to be activities which are not
inherently governmental that the government performs for
itself. The purpose of this legislation is to establish a
process to evaluate those activities that remain in-house. This
legislation does not affect the current Federal procurement
system nor does it impair the ability of agencies to contract
with the private sector for needed goods and services under
Further, S. 314 is the result of a long and contentious
debate, and all facets of the debate were considered in the
development of this legislation. However, enactment of S. 314
represents only the first step. Its full implementation and
vigorous congressional oversight are important next steps.
iii. legislative history
S. 314, the Freedom From Government Competition Act of
1997, was introduced on February 12, 1997 by Senator Craig
Thomas (for himself and Senators Brownback, Hagel, Enzi and
Kyl). Senators Burns, Shelby, Grams, Mack, Cochran, Hutchinson,
Faircloth, Helms, Allard, Wyden and Abraham became additional
co-sponsors. S. 314 was referred to the Committee on
Governmental Affairs and subsequently was referred to the
Subcommittee on Oversight of Government Management,
Restructuring, and the District of Columbia.
On June 18, 1997, the Subcommittee on Oversight of
Government Management, Restructuring, and the District of
Columbia held a hearing on S. 314 to investigate the
opportunities for greater competitive contracting within the
Federal government as well as other privatization projects at
the national level. The following witnesses presented testimony
on S. 314: The Honorable Craig Thomas, U.S. Senator from
Wyoming; the Honorable John J. Duncan, Jr. U.S. Representative
from Tennessee; the Honorable John A. Koskinen, Deputy Director
of the Office of Management and Budget; Mr. Samuel D. Kleinman,
Director of the Center for Naval Analysis; Captain Burton
Streicher, CEC, U.S. Navy, Director of Navy Outsourcing Support
Office; Mr. Charles S. Davis III, of Chamberlain, Davis, Rutan
and Volk, and former Associate Administrator for Operations,
General Services Administration; Mr. L. Nye Stevens, Director
of Federal Management and Workforce Issues, General Government
Division, U.S. General Account Office; Mr. John Sturdivant,
National President of the American Federation of Government
Senator Thomas emphasized that government ought to be as
small and lean and efficient as possible. He stated that it
ought to take advantage of private sector expertise whenever
that is appropriate. He summarized that S. 314 would require
agencies to identify those areas that are commercial in nature
as options for contracting; and then, through a fair process,
the best provider, either government or private industry, would
beselected. Senator Thomas stated that the process currently is
delineated in OMB Circular A-76, but unfortunately the circular is
routinely ignored by the executive agencies.
Representative John Duncan of Tennessee, who introduced
companion legislation (H.R. 716) in the House, testified CBO
currently estimates that 1.4 million Federal employees perform
activities that are commercial in nature. Congressman Duncan
stated that, under the bill, if it is established that these
commercial services can be provided in a more efficient and
cost effective manner from private industry, the agency would
be required to compete the activity.
Mr. Koskinen testified that any legislation needs to be
viewed against the ongoing reinvention efforts. He stated that
his concern with S. 314 was that it mandates a particular
approach rather than letting agencies examine their contract
mix to make the best management decision. He also expressed the
concern that S. 314 will result in a significant level of
Mr. Kleinman testified that, between 1979 and 1990, the
Navy competed 25,000 positions--80 percent civilian and 20
percent military. He stated that, overall, the savings were 30
percent, and the public sector won half of the competitions. He
said when the in-house team won, there were 20 percent savings,
and when the private firm won, savings were 40 percent. Mr.
Kleinman pointed out that the in-house savings seemed low
because when no bidder produced savings, the competition was
decided in favor of the in-house team, and these ``no-saving
competitions'' are included in the in-house average. He
stressed that competitions produce the best value for the
government. Captain Streicher also shared his experience in
conducting OMB Circular A-76 competition studies within the
Mr. Davis testified that the private sector is utilizing
outsourcing more and more and cited the automobile industry as
an example. He said the reason for private sector outsourcing
is not only for cost savings but a result of becoming more
mission oriented. He recommended that, for government,
outsourcing and competition should not be undertaken only
because of cost effectiveness, but because it allows government
executives to focus their attention on the mission and not be
distracted with trying to manage all parts of the process. Mr.
Davis noted that GSA achieved great savings and efficiencies
utilizing OMB's A-76 process.
Mr. Stevens testified that incorporating best value
criteria substantially had improved the bill. He stated that
the governments visited by GAO indicated that there was a need
to establish a dedicated organizational and analytical
structure to carry the privatization initiative, and S. 314
addressed this. He expressed that greater monitoring and
oversight of the contracting process will be necessary as a
result of contracting out.
Mr. John Sturdivant expressed his strong support of OMB
Circular A-76 and contended that the revisions made to A-76
make it a fair process. He also testified that the unions must
be part of any competition process. Mr. Sturdivant emphasized
that S. 314 is not needed because it is based on the notion
that work currently performed by government personnel can be
provided more cheaply through outsourcing. He stated that this
is false. Mr. Sturdivant said he is committed to work with the
Subcommittee to address his concerns.
On March 24, 1998, the Subcommittee held a joint hearing
with the House Government Reform and Oversight Subcommittee on
Government Management, Information, and Technology to focus on
the re-draft of S. 314, also known as the Fair Competition Act.
The bill was re-drafted as a result of the testimony provided
at the previous hearing. The following witnesses appeared to
present testimony on the re-draft of S. 314: The Honorable
Craig Thomas, U.S. Senator from Wyoming; the Honorable John
Duncan, U.S. Representative from Tennessee; the Honorable G.
Edward Deseve, Acting Deputy Director for Management of the
U.S. Office of Management and Budget; Mr. Skip Stitt, former
Deputy Mayor of the City of Indianapolis; Mr. Bryan Logan,
Chief Executive Officer of EarthData International on behalf of
the Management Association for Private Photogrammetric
Surveyors; Mr. Lawrence Trammell, Corporate Vice president and
General Manager of Science Applications International
Corporation on behalf of the Coalition for Taxpayer Value; Mr.
Douglas K. Stevens, Jr., partner of Information Technology
Services Group, Grant Thornton, LLP, representing the U.S.
Chamber of Commerce; Dr. Steve Kelman, Weatherhead Professor of
Public Management of Harvard University; Mr. Robert Tobias,
National President of the National Treasury Employees Union;
Mr. Bobby Harnage, President of the American Federation of
Government Employees; and Mr. Michael Styles, National
President of the Federal Managers Association.
Senator Thomas testified about the need for legislation
because current policy, also known as OMB Circular A-76,
routinely is ignored. He stressed that the legislation was re-
drafted significantly based on input from OMB, GAO, private
industry and labor unions to establish a simple and fair
competitive process. Finally, Senator Thomas expressed his
commitment to working with all interested parties on the
Congressman Duncan reiterated the need for a statutory
requirement for an inventory of noninherently governmental
functions in the Federal government and a level playing field
for competition. He also expressed his concern that agencies
are ignoring the current OMB A-76 guidelines.
Mr. DeSeve outlined OMB's fundamental principles that he
hoped would be included in the final product of S. 314 and
testified that the re-draft did not address these principles.
In his testimony, Mr. DeSeve listed OMB's principles as
1. The Administration's policy is to promote
competition to achieve the best deal for the taxpayer -
not simply to outsource.
2. Legislation must not increase the level of
judicial involvement in the government's management
decision as to whether or not to outsource.
3. Current guidance to promote competition is in
4. The complexities of public-public and public-
private competitions must be reflected in any
5. Legislation needs to be fair and equitable to all
6. Outsourcing must be viewed in the context of the
larger reinvention effort.
7. Legislation must not require the head of each
agency to undertake competition in accordance with a
schedule mandated in law.
Mr. Stitt expressed the support of the City of Indianapolis
for the focus of the S. 314 re-draft. He emphasized that, in
Indianapolis, competition is the most powerful and productive
tool in improving government services for citizens. Mr. Stitt
also stressed the significant role strong leadership and
employee participation plays in pursuing opportunities to
improve government services.
Dr. Kelman testified about the importance of looking at
outsourcing as an issue of good management and not as an
ideological issue. In addition, he suggested that good
management practice in a government agency or private business
is to focus on the core competency as an organization. The non-
core responsibilities in an agency should be done by other
organizations which have a core responsibility in that area. He
added his support for allowing Federal workers to compete under
the re-draft of S. 314, but expressed the need to include
proper accounting for indirect costs, as well as past
performance. Finally, he testified that every effort should be
made to hold Federal employees harmless in the transportation
Industry representatives, including Mr. Logan, Mr. Trammel,
and Mr. Stevens, testified that the current competition policy
of OMB Circular A-76 does not work and that the re-draft of S.
314 addresses this issue. Specifically, they added their
support for a list of non-inherently governmental activities
performed by the Federal government. They expressed, however,
some concern about the public-private competition provisions in
Federal employee representatives, including Mr. Tobias, Mr.
Harnage, and Mr. Styles, objected to the re-draft of S. 314 and
expressed their specific concerns regarding the bill. A
suggestion was made to require agencies to use a competitive
process when a function is reviewed for outsourcing. They also
expressed concern with prohibiting the conversion of contracted
functions to in-house performance. Finally, they recommended
that cost comparisons should be done for all service
On July 15, 1998, the Subcommittee on Government
Management, Restructuring, and the District of Columbia
returned S. 314 to the full Committee on Governmental Affairs
for further action. The Committee considered a substitute
amendment to S. 314 offered by Chairman Thompson at a business
meeting on July 15, 1998. Chairman Thompson's substitute
amendment represented an agreement reached among members of the
Committee. The amendment requires Federal agencies to prepare a
list of activities that are not inherently governmental
functions that are being performed by Federal employees, submit
that list to OMB for review, and make the list publicly
available. It also establishes an ``appeals'' process within
each agency to challenge what is on the list or what is not
included on the list. It also creates a statutory definition--
identical to current regulation--for what is an ``inherently
governmental function'' that must be preformed by the
government and not the private sector.
The Committee passed the Chairman's substitute amendment by
voice vote and voted to report it to the full Senate. Senators
voting and present were: Thompson, Stevens, Collins, Domenici,
Nickles, Levin, Lieberman, Akaka, and Cleland. Senators Roth,
Brownback, and Cochran indicated their ``yea'' by proxy.
iv. section-by-section analysis
Section 1. Short title
This section states the short title of the bill.
Section 2. Annual publication of lists of Government activities not
inherently governmental in nature
Lists Required.--This section would require, on an annual
basis, an agency to submit to OMB a list of activities that, in
the judgment of the agency head, are not inherently
governmental and are performed by Federal employees. After
consultation with the review by OMB, OMB would make the list
publicly available andpublish a notice of that availability in
the Federal Register. The section also would require the list to be
transmitted to Congress and updated whenever there are changes.
Competition Required.--Further, the section would require
an agency, within a reasonable time, to review each activity on
the list and, when competing activities, to use a competitive
process to select the source to perform the activity. It is the
Committee's expectation that OMB will work with Federal
agencies to ensure that they proceed in a reasonable time frame
with a competitive process for activities that are appropriate
for competition. The Committee believes that there are many
opportunities for competition and expects agencies to
prioritize functions that are most likely to have a high
payback from such competition. The Committee anticipates that
OMB will review agency plans and schedules for competition
under this section to ensure that such plans and schedules are
reasonable and conform with Administration policy and with the
requirements of this Act.
Section 3. Challenges to the list
Subsection (a) of this section would provide authority for
an interested party to challenge a particular activity omitted
from or included on the list of activities which are not
inherently governmental. Subsection (b) would define an
interested party. Subsection (c) would provide that a challenge
must be submitted to the agency within 30 days after the list
has been published.
Subsection (d) would require an agency to act within 28
days after receiving such a challenge and to inform the
challenger of its decision and its rationale for the decision.
Subsection (e) would authorize an appeal to the head of the
agency for an interested party receiving an adverse decision.
The Committee intends for any challenges to the inventory
list to be resolved solely at the agency level by the agency.
Section 4. Applicability
This section would provide the applicability of this Act to
executive departments, military departments and independent
agencies. Further, the section would specify that this Act not
apply to government corporations, the General Accounting
Office, and nonappropriated funds instrumentalities and would
make explicit that depot-level activities of the Department of
Defense are not affected in any respect by this Act.
Section 5. Definitions
This section would define:
(1) ``Federal Government source'' as an organization within
an agency using Federal government employees. It is the
Committee's intent to encompass Federal employees who are
responsible for the technical execution of an activity or the
preparation and delivery of the required goods or services. It
is not the intent of the Committee to encompass in this
definition Federal employees who are responsible for
administrative, financial or program management oversight of a
(2) ``depot-level maintenance and repair'' as it is defined
in 10 U.S.C. 2460.
(3) ``inherently Governmental function'' as it currently is
defined in FAR Part 7. The FAR currently includes a
nonexclusive list of examples of functions considered to be
inherently governmental or which are treated as such and a
nonexclusive list of examples of functions generally not
considered to be inherently governmental functions. It is the
Committee's intent that both these lists be included as part of
the definition of inherently governmental function in the
implementing regulations for this Act.
Section 6. Effective date
This section would provide for an effective date of October
v. regulatory impact statement
Paragraph 11(b)(1) of rule XXVI of the Standing Rules of
the Senate requires that each report accompanying a bill
evaluate ``the regulatory impact which would be incurred in
carrying out the bill.''
The enactment of this legislation would not have a
significant regulatory impact on the public, nor would it
constitute an undue regulatory burden on any government agency.
vi. cbo cost estimate
Congressional Budget Office,
Washington, DC, July 23, 1998.
Hon. Fred D. Thompson,
Chaiman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 314, the Federal
Activities Inventory Reform Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is John R.
June E. O'Neill, Director.
S. 314--Fedeal Activities Inventory Reform Act of 1998
S. 314 would require federal agencies to identify and list
agency activities that could be performed by the private
sector. The bill would require that the lists be made available
to the public for inspection, and it would allow private-sector
entities, agency employees and certain labor organizations to
challenge the lists. CBO estimates that the enacting S. 314
would result in no significant annual cost to the federal
government. Under OMB Circular No. A-76, agenceis are already
required to maintain and annually update a baseline inventory
of all in-house activities that could be performed by the
private sector. In addition the circular requires them to make
the lists available to the public upon request. This S. 314
would largely codify current administrative policy.
Because the bill would not affect direct spending or
receipts, pay- as-you-go procedures would not apply. In
addition, S. 314 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
and would not affect the budgets of state, local, and tribal
The CBO contact for this estimate is John R. Righter. The
estimate was approved by Paul N. Van de Water, Assistant
Director for Budget Analysis.
VII. ADDITIONAL VIEWS
S. 314, now known as the Federal Activities Inventory Act
of 1998, is legislation that both the Federal government and
private industry in America have needed for a long time. Put
simply, this bill would require agencies to assemble a list of
noninherently governmental--or commercial--functions performed
in-house and subject some of them to competition.
There is a systems failure within the Federal agencies
using the current competition process, also known as Office of
Management and Budget (OMB) Circular A-76. When the Senate
Oversight Subcommittee on Government Management, Restructuring,
and the District of Columbia held two hearings on S. 314,
witnesses from all sides of the issue testified about how
Federal agencies ignore the competition process set forth by
OMB A-76. The Subcommittee also held a third hearing focusing
on this issue and why the OMB A-76 is not working.
When J. Christopher Mihm, Associate Director of Federal
Management and Workforce Issues, General Government Division
for the General Accounting Office testified before the
Subcommittee on June 4, 1998, he explained that OMB A-76, when
followed, has had a proven success record in increasing
efficiency and producing savings. However, its use does not
appear to be a high priority within OMB or Federal agencies as
illustrated in the attached chart. As a result, agencies such
as the Departments of Education, Housing and Urban Development,
and Justice have ignored the requirements under OMB A-76 for
the last 11 years. These agencies have not studied any
potential commercial activity in their agency in that time. In
addition, Mr. Mihm testified that OMB has not provided the
leadership needed for a successful competition policy.
At the same hearing, Mr. G. Edward DeSeve, Acting Deputy
Director for Management of the U.S. Office of Management and
Budget expressed OMB's commitment to work with Federal agencies
and explained OMB's recent call to agencies for an updated
commercial inventory. He also acknowledged the inaccuracies in
the agencies' most recent A-76 inventories of commercial
S. 314, as passed by the Senate Governmental Affairs
Committee, addresses some of the flaws that both Mr. Mihm and
Mr. DeSeve included in their testimony. First, Federal agencies
will be required to make available to the public a list of
noninherently governmental activities performed by the in-
house. Second, the bill includes a process within each agency
that would allow all interested parties to challenge items
which are included or not included on the list. Third, under
this legislation, OMB must take an active leadership role in
implementing the requirements of this bill.
I am concerned, however, that S. 314 as reported by the
Senate Governmental Affairs Committee does not fully address
whether the activities on the list should be subject to
competition. Throughout the hearings on this bill, witnesses
from all sides on this issue repeated the need for a level
playing field in any competition policy of commercial
activities performed by the Federal government. S. 314,
however, requires a competition on commercial activities only
when an agency considers contracting with the private sector.
In other words, like OMB A-76, an agency has the option to
ignore the competition policy under S. 314 by simply refusing
to consider outsourcing a commercial function. I consider this
bill a first step toward ensuring that commercial activities
performed by the government will be competed in a timely
manner. The original intent of this legislation was to create a
fair competition process but this provision maintains one of
the fundamental flaws of OMB A-76. It is my hope that agencies,
in consultation with OMB, will consider contracting with the
private sector with any commercial activity which meets the
criteria set forth in the bill.
As chairman of the Senate Oversight Subcommittee on
Government Management, Restructuring, and the District of
Columbia, I am committed to having thorough Congressional
oversight on the implementation of this bill. I congratulate
the sponsor of this legislation, Senator Craig Thomas, for
bringing everyone together to reach an agreement with all
parties involved. I look forward to continue working with him
and my colleagues on the Committee and Subcommittee in our
VIII. CHANGES TO EXISTING LAW
There are no modifications of existing law.