Agencies Need Better Guidance for Choosing Among Contracts, Grants, and Cooperative Agreements
Gao ID: GGD-81-88 September 4, 1981The Federal Grant and Cooperative Agreement Act was passed primarily because the failure of Federal agencies to distinguish among procurement and various assistance relationships led to inappropriate use of grants to avoid the requirements of the procurement system and the unnecessary administrative requirements in grants. GAO has monitored the implementation of this Act and reported on actions needed to accomplish the Act's objectives.
The purposes of the Act have not been fully achieved. Although the Act was intended to curb the misuse of assistance instruments in procuring situations, Federal officials sometimes misinterpret the Act and select assistance instruments where GAO believes procurement contracts are appropriate. As a result, Federal procurement requirements designed to protect the Federal interest and ensure competition may not be applied. Due to vague guidance and a less-than-aggressive effort to implement the Act by many agencies, assistance relationships are often not reviewed to ensure that: Federal involvement is consistent with congressional intent and the agency's experience with a recipient; the legal instrument used matches the intended relationship; the terms and conditions of the instrument selected are the minimum necessary to assure that Federal funds are spent efficiently and for authorized purposes; and these terms and conditions clearly establish the roles and responsibilities of the Federal Government and the recipient. The Office of Management and Budget (OMB) needs to clarify its procurement guidelines and promote more aggressive implementation by Federal agencies. There is a need for better definitions of grants and cooperative agreements. Both OMB and the Federal agencies need to establish better coordination and oversight mechanisms to ensure that Federal officials' awareness of the Act is increased, different practices and procedures are identified and resolved, and policies conform with the objectives of the Act.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: No director on record Team: No team on record Phone: No phone on recordThis is the accessible text file for GAO report number GAO/GGD-81-88
entitled 'Agencies Need Better Guidance For Choosing Among Contracts,
Grants, And Cooperative Agreements' which was released on September 4,
1981.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer-term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report By The Comptroller General Of The United States:
Agencies Need Better Guidance For Choosing Among Contracts, Grants, And
Cooperative Agreements:
The Federal Grant and Cooperative Agreement Act distinguishes Federal
procurement from Federal assistance relationships and further
distinguishes between grant and cooperative agreement types of Federal
assistance. However, Federal agencies do not always select the
appropriate instrument because of vague OMB guidance and less-than-
aggressive implementation by the agencies. As a result, the Federal
interest may not be adequately protected in some procurement
situations. Further, development of a more orderly and less burdensome
Federal assistance system anticipated by the Congress has been impeded.
GAO recommends that the Office of Management and Budget clarify its
guidance, more actively direct and oversee Federal agencies'
implementation of the act, and establish clear differences among
contracts, grants, and cooperative agreements. GAO also recommends that
the Congress end OMB's authority to except individual programs or
transactions from the act's provisions.
GGD-81-88:
SEPTEMBER 4, 1981:
REPORT BY THE COMPTROLLER GENERAL OF THE UNITED STATES:
AGENCIES NEED BETTER GUIDANCE FOR CHOOSING AMONG CONTRACTS, GRANTS, AND
COOPERATIVE AGREEMENTS:
DIGEST:
The purposes of the Federal Grant and Cooperative Agreement Act of 1977
have not been fully achieved.
The major purposes of the act are to distinguish the types of
relationships the Federal Government enters into with recipients of
Federal awards and to bring about uniformity in the selection and use
of contracts, grants, and cooperative agreements.
The Congress passed the act primarily because failure of Federal
agencies to distinguish among procurement and various assistance
relationships had led to the inappropriate use of grants to avoid the
requirements of the procurement system, and to unnecessary red tape and
administrative requirements in grants. Although the act was intended in
part to curb the misuse of assistance instruments in procurement
situations, Federal officials sometimes misinterpret the act and select
assistance instruments where GAO believes procurement contracts are
appropriate. As a result, Federal procurement requirements designed to
protect the Federal interest and ensure competition may not be applied.
The Congress also intended to establish a systematic approach for
distinguishing among assistance relationships based on the degree of
Federal involvement with the recipient. However, due to vague guidance
and a less-than-aggressive effort to implement the act by many
agencies, assistance relationships are often not reviewed to ensure
that:
* Federal involvement is consistent with congressional intent and the
agency's experience with a recipient,
* the legal instrument used matches the intended relationship,
* the terms and conditions of the instrument selected are the minimum
necessary to assure that Federal funds are spent efficiently and for
authorized purposes, and:
* these terms and conditions clearly establish the roles and
responsibilities of the Federal Government and the recipient.
To further the purposes of the act, OMB needs to clarify its guidelines
and promote more aggressive implementation by Federal agencies. OMB
should ensure that meaningful differences among contracts, grants, and
cooperative agreements are established. Unless steps are taken to
establish clear differences among these instruments, it is unlikely
that the act will fully achieve its purposes.
The Chairman of the former Subcommittee on Federal Spending Practices
and Open Government, Senate Committee on Governmental Affairs, asked
GAO to monitor implementation of the Federal Grant and Cooperative
Agreement Act. This report discusses the extent to which Federal
agencies have implemented the act, whether this implementation has been
proper, and what Government-wide issues resulted from implementation.
AGENCIES STILL USE GRANTS AND COOPERATIVE AGREEMENTS INSTEAD OF
CONTRACTS:
Federal agencies' misunderstandings of key provisions of the act and
OMB's guidance have resulted in some circumvention of the procurement
system and also to a potential unwarranted expansion of their authority
to enter into assistance arrangements. (See p. 7.) Contributing to this
problem is the gradual erosion of the differences between procurement
and assistance procedures.
The act requires Federal agencies to use a type of procurement contract
when the principal purpose of the relationship with a recipient is to
acquire something for the direct benefit or use of the Federal
Government. An assistance relationship, on the other hand, occurs when
the principal purpose of the relationship is to transfer money,
property, or anything of value to a recipient to accomplish a public
purpose of support or stimulation.
Some Federal agencies will not use a procurement contract unless the
Federal Government "benefits" more than other parties. This
interpretation of the direct benefit clause gives rise to the use of
assistance awards rather than contracts for such things as the
production of a Federal agency program guidance manual or the use of an
intermediary to perform accounting and bill payment services for a
Federal agency. GAO believes these practices are questionable and
reflect a misunderstanding of the act. (See p. 9.)
GAO also noted cases in which officials interpreted the act as giving
them broad new independent authority to enter into assistance
relationships when no such authority previously existed. GAO believes
the Congress intended to correct inconsistencies in prior terminology
used to characterize agency/recipient relationships but did not intend
to authorize agencies to use grants, cooperative agreements, or
contracts irrespective of the basic relationships authorized by
substantive program legislation. (See p. 15.)
NEED FOR BETTER DEFINITIONS OF GRANTS AND COOPERATIVE AGREEMENTS:
Federal agencies are having problems determining when to use a
cooperative agreement or a grant in their assistance awards. Their
problems center on determining whether or not substantial Federal
involvement is anticipated in recipient activities. When substantial
involvement is anticipated, cooperative agreements are to be used.
Conversely, grants are for situations in which no substantial Federal
involvement is anticipated.
Although a good first step, OMB's guidelines do not adequately define
these levels of involvement. (See p. 22.) Further, OMB management
circulars setting forth Government-wide requirements and operating
procedures for assistance programs apply equally to grants and
cooperative agreements. (See p. 54.)
Tear Sheet:
Until meaningful distinctions between grants and cooperative agreements
are developed, the act will have little practical effect in
rationalizing the Federal assistance system. GAO recognizes the
difficulty in developing Government-wide guidelines and offers an
interim approach to promote more uniformity in the selection and use of
these instruments. (See p. 27.)
GAO's suggested approach involves having agencies identify what is
normal involvement for their programs and then base their grant and
cooperative agreement distinctions on the extent to which they are more
involved than normal with individual recipients. The fact that a
recipient is treated differently, i.e., subjected to more controls or
agency collaboration, and has less discretion than the normal program
recipient suggests that the agency is substantially involved and a
cooperative agreement is appropriate.
GAO recognizes the interim approach will not yield total uniformity.
For example, under this approach similar relationships entered into by
two agencies might be called grants by one and cooperative agreements
by the other. However, the approach will provide a more structured
basis for agencies' decisions and will provide the operating data
needed to start developing uniform Government-wide standards.
IMPLEMENTATION EFFORTS NEED IMPROVEMENT:
The steps taken by OMB and Federal agencies to implement the act were
not totally effective. Many Federal officials did not know of the act
or had inadequate information to apply it. Other Federal officials
resisted applying the act because they believed a change in terminology
for their assistance instruments would be detrimental to their existing
recipient relationships. (See p. 38.)
If the objectives of the act are to be attained, OMB and Federal
agencies need to place increased emphasis on the administration of the
act. (See pp. 42 to 47.) Both need to establish better coordination and
oversight mechanisms to ensure that officials' awareness of the act is
increased, different practices and procedures are identified and
resolved, and policies conform with the objectives of the act.
Because the act has yet to be applied to many programs, GAO also
believes OMB's authority to except individual programs or transactions
from the act's coverage should be renewed. Until it expired in March
1981, the authority was useful and OMB exercised it judiciously. (See
p. 47.)
RECOMMENDATION TO THE CONGRESS:
To accommodate potential unanticipated consequences from the act's use
and to facilitate consistent implementation, the Congress should renew
OMB's authority to except individual programs or transactions from the
act's provisions. (See p. 49.)
RECOMMENDATIONS TO THE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET:
The Director, OMB, should undertake specific actions to improve the
implementation of the act. These actions involve:
* improving OMB guidance on how agencies should choose between types of
procurement contracts and assistance instruments and on how to choose
between grants and cooperative agreements (see pp. 31 and 32);
* increasing monitoring and administration of the act by OMB and
Federal agencies (see p. 49); and:
* establishing clear operational differences among contracts, grants,
and cooperative agreements (see p. 61).
AGENCY COMMENTS:
GAO received comments on a draft of this report from OMB; the
Departments of the Interior, Energy, Transportation, Justice, and
Housing and Urban Development; the Environmental Protection Agency;
ACTION; and the Inspector General of the Department of Health and Human
Services. (See app. I through IX.)
Tear Sheet:
OMB agreed with GAO's interpretation of key provisions of the act and
generally agreed with GAO's recommendations. OMB plans to:
* Improve its guidance consistent with most of our recommendations on
how agencies should choose between types of procurement contracts and
assistance instruments (see p. 32).
* Facilitate better monitoring and administration of the act through a
broader effort to improve the management of all generally applicable
assistance policies (see p. 50).
* Consider establishing clear operational differences among contracts,
grants, and cooperative agreements (see p. 62).
The other agencies basically viewed the report as thorough and useful.
The Departments of the Interior, Energy, and Justice agreed with GAO's
recommendations, but they and the other agencies expressed individual
reservations. (See pp. 32, 50, and 62.)
Contents:
CHAPTER 1: INTRODUCTION:
The Federal Grant and Cooperative Agreement Act:
Objectives, scope, and methodology:
CHAPTER 2: INCORRECT INSTRUMENTS CAN BE CHOSEN BECAUSE GUIDANCE IS
VAGUE:
Clearer terms and procedures needed to distinguish between procurement
and assistance:
Need to improve cooperative agreement guidance:
Conclusions:
Recommendations to the Director, OMB:
Agency comments and our evaluation:
CHAPTER 3: STRONGER OMB AND AGENCY MANAGEMENT EFFORTS NEEDED TO
IMPLEMENT THE ACT:
The criteria of the act are frequently not being used:
Agencies need to establish better implementation systems:
OMB oversight of agency implementation of the act should be
strengthened:
OMB's authority to except programs was beneficial and should be
renewed:
Conclusions:
Recommendation to the Congress:
Recommendations to the Director, OMB:
Agency comments and our evaluation:
CHAPTER 4: NEED TO DEVELOP DIFFERENCES IN OPERATING PROCEDURES FOR
GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS:
Differences between procurement and assistance procedures appear to be
eroding:
Differences between grants and cooperative agreements need to be
established:
Conclusions:
Recommendation to the Director, OMB:
Agency comments and our evaluation:
APPENDIX I: Letter received July 2, 1981, from the Associate Director
for Management, Office of Management and Budget:
APPENDIX II: Letter dated June 26, 1981, from the Deputy Assistant
Secretary, Policy, Budget, and Administration, Department of the
Interior:
APPENDIX III: Letter dated June 25, 1981, from the Assistant Secretary,
Management and Administration, Department of Energy:
APPENDIX IV: Letter dated June 25, 1981, from the Assistant Secretary
for Administration, Department of Transportation:
APPENDIX V: Letter dated June 18, 1981, from the Assistant Attorney
General for Administration, Department of Justice:
APPENDIX VI: Letter dated June 18, 1981, from the Acting Deputy
Assistant Secretary for Administration, Department of Housing and Urban
Development:
APPENDIX VII: Letter dated June 30, 1981, from the Acting Assistant
Administrator for Planning and Management, Environmental Protection
Agency:
APPENDIX VIII: Letter received June 26, 1981, from the Director,
ACTION:
APPENDIX IX: Letter dated June 24, 1981, from the Inspector General,
Department of Health and Human Services:
ABBREVIATIONS:
CDBG: Community Development Block Grant:
CSA: Community Services Administration:
DOT: Department of Transportation:
EDA: Economic Development Administration:
EPA: Environmental Protection Agency:
GAO: General Accounting Office:
HHS: Health and Human Services:
HUD: Housing and Urban Development:
NASA: National Aeronautics and Space Administration:
NIC: National Institute of Corrections:
NSF: National Science Foundation:
OFPP: Office of Federal Procurement Policy:
OMB: Office of Management and Budget:
REA: Rural Electrification Administration:
SSA: Social Security Administration:
UMTA: Urban Mass Transportation Administration:
CHAPTER 1:
INTRODUCTION:
In recent years, the size and scope of the Federal domestic assistance
system has grown dramatically. Federal aid to State and local
governments has almost tripled, growing from $24 billion in 1970 to
about $90 billion for fiscal year 1980. This growth in financial
assistance has been accompanied by similar increases in the number of
programs awarding funds and the attendant Federal administrative
requirements. In addition to providing financial assistance, the
Federal Government is also heavily involved in procurement of goods and
services for its own use. Together, this spending for activities such
as research, construction, flood control, transportation, community
development, health care, and social services comprises a significant
part of the national budget.
Federal agencies use a wide variety of agreements in their procurement
and assistance relationships. These agreements include (1) procurement
contracts for acquiring goods and services for Federal Government use
or benefit, and (2) assistance agreements, like grants, cooperative
agreements, loans, and subsidies, with non-Federal parties to support
or stimulate activities deemed in the national interest. This report is
concerned with procurement contracts and the grant and cooperative
agreement types of Federal assistance.
THE FEDERAL GRANT AND COOPERATIVE AGREEMENT ACT:
Major efforts have been underway over the last decade to reform both
the procurement and assistance systems. The Commission on Government
Procurement (Procurement Commission), established by the Congress in
1969, studied and made numerous recommendations for improving agency
procurement procedures. Many of these recommendations have been adopted
by the executive branch and the Congress. Several other efforts to
reform assistance programs have also been undertaken by the Congress
and the executive branch.
One reform effort was common to both the procurement and assistance
systems. The Congress sought to bring order to the awarding of
financial assistance and the procurement of goods and services through
the Federal Grant and Cooperative Agreement Act of 1977. Prior to this
act, no uniform statutory guidance existed which expressed
congressional policy on the use of grants and contracts. As a result,
Federal agencies often improperly selected grants and contracts
interchangeably without significant regard for the type of relationship
being established.
In some instances, Federal agencies have administered assistance
agreements as though they were contracts. Generally, this has occurred
where Federal officials believed certain controls were necessary to
protect the Federal interest, even though the relationship was one of
assistance. Grants also were sometimes used to avoid competition and
other requirements of the procurement system.
The improper use of contracts and grants or confusion between
procurement and assistance relationships leads to inadequate protection
of Federal interests and to unnecessarily stringent requirements on
recipients of assistance awards. Because their premises differ,
contracts and grants have different requirements and consequences.
Federal procurement regulations and an extensive body of common law are
applied to contracts. The Federal procurement regulations have
extensive and detailed procedures for competition and the overall
process of awarding contracts. Contracts are also subject to other
Federal requirements, such as preferences given socially and
economically disadvantaged. small businesses, which are either not
applied to assistance awards or are merely encouraged. Assistance
instruments, although often considered to be a form of contract, have
not generally been held to be subject to the Federal procurement
regulations and the extensive body of contract law. A set of guidelines
for assistance is evolving, and the body of law relating to Federal
assistance is growing.
As indicated above, the Procurement Commission studied and recommended
ways to improve the Federal procurement process. Because of the
importance of Federal grant activities and the uncertainty about how
grant and procurement relationships differ, the Commission also
conducted a limited review of Federal assistance programs. In its 1972
report the Commission concluded that the failure to clearly distinguish
between procurement and assistance relationships led to the use of
grants to avoid the requirements of the procurement process, and to
unnecessary red tape and administrative requirements in grants. The
Commission also found that unlike procurement programs, assistance
programs operated without the benefits of a clear and comprehensive
system of guidance. The Commission recommended that the Congress enact
legislation to distinguish procurement and assistance relationships and
require a study of assistance programs be conducted to determine the
feasibility of developing a comprehensive system of guidance.
The Congress passed the Federal Grant and Cooperative Agreement Act
primarily as a result of the Commission's recommendation. The Congress
believed that the legal agreement used for each transaction should
communicate the roles and responsibilities of both the Federal
Government and the recipient of the Federal award. The Congress further
believed that the need to apply the criteria of the act to choose a
specific legal instrument would force Federal administrators to
carefully review proposed awards and identify unnecessary
administrative requirements affecting the administration of those
awards.
Other concerns of the Congress, Federal, State, and local governments,
and of private nonprofit and profit firms also contributed to the act's
passage and basic form. The Congress intended to (1) increase
competition in assistance awards, (2) reduce the complexity and
resulting confusion and inefficiency it saw in the assistance system,
and (3) reduce the inappropriate use of grants to avoid the controls
and procedures of the procurement system. State and local officials and
nonprofit organizations who receive Federal awards were also concerned
with excessive Federal involvement in the administration of assistance
programs, and saw the act as a possible way to increase the discretion
of recipients to manage the programs. Concerns expressed by profit
making firms that they were not allowed to compete for grants were also
addressed to some extent by the act. Such firms were not explicitly
excluded from eligibility for assistance awards, but the issue was to
be a subject for further study.
What the act did and did not do:
The act provides the criteria Federal agencies are to use to uniformly
and consistently distinguish procurement relationships from assistance
relationships. It mandates that Federal agencies use a type of
procurement contract as the legal instrument for acquisitions of
property or services for the direct benefit or use of the Federal
Government. Grants or cooperative agreements are the legal instruments
for transferring money, property, services, or anything of value to
recipients to accomplish a public purpose of support or stimulation.
Grants are to be used when no substantial Federal agency involvement
occurs during recipient performance of the activity. Cooperative
agreements are required when substantial involvement is anticipated.
Federal agencies were required to apply the criteria of the act by
February 3, 1979.
During congressional deliberations, Federal officials expressed concern
that the criteria of the act were somewhat vague and that unintended
consequences could result from use of the act. In response to these
concerns the Congress gave OMB authority to except transactions and
programs. This authority expired in March 1981. The Congress expected
that experiences of Federal agencies in applying the criteria of the
act would provide evidence for revising and improving the criteria of
the act.
The act does not cover all possible relationships that may exist
between Federal agencies and others. For example, it does not cover any
agreement under which Federal cash assistance is provided directly to
individuals, or a subsidy, loan, loan guarantee, or insurance is
provided.
The Office of Management and Budget was required by the act to conduct
a study of Federal assistance programs and provide a report to the
Congress by early February 1980. The study was to focus on developing a
better understanding of alternative means to implement Federal
assistance programs. Based in part on the experience Federal agencies
gained in the use of the criteria of the act, the study also was to
determine if it was feasible to develop a comprehensive system of
guidance for Federal assistance programs, perhaps analogous to Federal
procurement regulations. Further, OMB was charged with recommending
changes to the act that might be necessary to implement its findings.
Office of Management and Budget guidelines implementing the act:
As authorized by the act, the Office of Management and Budget issued
guidelines to Federal agencies on August 18, 1978, to promote
consistent and efficient use of contracts, grants, and cooperative
agreements. The guidance includes specific instructions to help
agencies make decisions on the use of these instruments. It describes
how OMB interprets several provisions of the act and how OMB will
administer agencies' requests for exceptions. The guidance further
describes how agencies should apply existing OMB administrative
standards to grants and cooperative agreements.
The guidance provides OMB's response to many agency requests for
clarification on how to select among the authorized instruments. It
also requires Federal agencies to insure that general decisions are
either made or reviewed at a policy level on whether a program is
principally procurement or assistance and whether substantial Federal
involvement will occur in assistance programs. Agencies are required to
document how these decisions are made so that data will be available to
measure the effects of implementation of the act and so that amendments
to the act can be drafted if necessary.
The guidance also emphasizes that the act's objectives are consistent
with other Presidential initiatives to improve management of Federal
assistance, and states that the act provides an important opportunity
to review, improve, and simplify Federal assistance programs.
OBJECTIVES, SCOPE, AND METHODOLOGY:
In an August 1, 1978, letter, the Chairman, Subcommittee on Federal
Spending Practices and Open Government [Footnote 1], Senate Committee
on Governmental Affairs, asked us to monitor the implementation of the
Federal Grant and Cooperative Agreement Act. We were asked to determine
to what extent Federal agencies have implemented the act, whether this
implementation has been proper, and what Government-wide issues
resulted from implementation.
In order to accomplish these objectives, we concentrated on efforts by
OMB and the executive agencies to apply the act's criteria when
selecting grants, cooperative agreements, or contracts. In addition, we
monitored OMB's study of Federal assistance programs and obtained
information on issues relevant to the effective implementation of the
act. To determine the intent of the act and circumstances leading to
its passage, we interviewed Federal executive and congressional
officials who were active in the events and deliberations leading to
the act and reviewed the act's legislative history.
To determine the extent of implementation of the act we administered a
questionnaire to a Government-wide, randomly selected and stratified
sample of Federal headquarters officials. We completed telephone
interviews with responsible headquarters officials in 384 of the 1,102
programs listed in the 1979 Catalog of Federal Domestic Assistance.
These programs contained both procurement and assistance transactions.
Our sample included programs administered by 48 of the 57 Federal
agencies listed in the Catalog. The questionnaire was applied during
May and June, 1980.
From the questionnaires we compiled data showing the number of programs
where:
* responsible officials knew of the act,
* plans have been made or carried out to implement the act, and:
* changes have occurred in the type of instruments used in the program.
The questionnaire also produced data on the criteria Federal officials
use to select the type of instrument used in these programs and
indicators of the effectiveness of the act in achieving its purposes.
Because we used a stratified sample in obtaining the data, we applied
weights to project the data to the universe of assistance programs. The
various figures used in this report are our estimates based on these
projections. We believe the projections present a reasonable picture of
Governmentwide implementation of the act. There is, however, an unknown
margin of error because the Catalog neither contains all assistance
programs, nor is it intended to contain procurement programs, such as
Department of Defense weapon system procurement.
To develop general information on Federal agencies' activities and
problems, we interviewed top department officials in 10 agencies who
were appointed as agency liaisons with OMB for matters relating to the
act, and we reviewed appropriate files. We also interviewed top agency
procurement officials in agencies where these officials were not the
liaisons with OMB.
To obtain specific information on how the act was being applied and on
issues arising from such application, we interviewed responsible
officials in 21 programs. For 10 of the 21 programs, we examined how
they were managed at the regional level. We generally reviewed up to 10
transactions per program and then selected 1 specific transaction in
each of the 10 programs for more thorough review, including field work
with the recipient. We performed this work at Federal regional offices
in Kansas City, Kansas; and Philadelphia, Pennsylvania. The programs
reviewed were selected to develop particular issues identified during
preliminary work conducted in 16 Federal agencies during calendar year
1979. Since these programs were not selected to represent the universe
of Federal programs, the findings specific to them cannot be projected
to all programs.
CHAPTER 2:
INCORRECT INSTRUMENTS CAN BE CHOSEN BECAUSE GUIDANCE IS VAGUE:
Two major problems the Congress sought to correct through the act are
not being adequately addressed. First, because assistance instruments
are being used in procurement situations, Federal procurement
requirements designed to protect the Federal interest and maximize
competition may not be applied. Second, because Federal officials are
not systematically examining assistance relationships in selecting
either grants or cooperative agreements, there is no certainty that
officials are limiting requirements in assistance awards to those
consistent with the intended relationship.
Several revisions to OMB's guidance are necessary to improve the act's
implementation and to achieve consistent Governmentwide selection of
appropriate legal instruments. Currently, OMB's guidance on several of
the act's key provisions, although a good first step, is too vague and
incomplete. Consequently, Federal officials interpret these provisions
in varying ways, some of which we believe are incorrect.
OMB currently has several task forces studying potential revisions to
its guidance and is in preliminary agreement with us on several issues
discussed below.
CLEARER TERMS AND PROCEDURES NEEDED TO DISTINGUISH BETWEEN PROCUREMENT
AND ASSISTANCE:
One of the basic purposes of the act was to curb the use of assistance
instruments in procurement situations. The inappropriate use of
assistance instruments in procurement situations was considered a
problem for more than one reason, but primarily because certain
procurement requirements, such as competition, were often avoided by
using assistance instruments. Thus, qualified bidders may be excluded
from consideration or low quality products may be delivered without
Government recourse.
During our review of individual agency awards made since passage of the
act, we found several actual or proposed assistance awards which we
believe should have been procurement con tracts. Most of the proposed
or actual awards were cooperative agreements. In other recent audits,
we also found assistance awards that we believe should have been
procurement contracts. Because of the general misunderstanding of key
provisions of the act, we believe the potential exists for many
questionable awards.
The act's terms and legislative history and OMB's implementing guidance
have fostered inconsistent interpretations. In analyzing the act and
its history, and after frequent discussions with OMB and congressional
staff, we have developed an interpretation that we believe yields
results consistent with congressional purposes. This interpretation is
the basis for our disagreement with some Federal officials' use of
assistance instruments rather than procurement contracts.
The act distinguishes between procurement and assistance relationships
based on the authorized Federal purpose. If the Federal purpose is to
acquire something, a procurement relationship is appropriate. If the
Federal purpose is to accomplish a public purpose of support or
stimulation as authorized by statute, either a grant or cooperative
agreement relationship is appropriate depending on the anticipated
degree of involvement with the recipient.
Determining the scope of an agency's authority to either procure or
assist is essentially a matter of statutory interpretation to answer
the question, "Can the organization spend money as it proposes?" Common
sources of this authority include the agency's organic legislation,
enabling statutes, or appropriation acts. The Federal Grant and
Cooperative Agreement Act's legislative history also refers to agency
"mission" statements as a source for determining whether an agency is
authorized to engage in assistance activities. In sum, defining an
agency's authority in a given case may require reference to a range of
materials. By en acting specific authorizing language and providing
various sources to help an agency understand this language, the
Congress is also implicitly describing the limitations on authority--
the Congress has authorized this much and no more. Therefore, an agency
official's responsibility when considering a proposed assistance award
includes deciding whether the agency has authority to enter into the
particular assistance transaction. This decision must be made for each
transaction because procurement authority is available in all
assistance programs and any given transaction might be either
procurement or assistance.
Applying these distinctions in practice has been anything but simple,
in part because the act is not a model of clarity. Thus it is not too
surprising that Federal agencies interpret and apply the criteria in
various ways and continue to use grants and cooperative agreements in
what appear to be procurement situations.
However, the Congress recognized that the criteria were primarily a
first step in clarifying difficult concepts. Accordingly, it authorized
OMB to issue supplementary interpretative guidelines. We believe the
vagueness in the act can be overcome by improved OMB guidance and a
more structured analysis by Federal agencies to determine what
instrument best reflects the relationships to be established.
One of the cooperative agreements we reviewed, for example, contained
provisions which clearly indicated to us that the agency was purchasing
products or services and should have used a contract. Among other
things, the recipient was to:
* Inventory recipients' training materials, get them well-edited, and
ready for the agency's approval, production and distribution. [service
culminating in a product]
* Hold the agency's annual evaluation conference and manage one other
conference. [service]
* Assist the agency to develop two Request For Proposals and assist in
selecting contractors. [service]
* Assist the agency in completing a manual it had drafted and complete
a plan for distributing and using the manual. [service and product]
We believe the relationship described in the foregoing example is
clearly procurement in nature. But in this and other cases some
agencies believe there is some basis for arriving at contrary
decisions. The variations in how agencies choose between a type of
procurement contract or assistance instrument stem from their
interpretations of sections 4(1) and 7(a) of the act. Section 4(1) sets
forth the criteria on when to use a type of procurement contract.
Section 7(a), as we see it, overcomes the problem many agencies face
when imprecise use of terms in authorizing legislation restricts them
to using a particular instrument where the program statute clearly
intended another relationship. Section 7(a) authorizes the use of the
act's instruments which are appropriate to the actual relationships
available under the program statute, and which satisfy the criteria of
the act.
Problems interpreting section 4(1):
Section 4(1) states that a type of procurement contract shall be used
"* * * whenever the principal purpose of the instrument is the
acquisition, by purchase, lease, or barter of property or services for
the direct benefit or use of the Federal Government."
Some officials key on the "direct benefit" language of this section and
interpret it to mean that the Federal Government must benefit more than
anyone else if procurement is to be used. If they conclude that someone
other than the Federal Government is going to benefit more than the
Government, they believe a grant or cooperative agreement is
appropriate. When determining who benefits, officials sometimes take
into consideration not only whether the immediate recipient of the
award benefits, but also whether other parties may benefit. For
example, in commenting on a cooperative agreement issued to a
university for evaluating a Federal agency program, a Department of
Housing and Urban Development (HUD) official noted that the cumulative
benefit to the (1) university researchers, (2) program recipients, and
(3) general public outweighed the benefit to the Federal Government.
In our opinion, this interpretation of direct benefit is questionable.
In practice, this approach adds another criteria--benefit to the
recipient or other parties--for when a grant or cooperative agreement
can be used. In passing the act, the Congress sought to restrict
agencies to the use of the act's criteria when selecting a grant or
cooperative agreement. To this end, the Congress specified that a grant
or cooperative agreement is to be used if the agency's principal
purpose in a given transaction is to transfer something of value to a
recipient to accomplish a public purpose of support or stimulation
authorized by Federal statute.
This direct benefit interpretation, in combination with other factors,
has also been applied in transactions involving so-called
intermediaries. An intermediary situation often arises where an
assistance relationship is authorized with certain parties, but the
Federal agency delivers the assistance by utilizing another party. This
"intermediary" thus is the recipient of the Federal award. For example,
the Community Services Administration (CSA), which frequently provides
assistance to community action agencies that lack computer expertise,
has considered entering into a relationship with a firm (an
intermediary) to prepare guidance manuals for distribution to community
action agencies. CSA officials contend that a procurement contract is
not appropriate in these circumstances because the Federal Government
does not benefit directly, as it does not directly receive the product
or service or it receives only an informational copy. CSA as well as
other officials following this approach seem to feel that the
Government must take direct possession of the product or service before
a procurement contract is required.
This approach, in our view, reflects a misunderstanding of section
4(1). Our interpretation of the act is that the choice of instrument
for an intermediary relationship depends solely on the Federal purpose
in the relationship with the intermediary since it is the recipient of
the Federal award. The fact that the product or service produced by the
intermediary pursuant to the Federal award may flow to and thus benefit
another party is irrelevant. What is important is whether the Federal
Government's purpose as defined by program legislation is to acquire
the intermediary's services, which happen to take the form of producing
the product or carrying out the service that is then delivered to the
assistance recipient, or if the Government's purpose is to 10 assist
the intermediary to do the same thing. In other words, where the
recipient of an award is not an organization that the Federal agency is
authorized to assist, but is merely being used to provide a service to
another entity which is eligible for assistance, the proper instrument
is a procurement contract.
We recognize that such distinctions are not always clear. However, an
analysis by each agency of its program legislation is an essential
first step in determining which instrument it may choose. Such an
analysis may not resolve all difficulties, but it will often ease the
task of choosing between procurement and assistance. Program
legislation often specifies:
* whether an agency is to conduct a basic program activity itself or is
to help (i.e., support or stimulate) someone else to perform the
activity;
* who are the eligible recipients; and:
* what the funds can be used for.
As discussed on page 8, only when an agency has statutory authority to
support or stimulate someone else can it use a grant or cooperative
agreement, [Footnote 2] and then, only for the recipients and purposes
authorized. This constitutes the scope of the agency's assistance
responsibilities. Basically, except where this kind of authority is
present, the agency is responsible for performing all other actions
itself or through procurement contracts and other arrangements
authorized by law.
Applying the criteria outlined above to actual or proposed agency
awards raises questions as to the appropriateness of their instrument
choices.
For example, the Rural Electrification Administration (REA), announced
in the June 1979 Federal Register that it was making funds available
"for the partial financing of a research and development project to
develop and make available on the market a direct burial splice closure
for buried telephone cable * * *." On September 21, 1979, REA awarded a
grant for the cited purposes to a private company which manufactures
telecommunications cable.
REA is a Federal lending agency that finances electric and telephone
facilities in rural areas. The REA Administrator's authorities in
relation to telephone service are specified in Title II of the Rural
Electrification Act:
"* * * the Administrator is authorized and empowered to make loans to
persons now providing or who may hereafter provide telephone service in
rural areas, to public bodies now providing telephone service in rural
areas, and to cooperative, non-profit, limited dividend, or mutual
associations."
The REA grant award does not appear to fall within the scope of this
authority since (1) the authority is specifically for the provision of
loans, and (2) those eligible for loans must either provide or plan to
provide telephone service in rural areas. The recipient of this REA
award does not provide such services, but rather supplies materials to
those that do.
REA indicated in its Federal Register announcement that under Section
11 of the Rural Electrification Act and under the Federal Grant and
Cooperative Agreement Act, the Administrator can make such expenditures
as are appropriate and necessary to carry out the provisions of the
Rural Electrification Act. Section 11 provides in part that "The
Administrator is authorized * * * to make such expenditures (including
expenditures for personal services; supplies and equipment; lawbooks
and books of reference; directories and periodicals; travel expense;
rental at the seat of government and elsewhere; the purchase,
operation, or maintenance of passenger-carrying vehicles; and printing
and binding) as are appropriate and necessary to carry out the
provisions of this act."
Although section 11 authorizes REA to make expenditures to conduct its
operations, we do not believe that this constitutes an authorization to
support or stimulate as contemplated by the Congress in the Federal
Grant and Cooperative Agreement Act. Nor do we believe, as discussed
later, that the act itself authorizes agencies to undertake activities
not previously authorized by enabling statutes.
In another example, the National Institute of Corrections (NIC),
administratively placed under the Bureau of Prisons, Department of
Justice, planned to use a cooperative agreement to hire an accounting
firm to pay its bills. our analysis of the program's legislation,
within the context of the Federal Grant and Cooperative Agreement Act,
indicates that a type of procurement contract rather than a cooperative
agreement was appropriate. NIC's legislative history notes that it is
to be a national center to which State and local correctional agencies
can look for the many different kinds of assistance they require. It
partially fulfills its responsibility by engaging consultants to assist
correctional agencies.
In the July 1980 Federal Register, NIC announced its intention to make
an assistance award "to provide management accounting and recordkeeping
functions for NIC Training and Consulting Projects."
As explained by NIC officials, a cooperative agreement would be
awarded, probably to a certified public accounting firm, and the
recipient would make payments to NIC's consultants upon authorization
from NIC. As succinctly stated by a former Department of Justice
internal auditor, the recipient of the cooperative agreement would "pay
NIC's bills."
NIC staff offered several reasons for the choice of a cooperative
agreement, including:
* NIC would be substantially involved with the recipient, and such
involvement would not be appropriate under a contract.
* The department's internal audit staff had questioned the choice of a
grant but had indicated either a contract or a cooperative agreement
would be appropriate.
* A contract would not be appropriate because NIC is not the recipient
of the services (i.e., expense checks for the consultants) and
therefore NIC does not directly benefit.
The third reason offered, that NIC is not to be the recipient of the
services produced under the cooperative agreement illustrates, as
previously discussed, how some officials believe that they must take
direct possession of a product or service for a procurement contract to
be the required instrument.
The Department of Justice's Internal Audit staff did, as indicated in
the second NIC reason, question NIC's use of a grant to fund a
certified public accounting firm for these purposes. The audit report
noted that "a grant solely for the purpose of processing payments to
consultants seems to provide a direct benefit to the government since
processing payments for services received is a normal function of a
Federal agency." However, contrary to NIC's assertion, the audit report
did not actually suggest that a cooperative agreement would be
appropriate. Rather, by noting that section 4(2) provides for the use
of a contract "whenever an executive agency determines in a specific
instance that the use of a type of procurement contract is
appropriate," the report appears to suggest that a contract should have
been used for these services.
The Department of Justice auditor who performed the survey of NIC's
activities said that although he believed NIC was clearly purchasing
the services of the public accounting firm, after reading the act he
did not feel he could make a sufficiently strong case to say a contract
had to be used. His doubt was based on an understanding that NIC was in
fact substantially involved with the recipient thus he believed a
cooperative agreement might be appropriate. In fact, when choosing
between procurement and assistance degree of anticipated involvement
does not matter; governed solely by the Federal purpose in the
relationship.
Department of Justice officials we interviewed about this award were
familiar with NIC's legislation and said that NIC has broad authority
to use either grants or contracts. In response to our questions, one
NIC official noted that the following section of its legislation
conferred broad authority:
"In addition to the other powers, express and implied, the National
Institute of Corrections shall have authority:
(1) to receive from or make grants to and enter into contracts with
Federal, State, and general units of local government, public and
private agencies, educational institutions, organizations, and
individuals to carry out the purposes of this chapter." (18 U.S.C.
4352(a)(1).)
Although this section does provide broad authority, we do believe it is
applicable to the situation contemplated in the proposed cooperative
agreement. Senate Judiciary Committee Report 93-1101 on NIC's
authorizing legislation explains that section 4352(a)(1) "would enable
the Institute to benefit from the resources and expertise of such
agencies * * * who have been active in supporting correctional reform
efforts." Public accounting firms, expected to perform accounting
services, do not meet this test.
However, the Congress did include a specific authorization in NIC's
legislation that we believe is directly applicable to the proposed
cooperative agreement. It provides that NIC shall have authority:
"to enter into contracts with public or private agencies,
organizations, or individuals, for the performance of an of the
functions of the Institute * * *." 18 U.S.C. 4352(a)(13).) Emphasis
added.
That the tasks to be performed under the proposed cooperative agreement
are functions of the Institute seems clear. This was the conclusion of
the internal audit staff as noted above. The audit report also notes
that NIC formerly performed these functions itself. The Federal
Register announcement also leads to this conclusion in stating that the
project is "to provide management accounting and recordkeeping
functions for NIC * * *."
Finally, the NIC official listed in the Register as an information
contact said that everyone agreed the activities covered under the
announcement were an in-house function, but because their requests to
OMB for additional staff had been turned down they could not perform
the functions themselves.
Problems with section 7(a):
Our review of agencies' decisions on when to use a type of procurement
contract, grant, or cooperative agreement indicated the potential
exists for misinterpretations of section 7(a). The problem centers on
whether this section gives agencies broad new independent authority to
choose to offer assistance where there was no authority to enter into
such an assistance relationship previously.
Although we identified only two cases where we believe a
misunderstanding of section 7(a) directly contributed to a questionable
change in instruments, the potential for many other questionable awards
exists on the basis of the general misunderstanding of this section.
Section 7(a) of the act states:
"Notwithstanding any other provision of law, each executive agency
authorized by law to enter into contracts, grant or cooperative
agreements, or similar arrangements is authorized and directed to enter
into and use types of contracts, grant agreements, or cooperative
agreements as required by this Act."
If the legislative history concerning section 7(a) is read within the
context of the general congressional purposes for the act, it does not
appear that the Congress intended any wholesale expansion of grant
authority. Rather, it appears that the Congress only intended to
require agencies to use an instrument that matches the relationship
they enter into, regardless of the label used in existing legislation
to characterize that relationship. In our opinion, the act was not
intended to change the nature of the relationships authorized in
existing legislation.
OMB's guidance on section 7(a) can be construed as supporting the
interpretation that section 7(a) supersedes program authorizing
legislation and in itself provides authority to use any of the three
instruments.
One portion of the act's legislative history which is closely
paraphrased in OMB's guidance, states:
"If an agency is presently authorized only to enter into either
contracts, grants, cooperative agreements or other arrangements, this
authorization enables that agency to enter into any or all three types
of agreements subject to the criteria set forth in sections 4, 5, and
6. However, if an agency is specifically proscribed by a provision of
law from using a type of agreement, this authorization would not affect
that prohibition."
Another passage says that agencies will have flexibility in deter
mining whether transactions are procurement or assistance.
We believe that section 7(a) gives agencies a very circumscribed
authority to overcome prior instrument restrictions that were not
consistent with the relationships described by program legislation. The
act's legislative history, dating back to the Commission on Government
Procurement, reflects a concern that program statutes often restrict
agencies to a type of instrument that is inconsistent with the overall
relationship described in the statute. Through the act, the Congress
sought to correct this situation. First, sections 4, 5, and 6 provide
Governmentwide criteria to be used in selecting instruments. In our
opinion, the Congress fashioned section 7(a) to deal with those cases
where, lacking such criteria, the Congress had unintentionally
restricted an agency to using a specific instrument which did not fit
the type of relationship described in the statute itself. The following
passage from Senate Report Number 95-449, partially explains section
7(a).
"The proposed legislation does not automatically change the type of
instrument authorized by statute but rather authorizes the agencies to
use other instruments if appropriate and consistent with this bill. The
legislation is not intended to nor will it eliminate specific program
or administrative requirements placed by the Congress in individual
program statutes. It also will not eliminate specific requirements
applying, for example, to grants in such organic statutes as the Work
Hours Standards Act. Given the foregoing understanding, it is not
practical or necessary to identify all of the statutes which might be
somewhat affected."
In short, the Congress did not consider it necessary or practical to
tackle the enormous housekeeping problem of going through each piece of
authorizing legislation and inserting, where the guidelines of the
Federal Grant and Cooperative Act made it appropriate, the words grant,
cooperative agreement, or contract. Rather, the Congress left it to the
executive branch agencies to analyze their particular authorizing
statutes. Under this approach, to find "grant" or "cooperative
agreement" authority in each agency's authorizing statute, where these
specific words of authority have not been used, it must be determined
what kind of relationships the agency's statute authorizes: namely, in
order to find grant authority, the authorizing legislation must be
examined to determine if a grant type relationship was intended or
permitted rather than simply looking for the word "grant." If the
Congress had intended that section 7(a) authorize agencies to use
grants, cooperative agreements, or contracts irrespective of the basic
relationships authorized by prior program legislation there would have
been no need to state that the act "does not automatically change the
type of instrument authorized by statute." Thus, we believe section
7(a) is intended to function as is illustrated hypothetically in the
following table.
Prior enabling legislation:
1)Hypothetical authorization:
"Agency X shall determine which local governments suffer most due to
the inequitable impact of energy development and provide such financial
and technical assistance as is necessary to mitigate such impact. In
providing such assistance, the administrator is authorized to enter
into contracts with such local governments or public or private
organizations as he deems necessary."
Change due to section 7(a):
Since the last sentence in this hypothetical authorization limits the
administrator to the use of contracts even though the relationship with
the local governments is clearly assistance, we believe section 7(a)
allows the second sentence to be interpreted as follows:
"In providing such assistance, the administrator is authorized to enter
into grants or cooperative agreements with such local governments or
other public or private organizations as he deems necessary."
2)Hypothetical authorization:
"Agency Y shall identify those individual veterans who, for whatever
reason, have not been adequately provided job training and shall
provide them with the necessary training to make them competitive in
the job market. In providing such training, the administrator may
utilize agency employees, may hire new employees, or may contract with
public or private organizations."
Since the agency responsibility delineated in this authorization is to
provide the training itself, section 7(a) does not authorize the agency
to use grants or cooperative agreements with public or private
organizations.
Our interpretation of section 7(a) was well expressed in a legal
memorandum by the Department of Energy's Acting General Counsel:
"Indeed, it seems clear that the FGCAA was not intended to permit an
agency, in implementing any program, to transcend the discretion which
was conferred upon it by the enabling law, but only to carry out the
purposes of that law more efficiently. That is, the FGCAA is not a
"bootstrap," and may be relied upon to enhance agency prerogatives only
after the objectives of the enabling law have been appropriately
characterized, not before. In some instances, it will be difficult to
make this characterization, and legislative history and judicial
decision may need to be invoked. But in each case, it will be the four
corners of the enabling law, and not the FGCAA, which will establish
the parameters of the relationship between Federal and non-Federal
parties. The FGCAA may then be utilized so that the law can be
implemented without regard to ill-defined nomenclature in the enabling
law which may, for that reason alone, hamper an agency's ability to
give effect to Congress' intent." (Footnote omitted.)
Officials who do not share this view have used section 7(a) to justify
the use of assistance instruments for transactions which otherwise
would appear to call for use of procurement con tracts. For example,
prior to the act, the Environmental Protection Agency (EPA) used
contracts in its Epidemiologic Studies program. Although this
necessitated following certain procedures which EPA officials believed
were time consuming and objectionable to both EPA and recipients, EPA
officials considered themselves to be statutorily restricted to
procurement contracts. After the act became effective, EPA began using
cooperative agreements instead of contracts. EPA officials told us that
this change was due, among other reasons, to their belief that section
7(a) gave them authority to use grants, contracts, or cooperative
agreements. Our interpretation of EPA's authority under this program
indicated there is some justification for use of assistance
instruments. However, EPA officials said they had not specifically
reviewed their legislation for the presence of such authority but
relied on their interpretation of section 7(a) and other factors.
Interestingly, although there appears to be some justification for
using assistance instruments, both EPA program officials and a
recipient of a cooperative agreement told us they viewed the research
being conducted as primarily for EPA's benefit or use in connection
with its responsibilities for monitoring and regulating pesticides,
suggesting that a contract would continue to be the appropriate
instrument.
Although an analysis of program authorizations to determine what type
of relationship the Congress intended should resolve many of the
current problems in selecting instruments, there are authorizations
which permit agencies to exercise broad discretion in designing
relationships to achieve particular objectives. Therefore, if in
reviewing its enabling legislation an agency determines its
authorization is broad, it then becomes necessary to determine which of
the instruments authorized by the act most closely match the agency's
purpose in a proposed transaction. For example, the Secretary of HUD
has broad authority to:
"undertake such programs of research, studies, testing, and
demonstration relating to the mission and programs of the department as
he determines to be necessary and appropriate."
Because the Secretary is neither directly mandated to do this work with
HUD staff, nor mandated to assist others to do such work, but rather is
given authority to undertake "programs," the Secretary has considerable
discretion. This discretion is reinforced through a provision stating
the Secretary may perform such duties "either directly or * * * by
contract or by grant."
Pursuant to this authorization, HUD officials determined that there was
a need to document and disseminate information about urban insurance
availability "in order to stimulate local government involvement in
these issues." Lacking in-house resources and technical expertise, HUD
identified a firm that could do the work. A noncompetitive cooperative
agreement was awarded to the firm to:
* produce a guidebook on local insurance problems for HUD distribution
to local governments;
* conduct two regional workshops to familiarize local government
officials with strategies to analyze and resolve insurance problems;
and:
* conduct a briefing for key Federal officials, interest groups, and
industry representatives.
In summary, HUD officials recognized an agency responsibility to assist
the local governments, but lacking an in-house capability to do so,
acquired the services of a firm to help the agency discharge its
responsibility. Although the statutory authorization under which the
work was performed is broad, we believe the relationship itself is one
of procurement and, on the basis of the act's criteria, a procurement
contract should have been used.
Finally where program authority can justify a choice of instruments and
it is difficult to say that assistance or procurement is the principal
purpose of the transaction, agencies have discretion and should
exercise the discipline noted in the legislative history of the act in
their choice of instruments. It should be kept in mind, however, that
the first-level analysis of agency authority to enter into the kind of
transaction envisioned is not really a matter of discretion--the
statutory authority is either there or is not there, regardless of
agency preference. We recognize that agency authority may be difficult
to determine and require the exercise of a substantial amount of
judgment.
Agencies usually supplement, or do not use, the act's criteria when
selecting instruments:
The Federal Grant and Cooperative Act contains the only criteria
Federal officials are supposed to use when selecting instruments. But
many officials do not use the criteria or supplement it with their own
criteria when deciding what instrument to use.
On the basis of our telephone survey we estimate that 77 percent of
Federal officials use a mixture of the act's criteria and other
criteria when choosing between procurement and assistance instruments.
Another 8 percent do not rely at all on the act's criteria when making
their choices. Our detailed review of selected programs produced
similar evidence that officials use criteria in addition to that in the
act.
The use of these additional criteria seems to influence agencies toward
the selection of assistance instruments. As previously discussed (see
p. 10), Federal officials, in effect, use criteria not in the act when
they make assistance awards because someone else benefits more than the
Government from a relationship. Officials also told us that in deciding
which instruments to use they consider factors such as potential
adverse program effects, preferences of recipients, and the degree of
administrative flexibility available under the type of instruments. For
instance, one program director told us that, although certain aspects
of the program indicate a cooperative agreement would be appropriate, a
change from grants to cooperative agreements would upset recipients and
endanger the program's success. An assistance policy official in
another agency also noted that while the official departmental policy
is to adhere to the act's criteria, the preferences of recipients
"count."
Some other officials indicated that the need for more effective control
over recipients' actions is considered in selecting instruments. In
such cases, they generally believe contracts are appropriate.
Federal officials' reliance on other criteria when selecting contracts,
grants, or cooperative agreements runs directly counter to the act's
purpose of achieving uniformity in the use of such instruments.
Although OMB's guidance contains an explicit statement limiting
agencies to using the act's criteria when choosing between grants and
cooperative agreements, it does not contain a similar direct limitation
for choosing between procurement and assistance.
NEED TO IMPROVE COOPERATIVE AGREEMENT GUIDANCE:
Two years after OMB issued its guidelines, officials of Federal
agencies, OMB, and we, ourselves, do not clearly understand what a
cooperative agreement is, when to use it, and what to use it for. Thus,
Federal officials are not always systematically identifying the type or
degree of their involvement with a recipient. Identification of this
involvement could lead to a reduction in unnecessary administrative
requirements in assistance awards.
The act provides that the factor to consider in deciding whether a
cooperative agreement is appropriate, as opposed to a grant, is whether
the Federal agency will be substantially involved during recipient
performance. Although a good first step, OMB's guidelines do not
adequately define and distinguish substantial involvement, normal
involvement, and normal Federal stewardship. As a result, Federal
agencies find it difficult to apply the criteria when deciding what
instruments to use in their programs.
We recognize the difficulty in developing Government-wide guidelines
that will yield uniformity in the use of grants, contracts, and
cooperative agreements. As discussed in chapter 4, differences in
operating procedures must be developed for these instruments in order
to make the distinctions meaningful. This may take considerable time
and effort. In the meantime, interim revisions to OMB's guidance would
seem desirable to gain the operating experience needed to develop the
necessary distinctions, and standardize grant/cooperative agreement
decisions within programs and agencies.
Difficulty in developing Government-wide guidelines for cooperative
agreements:
OMB had two basic problems when it prepared the guidelines on
cooperative agreements and which face it now as it works to revise
them. First, because the Congress wanted the instrument to evolve with
agencies' experience, it did not thoroughly describe what a cooperative
agreement is, nor when and how it should be used. Second, adequate data
was not available on practices and procedures used by Federal agencies
to manage assistance awards. Combined, these problems made it very
difficult to develop guidelines which would clearly distinguish between
grant and cooperative agreement relationships.
The Congress' intent in establishing the cooperative agreement as a
category of existing assistance relationships originated in the
findings of the Commission on Government Procurement. The Commission
concluded that a cooperative agreement category was essential for
reducing the confusion in deciding when to use grants or contracts. The
Commission found that the need to be more involved with assistance
recipients than was customary in grant relationships was leading
agencies to use contracts in assistance relationships. The cooperative
agreement category was viewed as a recognition that the Federal
Government was sometimes closely involved with assistance recipients.
In addition, the Commission saw other advantages in dividing assistance
relationships into two categories:
* Clarification of Federal and recipient roles and responsibilities
based on different expected levels of involvement.
* Increased consistency in Federal interactions with recipients.
* An initial basis for making the Federal assistance system more
rational, possibly along lines analogous to the procurement system.
As a criteria for distinguishing between grants and cooperative
agreements, the Commission proposed using the amount of Federal
involvement with the recipient during performance of the supported
activity. Little involvement would equate to a grant, and substantial
involvement would equate to a cooperative agreement.
The Commission was not explicit, however, on what constituted
substantial involvement. On the basis of explanatory text in the
Commission's report and examples of cooperative agreements, the
Commission seemed to see substantial involvement in two senses: (1)
when Federal and recipient officials work closely together, and (2)
when Federal officials need to closely oversee a recipients' activities
to ensure that the program's objectives are achieved.
The Congress accepted the Commission's recommendation and included the
cooperative agreement category in the act. However, the legislative
history provides little elaboration on the Commission's explanation of
cooperative agreements or how to determine when to use them. Committee
reports cite the same examples used by the Commission to illustrate
when a cooperative agreement would be used. Recognizing that more
definitive guidance was needed for agencies to follow in selecting
cooperative agreements, the Congress charged OMB with interpreting the
act's criteria for choosing between grants and cooperative agreements.
Until better guidance was developed, the Congress only expected that
agencies would be able to reasonably justify their instrument choices.
In addition to the congressional intent that the instruments would
evolve with agencies' experiences, adequate data on agency practices
and procedures was not available to assist OMB in developing an initial
set of Governmentwide standards for uniform selection of cooperative
agreements. Prior surveys of Federal agencies' operating practices were
not comprehensive enough or were not directed to the development of
standards to identify or measure substantial involvement during
performance. Further, the work of the Procurement Commission and
others, although extensive, did not comprehensively survey agency
practices in administering their assistance programs. Thus, in
developing guidelines, OMB relied for the most part on experiences of
Federal officials obtained through discussions and circulation of draft
guidance. This approach worked reasonably well as a first step, but
further efforts are needed to refine the guidelines to make them more
useable.
Problems facing Federal officials in identifying cooperative
agreements:
A number of Federal officials have used OMB's guidelines as a basis for
issuing cooperative agreements in their programs. However, most Federal
officials we talked to have difficulty applying the guidelines because
their decisions must be based on relative standards like "substantial
involvement" and "normal Federal stewardship" which are not adequately
defined. As a result, these officials have a difficult time identifying
situations where a cooperative agreement should be used.
OMB's guidelines state that anticipated substantial involvement during
performance is a relative rather than an absolute concept. The
guidelines establish a general policy that substantial involvement is
not anticipated when the terms of an assistance award indicate the
recipient can expect to run the project without Federal agency
collaboration, participation, or intervention as long as it is run in
accordance with the terms of the instrument. Conversely, substantial
involvement is anticipated when the terms of the instrument indicate
the recipient can expect Federal agency collaboration or participation
in the management of the project.
As a guide to making these determinations, OMB provided eight
illustrations of agency practices and procedures where substantial
involvement could be present depending on the circumstances of a
particular award. Federal officials are to relate specific program
procedures to these indicators of substantial involvement in deter
mining whether their practices exceed the normal exercise of Federal
stewardship responsibilities.
The guidelines, however, do not define involvement or clearly establish
how normal Federal stewardship differs from, or is similar to,
substantial involvement. The guidelines also do not indicate which
individual indicator or combination of indicators, requires the use of
a cooperative agreement. Thus, a decision to use a cooperative
agreement is a very subjective exercise.
Instead of clarifying substantial involvement, the guidelines may tend
to confuse Federal officials and thus limit the use of cooperative
agreements. The guidelines state that anticipated substantial
involvement does not include the exercise of normal Federal stewardship
responsibilities during the project period, such as site visits,
performance reporting, financial reporting, and audit to insure that
the objectives, terms, and conditions of the award are accomplished.
This causes Federal officials to consider their management and
oversight practices, even though more extensive in some cases than
others, as "normal" and to conclude that they are therefore not
substantially involved. They view the typical grant relationship as one
of carrying out their responsibility to make sure recipients spend
Federal funds for the purposes intended and comply with other
conditions of the award. As a result, their involvement with a
recipient takes on an air of legitimacy, making it difficult for them
to see that they may be substantially involved with some recipients.
Consequently, they are less likely to evaluate the appropriateness and
need for that level of involvement.
For example, the Community Services Administration (CSA) has extensive
rules and procedures for funding and evaluating its recipients.
However, CSA officials said these rules and procedures and related
monitoring could not be considered substantial involvement because CSA
is carrying out its statutory obligation to oversee how Federal funds
are spent. They also said the OMB guidelines excluded efforts to see
that rules and procedures are carried out because these efforts are an
exercise of normal Federal stewardship responsibilities.
This interpretation can lead agencies to overlook indicators of
substantial involvement. The Department of Transportation's Urban Mass
Transportation Administration (UMTA), for example, considers its
extensive control and evaluation of recipients a part of normal Federal
stewardship. But UMTA procedures appear to relate to at least one of
OMB's indicators of substantial involvement suggesting that cooperative
agreements may be appropriate. The OMB indicator pertains to Federal
involvement in the awarding of subgrants or subcontracts by a recipient
of Federal assistance. It suggests that reviews and approvals which
exceed existing OMB policies on Federal oversight of grantee
procurement standards and sole source procurement be considered as
potential substantial involvement. UMTA officials acknowledged that
their procedures of regular review of proposed subawards go beyond the
cited OMB policies.
The difficulties Federal officials have in applying the OMB guidelines
are illustrated by differences in opinions between Federal officials
within the same agency. For example, the announcement for EPA's solid
waste resources recovery program stated that cooperative agreements
should be used because close interaction and cooperation between EPA
and recipients is required. Regional officials, however, said such EPA
involvement occurred only during the planning phase and therefore
grants might be more appropriate.
The difficulty in applying the guidelines to specific programs was
readily apparent to us from our discussions with OMB. What appears to
be normal Federal stewardship to one person could be substantial
involvement to another depending on their individual frame of
reference. The OMB indicators of substantial involvement were
intentionally broad. OMB did not want them to be viewed as a checklist
but rather as a frame of reference for agencies to assess the level of
involvement in their programs. Although appearing to be a practical
approach, agencies have had difficulty applying these broad indicators
to specific operating practices in their many and varied programs.
For example, the OMB guidelines state that substantial involvement may
be present when the relationship includes Federal:
"review and approval of one stage before work can begin on a subsequent
stage during the period covered by the assistance instrument."
An official of the Health Standards Quality Review Bureau of the
Department of Health and Human Services (HHS) described to us how his
agency reviews and approves recipient plans for implementing medical
reviews. These plans evolve through interaction between HHS and its
recipients, but the official was not certain if this constitutes
approval of stages as described in the OMB guidelines.
We discussed this and several other examples with OMB officials and had
difficulty determining how the substantial involvement indicator
applied. After considerable discussion, an OMB official responsible for
the guidance concluded that stages of work are present when, in a
project:
* segments are integrated and have one clearly defined overall output,
* each segment clearly follows the preceding segment and is directly
linked to it, and:
* the segments fall within one funding period.
With this amplification of the criteria it was easier to apply the
indicator to specific examples. However, further work still needs to be
done. Although subjective judgments will always be present in arriving
at these decisions, we believe OMB can reduce the amount of
subjectivity by better defining the various kinds of involvement and
expanding on the indicators of substantial involvement.
We also believe one of the indicators of substantial involvement is
overly qualified and excludes significant Federal involvement from
consideration when the selection is made between grants and cooperative
agreements. According to the guidelines, involvement could be
substantial where the relationship includes:
"Highly prescriptive agency requirements prior to award limiting
recipient discretion with respect to scope of services offered,
organizational structure, staffing, mode of operation, and other
management processes, coupled with close agency monitoring or
operational involvement during performance over and above the normal
exercise of Federal stewardship responsibilities to ensure compliance
with these requirements."
Initially, the indicator presents the same problem discussed above
concerning what is normal Federal stewardship. In addition, the
indicator applies only when the highly prescriptive requirements are
coupled with close agency monitoring or operational involvement during
performance.
In our opinion, highly prescriptive requirements themselves can, if
they significantly restrict how a recipient must do something, indicate
that the Federal agency is substantially involved during performance.
Simply because these requirements are placed on the recipient prior to
award does not alter the fact that the recipient has limited
discretion, during performance, to manage the program or project
involved. Further, the manner in which the requirements are monitored
is not pertinent; they effectively limit what the recipient can do and
increase the Federal presence. We believe that, among other things, the
Congress had this type of Federal/recipient relationship in mind when
it created the cooperative agreement category.
Suggested approach to further defining substantial involvement:
Until specific operational characteristics are developed distinguishing
grants and cooperative agreements, it Will be difficult to achieve
Government-wide uniformity in the decisions on when and how they should
be used. This is discussed further in chapter 4. In the interim, we
believe it would be useful to develop an agency or program approach to
defining normal or substantial involvement. This approach would promote
standardized decision making at least at the program level, and
possibly at the agency level. As this would still require use of the
OMB indicators of substantial involvement as a frame of reference, it
is not too unlike the way OMB and agency judgments are now made.
The key distinction would be that decisions on whether to use a grant
or cooperative agreement would also hinge on whether recipients within
a program, or among programs within an agency, are treated differently.
The feasibility of this approach is based on the fact that recipients
of awards within many Federal assistance programs are treated
differently depending upon such things as:
* the capacity of a recipient to implement Federal programs without
detailed Federal oversight, monitoring, and direction;
* prior Federal experience with a recipient; and:
* the need for close Federal/recipient interaction to mutually
contribute to achieving specific program objectives.
The first test in determining whether a cooperative agreement is
appropriate for a given relationship would be whether or not the OMB
indicators of substantial involvement are relevant. If that test fails
due to problems previously discussed, the fact that a recipient is
treated differently, that is, subjected to more controls and
collaboration and has less discretion than the normal recipient for a
given program, would suggest that the Federal agency is substantially
involved and a cooperative agreement may be appropriate.
Where they do not now exist, standards could be developed by agency
personnel for each program to promote uniformity in procedures and
requirements. For example, HUD varies its involvement in the Community
Development Block Grant (CDBG) program on a selective basis but does
not generally consider its awards to be cooperative agreements. HUD
CDBG program officials prepare a list of selected recipients
representing the largest grantees and those grantees which have posed
significant problems, such as poor performance and noncompliance with
regulations. These recipients may be monitored extensively while other
recipients may be monitored only once or twice annually. Also, program
officials may require some of the identified recipients to complete
activities in accordance with specified schedules or impose
administrative or civil remedies, including requests for additional
information and directions to discontinue activities and reprogram
funds. Finally, if the lack of progress, compliance, or capacity is
serious enough, a recipient may have a succeeding year's award reduced
or given conditional approval.
HHS is another agency with a procedure similar to HUD's CDBG program
approach. HHS has an agencywide "high-risk" procedure for problem
recipients. A high-risk recipient is defined as one whose management
practices raise serious questions about its ability to assure proper
programmatic use and financial stewardship of grant funds. The criteria
for identifying such recipients includes a history of unsatisfactory
performance and material violations of the terms and conditions of
awards. Under the high-risk procedures, HHS requires monthly reporting
and other special conditions which exceed normal policies and
procedures. In addition to procedures to correct problems with a
present recipient, Federal officials also become more involved when a
new recipient has not demonstrated a capacity to perform. For example,
ACTION officials provide more technical assistance and make more site
visits when dealing with new recipients.
Of course, control purposes are not the only reason a Federal agency
may be substantially involved with a recipient. Federal agencies often
have cooperative relationships with recipients of their assistance
awards that include frequent collaborative interactions to accomplish
mutual objectives.
We believe that when Federal agencies vary their interactions as
described above, they are often "substantially involved" in how a
recipient administers an award. Because of the difficulties in applying
OMB's guidance and their own perceptions of how much they are really
involved, Federal officials often do not believe their involvement is
substantial enough to require the use of cooperative agreements. One
way OMB can address this problem on an interim basis is by instructing
agencies to identify what is normal involvement for each of their
programs and base their grant and cooperative agreement distinctions on
whether they are more involved than normal with individual recipients
in a given program.
The value of our suggested approach lies in its compatibility with, and
foundation in, existing Federal administrative practices across many
Federal programs. Thus, it is more likely to be accepted and
implemented by Federal officials. This, in turn, will provide the data
needed to start developing Government-wide standards. It also will
provide an opportunity to compare the existing requirements for
consistency with congressional intent and with the needs of a
particular award.
We recognize, however, that some inconsistencies among programs will
continue. Agencies that treat recipients differently but on the whole
may be substantially involved with all recipients in a single program
might characterize their normal recipient relationship as that of a
grant. Likewise, agencies that treat recipients differently but may
still not be substantially involved may use cooperative agreements with
those recipients where their involvement is more than normal. To the
extent agencies can relate the OMB indicators of substantial
involvement to their programs, these problems should not occur. To the
extent they cannot, they would at least have a more structured basis
for their choices.
Inconsistent instrument choices could also be reduced by policy level
reviews of the decisions program officials make under the interim
approach. The policy level reviewer would judge whether the normal
level of involvement for a particular program is actually substantial
compared to all other programs within the agency. If so, the program's
normal awards would be cooperative agreements and if some awards have
less involvement than the norm, they might qualify as grants. This
approach would be in keeping with the requirement in OMB's guidance
that program decisions be reviewed at a policy level.
OMB is working to revise its guidelines:
In its March 1980 report to the Congress, OMB stated that its guidance
could be made more precise and understandable based on agencies'
experiences in implementing the act. OMB is now developing revisions
and additions to its current guidance on grants and cooperative
agreements to improve implementation of the act. The work is primarily
being conducted by two task groups composed of Federal officials,
private citizens, and representatives of interest groups under the
overall direction of OMB. Several proposals have been developed by the
task groups and are being considered by OMB.
The current OMB work addresses many of the matters discussed in this
chapter and a number of other issues developed during the study of
Federal assistance programs mandated by the act. We worked extensively
with OMB to identify and develop these issues and to discuss potential
revisions to the guidance. We also provided comments on the drafts
developed by the task groups and the OMB staff. Our interaction with
OMB has been very productive and, as a result, we believe a general
consensus has developed between GAO and OMB regarding a basic
interpretation of the act and how it should be applied to Federal
procurement and assistance transactions.
CONCLUSIONS:
The Congress established the act's criteria in part to promote
Government-wide uniformity and increased discipline in the selection of
procurement and assistance instruments. Although only two years have
passed since the act has been in effect, it is evident that
congressional purposes will not be fully realized unless OMB's guidance
is improved. The current guidelines to distinguish between procurement
and assistance do not clearly explain certain provisions of the act or
outline a structured procedure for making decisions. As a result,
Federal officials interpret key provisions of the act in ways we
believe yield results inconsistent with congressional intent. Further,
officials often inadequately review their authorizing legislation and
frequently supplement or do not use the act's criteria when deciding
which instruments to use.
Current guidance to distinguish between grants and cooperative
agreements is also unclear and incomplete. The terms used by OMB to
guide the decision between grants and cooperative agreements are too
vague for consistent application. Better definitions of normal
involvement, normal Federal stewardship, and substantial involvement
are needed to promote more consistent agency decisions.
Because data is lacking, and an understanding of the nature, purposes,
and uses of cooperative agreements is still evolving, it may be some
time before guidance to achieve Governmentwide uniformity in the
selection of cooperative agreements will be possible.
As an interim measure, differentiations between normal and substantial
involvement could be based on what is normal for each program and
whether some recipients are treated differently from the norm. This
approach will provide agencies with a more structured basis for
defining this involvement and should produce more uniformity within
each program, because it takes into account the fact that agencies vary
their involvement depending on the recipient. Further improvements to
OMB's guidelines could then be developed by studying the nature of
involvement associated with the cooperative agreements.
OMB is taking steps to revise its guidelines. OMB staff generally
concur with our interpretations of the act and what should be done to
improve its implementation. The proposed revisions may be published in
the next several months.
RECOMMENDATIONS TO THE DIRECTOR, OMB:
To improve the selection of procurement contracts and assistance
instruments, OMB should revise its guidance on the Federal Grant and
Cooperative Agreement Act to:
* More clearly define the terms "direct benefit and use" as they relate
to the selection of contracts and "accomplishing a public purpose of
support or stimulation" as it relates to assistance.
* Require Federal program officials to base instrument choices on the
Federal purpose in the relationship established after (1) reviewing
their authorizing legislation to determine their authority to procure
or assist, and (2) reviewing each proposed transaction in light of the
act's criteria.
* Clearly state that section 7(a) of the act does not create new
authority to make assistance awards independent of program legislation.
To help Federal officials identify potential awards where a cooperative
agreement might be appropriate we also recommend that OMB revise its
guidance specifically related to cooperative agreements. The revisions
should:
* Define normal involvement, normal Federal stewardship, and
substantial involvement. This could be accomplished by adopting our
suggested interim program approach for assessing levels of involvement
with program recipients.
* Recognize that highly prescriptive requirements prior to award
limiting recipient discretion may constitute substantial involvement
during performance whether or not they are coupled with close agency
monitoring of, or operational involvement with, the recipient.
* Provide more detailed and complete illustrations of agency practices
which can be considered as substantial involvement.
AGENCY COMMENTS AND OUR EVALUATION:
OMB and four of the responding Federal agencies generally agreed with
our recommendations. With one exception, OMB is taking action to
improve its guidance on how agencies should choose among procurement
contracts, grants, and cooperative agreements. OMB disagrees, however,
that highly prescriptive requirements may be an indicator of
substantial involvement during performance whether or not they are
coupled with close agency monitoring of, or operational involvement
with, the recipient. This is discussed further below. The responses of
other agencies ranged from general agreement with the thrust of the
chapter to substantive disagreements on some points.
An analysis of the comments, particularly where major disagreements
exist, and our evaluation follows. In cases where several agencies
generally agreed with us or did not provide specific comments, we have
concentrated on OMB's comments.
Distinguishing between procurement and assistance:
OMB agreed with our interpretation of section 4(1) and said it will
include an expanded discussion of the terms "direct benefit and use"
and "accomplishing a public purpose of support or stimulation" in its
revised guidance. OMB did express a reservation, however, about
requiring a review of each transaction. OMB believes that for the vast
bulk of assistance and procurement actions a transaction level review
is not necessary and in its revised guidance will call for such reviews
only for those transactions that require it. Although we recognize that
most decisions on individual transactions will be routine in nature,
particularly when the guidance is revised, we believe it will be
difficult to identify those that are non-routine without some review of
each transaction.
HUD, Justice, and the Department of Transportation (DOT) disagreed with
our interpretation of section 4(1). We believe that Justice
misinterpreted our position by inferring that we were of the opinion
that contracts are the only appropriate instruments for intermediary
relationships. In our opinion, an assistance instrument is appropriate
if the intermediary is authorized to be assisted and assistance is the
nature of the relationship. This is the same basic view held by Justice
and we therefore believe there is no real disagreement. HUD and DOT,
however, have fundamental differences of opinion with our
interpretation.
HUD disagrees with our position that assistance awards can only be made
to intermediaries when they are statutorily authorized to receive such
assistance. HUD basically espouses the view that in intermediary
situations direct benefit and use occurs only when the Federal
Government actually receives the product or service produced by the
intermediary. If the product or service is delivered instead to a third
party which is authorized to receive Federal assistance, HUD contends
an assistance award can be made to the intermediary. We continue to
disagree with this argument as explained on page 10 of this chapter. In
addition, Justice's comments point out that the act's definition of
"other recipient" supports our position. The act defines other
recipient as a party "authorized to receive Federal assistance or
procurement contracts * * *." (Emphasis added.)
HUD goes on to recommend deferring issuance of our report until OMB's
new guidance is completed. In that most agencies found our report
useful, we believe that its issuance will contribute to improving OMB's
guidance.
DOT believes that the "direct benefit and use of the Federal
Government" language in section 4(1) has contributed to misuse of
assistance instruments in procurement situations and believes that the
language should be removed from the statute. In intermediary
situations, DOT, similar to HUD, believes that the "direct benefit and
use" language forces it to use grants or cooperative agreements unless
the Federal Government is the direct recipient or user of an
intermediary's product or services. Because DOT believes that
transactions with intermediaries generally should be by contract, it
has used section 4(2) of the act to require the use of contracts with
intermediaries. Section 4(2) authorizes agencies to use contracts in
specific instances where they determine the use of a type of contract
is appropriate.
The basic thrust of DOT's argument is considered in our discussion of
section 4(1) and we find no need to alter that presentation. As to
DOT's contention that the act must be amended, we do not believe that
is necessary. When section 4(1) is applied to the immediate
relationship between the Federal Government and the recipient as we
outline in this chapter, we find that section 4(1) yields results
consistent with the act's intent. What is needed is improved OMB
guidance on the application of section 4(1) and more training of
officials on how to apply the act. As noted above, OMB agrees with our
interpretation of 4(1) and plans to revise its guidance accordingly.
Section 4(2) is, in effect, a second line of defense which expresses
congressional preference for contracts in intermediary situations.
OMB agreed with our interpretation that section 7(a) of the act does
not create new authority to make assistance awards independent of
program legislation. OMB said it will include such a statement in its
revised guidance. EPA also agreed with us on section 7(a) but pointed
out that our draft report characterized EPA as disagreeing with our
interpretation. We revised appropriate sections of this chapter to
indicate that only certain EPA officials held a contrary opinion on the
interpretation of section 7(a).
ACTION did not believe our interpretation of section 7(a) was
persuasive. It commented that a reasonable interpretation of the
legislative history can also support an opinion that section 7(a)
allows agencies to use grants and cooperative agreements even where
their program legislation only authorizes contracts, unless such
legislation specifically prohibits such assistance activities. To the
extent there is disagreement on the Congress' intent, ACTION believes
clarification should come from the Congress rather than OMB.
Although we agree that section 7(a) allows an agency to use grants and
cooperative agreements where it was previously restricted by program
legislation to using contracts, this should only occur when the program
legislation actually describes an assistance relationship. To permit
agencies to use either of the instruments irrespective of program
legislation would be inconsistent with the congressional purposes of
providing criteria for, and promoting more uniformity in, the selection
and use of contracts, grants, and cooperative agreements. For this
reason and because OMB, which has statutory responsibility for issuing
interpretative guidelines, also shares our view, we do not believe
congressional clarification is required.
Distinguishing between grants and cooperative agreements:
OMB agreed to clarify its guidance on the terms normal involvement,
normal Federal stewardship, and substantial involvement. However, OMB,
ACTION, and the Departments of the Interior and Energy expressed
concern with our suggested interim program approach to better defining
substantial involvement.
The four agencies generally believed our interim approach could be
counterproductive because later OMB guidance or experience might cause
agencies to reverse decisions based on that approach. The magnitude of
changes that may occur is difficult to predict. We do not believe,
however, that changes would be necessarily undesirable. Indeed, the
Congress anticipated that an evolutionary process might be needed to
refine the meaning of grants and cooperative agreements.
Interior also questioned our interim approach because it believes
normal involvement will not be any easier to define than substantial
involvement for a given program. We found that officials' inability to
determine whether substantial involvement was present often stemmed
from a lack of knowledge about how other programs operated. Our
thinking in suggesting the interim approach is that officials usually
do know what is normal involvement for their own programs. Basing
decisions on what level of involvement occurs most frequently (or is
normal) within the program is a more natural starting point for these
officials than concentrating first on what constitutes substantial
involvement, which is now basically undefined.
Energy and ACTION commented that under our interim approach a given
recipient can receive different types of assistance instruments for
different programs where the Federal involvement is essentially
identical. We recognize this could occur, but we believe that such
inconsistencies can also result from OMB's current guidance. We believe
such inconsistencies can be reduced, however, by an agencywide analysis
and comparison of program decisions.
We therefore added material to the report to emphasize that program
decisions should be reviewed at a policy level. This review would
promote more uniformity by determining whether the normal level of
involvement for a particular program is actually substantial compared
to other programs within the agency. If so, that program would
generally award cooperative agreements. This review procedure could be
incorporated into the policy level review of program decisions
currently required in OMB's guidance.
We recognized in offering our suggested approach that some
inconsistencies would continue and some changes might be needed as more
operating experience is gained. However, we perceived the need for
agencies to have a more structured basis to distinguish among normal
involvement, normal Federal stewardship, and substantial involvement.
We therefore offered the interim approach as a suggestion and are
pleased that OMB considered it constructive and will give it serious
consideration.
DOT did not comment on the interim approach but rather took issue with
the act's basic structure. It said the cooperative agreement category
is not needed, is confusing, and only provides further opportunities
for program officials to avoid procurement regulations. DOT believes
the Congress should amend the act to delete the cooperative agreement
category. We disagree because revised guidance should help to eliminate
confusion, reduce opportunities for avoiding the procurement system,
and make the cooperative agreement a more meaningful category of
assistance. DOT also suggested that the original purpose of the act can
be more easily achieved by establishing subcategories of assistance
similar to the subcategories that exist within procurement. We believe
this is what the act in effect began to do by dividing the assistance
system into the subcategories of grants and cooperative agreements. The
Congress anticipated that further standard subcategories, such as loans
and subsidies, would be established in the future.
Finally, OMB, Justice, and Energy disagreed with our recommendation
that OMB's revised guidance should recognize that highly prescriptive
pre-award conditions, even if they are not accompanied by close
monitoring or operational involvement during performance, may
constitute substantial involvement. They believe that these
requirements must be accompanied by close monitoring or operational
involvement after the award is signed. They hold this opinion, as OMB
indicated, because "involvement during performance of an activity must
actually occur during the performance period". In our opinion, when an
agency includes highly prescriptive requirements in an award their
effect on the recipient usually comes during performance. For example,
we found that agencies sometimes write requirements into awards that
condition future funding on the completion of specified activities
within prescribed time frames. Through such requirements, an agency
clearly influences the recipient's activities during an award period
and, in our opinion, this may constitute substantial Federal
involvement. Close monitoring for compliance may occur, but even
without it, the recipient must comply or risk audit disallowances,
funding reductions, or disqualification for future awards. Therefore,
we continue to believe that highly prescriptive requirements, by
themselves, are a potentially useful indicator of substantial
involvement.
CHAPTER 3:
STRONGER OMB AND AGENCY MANAGEMENT EFFORTS NEEDED TO IMPLEMENT THE ACT:
The steps taken by OMB and Federal agencies to implement the act have
not been totally effective. Enough effort has not been made to bring
the act to the attention of Federal officials responsible for its
implementation. Most of the Federal agencies we reviewed had issued
guidelines implementing the act. But some agencies issued their
guidelines late and several agencies have not issued final guidelines.
Agencies also have not established effective mechanisms to insure that
agency officials use the guidelines or apply them properly.
As a result, many Federal officials do not know of the act or have
inadequate information to apply it. Other Federal officials are
resisting the use of the act because they fear they must change the
type of instrument used to the detriment of their programs. They
believe these changes will disrupt relationships with their recipients
and possibly cause some recipients to withdraw from their programs.
THE CRITERIA OF THE ACT ARE FREQUENTLY NOT BEING USED:
In many programs, the act's criteria are not being used to select the
appropriate instruments. This is partially due to the interpretation
problems discussed in chapter 2. Frequently, how ever, Federal program
officials both in Washington and the regions were not aware of the act.
Further, when agencies had published guidance, most regional officials
we contacted were unaware of it. In some programs, Federal officials
were aware of the act but were trying to be excluded from its coverage
or were discouraging its use by regional officials.
Federal and recipient officials frequently do not know of the act:
Many Federal officials are not implementing the act because they do not
know of it. Our telephone survey indicated that, Governmentwide,
responsible officials in an estimated 43 percent of all programs did
not know about the act. For the six largest agencies this percentage
ranged from 37 to 63 percent. Although they did not know of the act,
about 84 percent of these officials said that they do use one or more
of the act's instruments. This is not surprising in that the terms
contract and grant have been traditionally used to describe Federal
financial relationships.
Federal regional officials and recipients of Federal aid we contacted
were also generally unfamiliar or only slightly familiar with the
criteria of the act or OMB's guidance. For example, in one region, of
30 officials we interviewed in nine agencies, 10 officials were not
familiar with the act and 10 were only somewhat familiar.
We also made limited contacts with recipients of Federal aid. Like many
of the Federal officials, they were generally unaware of the act or its
provisions. During our survey work in 1979 in one State, none of the
officials of six recipient agencies could discuss the act or its
purposes. Officials of four of these six agencies had not even heard of
the act. Recipient officials we interviewed in our detailed review work
during 1980 also had limited knowledge of the act. When they were aware
of the act some Federal officials and recipients of Federal awards
wanted to know more about it and were concerned about how they would be
affected by Federal decisions implementing the act.
Attests to resist complying with the act:
Some Federal officials are trying to exclude their programs from
coverage of the act or are reluctant to use the act's criteria because
unwanted changes in required instruments could occur. Federal officials
believe that the changes will (1) cause recipients to discontinue
participation in their programs, (2) complicate working relationships
with recipients, and (3) increase the likelihood of lawsuits against
the Federal Government.
Federal officials have not substantiated their concerns, however, and
there is some evidence that their concerns are overstated. Although
significant changes in types of instruments and practices are possible,
experience is needed before a valid assessment of the act can be made.
The act gave OMB authority to except transactions and programs from the
act's coverage for those cases where harm can be demonstrated by
Federal agencies. Bills to extend this authority, which lapsed in March
1981, are being considered in the Congress.
Attempts to be excluded from coverage of the act:
Officials in several agencies expressed concern that compliance with
the act would cause recipients to discontinue participation in their
programs. For example, Social Security Administration (SSA) officials
sought and obtained legislation they believe excludes the Disability
Insurance program from the act's coverage. The Disability Insurance
program utilizes States to make determinations of eligibility for
Federal disability insurance payments. Officials said they were not
willing to use contracts with the States because, in their view, States
would not accept contracts and would drop out of the program. If the
States drop out the Federal Government would, by law, have to make the
disability determinations with Federal personnel.
Presently, SSA enters into agreements with the States but does not
strictly follow procurement or assistance rules and procedures. SSA
officials are aware that the relationship with States under the
Disability Insurance program is not one of assistance, but rather a
purchase of services. Their concern about States' participation is
based on States' resistance to agreements developed by SSA which were
intended to clarify roles and responsibilities. One SSA official said
the States were not willing to accept the added controls, several of
which were procurement clauses, in the new agreements. According to SSA
statistics, 21 of the States, as of June 1980, have signed these new
agreements.
Even before SSA obtained the apparent legislative exemption, SSA
officials said they did not plan to implement the act. Because of SSA's
plans not to implement the act, we contacted OMB to deter mine whether
an exemption had been granted. An OMB staff member told us that SSA had
not been granted an exemption and should classify these agreements as
contracts, cooperative agreements, or grants. After SSA officials said
they had the legislative exemption, we again contacted OMB. OMB
officials did not know that SSA had sought a legislative exemption, and
they had not taken action to resolve this matter with SSA.
The Department of Agriculture's Forest Service is currently preparing
draft legislation that would create a new class of transactions for its
programs. A Forest Service official said that in the interim the
Service has moved to implement the act and is now using procurement
contracts for many transactions it previously entered into with
cooperative agreements but which no longer meet the act's definition of
cooperative agreements. This official said, however, that recipients
are unhappy with the contracts because they must comply with
procurement regulations and requirements.
He said some States claimed their laws prohibit them from accepting
contracts. This official acknowledged that the Forest Service has not
verified the States' claim but has nevertheless requested an OMB
exemption. An OMB official said that the office had not granted an
exemption to the Forest Service upon its original request, because data
submitted by the Forest Service did not support its claim that
exemptions are needed. OMB, however, told the Forest Service to use
existing agreements in three programs while discussions continued on
those programs.
Federal officials have not clearly substantiated that contracts cannot
be used. There is some contrary evidence available to indicate that
States and local governments will accept con tracts. For example, the
Department of Labor, in its Job Corps Program, now uses some
performance-based contracts with States instead of grants. Under this
type of contract, payment is made by Labor for each person recruited
under the Job Corps program. Labor officials said they switched to a
performance contract because State and local governments were not
performing adequately under the cost reimbursement grant. According to
Labor officials, the cost per enrollee dropped dramatically after they
switched to performance contracts, and only a few States refuse to
accept a contract. At the time of our review, Labor had not pressed the
matter with these States and continued to award grants.
Limits on officials' authority to select instruments Although not
attempting to be excluded from the act's coverage, other program
officials have similar reservations about using instruments required by
the act. In an attempt to minimize perceived problems, Federal agencies
do not always allow officials making an award to choose the type of
instrument required by the act. In other words, agency officials are
sometimes required to use one type of instrument when another type may
be more appropriate.
Unless transactions are reviewed on a case-by-case basis, there is
little assurance that the instrument selected meets the criteria of the
act. For example, where a program has both procurement and assistance
authority, each transaction must be reviewed to insure that it has been
designated properly. As described in chapter 2, Federal officials must
determine the purpose and characteristics of each transaction, whether
authority exists to issue an assistance award, and how much involvement
is contemplated for each recipient. The extent of involvement often
varies within programs depending on the recipient, indicating the need
for case-by-case decisions on whether a grant or cooperative agreement
is most appropriate.
In spite of this need to decide between different types of instruments,
many regional officials told us they do not have the authority to
determine what instruments are appropriate for given transactions.
Although agencies' implementing guidelines may not specifically
restrict their authority, regional officials told us that restrictions
occur through headquarters interpretations of the guidance or decisions
that a certain type of instrument will be used on a programwide basis.
This is sometimes deliberately done to discourage the use of
cooperative agreements. For example, an EPA headquarters program
official was concerned that a change to a cooperative agreement could
cause confusion on the part of recipients. Although he recognized the
program should use cooperative agreements, the official said he did not
want mayors throughout the nation upset because of a name change in the
award. EPA finally decided to permit the use of both grants and
cooperative agreements, but a regional official said he understood only
grants are to be used. Similarly, CSA headquarters officials were
concerned that their regional officials might use cooperative
agreements to gain more control over recipients than might be
appropriate and therefore sought to limit regional officials knowledge
of the act and thus discourage them from using cooperative agreements.
We believe regional officials should be informed of any agency
policies, and how they should be applied in order to effectively
implement them.
In the case of HUD and Labor, regional officials who had heard about
the act and requested headquarters guidance were advised not to take
any action or be concerned about the act.
Fears of liability under a cooperative agreement:
Many Federal officials are also reluctant to use cooperative agreements
because they fear these agreements may increase the likelihood of
lawsuits against the Federal Government. This fear is based on their
belief that if the Government is substantially involved with the
recipient, the courts may consider the Federal Government to be
partially responsible for the recipient's actions.
In its letter commenting on OMB's draft guidelines, the Department of
Transportation's Urban Mass Transportation Administration (UMTA)
expressed concern that characterizing programs as "cooperative
agreements" might expose the Department to tort claims for the
negligence of recipients engaged in UMTA projects. UMTA is apprehensive
about this point because it believes a cooperative agreement could
possibly be interpreted as a joint venture with liability shared by
both parties.
Court decisions generally have not held that the Federal Government is
liable for the actions of recipients of Federal assistance. The courts
have held that although Federal funds are awarded to cover some or all
of the costs of recipients' projects, the projects themselves are
considered to be the recipients' and their direction and operation are
the recipients' responsibility.
A 1976 Supreme Court case, United States v. Orleans, 425 U.S. 807
(1976), suggests that the Government may transform a normal
relationship with an independent grantee into an agency relation ship
through the exercise of very close day-to-day Federal supervision of
the grantee. If a grantee is an agent of the Federal Government, the
Government may be financially responsible for the agent's conduct.
Although the Court has yet to find that a Federal grantee is an agent
of the Government, the suggestion has produced a number of lower court
cases where the argument has been made.
Courts, however, may be reluctant to allow the statement in Orleans to
become a means by which Federal officials can change the nature of the
congressionally authorized relationship through excessive zeal in day-
to-day supervision. In practice, the rule may well develop that no
matter how far Federal employees go in supervising grantee activities,
an agency relationship is not created unless expressly authorized by
the program legislation because:
* it cannot be shown that the grantee had to accept the offending
supervision under the terms and conditions of the award; and:
* if the relationship contains such elements of supervision as to make
the grantee an agent, it exceeds the agency's program authority and
accordingly cannot bind the Government.
So far, lower courts have also rejected the notion that the Government
might be subject to direct tort liability for acts of a grantee because
of some shortcoming in the way the Government has exercised its program
responsibilities over assistance programs. Ultimately, other theories
may raise a more substantial danger of increased Government liability
than the agency theory, where Government employees participate directly
in collaborative-type cooperative agreements. It seems possible that
under some facts where there is a combination of an instrument called
"cooperative agreement" and a Government employee actually
participating in the project activity the Government may be held liable
with a grantee.
We do not believe that the Congress intended that substantial
involvement in cooperative agreements would normally reach the point of
sharing responsibility. The report of the Commission on Government
Procurement explained that the cooperative agreement category was not
intended to establish a new assistance relationship, but rather to
divide the range of grant-type activities into two more descriptive
categories.
OMB's guidelines note that Federal agencies' statements of anticipated
substantial involvement "must be developed with care to avoid
unnecessarily increasing Federal liability under the assistance
instrument." We believe this guidance should be expanded to reflect the
issues that are developing in the courts and to emphasize that the act
itself does not authorize agencies to impose controls inconsistent with
their authorizing legislation.
AGENCIES NEED TO ESTABLISH BETTER IMPLEMENTATION SYSTEMS:
Under OMB's leadership, Federal agencies are responsible for insuring
that the act's criteria are observed in administering their programs.
Federal agencies, however, have not always taken timely or effective
steps to develop and distribute internal guidance and insure that it
was acted on.
Agency efforts to provide internal guidance and training have not been
timely or effective:
OMB issued guidelines implementing the act on August 18, 1978. However,
agencies have not issued internal guidelines in a timely fashion or
provided adequate training to their staffs. As of August 1980, 4 of the
10 agencies we reviewed had not issued final guidelines, and 2 other
agencies had not issued guidelines until early 1980. As previously
noted, our mid-1980 questionnaire showed that about 43 percent of
headquarters program officials did not know of the act. The status of
the 10 agencies' guidance as of August 1980, is shown below.
Status: Final in 1978;
Number of agencies: 2.
Status: Final in 1979;
Number of agencies: 2.
Status: Final in 1980;
Number of agencies: 2.
Status: Draft in August, 1980 (see note a); Number of agencies: 4.
Total;
Number of agencies: 10.
[A] Includes one agency's temporary guidance, which expired without
being finalized.
[End of table]
Agency guidance was issued late or has not been issued for several
reasons. Some agencies simply did not move in an expeditious manner. In
one agency for example, policy officials said draft guidelines "just
sat" in the Office of General Counsel for about 7 or 8 months. These
officials had earlier indicated to us that the guidelines did not have
a high priority with them. In other agencies there was internal
disagreement over the guidelines, and/or personnel assigned to work on
implementing the act were reassigned to other duties or left their
agencies.
Where agencies had issued guidance, Federal officials responsible for
implementing the act did not always have knowledge or copies of their
agencies' guidelines. For example, in April 1980, regional and
headquarters officials of one agency had not received agency guidelines
which had been issued in January 1980. In another agency, the region
had received and filed the guidelines but regional officials were not
aware of them at the time of our visit. These officials subsequently
told us the guidelines had been put into a general file and no action
was taken because no one was assigned responsibility for their
implementation. A somewhat similar situation occurred in the regional
office of another agency. In a regional office of a fourth agency,
agency guidelines were not being followed because most agency officials
we contacted were not knowledgeable about the act.
Agencies have held some training sessions on the act, but their
effectiveness is questionable. Early in 1980, a year after
implementation of the act was to be fully underway, most of the 10
agencies we reviewed had held few formal training sessions on the act.
The training that had occurred was usually informal, constituted a
general introduction to the act, and was not con ducted agencywide.
Only two agencies planned additional as training efforts. Despite the
training that had been offered, noted earlier, our mid-1980 telephone
questionnaire and work in two regions indicated that officials in many
programs did not know of the act, or wanted additional guidance. This
lack of effective guidance and training may also partially explain why,
on the basis of the results of our questionnaire, responsible officials
in about 86 programs who knew of the act said they have no plans to
implement it. Most of these officials believed the act did not apply to
their programs. However, on the basis of our questionnaire, we estimate
that 70 percent of the programs use at least one of the act's
instruments, and about one-third of the programs use two or more of the
act's instruments.
Effective agencywide oversight of implementation is lacking In its
guidance, OMB noted that the act was a preliminary step toward the long-
range overhaul of Federal assistance activities and advised agencies
they should anticipate extensive questions about the effects of
implementing the sections of the act dealing with the criteria for
using contracts, grants, and cooperative agreements. Accordingly, OMB
instructed agencies to develop systems of records that would allow them
to answer questions such as the number and type of award instruments
used, classes of recipients, criteria for determining which instruments
to use, and experiences and problems in implementing the act. OMB also
noted that the determinations of whether a program is principally one
of procurement or assistance and whether substantial Federal.
involvement will normally occur are basic agency policy decisions, and
agency heads should insure that the general decisions for each program
are made or reviewed at a policy level. OMB also asked agencies to
designate liaison officials to serve as focal points on matters
concerning the act.
All of the 10 agencies we reviewed designated liaisons as requested by
OMB. Most of them also either already had or subsequently established
assistance policy offices to which these officials were assigned.
However, most offices either lacked the authority, inclination, or
staff to oversee and assess the act's implementation.
In 6 of the 10 agencies we reviewed, the assistance policy offices did
not, in our opinion, have adequate authority or staff to insure that
implementation would be consistent or adequate. Officials in one
agency, for example, noted that although the program offices must,
according to policy, comply with guidance issued by the assistance
policy office, they are in practice very autonomous. One official of
this agency told us that his office was consistently unable to resolve
disputes with program offices. This same official also noted that due
to a lack of staff, he is unable to even review the additional guidance
that these offices publish.
In another agency there was evidence that top officials have not given
adequate support to the assistance policy office. Agency officials note
that although the agency's 62 assistance programs account for close to,
if not more than, half the agency's annual expenditures, there is only
one staff person responsible for agencywide assistance policy. They
said the agency has a bias toward procurement and has not provided
adequate support for assistance management. These officials said no
effort is made to oversee implementation of assistance policies. In a
third agency, a centralized assistance policy function has only
recently been established. A fourth agency does not have an office
responsible for agencywide assistance policy development and oversight.
It is debatable whether program decisions were made or reviewed at a
policy level as required by OMB. We encountered difficulties in
determining who made the decisions and on what basis they were made. It
is clear, however, that virtually none of the 10 agencies we reviewed
had placed significant emphasis on systematically gathering information
in anticipation of future questioning and monitoring how the act was
being implemented. To the extent agencies had monitored implementation,
it was usually on an informal, ad hoc basis. Officials often indicated
it was too early to monitor implementation or that they lacked staff to
undertake such work.
The lack of data gathering and monitoring has prevented agencies from
identifying whether and how their guidance was being used and whether
decisions were properly made and documented.
OMB OVERSIGHT OF AGENCY IMPLEMENTATION OF THE ACT SHOULD BE
STRENGTHENED:
OMB must rely on Federal agencies to implement the act but has not
developed a systematic approach to determine the extent to which the
act is being applied to Federal programs. Over time, it has become
apparent that proper implementation of the act is heavily dependent on
OMB oversight. As discussed in chapter 2, the act's criteria and OMB's
guidelines are being interpreted in divergent ways. Some oversight by
OMB has occurred, and in its report to the Congress required by section
8 of the act, OMB indicates that more investigation into the act's
implementation is needed.
However, in fulfilling its commitment, we believe OMB needs to devote
more attention to the manner in which it oversees agency implementation
and the way that it responds to issues brought to its attention.
OMB has primarily overseen the act's implementation on an informal, ad
hoc basis. To detect implementation problems it has relied extensively
on discussions with agencies' liaisons and periodic contacts with other
officials. The principal OMB effort to systematically gather data on
the act's implementation occurred in connection with the study required
by section 8 of the act. OMB required agencies to answer, by March 1,
1979, a series of questions concerning their experience in implementing
the act. However, many agencies did not respond, and, because agencies
had limited experience with the act, the answers from those that did
respond were limited in scope and completeness.
With its limited monitoring, OMB did identify several issues requiring
its attention. However, more monitoring is required to systematically
identify and resolve implementation problems. During our early review
work we advised OMB of inconsistencies in agencies' policies and
proposed practices concerning assistance awards to profit making firms,
payment of fees, competition, and certain provisions in its guidance.
Some agency officials had detected similar inconsistencies.
Accordingly, OMB is now developing new guidance on several of these
issues and plans to further investigate the act's implementation.
However, OMB does not believe it has sufficient authority to issue
legally binding interpretations of the act. Currently, OMB is
authorized by the act to issue supplementary interpretive guide lines.
According to OMB, Federal agencies have questioned whether such
interpretations are binding. To rectify this perceived problem, in its
1980 report OMB proposed to strengthen the act, to provide OMB specific
authority to issue implementing regulations. In our opinion, the
Congress clearly intended that OMB direct Federal agencies' actions.
Senate Report 95449 states that the act gives the OMB Director
authority "to issue Governmentwide guidance and to manage agency
implementation of the requirements of this Act." (Emphasis added.)
Although the informal procedures used thus far have identified some
issues, other issues have not been adequately identified and resolved.
In particular, OMB officials need better information on whether and how
agencies are implementing the act. For example, OMB was not aware that
two agencies are taking steps to amend program legislation to remove
several programs from coverage of the act. OMB officials said they have
no way to know what agencies are planning to do in such cases. They
said it is especially difficult to monitor appropriation legislation
because of time constraints. Although made aware of this matter, OMB
has not yet followed up to determine the appropriateness of the
agencies' actions.
The need for closer OMB monitoring of how agencies are implementing the
act is also supported by indications that some agencies may utilize
cooperative agreements in unique ways. For example, EPA believes that
the Congress intended for agencies to experiment with cooperative
agreements. The Department of Energy plans to utilize cooperative
agreements in a unique way by combining procurement and assistance
terms and conditions in individual transactions in order to use
procurement controls in an assistance environment. Although the
cooperative agreement instrument is still evolving, we believe OMB
needs to continually review its application to help insure that the
act's goal of uniformity is not lost and that clear differences are
maintained between procurement and assistance instruments.
OMB also needs to improve its means for documenting and responding to
problems identified through its monitoring activities. While it has
been relying on informal procedures for re viewing implementation, OMB
has not kept a record of issues raised in discussions with Federal
officials nor has it systematically communicated any verbal guidance
given in individual cases so that other agencies might benefit. For
example, OMB has provided some Federal agencies with interpretations of
its guidance on substantial involvement, section 7(a), and intermediary
transactions, but it has not issued supplementary guidance to other
agencies which also can be affected by its interpretations and policy
decisions.
Finally, OMB's ability to adequately monitor the act's implementation
may be constrained by staff availability. Administration of OMB's
guidelines rests with a small staff of four professionals whose work
has been basically confined to the OMB study and many followup projects
to develop new OMB policies. OMB supplemented this permanent staff with
personnel from Federal agencies to help conduct these activities.
Because of turnover in agency details, this temporary staff may not be
suitable for long-term monitoring efforts. Although we did not evaluate
the adequacy of OMB's staffing, we believe that more effort is needed
in monitoring implementation of the act.
OMB'S AUTHORITY TO EXCEPT PROGRAMS WAS BENEFICIAL AND SHOULD BE
RENEWED:
The Congress, recognizing that problems might arise in applying the act
to the many and diverse Federal programs, authorized the Director, OMB,
to except transactions or programs from the act. This authority,
contained in section 10(d), expired in March 1981.
OMB used the authority with restraint in the 3 years it was available,
excepting only the general revenue sharing and countercyclical aid
programs and nonmonetary grants. Requests for exceptions, although
infrequent, have involved significant issues and were carefully
reviewed. For example, had general revenue sharing been subject to the
act's provisions and classified as a grant, the attendant requirements
and procedures would have been counter to congressional intent on how
the program should operate. Because the act has not yet been applied in
a great many programs, we anticipate that additional cases will arise
in which the exception authority would be useful.
Other considerations also argue for renewing the authority. A principal
purpose of the act is to promote uniformity in the use of grants,
cooperative agreements, and contracts. Although there have been
numerous difficulties, as explained earlier, in achieving this purpose,
section 10(d) promoted greater consistency, since it essentially
empowered OMB to be the final arbiter on implementation of the act.
Future requests for exceptions might highlight other problems with both
the OMB guidance and the act by providing actual case examples
demonstrating how agencies apply OMB's guidance. Finally, reviewing the
requested exceptions could assist the Congress and OMB in judging
whether the act needs clarification or whether it is being properly
interpreted by executive agencies.
OMB recognizes that the exception authority was useful and has
requested congressional renewal of the authority. Bills have been
introduced in both the Senate and House which would renew this
authority.
CONCLUSIONS:
OMB and Federal agencies have not aggressively implemented the act. The
administrative systems needed to achieve the act's objectives have not
been established. OMB provided implementing guidance to Federal
agencies but has not actively monitored its use. Among Federal
agencies, steps to implement and administer the act have not always
been timely or effective.
Many Federal officials have insufficient information on how to meet the
objectives of the act. Frequently, the act's criteria are not being
used when decisions are made to use grants, cooperative agreements, or
contracts to award Federal funds. This is due in part to the problems
discussed in chapter 2. It also indicates, however, the need for more
training on the application of the act and OMB's guidance.
Federal agencies have not placed a high priority on implementing the
act. Internal guidance and efforts to oversee the act's implementation
have been limited. From the perspective of some Federal officials there
are disincentives to implementing the act, such as disrupting ongoing
relationships with grantees and increasing the likelihood of lawsuits
against the Federal Government.
If the objectives of the act are to be attained, OMB and Federal
agencies need to place increased emphasis on the administration of the
act. Both need to establish better coordination and oversight
mechanisms to ensure that officials' awareness of the act is increased,
that variant practices and procedures are identified and resolved, and
that policies conform with the objectives of the act.
Implementation of the act would also be facilitated by renewing the OMB
exception authority previously provided by section 10(d). Until the
authority expired in March 1981, OMB used it judiciously. Continued
exception authority would be beneficial in (1) acting as a safety
mechanism when application of the act's provisions might not be
practical, (2) promoting consistent use of the act's instruments, and
(3) providing both the Congress and OMB useful information for
assessing implementation of the act and OMB's guidance.
RECOMMENDATION TO THE CONGRESS:
In order to accommodate potential unanticipated consequences from the
act's use and to facilitate consistent implementation, we recommend
that the Congress renew, without time limit, OMB's authority to except
individual programs or transactions from the act's provisions.
RECOMMENDATIONS TO THE DIRECTOR, OMB:
To improve the administration and monitoring of the act, we recommend
that the Director, OMB:
* Direct Federal agencies to (1) develop administrative systems
necessary to implement and monitor compliance with the act, (2)
identify emerging problems so that revisions to policies and procedures
can be considered, (3) provide adequate staff training and technical
assistance on the act and OMB guidelines, and (4) develop systems of
records on their operating experiences in implementing the act.
* Actively monitor the implementation by Federal agencies to assure
that OMB policies and guidelines are carried out uniformly and in a
timely manner.
* Establish an effective, ongoing system to document and respond to
problems identified during monitoring activities.
* Revise the OMB guidance to provide more insight into how agencies can
avoid unnecessarily increasing Federal liability under cooperative
agreements.
AGENCY COMMENTS AND OUR EVALUATION:
OMB agreed in a general sense that the executive branch must improve
management of all requirements which are generally applicable to
assistance programs. Because the Federal Grant and Co operative
Agreement Act is but one of approximately 60 such requirements, OMB
plans to address the problems we identified as part of a broader effort
with primary emphasis on helping Federal agencies to better manage
themselves. Accordingly, it will soon issue a new OMB circular on
general assistance policies and include the revised guidance on the act
as an attachment.
OMB's planned approach is a positive response to our recommendation and
should foster better management of Federal assistance programs. We
agree with OMB that the responsibility for good management must rest
with the assistance agencies and that many of the problems can be
resolved by agencies themselves once their internal management systems
are developed to the point that they are routinely used. We believe,
however, that OMB still needs to adopt a more active monitoring role.
The Department of Energy expressed some reservations about the need for
more OMB oversight of the act's implementation. Energy officials
believe that increased oversight will be of little value until better
guidance is published and, conversely, with better guidance there will
be less need for OMB oversight. We continue to believe that more
oversight is needed. As pointed out in chapter 2, OMB's guidance is
still evolving. In the interim, monitoring will (1) enable OMB to
gather the data needed for periodic revisions and (2) help promote the
uniformity in use of grants, cooperative agreements, and contracts
envisioned by the Congress.
ACTION was concerned that developing adequate administrative and
monitoring mechanisms for implementing the act would increase the
regulatory and paperwork burdens on Federal agencies. We recognize that
some increase in burden may result, but we do not believe that the
increase needs to be substantial. More importantly, we believe the
virtual absence of any administrative and monitoring systems that we
found in some agencies must be rectified if the act is to be adequately
implemented.
Finally, OMB agreed to revise its guidance to provide more insight into
how agencies can avoid unnecessarily increasing Federal liability under
cooperative agreements.
CHAPTER 4:
NEED TO DEVELOP DIFFERENCES IN OPERATING PROCEDURES FOR GRANTS,
COOPERATIVE AGREEMENTS, AND CONTRACTS:
The Federal Grant and Cooperative Agreement Act was intended to do more
than provide standard criteria to help ensure the proper selection of
contracts, grants, and cooperative agreements. In passing the act, the
Congress also envisioned (1) a reduction in unnecessary administrative
requirements in Federal assistance programs, (2) a better understanding
of Federal and recipient roles and responsibilities under the various
types of relationships covered by the act, and (3) improvements in the
management and oversight of Federal assistance programs. These purposes
are not likely to be realized without further efforts to make the act's
distinctions more meaningful and to utilize the act more fully in
reforming the assistance system.
The purposes of the act will be advanced through improved guidance and
management procedures as discussed in the preceding chapters. Choices
among contracts, grants, and cooperative agreements must have
discernible consequences in operating procedures, if the choices are to
be meaningful. However, the consequences of selecting between
instruments are often not clearly known. Currently, there are
differences between the procedures for procurement contracts and
assistance agreements, although these differences seem to be gradually
eroding. In the assistance arena, no such obvious difference exists
between grants and cooperative agreements. To many officials, the
choice constitutes a distinction without a difference in terms of
operating procedures.
If operational distinctions are developed (1) Federal officials will
have more incentive to select the appropriate instrument, (2) the
instrument choice will better facilitate communicating the respective
roles and responsibilities of the Federal Government and recipients,
and (3) the Congress and executive agencies should be better able to
oversee the implementation of Federal programs.
DIFFERENCES BETWEEN PROCUREMENT AND ASSISTANCE PROCEDURES APPEAR TO BE
ERODING:
Different laws, regulations, and procedures apply to procurement
contracts and assistance awards. However, these differences are eroding
as Federal officials turn to procurement for precedents to apply in
assistance awards. This will continue until a decision is made as to
the extent and nature of the differences that should exist between
procurement and assistance.
Because the Congress perceived that the Government's purpose is
different in a procurement relationship from an assistance
relationship, it clearly intended that the requirements associated with
these two basic relationships would also differ. For instance, Senate
Report 95449 noted that one effect of the act would be:
"When an agency, complying with the criteria established herein,
changed the award mechanism for a particular activity from a type of
grant to a type of procurement contract, then the procurement
regulations would apply. Conversely, when an agency changed the award
mechanism from a type of procurement contract to a type of grant, the
regulations and statutes applying to procurement contracts would no
longer apply. The regulations and statutes applying to transactions of
Federal assistance would apply."
The differing requirements for procurement contracts and Federal
assistance awards exist in statutes, regulations, and OMB guidance. For
example:
* Procurement contracts are subject to some laws which either are not
applicable to assistance awards, e.g., the Service Contract Act and
Small Business Investment Act as amended; or laws which are not usually
applied to assistance, e.g., Buy American Act and Walsh-Healey Act.
Conversely, assistance awards are sometimes covered by acts which do
not apply to procurement contracts, e.g., the Joint Funding
Simplification Act, and the Intergovernmental Cooperation Act of 1968
(excluding Title V).
* Procurement contracts are subject to the Federal Procurement
Regulations or Defense Acquisition Regulations. Assistance awards are
not subject to these regulations nor is there a cohesive body of
regulations covering assistance.
* Procurement contracts are subject to some OMB circulars which are not
applicable to assistance awards, e.g., A109, Major Systems
Acquisitions, and A76, Policies For Acquiring Commercial Or Industrial
Products and Services for Government Use. Conversely, assistance awards
are subject to some circulars which do not apply to Federal procurement
awards, e.g., A102, Uniform Administrative Requirements For Grants-in-
aid to State and Local Governments.
The overall differences between the requirements governing procurement
contracts and assistance awards nevertheless seem to be decreasing as
Federal officials sometimes turn to the precedents of the procurement
system when:
* selecting clauses to be included in assistance award documents;
* designing competitive procedures for assistance awards;
* establishing procedures to debar recipients who have not performed
well in the past from receiving future Federal awards; or:
* resolving disputes under agencies' internal procedures, under GAO's
bid protest procedures, and in the courts.
The convergence of procurement and assistance rules and regulations has
also flowed from the increasing use of both to achieve social or
economic goals. During the explosive growth of assistance programs over
the past three decades, the Congress and Presidents have attached
requirements promoting social or economic goals to both systems. For
example, the Davis-Bacon Act, which applied originally to construction
work under Federal contracts, has been applied by the Congress through
program statutes to construction under various Federal assistance
programs. Similarly, Executive Order No. 11246 on discrimination due to
race, color, religion, sex, or national origin, applies to both
procurement and financial assistance programs.
The procurement and assistance systems should not become fully
overlapping. We believe that the characteristics of Federal assistance
relationships fundamentally differ from those of procurement
relationships and, accordingly, it would be inappropriate to have one
system of requirements that does not adequately provide for different
treatment of the two relationships. Further, if the two systems
converge, there will be less incentive to choose the appropriate
instrument as required by the act because the choice would have few
practical consequences. A lack of practical consequences flowing from
the choice of instrument would also defeat the act's purpose of having
each type of instrument clearly reflect the kind of relationship
intended. Executive branch officials, who are responsible for
assistance policy, have also expressed concern about excessive overlap
of the two systems or inappropriate use of procurement principles in
assistance relationships.
An example of where assistance procedures should differ from
procurement is the power to terminate for the convenience of the
Federal Government. In procurement, when a situation changes so as to
nullify the Government's need for the product or service, the
Government has the option of terminating all or part of the contract
before its agreed upon completion and making a reasonable settlement
with the contractor. In assistance relationships, the Federal
Government's and the recipient's interests coincide. Accordingly, a
similar option would not seem appropriate without specific
restrictions. Although the Government may change its objectives, it
would not seem appropriate that it have an unrestricted power to
unilaterally terminate what was intended to be a project of mutual
interest.
If terminations for Federal convenience are permitted in assistance,
restricting them to the ends of funding periods would allow for more
orderly transitions in which the assisted recipient could either find
other resources or phase down its activities over time. Nevertheless,
some Federal officials feel a need to be able to terminate for
convenience in assistance programs, and provisions for unilateral
Federal terminations appear in assistance guidance or actual assistance
award documents.
Identifying what differences should exist between the two systems will
be difficult because some elements of procurement can be reasonably
applied to assistance. For example, assistance agreements have long
been recognized by the courts and the Comptroller General as forming a
type of contractual relationship between the Federal Government and the
recipient. Therefore, certain principles or practices that have been
developed under procurement law would seem appropriate for application
in total or a slightly modified form to assistance relationships.
The Federal purpose in the relationship should be the key to
determining which features should be unique to each system, or how the
same overall feature might differ in scope or emphasis depending upon
the system to which it is applied. The purpose in procurement, to
acquire something, leads to rules and regulations which are designed to
protect and promote the Federal interest while allowing the potential
contractor a fair opportunity to compete and, where profits are
permitted, a reasonable profit. The purpose of assistance relationships
is to support or stimulate a recipient so that it can carry out an
activity coinciding with a Federal statutory objective. The common
interest of the Federal Government and the recipient in achieving an
objective should therefore be reflected in assistance roles and
regulations.
DIFFERENCES BETWEEN GRANTS AND COOPERATIVE AGREEMENTS NEED TO BE
ESTABLISHED:
Currently there are no standard operational differences between grants
and cooperative agreements. The potential utility of these
classifications cannot be fully realized until operational differences
are established. The lack of operational differences is primarily due
to the newness of the cooperative agreement instrument to most
agencies, to the equal application of OMB circulars to both grants and
cooperative agreements, and to the lack of knowledge of the full range
and diversity of agency involvement with recipients.
The operational consequences of choosing a grant or a cooperative
agreement are presently so unclear that some officials consider the
choice to be a distinction without a difference. Officials ranging in
responsibility from those establishing agencywide assistance policies
for hundreds of programs to those associated with individual programs
have expressed sentiments that the grant versus cooperative agreement
choice has no practical impact. However, some of these officials
nevertheless do foresee potential benefits if meaningful distinctions
were made. For instance, some officials believe that if the grant
versus cooperative agreement choice were made meaningful, then both the
Congress and agencies could make more intelligent analyses and
decisions about how programs are and should be operating.
As discussed in chapter 2, Federal officials do not understand how to
identify or use a cooperative agreement. The act took what used to be a
very broad category of assistance relationships, known as grants or
grants-in-aid, and divided it into two subsets-grants and cooperative
agreements. Although cooperative agreement relationship-assistance
relationships where the Federal Government was substantially involved
with recipients had been present in agencies, they had not been
systematically identified as such nor were they administered under a
separate set of rules and procedures.
OMB's decision to apply Circulars A102 and A110 to both grants and
cooperative agreements was ultimately based on a passage in the act's
legislative history which implied that it should apply the circulars to
both instruments. These two circulars establish uniform financial and
other administrative requirements for grants-in-aid to State and local
governments and for grants and agreements with institutions of higher
education, hospitals, and other nonprofit organizations, respectively.
We believe that the Congress intended that the circulars be applied to
both instruments as an interim measure while improved guidance was
being developed. In conducting the study required by section 8 of the
act, OMB did leave open the possibility of building upon existing
guidance; however, it did not produce such revised Governmentwide
guidance.
Many officials believe that OMB's decision to apply Circulars A102 and
A110 to both grants and cooperative agreements significantly limits the
ability to create operational differences between the instruments. HHS
officials, for example, believe that because the circulars prescribe
uniform administrative requirements and constrain agencies from
expanding the requirements, applying them to cooperative agreements
limits potential Federal involvement in a recipient's administration of
an award. Consequently, these officials conclude that the ability to be
substantially involved is restricted to matters relating to the program
itself, such as who is to be served and how. But Federal officials
often reason that they still need an ability to vary reporting and
financial controls.
Federal officials' perception that these circulars effectively limit
their ability to create operational differences between grants and
cooperative agreements are not entirely accurate. Both circulars allow
some variability in how agencies can treat their recipients. The
broadest allowance for variability exists under the circulars'
Exceptions for certain recipients provisions. The exceptions provide
that "if an applicant/recipient has a history of poor performance, is
not financially stable, or its management system does not meet the
standards prescribed in the Circular, Federal agencies may impose
additional requirements as needed provided that such
applicant/recipient is notified in writing as to:
(a) Why the additional standards are being imposed;
(b) What corrective action is needed."
When exercising the exception, agencies do not need to obtain prior
approval from OMB but must send a copy of the recipient notification
letter to OMB.
Although some of the circulars' provisions afford the opportunity for
variations on the basis of whether a grant or cooperative agreement is
being used, we believe the circulars should be revised to establish
clear operational differences for grants and cooperative agreements.
Within OMB there is some sentiment that developing separate terms and
conditions for each type of instrument may be desirable, but an agency
decision on this has not been made.
As an approach to restructuring the circulars, we would suggest that
the provisions be analyzed to identify (1) minimum requirements for
each guidance provision, such as closeout procedures or frequency of
financial reports, (2) optional requirements above the minimum, but
still consistent with a grant relationship, and (3) requirements above
those available in grants that are consistent with and can only be used
in a cooperative agreement relationship. Under this structure, the
optional requirements for both grants and cooperative agreements would
be available only when program officials judge they are needed and
would better express the nature of Federal involvement. Some
hypothetical revisions to A102 and A110 are illustrated in the table on
page 57.
Attachments H of A102 and G of A110, which provide for uniform
financial reporting requirements, specify that financial reports are
not to be required more than quarterly or less than annually. In a
hypothetical restructuring of this guidance provision, the "not less
than annually" provision could be viewed as the minimum considered
necessary for adequate Federal stewardship. The provision allowing up
to quarterly reports provides a range of normal reporting requirements
that could also be permitted in grant relationships. In situations
where a recipient has not properly accounted for Federal funds from
prior awards or is a new recipient that the agency wishes to assist in
establishing a good accounting process for the Federal funds, an agency
might want to obtain financial reports on a monthly basis. Since an
agency would want these monthly reports because it determines more
involvement with the recipient is needed, requiring financial reports
more frequently than quarterly might be a logical option available only
under cooperative agreements. Finally, even under cooperative
agreements, to insure against an unreasonable frequency of reports an
absolute maximum of monthly reporting could be established which could
not be exceeded without OMB approval.
Hypothetical Revision To Selected A102 And A110 Provisions:
[See PDF for image]
[End of table]
Just as the guidance on frequency of financial reports could be
modified to coincide with the act, so could the guidance on the
contents of reports. Attachments H and G of A102 and A110,
respectively, also specify, through a set of standard reporting forms,
what financial information can be obtained from recipients. However,
not all of the information on the reports has to be collected since
agencies can waive information requirements if deemed unnecessary for
decisionmaking. These permissible information requirements could be
rewritten to specify which financial information requirements could
never be waived, that is, are the minimum necessary for prudent
stewardship. The rest of the currently allowable financial information
requirements on the standard forms might then also be available under
grant relationships. Finally, requiring information beyond that on the
standard forms could be designated as an option available only when
needed and only under cooperative agreements.
A third guidance provision that could be restructured to parallel the
act's provisions is the frequency of monitoring visits. Both A102 and
A110 provide that Federal awarding agencies shall make site visits as
frequently as practicable. This broad charge could be revised to
provide that, as a minimum, an agency can make either no visit or one
visit per year. No visits might be acceptable when a recipient is
highly capable, or the dollar award is very small. At the next level,
yet still consistent with a grant relationship, up to quarterly visits
might be deemed appropriate. Lastly, site visits more frequent than
quarterly would be conducted only in cooperative agreement
relationships. This option might be frequently used when the Federal
agency collaborates with a recipient in the conduct of a project such
as in scientific research.
Interestingly, the Office of Federal Procurement Policy (OFPP) in OMB
has proposed restructuring Attachment O of Circulars A102 and A110 in a
manner similar to the restructuring we propose. Attachment 0 provides
standards for procurement by recipients of Federal assistance.
According to OFPP's proposal, if a recipient's procurement system meets
minimum standards, Federal agencies' involvement would be limited to
general oversight. If these standards were not met, agencies would have
various options open to more thoroughly oversee recipient procurements.
Some OMB officials believe that the restructuring of Attachment 0 is
complementary to the act's grant and cooperative agreement categories.
While OMB is developing these distinctions, we believe it should also
reconcile the primary organization of these two circulars to the act's
basic framework. The act's legislative history indicates that:
"The criteria established in sections 4, 5, and 6 of this bill are a
beginning * * * in providing a framework of relationships for
governmental guidance in assistance programs." Emphasis added.
The circulars' current orientation of providing assistance guidance
initially by type of recipient does not mesh with the act's framework
type of legal instrument. In revising the guidance, OMB, however, might
still want to preserve some variances by type of recipient. For
example, within the guidance for either grant or cooperative agreement
relationships, requirements for large recipients such as major cities
might vary from those for very small ones like rural counties.
Modifications like these could facilitate achieving the act's purposes.
First, a reduction in unnecessary administrative requirements might
result because Federal officials would be selecting the optional grant
or cooperative agreement requirements on the basis of a need for them
in the particular relationship. For example, the city of Portsmouth,
Virginia, was required to submit very detailed information to the
Economic Development Administration (EDA) to justify its requests for
reimbursement under an EDA discretionary grant. Although EDA staff
originally wanted copies of actual checks, they agreed to accept
schedules of each purchase order annotated with the check number and
date. EDA had not explained to the city why such detail was required,
such as notifying the city that its accounting systems were
insufficient. If detailed records, such as these, could only be
required under cooperative agreement options, and the Federal agency
could not justify the use of a cooperative agreement, then the city
would have had a clear avenue to dispute the requirement.
Second, the respective roles and responsibilities of the Federal
Government and recipients would be clarified because the allowable
Federal requirements and when they could be used would be more
explicit.
Third, with operational differences developed, the Congress and the
executive agencies could utilize the grant and cooperative agreement
categories in their oversight and management of Federal programs. As
shown in the legislative history, it was anticipated the act's
categories would be useful for congressional oversight of assistance
programs:
"The broad statutory framework provided by this legislation will enable
the Congress to exercise better oversight of agency attempts to bypass
Congressional intent * * *."
For example, if a program that Congress intended to be operated
primarily as a grant were to award numerous cooperative agreements, an
oversight committee might question such awards. An analysis of the
application of the act's categories could also be useful to agency
officials. For example, a program that used a high proportion of
cooperative agreements might require more staff than one using all
grants. When allocating personnel among programs, agency officials
could utilize data on the types of instruments used.
Finally, because the choice of either a grant or a cooperative
agreement would have operational consequences, we believe Federal
officials would have more incentive to select the proper instrument.
OMB Circulars A102 and A110 do not cover all Federal involvement with
recipients. However, this other involvement is not subject to
Governmentwide guidance similar to the circulars and therefore is not
ready to be structured as we propose for A102 and A110. Indeed, no one
knows the full extent or diversity of agencies' involvement with
recipients. One benefit of the interim approach we propose in chapter 2
for identifying cooperative agreements is that by studying the
cooperative agreements thus identified, OMB may be able to learn more
about the range of this involvement. OMB could then judge whether
additional structuring of guidance around the grant and cooperative
agreement relationships is appropriate. Perhaps such crosscutting
guidance topics as civil rights, environmental protection, and energy
conservation would lend themselves to restructuring too.
Although we believe that developing operational distinctions will
enhance the achievement of the act's purposes, we recognize that
developing the differences will not be easy. As in the determination of
which rules should apply to assistance versus procurement, the
development of guidance specific to grants and cooperative agreements
will reflect Federal policy on the respective roles and
responsibilities of the Government and recipients under the two
assistance relationships. For example, some recipients feel that the
involvement currently sanctioned by A102 and A110 is substantial. They
would prefer to roll back the permissible level of involvement under
grants rather than increase the level for cooperative agreements.
Therefore, the development of new guidance specific to grants versus
cooperative agreements should, as for assistance versus procurement, be
made with due regard for the input of all potentially affected parties.
Establishing what the distinctions between these instruments should be
and how they would be applied, will require an adequate data base on
the different ways that Federal agencies presently interact with
recipients and what their preferences, as well as recipients'
preferences, would be for changing interactions. Because many officials
believe that the type or level of Federal involvement should
legitimately vary depending on the functional category of the program,
e.g., construction programs, research programs, and social service
delivery programs, the data base should be representative of the
various categories of Federal assistance.
CONCLUSIONS:
The purposes of the Federal Grant and Cooperative Agreement Act cannot
be fully achieved unless meaningful distinctions between the act's
categories are developed. Operating distinctions between procurement
and assistance appear to be eroding, and there are no standard
operational differences between grants and cooperative agreements.
Therefore, an effort must be undertaken to identify and promulgate
consistent operational distinctions. Because establishing differences
between the act's instruments will also establish Federal policy on the
respective soles and responsibilities of the Federal Government and
recipients, and because the act seeks to achieve uniformity in the use
of contracts, grants, and cooperative agreements, we believe OMB is the
best organization to lead the necessary Governmentwide effort.
When determining the differences which should exist between procurement
and assistance, we believe the act's criteria--the Federal purpose in
the relationship--should be relied on in deciding which procedures are
appropriate to each category. In deciding on operational distinctions
between grants and cooperative agreements we believe further study
should be made of how Federal agencies currently vary their
interactions with recipients. Revising and reorganizing Circulars A102
and A110 to establish minimum requirements for any assistance award and
optional requirements specifically available under grants and
cooperative agreements seems to be a practical approach for
establishing the needed distinctions between grants and cooperative
agreements.
RECOMMENDATION TO THE DIRECTOR, OMB:
To improve the implementation of the Federal Grant and Cooperative
Agreement Act, we recommend that the Director of OMB take the lead in
establishing clear operational differences among contracts, grants, and
cooperative agreements.
AGENCY COMMENTS AND OUR EVALUATION:
EPA and the Departments of the Interior and Justice agreed with our
recommendation that OMB take the lead in establishing clear operational
differences among contracts, grants, and cooperative agreements. OMB
agreed to consider the recommendation during its current efforts to
develop revised guidance implementing the act.
The Department of Energy said categorization of Circulars A102 and A
110 would not help in differentiating between grants and cooperative
agreements but might encourage agencies to adopt all of the more
stringent requirements of cooperative agreements for fear of being
thought irresponsible. We disagree. A clear distinction between the
administrative requirements in these circulars by type of instrument
will help Federal officials match their practices and procedures with
the appropriate instrument. This will identify where substantial
Federal involvement is occurring so that top executive officials and
the Congress can approve or modify that involvement with recipients.
Further, in that Federal officials would select cooperative agreement
requirements on the basis of a need for them in a particular
relationship we believe they will be less likely to become
unnecessarily involved.
Energy was also concerned that we consider cooperative agreements to be
the preferred instrument where additional requirements are needed for
"high-risk" recipients. Energy believes the choice of grants or
cooperative agreements is independent of the decision to include
additional requirements for such recipients. Although we do not intend
to suggest that all high-risk recipients should automatically receive
cooperative agreements, additional requirements levied on them tend to
indicate substantial involvement and are therefore directly related to
the decision to use a grant or a cooperative agreement. Such
requirements exist because the agency perceives a need to exercise more
control, which is an expression of involvement, over a particular
recipient. To the extent that the additional requirements exceed the
norm for Federal involvement, a potential cooperative agreement
relationship exists.
[End of section]
APPENDIX I:
EXECUTIVE OFFICE OF THE PRESIDENT:
OFFICE OF MANAGEMENT AND BUDGET:
WASHINGTON, D.C. 20503:
Mr. William J. Anderson:
Director, General Government Division: United States General Accounting
Office: Washington, D. C. 20548:
Dear Mr. Anderson:
This is in response to your request of May 13, 1981, for comments on
the draft GAO report entitled, "Improvements Needed in the
Implementation of the Federal Grant and Cooperative Agreement Act." The
report presents a good review of an extremely complex subject and we
are in general agreement with most of its contents. It will be of
immediate use since we are revising the OMB guidance on implementing
the Act issued in 1978.
The report recommends stronger OMB monitoring of agency efforts to
implement the Act. The report concentrates on a single policy area. As
we see it, however, the report documents symptoms of a larger problem.
When one studies the ways that agencies have implemented the sixty-plus
generally applicable assistance policies, the same basic picture tends
to emerge. Viewed this way, the problem is one of improving the ways
agencies manage all the requirements generally applicable to assistance
programs and other Federal transactions, including the Federal Grant
and Cooperative Agreement Act.
To address this larger management problem, we have in development and
plan to issue shortly, a new OMB Circular on General Assistance
Policies. This Circular will deal, in part, with the internal agency
communication and coordination problems of assistance programs
documented in the report. The revised guidance on implementing the Act
will become an attachment to the new Circular. In addition, the Office
of Federal Procurement Policy will communicate the portions of the
revised guidance it concludes procurement officials should have.
I believe an additional point needs to be made for the record by OMB.
The basic distinctions presented by the Act work and are used
successfully by the agencies for most of their relationships. There are
cases, however, as the report indicates, where the Act has led to
confusion. On close examination, the Act turns out to contain a
paradox.
The Act instructs agencies to use a procurement contract when the
transaction provides something of direct benefit or use to the
Government. One can reason that anything which helps an agency
accomplish its mission is of benefit or use to the Government. Since
virtually everything an agency does should be to accomplish its
mission, it can be argued that all of its transfer activities should
use procurement.
Conversely, the Act instructs agencies to use grants or cooperative
agreements to "accomplish a public purpose of support or stimulation
authorized by Federal statute." If an agency's mission is one of
stimulation or support, and one reasons that all agency actions are in
support of the mission, then one can conclude that grants or
cooperative agreements are required for all actions. Thus, the Act can
be seen as requiring the use of both procurement and assistance
instruments for the same transaction.
Many of the examples of agency reasoning presented in the report show
the effects of this paradox. Reasonable people in the agencies, trying
to do the right thing, can and do reach different conclusions about
which type of relationship to establish. Our concern for the agency
actions described in the report is tempered by an appreciation of the
magnitude of the problems presented to them by the Act.
The report includes eleven specific recommendations for OMB. Enclosed,
are our responses to these useful suggestions. The fact that we differ
on some of them is significant. For the past three undone half years,
OMB and GAO staffs have cooperated closely in this field. They have
shared information, ideas, and concepts. All along, it was intended
that our two organizations should be able to cooperate and use a common
data base without impairing their independence of judgment. I feel the
experiment has worked, and I congratulate your staff members who
contributed to its success.
Sincerely,
Signed by:
Harold I. Steinberg:
Associate Director for Management:
Enclosure:
OMB Response to GAO Recommendations in the Draft Report "Improvement
Needed in the Implementation of the Federal Grant and Cooperative
Agreement Act"
The draft GAO report on the Federal Grant and Cooperative Agreement
Act, sent to OMB for comment on May 13,1981 contains eleven specific
recommendations to the Director of OMB. Our responses to these
recommendations follow Recommendations 1, 2, and 3: The first three
recommendations are prefaced with "To improve the selection of
procurement contracts and assistance instruments, OMB should revise its
guidance on the Federal Grant and Cooperative Agreement Act to."
GAO Recommendation 1:
"more clearly define the terms "direct benefit and use" as they relate
to the selection of contracts and "accomplishing a public purpose of
support or stimulation" as it relates to assistance."
OMB Response: We agree. The revised implementing guidance will include
an expanded discussion of these fundamental terms.
GAO Recommendation 2:
"require Federal program officials to base instrument choices on the
Federal purpose in the relationship established after (1) reviewing
their authorizing legislation to determine their authority to procure
or assist, and (2) reviewing each proposed transaction in light of the
act's criteria."
OMB Response: We agree with one reservation. For the vast bulk of all
assistance and procurement actions, it is not necessary to review each
transaction. The revised guidance will call for such transaction level
reviews only for those transactions that require it.
GAO Recommendation 3:
"clearly state that section 7(a) of the act does not create new
authority to make assistance awards independent of program
legislation."
OMB Response: We agree, and the revised guidance will include such a
statement.
Recommendations 4, 5, and 6 are prefaced with:
"To help Federal officials identify potential awards where a
cooperative agreement might be appropriate we also recommend that OMB
revise its guidance specifically related to cooperative agreements. The
revisions should:"
GAO Recommendation 4:
"define normal involvement, normal Federal stewardship, and substantial
involvement. This could be accomplished by adopting our suggested
interim program approach for assessing levels of involvement with
program recipients."
OMB Response: We agree that the three terms need to be clarified, and
will try to do so. The proposal for the interim program approach is a
constructive suggestion which we will consider seriously. We are
concerned, however, that the approach may require some agencies to
change their interim decisions which could cause confusion and
unwarranted uncertainty.
GAO Recommendation 5:
"recognize that highly prescriptive requirements prior to award
limiting recipient discretion may constitute substantial involvement
during performance whether or not they are coupled with close agency
monitoring of, or operational involvement with, the recipient."
OMB Response: The Act differentiates between grants and cooperative
agreements solely on the basis of substantial involvement anticipated
during performance of the contemplated activity. While we understand
the GAO intent, we do not agree that involvement during performance can
be interpreted as including pre-award conditions that limit recipient
discretion. We believe that involvement during performance of an
activity must actually occur during the performance period.
GAO Recommendation 6:
"provide more detailed and complete illustrations of agency practices
which can be considered as substantial involvement."
OMB Response: We will attempt to do this in the revised guidance. A
more effective way, however, may be through interagency workshops and
training sessions.
Recommendations 7, 8, 9, and 10, are prefaced with:
"To improve the administration and monitoring of the act, we recommend
that the Director, OMB:"
GAO Recommendation 7:
"Direct Federal agencies to (I) develop administrative systems
necessary to implement and monitor compliance with the act, (2)
identify emerging problems so that revisions to policies and procedures
can be considered, (3) provide adequate staff training and technical
assistance on the act and OMB guidelines, and (4) develop systems of
records on their operating experiences in implementing the act."
OMB Response: We believe that improvements can best be achieved by
treating the Federal Grant and Cooperative Agreement Act as both a
federal procurement policy and one of the generally applicable
assistance requirements for which a broad assistance management policy
circular is being developed. A draft of the circular policy was
published in the Federal Resister on November 7, 1980. A final version
is expected to be issued in the next several months. This two-pronged
approach that uses the existing procurement disciplines and strengthens
assistance management on a broad scale gives promise of accomplishing
more than concentration on just the Act.
GAO Recommendation 8:
"Actively monitor the implementation by Federal agencies to assure that
OMB policies and guidelines are carried out uniformly and in a timely
manner."
OMB Response: This will be done as part of the larger effort on
improving the management of generally applicable requirements. It may
also be included as part of the Financial Priorities Program that
agencies are now implementing under OMB guidance. But we believe that
primary emphasis must be on helping the agencies manage themselves in
accordance with the Act, rather than on monitoring what the agencies
do.
GAO Recommendation 9:
"Establish an effective, ongoing system to document and respond to
problems identified during monitoring activities."
OMB Response: We believe the new policy for managing generally
applicable requirements will contribute to this. Many of the problems
can be resolved by the agencies themselves, once their internal
management systems are developed to the point that they are routinely
used.
GAO Recommendation 10:
"Revise the OMB guidance to provide more insight into how agencies can
avoid unnecessarily increasing Federal liability under cooperative
agreements."
OMB:
Response: We agree and plan to do this.
GAO:
Recommendation 11:
To improve the implementation of the Federal Grant and Cooperative
Agreement Act, we recommend that the Director of OMB take the lead in
establishing clear operational differences among contracts, grants, and
cooperative agreements.
OMB Response: This subject will be addressed in policy deliberations
over the revised guidance that OMB is developing for the Act.
[End of section]
APPENDIX II:
United States Department of the Interior: OFFICE OF THE SECRETARY:
WASHINGTON, D.C. 20240:
Henry Eschwege:
Director:
Community and Economic Development Division: U.S. General Accounting
Office:
Washington, D.C. 20548:
JUN 26, 1981:
Draft Report, "Improvements Needed in the Implementation of the Federal
Grant and Cooperative Agreement Act"
Dear Mr. Eschwege:
We have reviewed the subject draft report and agree with its findings
and recommendations.
The report's basic finding is that the Congressional purpose in passing
the Federal Grant and Cooperative Agreement Act, namely, to establish a
systematic approach to distinguish contracts, grants and cooperative
agreements, has been frustrated due to agencies misunderstanding key
provisions of the Act. In order to improve understanding of the Act,
the report makes several recommendations to the Director, Office of
Management and Budget. These include:
1. Improving OMB guidance on how to distinguish procurement and
assistance, and grants and cooperative agreements;
2. Increasing monitoring and administration of the Act by OMB and the
agencies;
3. Establishing clear operational differences between contracts, grants
and cooperative agreements.
Although we support the basic recommendations of the report, we have a
couple of comments regarding the proposed interim procedure for
determining "substantial involvement." While we agree that clearer
guidance in determining what constitutes "substantial involvement" is
needed, we wonder how useful it is to impose an interim system on the
agencies, when, according to the report, revised OMB guidance is to be
issued within the next several months. In addition, we wonder whether
defining "normal involvement" in the context of individual programs
will be any easier than defining "substantial involvement".
Thank you for the opportunity to comment.
Sincerely,
Signed by: (name illegible)
Deputy Assistant Secretary:
Policy, Budget, and Administration:
[End of section]
APPENDIX III:
Department of Energy:
Washington, D.C. 20585:
JUN 25 1981:
Mr. J. Dexter Peach:
Energy and Minerals Division:
U.S. General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Peach:
The Department of Energy appreciates the opportunity to review and
comment on the General Accounting Office's draft report entitled
"Improvements Needed in the Implementation of the Federal Grant and
Cooperative Agreement Act." The draft report contains a helpful
discussion of the problems associated with implementation of P.L. 95
224 and makes generally useful recommendations for resolving them. DOE
does, however, have reservations concerning some aspects of these
recommendations.
The draft report expresses the opinion that highly prescriptive
requirements imposed before an assistance award can in and of
themselves, dictate use of a cooperative agreement. This differs from
the existing Office of Management and Budget guidance which counsels
that such requirements must be coupled with close agency monitoring or
operational involvement during performance before a cooperative
agreement is indicated. DOE finds the Office of Management and Budget's
guidance to be more helpful. For example, an award made in response to
an unsolicited proposal may need to be "highly prescriptive" in order
to keep the project within limits which the agency may appropriately
fund but differs in no other way from the typical grant as envisioned
by P.L. 95-224.
The draft report suggests that an interim approach to further defining
substantial involvement (prior to development of specific operational
characteristics distinguishing grants and cooperative agreements) be
based upon each agency's normative involvement characteristics either
on an agencywide basis or for individual programs and basing grant and
cooperative agreement distinctions on how they are more or less
involved with individual recipients. This approach is not entirely
useful for two reasons. First, if the norms are developed by program
rather than agency, it could lead to a given recipient receiving
funding from two different programs in the same agency under different
instruments while the federal involvement was essentially identical.
Secondly, since it is an interim process, it could, for example, lead a
program to shift from grants to cooperative agreements to grants again
when final guidance was developed. In both cases the confusion
generated among recipients and the resultant lack of confidence in the
Federal Agency is difficult to accept.
The draft report also recommends increased office of Management and
Budget oversight of agency implementation of the Act as a way of
improving compliance with the Act's provisions. DOE officials believe
increased oversight will be of little value unless the guidance on
implementing the Act is perfected. The problem is less one of bad faith
than it is of genuine confusion and lack of operational experience.
With better guidance, there will be less need for the Office of
Management and Budget oversight.
DOE officials believe the draft report's proposal to categorize the
provisions of the Office of Management and Budget's Circulars A102 and
A110 by frequency of use or degree of detail will not assist in
differentiating between instruments but might encourage Federal
officials to adopt all of the more stringent requirements for
cooperative agreements for fear of being thought irresponsible. DOE has
not had any major difficulty in writing cooperative agreements that
comply with the circulars. DOE notes that the draft report in its
discussion related to this proposal implies that the Circulars'
Exceptions for Certain Recipients provisions, which provide for
increased requirements on what are commonly referred to as "high risk"
recipients, be used to write in additional requirements generally on
cooperative agreements. The further implication is that the General
Accounting Office believes the cooperative agreement is the instrument
of choice when dealing with a "high risk" recipient. DOE officials do
not share this view, but believe the decision to use a grant or
cooperative agreement is independent of the decision to include
additional requirements in awards to high risk recipients. In addition,
more attention needs to be focused on the fact that there is no
guidance equivalent to OMB Circulars A102 and A110 for dealing with
"for-profit organizations." Until such guidance is developed it can be
expected that agencies will increasingly turn to Procurement
Regulations for guidance in developing the rules for making assistance
awards to for-profit organizations.
Again, DOE appreciates the opportunity to comment on this draft report
and trusts that the General Accounting Office will consider these
comments in preparing the final report.
Sincerely,
Signed for:
William S. Heffelfinger:
Assistant Secretary:
Management and Administration:
[End of section]
APPENDIX IV:
U.S. Department of Transportation:
Office of the Secretary of Transportation:
Assistant Secretary for Administration: 400 Seventh Street SW:
Washington, DC 20590:
June 22, 1981:
Mr. Henry Eschwege:
Director, Community and Economic Development Division: U.S. General
Accounting Office:
Washington, D. C. 20548:
Dear Mr. Eschwege:
We have enclosed two copies of the Department of Transportation's (DOT)
reply to the General Accounting Office (GAO) draft report,
"Improvements Needed in the Implementation of the Federal Grant and
Cooperative Agreement Act," dated May 18, 1981.
DOT generally supports GAO'S findings with regard to implementation of
the Act, but believes that it will be necessary to amend the statute
itself so as to remove those impediments contained within the statute
which thwart its basic purpose. We do not believe the recommendations
made to OMB, although valid, can be accomplished without first revising
the statute.
If we can further assist you, please let us know.
Sincerely,
Signed by:
Robert L. Fairman:
Enclosures:
DEPARTMENT OF TRANSPORTATION STATEMENT ON GAO REPORT:
I. TITLE: IMPROVEMENTS NEEDED IN THE IMPLEMENTATION OF THE FEDERAL
GRANT AND COOPERATIVE AGREEMENT ACT:
II. GAO FINDINGS AND RECOMMENDATIONS: The General Accounting Office
(GAO) has reviewed Federal agency implementation of the Federal Grant
and Cooperative Agreement Act (P.L. 95224) to determine whether this
implementation has been proper, and what Governmentwide issues have
resulted from implementation. GAO concluded that operating distinctions
between procurement and assistance appear to be eroding, that there are
no standard operational differences between grants and cooperative
agreements, and that an effort must be undertaken to identify and
promulgate consistent operational distinctions.
The GAO recommends that the Office of Management and Budget (OMB)
revise its guidance on the Federal Grant and Cooperative Agreement Act
to:
* More clearly define the terms "direct benefit and use" as they relate
to the selections of cutbacks, and "accomplishing a public purpose of
support or stimulation" as it relates to assistance.
* Require Federal program officials to base instrument choices on the
Federal purpose in the relationship established after (1) reviewing
their authorizing legislation to determine their authority to procure
or assist, and (2) reviewing each proposed transaction in light of the
Act's criteria.
* Clearly state that section 7(a) of the Act does not create new
authority to make assistance awards independent of program legislation.
* Revise its guidance specifically related to cooperative agreements.
The revisions should:
- Define normal involvement, normal Federal stewardship, and
substantial involvement.
- Recognize that highly prescriptive requirements prior to award
limiting recipient discretion may constitute substantial involvement
during performance whether or not they are coupled with close agency
monitoring of, or operational involvement with, the recipient.
- Provide more detailed and complete illustrations of agency practices
which can be considered as substantial involvement.
- Direct Federal agencies to (1) develop administrative systems
necessary to implement and monitor compliance with the Act, (2)
identify emerging problems so that revisions to policies and procedures
can be considered, (3) provide adequate staff training and technical
assistance on the Act and OMB guidelines, and (4) develop systems of
records on their operating experiences in implementing the Act.
- Actively monitor the implementation by Federal agencies to assure
that OMB policies and guidelines are carried out uniformly and in a
timely manner.
- Establish an effective, ongoing system to document and respond to
problems identified during monitoring activities.
- Revise the OMB guidance provide more insight into how agencies can
avoid unnecessarily increasing Federal liability under cooperative
agreements.
III. DOT COMMENTS ON FINDINGS AND RECOMMENDATIONS:
GENERAL:
The Department of Transportation generally supports GAO's findings with
regard to implementation of the Act, but believes that it will be
necessary to amend the statute itself so as to remove those impediments
contained within the statute which thwart its basic purpose. We do not
believe the recommendations made to CMB, although valid, can be
accomplished without first revising the statute.
SPECIFIC:
CHAPTER 2. INCORRECT INSTRU1ENTS CAN BE CHOSEN BECAUSE GUIDANCE IS
VAGUE:
Clearer Terms and Procedures Needed to Distinguish Between Procurement
and Assistance:
The Department of Transportation agrees that there is a need for
clearer terms and procedures as cited by GAO, but believes that the
starting point for any such action should be the statute itself. The
term "Direct Benefit and Use of the Government" contained in Sec. 4(1)
has been utilized to thwart the basic intent of the statute. The
Federal Grant and Cooperative Agreement Act (P.L. 95224) was primarily
enacted to establish clear distinctions between procurement and
assistance, however, language such as mentioned above only contributes
to the further misuse of assistance instruments in situations which are
clearly procurement. We in the Department of Transportation were able
to deal with problems in the basic statute by employing provisions such
as section 4(2) by requiring the use of a procurement instrument
whenever the Department is purchasing property or services regardless
of whether the intended beneficiary is the Department itself or a third
party. Furthermore, we require that the focus be on the immediate
transaction between the Department and the party with which we are
entering into the transaction. If we are buying from that party,
procurement is required, if we are primarily assisting that party, an
appropriate assistance instrument is required.
Section 4(2),of the Act provides, that a procurement contract shall be
used whenever an executive agency determines in a specific instance
that the use of a type of procurement contract is appropriate. If it
were not for this provision, we do riot believe we would be in
conformance with the Direct Benefit and Use requirement contained in
section 4(1) of the statute if we required procurement in situations
other than when the Department is the direct recipient or user under
the agreement. In the draft report, GAO contends that agencies have
misunderstood section 4(1) particularly with reward to intermediaries.
We agree that transactions requiring intermediaries should be in the
procurement mode, but we do. not believe that section 4(1) can be the
basis for such action given the "direct use and benefit" language
currently contained therein. In fact, the legislative history for
section 4(2) indicates that it is that section and not section 4(1)
that was enacted to accommodate situations where it is desired to
utilize an intermediary through the use of the procurement process. The
problem is that section 4(2) is permissive, and thus perpetuates
inconsistency of treatment in situations involving intermediaries.
We recommend that the report contain a recommendation to the Congress
to delete the term "Direct Benefit and Use of the Federal Government"
from the statute so that it will be mandatory to utilize the
procurements process whenever the Federal Government is purchasing
property or services regardless of whether for itself or third persons
through an intermediary.
CHAPTER 3. STRONGER OMB AND AGENCY MANAGEMENT EFFORTS NEEDED TO
IMPLEMENT THE ACT.
On August 23, 1979, the Department of Transportation issued DOT 4000.8,
Use of Contracts, Grants and Cooperative Agreements. The Order followed
OMB guidance establishing criteria for distinguishing between
procurement and assistance. However, there are very few programs within
the Department that are involved in other than assistance activities.
The one program that is involved in procurement and assistance
activities has been monitored very closely to make sure that the proper
instruments are being utilized. With regard to our assistance programs,
we do not perceive any change in the substance of our agreements and
after close analysis concluded that the majority of projects would be
properly categorized as cooperative agreements. It is important to
note, however, that we see this as nothing but a re-labeling exercise
with business as usual as far as the administration of these projects
is concerned. Perhaps there is a need for stronger management efforts
to implement the Act with regard to other Federal programs, but we see
no such need in this Department.
Problems with section 7(a):
We fully agree with GAO on this point and have utilized section 7(a) as
a mechanism authority only. It does not impact on the program substance
which originates in authorizing legislation. Section 7(a) only provides
flexibility in selecting the instrument to be used in carrying out that
activity. If an assistance instrument is selected, there must be
authority to provide assistance in the authorizing legislation. Section
7(a) does not create the authority to provide assistance.
CHAPTER 4. NEED TO DEVELOP DIFFERENCES IN OPERATING PROCEDURES FOR
GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS:
Before we attempt to develop criteria clearly defining substantial
involvement, and before we attempt to distinguish grants from
cooperative agreements, we should first decide the merit to such
exercises. What is the need? Is it merely an unnecessary bureaucratic
exercise? We see absolutely no reason for the cooperative agreement
category. It merely muddies the water and creates further opportunity
for program officials to avoid the Federal Procurement Regulations. If
there were two general categories, Procurement and Assistance, with
subcategories under each (as there presently is under Procurement) to
accommodate the peculiarities of particular transactions, the original
purpose of the statute could be achieved in a relatively simple manner.
This can only be achieved through statutory revision, and we recommend
that the GAO consider this position and make appropriate
recommendations to the Congress.
[End of section]
APPENDIX V:
U.S. Department of Justice:
Washington, D.C. 20530:
JUN 18 1981:
Mr. William J. Anderson:
Director:
General Government Division:
United States General Accounting Office: Washington, D.C. 20548:
Dear Mr. Anderson:
This letter is in response to your request to the Attorney General for
the comments of the Department of Justice (Department) on your draft
report entitled "Improvements Needed in the Implementation of the
Federal Grant and Cooperative Agreement Act."
The Department generally concurs with the findings and recommendations
of the draft report. In particular, the Department agrees that the
Office of Management and Budget (OMB) should establish clear
operational differences among grants, contracts, and cooperative
agreements, and develop additional guidance on how to select the proper
instrument based on various agencies' experience to date.
As the report indicates, the Department's National Institute of
Corrections (NIC), like other Federal agencies, has found considerable
ambiguity to exist regarding clear operational differences between
contracts, grants and cooperative agreements and has experienced
difficulty in determining when to use cooperative agreements or
contracts to reflect different levels of Federal involvement in
assistance relationships or procurement situations. However, the
Department agrees with the General Accounting Office's (GAO)
observation that Congress did include a specific authorization in NIC's
legislation giving NIC authority, in procurement situations:
"to enter into contracts with public or private agencies,
organizations, or individuals, for the performance of an of the
functions of the Institute* * * ." (U.S.C. 435 (T3).) (Emphasis added.)
In view of the total range of issues raised by GAO, NIC has reviewed
its assistance and procurement efforts to more closely distinguish
between the two. Where a clear distinction between the two appears
ambiguous, the guidance provided by the subject GAO report will be
employed pending the dissemination of more detailed guidance by OMB.
Although not included in GAO's study, the Department's Office of
Justice Assistance, Research and Statistics (OJARS) has had
considerable experience with grants, contracts, and cooperative
agreements and has devoted substantial effort to the interpretation and
implementation of the Federal Grant and Cooperative Agreement Act.
Based on its experiences, OJARS generally agrees with the findings and
recommendations of the report, but differs with GAO in its
interpretation of some of the issues raised in the report.
On page 31, GAO states that "Agencies also have not established
effective mechanisms to insure that agency officials use the guidelines
or apply them properly." OJARS has not experienced such problems and,
in fact, has been effective in implementing the alternate funding
approaches in an appropriate manner. Unlike many of the agencies
surveyed by GAO, OJARS has an agencywide instruction on this subject,
although it requires updating to reflect experience to date.
GAO's main point in Chapter 2 is that agencies have been using improper
criteria or questionable interpretations of vague OMB guidance in
making determinations of the appropriate instrument to use. We agree
that where a procurement relationship is clearly established, a
contract is required as pointed out in the example on page 9. We also
agree that agencies keying on the "direct benefit" language of the Act
can lead to the inappropriate use of assistance instruments where a
contract is indicated as in the example on pp. 910. However, we believe
that the inflexible approach (interpretation) set forth by GAO in the
last paragraph of page 10 of the draft report does not reflect
Congressional intent.
GAO takes the position that the proper interpretation of the Federal
Grant and Cooperative Agreement Act of 1977 requires, in situations
where agencies use "intermediaries" to provide assistance to eligible
beneficiaries of Federal financial assistance, that the relationship
between the Federal Government and the intermediary be reflected in a
contract rather than a grant. It is our opinion that this GAO
interpretation conflicts with the plain language of the Act.
Section 4 of the Act requires the use of contracts:
" . whenever the principal purpose of the instrument is the
acquisition, y purchase, ease, or barter of property or services for
the direct benefit or use of the Federal Government." (Emphasis added.)
Section 5 and Section 6 of the Act require, in pertinent part, that
assistance instruments (grants, cooperative agreements) be used
"whenever the principal purpose of the relationship between the Federal
Government and the recipient is the transfer of money, property,
services, or anything of value to the State or local government or
other recipient in order to accomplish a public purpose of support or
stimulation authorized by Federal statute, rather than acquisition, y
purchase, ease or barter, of property or services for the direct
benefit or use of the Federal Government." (Emphasis added.)
GAO states in their interpretation that the choice of instrument for an
intermediary relationship must depend solely on the Federal purpose in
establishing the relationship with the intermediary because it (the
intermediary) is the direct recipient of the Federal award. GAO
concludes that Federal agencies have given inappropriate emphasis to
the term "direct benefit" used in Section 4 of the Act with the result
that such agencies have inappropriately tended to look at the extent of
benefit received by beneficiaries of the Federal assistance who are not
parties to the instrument.
In situations where the primary beneficiaries of Federal assistance are
nonparty beneficiaries, i.e., not the intermediary, many Federal
agencies have interpreted the Act and regulations to permit the use of
an assistance instrument rather than a contract. According to GAO's
interpretation, this agency interpretation is incorrect. GAO asserts
that a contract relationship should be established.
Our view is that GAO's interpretation is inconsistent with the plain
language of the above-cited statutory sections. Section 5 and Section 6
state that an assistance instrument must be used whenever the principal
purpose of the relationship is to accomplish a public purpose of
support or stimulation.
It does not indicate who is to be supported or stimulated. Had Congress
intended to require that the support or stimulation be only of the
immediate party to the instrument, then it could easily have so stated.
Section 4 of the Act states, and Sections 5 and 6 of the Act reiterate,
that a contract will be used whenever the principal purpose of the
relationship is to provide property or services for the direct benefit
or use of the Federal Government. GAO's interpretation would give the
word "direct" no meaning. We believe that when the relatively
restrictive term "direct benefit" is compared with the relatively broad
term of "support or stimulation," it is clear that the latter was
intended to be more inclusive than the former. Thus, the plain language
of the statute would support, in may intermediary situations, the use
of an assistance instrument rather than a contract. A contract is the
only appropriate instrument only when the principal purpose of the
relationship is to obtain a product or service for the direct benefit
or use of the Federal Government. An assistance instrument should be
used in all other situations where the principal purpose of the
instrument is support or stimulation of any authorized recipient. This
interpretation is fully consistent with the statute's plain language.
There is an important qualifier that must be added to this discussion:
the intermediary must be a statutorily eligible recipient of the
assistance. This qualifier requires that the intermediary be expressly
authorized under the agency's enabling statute to receive the
assistance. This condition is stipulated by the definition of the term
"other recipient" in the Act. "Other recipient" is defined as "any
person or recipient" other than a State or local government who is
authorized to receive Federal assistance or procurement contracts . . .
. (Emphasis added.) Many grant statutes have limitations on the types
of recipients eligible to receive funding. Thus, if the intermediary is
not itself authorized to receive assistance under the statute, then a
contract would be required. This qualifier is in addition to the
qualifier noted by GAO that the statute must, in the first instance,
authorize the agency to "stimulate and support" before any assistance
instrument can be used (draft report, pp. 1420).
With regard to other matters covered in Chapter 2, we disagree with
GAO's opinion that prescriptive requirements limiting a recipient's
management discretion prior to award or during performance are
themselves indicative of an agency's substantial involvement. We think
the current OMB guidance better reflects the concept of substantial
involvement.
In conclusion, while we are in agreement with most aspects of the
report, we are left with the distinct impression that it is overly
contract oriented to the detriment of the type of agency flexibility
that was intended by Congress under the Federal Grant and Cooperative
Agreement Act. GAO fails to recognize the additional dimensions of
flexibility, speed, and recipient control and discretion that are
byproducts of properly employed assistance instruments. These
advantages over contracts, in appropriate assistance situations, should
not be minimized.
We appreciate the opportunity to comment on the draft report. Should
you desire any additional information, please feel free to contact me.
Sincerely,
Signed for:
Kevin D. Rooney:
Assistant Attorney General for Administration:
[End of section]
APPENDIX VI:
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: WASHINGTON, D.C. 20410:
OFFICE OF THE ASSISTANT SECRETARY FOR ADMINISTRATION:
June 18, 1981:
Mr. Henry Eschwege:
Director, Community and Economic Development Division: General
Accounting Office:
Washington, D.C. 20548:
Dear Mr. Eschwege:
Your letter of May 18, 1981 requested the Department's comments
concerning the draft GAO report entitled "Improvements Needed in the
Implementation of the Federal Grant and Cooperative Agreement Act."
In general, we find the draft report to be well written, fair and
constructive. Although the report takes issue with some of the
interpretations of the proper legal instrument made by agency
officials, it points out that the legislation "is not a model of
clarity" and that "it is not too surprising that Federal agencies
interpret and apply the criteria in various ways and continue to use
grants and cooperative agreements in what appears to be procurement
situations."
The Department's principal concern with the draft report relates to
your Office's interpretation regarding the Act's mandate to use a
procurement contract as the legal instrument "whenever the principal
purpose of the instrument is the acquisition, by purchase, lease or
barter, of property or services for the direct benefit or use of the
Federal Government." This mandate is contrasted with the Act's
requirement to use an assistance instrument when "the principal purpose
of the relationship is the transfer of money, property, services, or
anything of value to the State or local Government or other recipient
in order to accomplish a public purpose of support or stimulation
authorized by Federal statute."
The GAO interpretation of the use of intermediaries (recipients of
Federal awards who deliver authorized assistance to third parties)
would authorize assistance awards to such entities only if the agency
is authorized to directly assist those entities. As indicated on page
10 of the draft report:
Our interpretation of the Act is that the choice of instrument for an
intermediary relationship depends solely on the Federal purpose in the
relationship with the intermediary since it is the recipient of the
Federal award. The fact that the product or service produced by the
intermediary pursuant to the Federal award may flow to and thus benefit
another party is irrelevant. What is important is whether the Federal
Government's purpose is to acquire the intermediary's services, which
happen to take the form of producing the product or carrying out the
service that is then delivered to the assistance recipient, or if the
Government's purpose is to assist the intermediary to do the same
thing. In other words, where the recipient of an award is not an
organization that the Federal agency is authorized to assist, but is
merely being used to provide a service to another entity which is
eligible for assistance, the proper instrument is a contract.
We would contend that the words "to accomplish a public purpose of
support or stimulation authorized by Federal statute" do not imply that
only recipients authorized by statute to be supported or stimulated can
be direct recipients of Federal assistance awards. In our view, the
major factor in distinguishing between assistance and acquisition
relationships when intermediaries are involved is whether or not the
Government becomes the intermediary in conveying the assistance. If a
recipient's products or services are delivered to the Government which
uses them to convey assistance to the third party, that initial
relationship should be established in the form of a procurement
contract since the recipient's products or services are for the
Government's "direct benefit or use." If however the recipient delivers
products or services to a third party which is authorized by statute to
be supported, the Government is not receiving the "direct benefit or
use" of those products or services and therefore an assistance
instrument should be used.
The fact that both interpretations can be accommodated under the
existing legislation and OMB guidance is indicative of the need for
refinements in that guidance. We would only stress that such refinement
need not entail the wholesale elimination of assistance awards to
recipients not specifically authorized to receive them. Improved
guidance or examples concerning the "direct benefit or use" test would
be just as productive and would appear to yield more uniformity of
interpretation and application.
The draft report indicates that OMB will soon be issuing new guidance
concerning the Act. It is strongly recommended that your Office defer
issuance of the final report until an assessment of that guidance can
be made and the remaining problems addressed.
We appreciate the opportunity to review the draft report.
Sincerely,
Signed by:
Albert J. Kliman:
Acting Deputy Assistant Secretary:
[End of section]
APPENDIX VII:
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY: WASHINGTON, D.C. 20460:
30 JUN 1981:
Mr. Henry Eschwege:
Director:
Community and Economic Development Division: United States General
Accounting Office: Washington, D.C. 20548:
Dear Mr. Eschwege:
The Environmental Protection Agency (EPA) has reviewed the General
Accounting Office (GAO) draft report entitled "Improvements Needed in
the Implementation of the Federal Grant and Cooperative Agreement Act."
We believe this report constitutes a reasonable summary and assessment
of agencies' experience in implementing the Federal Grant and
Cooperative Agreement Act (FGCAA). We appreciate the thorough job GAO
has done in researching some very complicated questions related to
implementing FGCAA and in suggesting interpretations or other
approaches which can help the Agency do a better job. There are,
however, a few points which we believe should be clarified in the final
report.
FGCAA required Federal agencies to make significant changes in policies
and procedures for awarding assistance and procurement contracts. The
difficulties in implementing these changes were compounded by the
ambiguous language of the Act. The draft report confirms that "(t)he
act's terms and legislative history and OMB's guidance have fostered
inconsistent interpretations" (page 8, paragraph 1) and "(t)he act is
not a model of clarity" (page 8, paragraph 4). On page 7, the report
states that during GAO's review of agency actions in researching this
and other reports, GAO found "several actual or proposed assistance
awards which we believe should have been procurement contracts."
Considering the thousands of awards made since passage of this Act, the
record seems to be a good one.
Attached are specific comments relating to the draft report which we
feel should be considered. In addition, two pages from the draft report
requiring technical/typographical corrections are attached. (See GAO
note.)
We appreciate the opportunity to comment on the draft report prior to
its issuance to Congress.
Sincerely yours,
Signed by:
Roy N. Gamse:
Acting Assistant Administrator for Planning and Management:
GAO Note: We did not include these two pages in the final report.
Specific Comments:
CHAPTER 1:
We particularly agree with the paraphrasing of the "public purpose of
support or stimulation" language of the Act on page 1, paragraph 2,
item (2), to indicate that assistance agreements are used "to support
or stimulate activities" (emphasis added). However, on page 11,
paragraph 2, the report indicates that assistance agreements may be
used only when an agency has statutory authority "to support or
stimulate someone else" (emphasis added). This is an important shift in
terminology which may not have been intentional, although we believe it
is incorrect. This position remains consistent with our support for
GAO's interpretations of section 4(1) of the Act, as stated in Chapter
2.
We are concerned about the sweeping generalizations and statistics
based on GAO's questionnaire. For example, one EPA official was called
twice by different interviewers, who we believe were administering the
same questionnaire. The interviewee is convinced the interviewers had
no practical knowledge of grant assistance or how different agencies
operate. The interviewers asked questions which were irrelevant to the
interviewee's role and insisted that he answer, even though the answer
may not have been pertinent to the employee's responsibilities or the
Agency. While we hesitate to generalize from one experience, we are
concerned that this experience may have been more widespread and
rendered less-than-valid data.
CHAPTER 2:
We agree with the GAO interpretation of the "direct benefit" language
in Section 4(1) of the Act.
We agree with the GAO interpretation of section '1(a) of the Act. The
Agency's Office of General Counsel believes their interpretation of the
Act and their guidance to EPA officials in implementing the Act has
been consistent with the opinion of the Acting General Counsel of the
Department of Energy, as quoted in the draft report, page 18.
Nevertheless, GAO cites EPA as an agency which does not share the
opinion of the Acting General Counsel of the Department of Energy. We
believe that this is a misrepresentation of EPA's position. To support
this characterization, GAO cites one program in which an error was made
while implementing the Act in 1979.
This is an aberration of EPA's implementation of the Act. In the same
paragraph, GAO points out that cooperative agreements based on
assistance authority in the program legislation could have been used in
the particular example. If this is GAO's interpretation, then EPA was
not in violation of FGCAA.
We request clarification of GAO's suggested interim agency or program
approach to defining normal or substantial involvement (page 26 ff.) In
the second paragraph on page 27, the draft report states "the fact that
a recipient is treated differently, that is, subjected to more controls
and collaboration and less discretion than the normal recipient for a
given program" (emphasis added), would suggest that the Federal agency
is substantially involved and a cooperative agreement may be
appropriate." This would mean GAO considers the normal instrument in
every program (in this second test) to be a grant. However, on page 28,
paragraph 2, the draft report indicates that agencies should "identify
what is normal involvement for their programs and base their grant and
cooperative agreement distinctions on how they are more or less
involved than normal with individual recipients" emphasis added.) This
suggests that an agency could define the norm for each program as a
grant or a cooperative agreement, with variations specifically
justified. We agree with the latter statement. As now written, the
recommendation beginning "define normal involvement, ..." on page 30
does not clearly reflect the discussion on pages 2829; it should be
revised to do so. Further, we suggest that this approach may be valid
as a permanent, rather than an interim one.
We believe it would be helpful for agencies' continued implementation
of the Act if GAO would express their opinion of the proper
interpretation of section 4(2) of the Act.
CHAPTER 4:
We support the main recommendation that OMB should revise its Circulars
to establish clear operational differences for grants and cooperative
agreements. We also agree that the report's suggested approach
(minimum, optional, and maximum requirements), on page 49, is a good
starting place for a redrafting effort. This would be consonant with
our view that each agency is in the best position to determine the
level of operational activities appropriate to its programs. The
current distinctions between types of recipients (State and local
governments in A102 and institutions of higher education, hospitals,
and other nonprofit organizations in A110) can be maintained with the
legal instrument distinctions within each Circular. Alternatively, OMB
could structure the Circulars (or a single Circular, preferably) by
type of instrument with recipient distinctions within them.
[End of section]
APPENDIX VIII:
ACTION: The Agency for Volunteer Service: WASHINGTON, D C 20525:
OFFICE OF THE DIRECTOR:
Mr. Gregory Ahart, Director:
U.S. General Accounting Office:
Washington, D.C. 20548:
Dear Mr. Ahart:
Thank you for allowing ACTION the opportunity to review the proposed
report entitled "Improvements needed in the Implementation of the
Federal Grant and Cooperative Agreement Act."
Due to the vagueness of existing guidance and the lack of specific
operating procedures, progress in achieving the Act's objectives has
been limited. In the face of incomplete or nonexistent operational
guidance, agencies have frequently resorted to inappropriate
procurement practices. For these reasons GAO should be applauded for
its initiative in taking on this effort to improve the Act.
I have asked my staff to review the draft report and offer the
following comments:
1) The suggested approach to further defining substantial involvement
described on page 26 may be counterproductive. Requiring individual
agencies or programs to develop characteristics for distinguishing
between grants and cooperative agreements, even on an interim basis
until OMB develops better guidelines, could result in more firmly
entrenched differences among agency interpretations of the Act's
requirements. This, in turn, would place additional and conflicting
reporting burden on recipients engaged in similar activities under
grants from some agencies and cooperative agreements from others.
This suggestion appears to conflict with the conclusion on page 29,
that "[b]etter definition of... substantial involvement [is] needed to
promote more consistent agency decisions.
2) The draft's argument for restrictive interpretation of Section 7(a)
is not persuasive. (Pages 1416 and 30.) The legislative history cited
does not clearly indicate that Congress did not intend an expansion of
grant authority. The cited legislative history explains that,
[i]f an agency is presently authorized only to enter into either
contracts, grants, cooperative agreements, or of e arrangements, this
authorization enables that agency to enter into any or all three types
of agreements... (emphasis added).
In the draft this language is interpreted to mean that "Section 7(a) of
the act does not create new authority to make assistance awards
independent of program legislation," and suggests that OMB revise its
guidance to "clearly state" this interpretation.
Another reasonable interpretation of the legislative history is that an
agency previously authorized by its organic legislation to enter into
only contracts may now enter into grants and cooperative agreements as
well, unless its legislation specifically prohibited such assistance
activities. If there is disagreement on Congress' intent, clarification
should come from Congress, not OMB.
3) The first recommendation to the Director of OMB on page 43 would
increase the regulatory and paperwork burdens on Federal agencies. This
recommendation calls for the development of new "administrative
systems" for implementing and monitoring compliance with the Act, and
new "systems of records on [agencies') operating experiences in
implementing the act." Similarly, the suggestion on page 51 that an
"agency might want to obtain financial reports on a monthly basis" for
new recipients of assistance would increase the reporting burdens
already imposed on grantees.
4) The discussion on termination of assistance for Federal convenience"
on page 47 fails to take into account statutory requirements such as
Section 412 of the Domestic Volunteer Service Act of 1973, as amended,
P.L. 93113. That section authorizes the Director of ACTION to terminate
grant assistance 'whenever he determines there is a material failure to
comply with the applicable terms and conditions" of a grant. It also
sets forth certain specified due process requirements to be followed in
grant termination procedures.
If you have any questions or with further information on these
comments, please let me know.
Sincerely,
Signed by:
Thomas W. Pauken:
Director:
[End of section]
APPENDIX IX:
DEPARTMENT OF HEALTH & HUMAN SERVICES: Office of Inspector General:
Washington, DC 20201:
24 JUN 1981:
Mr. Gregory J. Ahart:
Director, Human Resources Division:
United States General Accounting Office: Washington, D.C. 20548:
Dear Mr. Ahart:
Thank you for the opportunity to review and comment on the draft report
entitled, "Improvements Needed in the Implementation of the Federal
Grant and Cooperative Agreement Act." It is a very thorough and
objective analysis of the Act. The Office of Inspector General will
continue to evaluate compliance by Departmental components with the
spirit and intent of the Act as part of our ongoing audit effort. Also,
copies of the final version of this report will be furnished our audit
staffs upon its release to illustrate the need for this continual
monitoring. Inasmuch as there are no specific problems or
recommendations regarding this Department, we have no other comments.
Sincerely,
Signed by:
Richard P. Kusserow:
Inspector General:
[End of section]
(017630):
FOOTNOTES:
[1] In the 97th Congress the name of the Subcommittee was changed to
Subcommittee on Federal Expenditures, Research and Rules.
[2] An agency may, of course, be authorized to assist someone through
use of other means, such as loans, direct payments, or subsidies.
GAO's Mission:
The Government Accountability Office, the investigative arm of
Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO email this list to you every afternoon, go to
www.gao.gov and select "Subscribe to email alerts" under the "Order GAO
Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office
441 G Street NW, Room LM
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 5126000:
TDD: (202) 5122537:
Fax: (202) 5126061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm
Email: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director,
NelliganJ@gao.gov
(202) 512-4800
U.S. Government Accountability Office,
441 G Street NW, Room 7149
Washington, D.C. 20548:
