[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Extensions of Remarks]
[Pages E1975-E1976]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            FEDERAL ACTIVITIES INVENTORY REFORM ACT OF 1998

                                 ______
                                 

                               speech of

                           HON. PETE SESSIONS

                                of texas

                    in the house of representatives

                        Monday, October 5, 1998

  Mr. SESSIONS. Mr. Speaker, I am pleased that the House is poised to 
pass S. 314, the Federal Activities Inventory Reform (FAIR) Act. This 
legislation is a consensus compromise bill. It is an important step in 
the process of ensuring that the component agencies of the Federal 
Government deliver performance to the taxpayers they serve. This 
legislation, combined with the Government Performance and Results Act, 
the Chief Financial Officer Act and other procurement and financial 
management reforms, will result in an improved Federal Government.
  In the 1920s, Congress raised concern over the large numbers of 
additional Federal functions initiated during the First World War and 
never discontinued. These concerns resulted in hearings. Later, in the 
1950s, the House of Representatives passed legislation to terminate 
commercial activities of the Federal Government. In response to this 
legislation the Bureau of the Budget, and later, the Office of 
Management and Budget, issued guidance for executive branch agencies on 
the issue of agencies performing commercial activities. This guidance 
is currently represented by OMB Circular A-76.
  This policy has been erratically followed since its promulgation. 
Agencies routinely ignore the stated policy of the President. Among the 
greatest problems which we face with the ineffective Administrative 
policy regarding the performance of agency commercial activities are 
the following:
  (1) Agencies do not develop accurate inventories of such activities,
  (2) They do not conduct the reviews outlined in the Circular,
  (3) When reviews are conducted they drag out over extended periods of 
time,
  (4) Agencies initiate commercial activities without reference to the 
policy, and
  (5) The criteria for the reviews are not fair and equitable.
  For example, certain practices are tolerated which bias cost-
comparison competitions in favor of the Federal Government. A 
description of the cost-comparison competition process illustrates this 
costly unfairness. First, when an action is to be taken, the agency 
develops a ``most efficient organization,'' designed to represent the 
best form to accomplish the purpose of the commercial activity. This 
MEO allows for agency commercial activities to reorganize prior to the 
competition. Agencies promise to shed staff and reorganize for 
efficiency. Sometimes, agencies do not make the changes promised under 
the MEO. And in no case are the post-competition promises of agency 
commercial activities verified or audited.
  Once the MEO is established, two competitions are held. In the first 
competition, a commercial source is selected using performance-based 
criteria. The offeror representing the best value source is chosen. The 
winning offeror is often not the low-price offeror, since a higher-
quality source can offer better value for the money. Then the best 
value commercial source is compared to the agency commercial activity 
on the basis of cost, regardless of performance or quality. The 
commercial source must then beat cost of the agency commercial 
activity, and do so by at least 10 percent.
  In enacting S. 314, the Federal Activities Inventory Reform, it is 
the intent of Congress that the Director of the Office of Management 
and Budget take prompt action, through the budget process and 
regulations promulgated pursuant to this legislation, to ensure that:
  1. Agency commercial activities establish and use cost accounting 
systems, as required under the Federal Accounting Standards Board 
(FASAB) and applicable law.
  2. Agency commercial activities are not given an advantage in terms 
of avoiding any evaluation on performance.
  3. Agency commercial activities are not given any preference merely 
because they are government agencies or the incumbent provider of goods 
or services. Agency commercial activities ought to be treated 
identically in this regard to commercial sources.
  4. Agency commercial activities are evaluated after any award, and 
penalties for default are established. Such penalties should include 
re-competition or termination of the activity.
  5. Agency commercial activities be evaluated upon their performance 
during the cost-

[[Page E1976]]

comparison competition process. If the offer of any commercial source 
is lower than the agency commercial activity, the in-house agency 
commercial activity should not be selected, even if another commercial 
source is the best value offeror, unless the agency commercial activity 
is the best value source.
  6. Agency commercial activities are regularly subjected to 
competition to ensure that the taxpayer is getting the best value.
  During the course of our hearings on this legislation, it became 
abundantly clear that there are certain activities that the Federal 
government has performed in-house which can and should be converted to 
the private sector. Areas such as architecture, engineering, auctions, 
surveying and mapping, laboratory testing, information technology, and 
laundry services have no place in government. These activities should 
be converted to performance by the private sector.
  There are other activities in which a public-private competition 
should be conducted to determine which provider can deliver the best 
value to the taxpayer. Examples include base and facility operation and 
campgrounds.
  Section 2(d) of the legislation requires the head of an agency to 
review the activities on its list of commercial activities ``within a 
reasonable time.'' Unfortunately, OMB opposed a legislative timetable 
for conducting these reviews. As a result of the compromise language on 
this matter, it will be incumbent on OMB to make certain these reviews 
are indeed conducted in a reasonable time frame. It is the intent of 
Congress in enacting this legislation that at the Department of 
Defense, agency commercial activities will be reviewed and competed 
within seven years. For the civilian agencies, it is the intent of 
Congress that such activities be reviewed before five years. I urge OMB 
to exercise strong oversight to assure timely implementation of this 
requirement by the agencies.

  This provision also requires that agencies use a ``competitive 
process'' to select the course of goods or services. This term has the 
same meaning as ``competitive procedure'' as defined in Federal law (10 
U.S.C. 2302(2) and 41 U.S.C. 259(b)). To the extent that a government 
agency competes for work under this section of the bill, the government 
agency will be treated as any other contractor or offeror in order to 
assure that the competition is conducted on a level playing field.
  Another key decision which must be made is the determination of what 
is inherently governmental. The legislation continues current policy, 
embodied in OFPP Policy Letter 92-1. There will be certain agency 
commercial activities that may have components which are both 
inherently governmental and commercial in nature. Such activities 
should be segmented, so that the commercial activity can be studied for 
competition.
  For example, one important agency function deals with the disposal of 
surplus government property. The Committee on Government Reform and 
Oversight is intimately familiar with such actions, due to its 
jurisdiction over the Federal Property and Administrative Services Act.
  While an agency's decision of whether or not to dispose of excess, 
surplus and seized property is inherently governmental, the process of 
actually disposing of excess, surplus and seized property is not an 
inherently governmental function and, therefore, this activity should 
be listed on the commercial inventory under this legislation. There 
will be situations where disposal of property is an inherently 
governmental function, such as the disposal of certain surplus naval 
vessels and other weapons and weapon systems. But generally, such 
functions are commercial in nature, since the property disposal process 
generally is not so intimately connected with the public interest as to 
require performance by Federal employees. Therefore, Congress intends 
that property disposal would normally be conducted by contracting with 
commercial sources. The utilization of experienced, bonded commercial 
property disposal firms will assist the government to meet that goal, 
using the same structures and incentives as the private sector in 
disposing of excess, surplus and seized property. These practices are 
designed to maximize the commercial value of this property, while 
government practices and incentives are primarily designed to dispose 
of inventory as quickly as possible rather than maximizing the return 
on the dollar. That is the goal of this legislation.
  Mr. Speaker, it is high time to pass this legislation. It is long 
overdue. So do all of your constituents a favor and vote for S. 314.

  Executive Office of the President--Office of Management and Budget, 
                              Oct. 2, 1998

                   Statement of Administration Policy


            S. 314--Federal Activities Inventory Reform Act

                   (Thomas (R) WY and 16 cosponsors)

       The Administration has no objection to S. 314, the 
     ``Federal Activities Inventory Reform Act of 1998 (FAIR).'' 
     The Act would reinforce efforts to improve the identification 
     and review of non-inherently governmental activities. The 
     bill permits the agencies to assess which functions should be 
     submitted to competition with the private sector and allows 
     the Government to choose the source--public or private--which 
     is the most cost effective and in the best interests of the 
     taxpayer. This bill is consistent with Administration efforts 
     to reform Federal procurement and ensure that taxpayers 
     receive the best value.
       The Administration's policy is to promote competition to 
     achieve the best deal for the taxpayer. Competition is an 
     integral part of the Administration's overall reinvention and 
     management improvement effort. The inventories of commercial 
     activities required by the FAIR Act will help senior agency 
     managers and OMB to identify opportunities not only for 
     competition, but also other reinvention opportunities, 
     including: re-engineering, organizational restructuring, 
     termination decisions, and the possibility of applying new 
     technologies, such as electronic commerce.

     

                          ____________________