Competitive Contracting: The Understandability of FAIR Act Inventories
Was Limited (Letter Report, 04/14/2000, GAO/GGD-00-68).

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

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

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-68
     TITLE:  Competitive Contracting: The Understandability of FAIR Act
	     Inventories Was Limited
      DATE:  04/14/2000
   SUBJECT:  Competitive procurement
	     Privatization
	     Reporting requirements
	     Federal agency reorganization
	     Federal procurement
	     Cost effectiveness analysis
IDENTIFIER:  OMB Circular A-76 Program

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************

United States General Accounting Office
GAO

Report to the Chair, Subcommittee on Oversight,

Investigations, and Emergency Management

House Committee on Transportation and

Infrastructure

April 2000

GAO/GGD-00-68

COMPETITIVE CONTRACTING
The Understandability of FAIR Act Inventories

Was Limited

Ordering Copies of GAO Reports
The first copy of each GAO report and testimony
is free. Additional copies are $2 each. Orders
should be sent to the following address,
accompanied by a check or money order made out
to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are
accepted, also. Orders for 100 or more copies to
be mailed to a single address are discounted 25
percent.
Order by mail:
U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013
or visit:
Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC
Orders may also be placed by calling (202) 512-
6000 or by using fax number (202) 512-6061, or
TDD (202) 512-2537.
Each day, GAO issues a list of newly available
reports and testimony. To receive facsimile
copies of the daily list or any list from the
past 30 days, please call (202) 512-6000 using a
touch-tone phone. A recorded menu will provide
information on how to obtain these lists.
Viewing GAO Reports on the Internet
For information on how to access GAO reports on
the INTERNET, send e-mail message with "info" in
the body to:
[email protected]
or visit GAO's World Wide Web Home Page at:
http://www.gao.gov

Reporting Fraud, Waste, and Abuse in Federal
Programs
To contact GAO FraudNET use:
Web site:
http://www.gao.gov/fraudnet/fraudnet.htm
E-Mail: [email protected]
Telephone: 1-800-424-5454 (automated answering
system)

United States
General Accounting Office
Washington, D.C. 20548-0001
Official Business
Penalty for Private Use $300
Address Correction Requested

                    Bulk Rate
               Postage & Fees Paid
                       GAO
                 Permit No. G100

(410469)

Contents
Page 201        GAO/GGD-00-68 FAIR Act Inventories
Letter                                                                      1
                                                                             
Appendix I                                                                 22
Agencies Rely on Raines
Lists and Their
Components to Create
FAIR Act Inventories
                           Commerce, DOT, and GSA Used Their               22
                           Raines Lists
                           EPA and FEMA Used Components Input              22
                                                                             
Appendix II                                                                24
Agencies Exempted Many
Commercial FTEs From
Competition
                           Commerce's Inventory Contains                   24
                           Contradictions
                           EPA Exempted Its Modified Function              25
                           Codes From Competition
                           FEMA Exempted Almost All FTEs From              25
                           Competition
                           Majority of GSA's Commercial FTEs               26
                           Designated as "Commercial
                           Competitive"
                           Many of DOT's Commercial FTEs Are               26
                           Repair and Maintenance Activities
                                                                             
Appendix III                                                               28
GAO Contacts and Staff
Acknowledgments
                                                                             
Tables                     Table 1: Number and Percent of FTEs              7
                           Agencies Identified as Performing
                           Commercial Activities
                           Table 2: Reason Codes Contained in              11
                           Circular A-76 Supplemental Handbook
                           Table 3: Number of Commercial FTEs              12
                           Agencies Designated by Reason Code
                           Table II.1: Five Function Codes in              25
                           Commerce's Inventory With the Most
                           FTEs
                           Table II.2: Top Five Function Codes             25
                           Exempted From Competition by EPA
                           Table II.3: Top Five Function Codes             25
                           Exempted From Competition by FEMA
                           Table II.4: Top Five Function Codes             26
                           Designated as "Commercial
                           Competitive" by GSA
                           Table II.5: Top Five Function Codes             26
                           Exempted From Competition by GSA
                           Table II.6: Top Five Function Codes             27
                           Exempted From Competition by DOT
                           Table II.7: DOT's Top Five Function             27
                           Codes That Could Be Considered for
                           Competition
                                                                             

Abbreviations

DOT       Department of Transportation
EPA       Environmental Protection Agency
FAIR      Federal Activities Inventory Reform Act
FEMA      Federal Emergency Management Agency
FTE       full-time equivalent
GSA       General Services Administration
OMB       Office of Management and Budget

B-283779

Page 15         GAO/GGD-00-68 FAIR Act Inventories
B-283779

April 14, 2000

The Honorable Tillie Fowler, Chair
Subcommittee on Oversight, Investigations, and
  Emergency Management
Committee on Transportation and Infrastructure
House of Representatives

Dear Madam Chair:

As requested, this report describes the initial
implementation of the Federal Activities Inventory
Reform (FAIR) Act of 1998 and examines selected
agencies' inventories of noninherently
governmental activities.1  These agencies are the
Departments of Commerce and Transportation, the
General Services Administration (GSA), and the
Environmental Protection and Federal Emergency
Management Agencies.  The FAIR Act became law on
October 19, 1998, requiring executive agencies to
submit each year to the Office of Management and
Budget (OMB) inventories of activities that, in
the judgment of the head of the agency, are not
inherently governmental functions.  OMB's Circular
A-76, which establishes federal policy for the
executive branch's performance of commercial
activities, includes detailed procedures for
competitively determining whether commercial
activities should be performed by federal
employees or the private sector.  As our October
1999 testimony discussed, implementation of the
FAIR Act is in its early stages, and continuing
congressional interest in the FAIR Act is needed
to maintain serious agency attention to developing
and using the inventories.2

Our objectives were to (1) describe the overall
initial implementation of the FAIR Act, (2)
analyze the clarity and understandability of the
five agencies' FAIR Act inventories, (3) examine
the extent to which these agencies exempted
commercial activities from competition, and (4)
identify supplemental information that enhanced
the understandability of agencies' inventories.

The possible consideration of contracting for some
of these activities makes it important for
interested parties to be able to look across
agencies' inventories to identify differences in
whether agencies consider an activity inherently
governmental, commercial and subject to
competition, or exempt from competition.  In
addition, reflecting the importance of some degree
of comparability across agencies, the commercial
activities listed in agencies' FAIR Act
inventories must be understandable to interested
parties.  As defined by the act, interested
parties may challenge agency lists based on "an
omission of a particular activity from, or an
inclusion of a particular activity on, a list."3
Interested parties have 30 days after the
publication of the notice of the public
availability of the FAIR Act inventory to file a
challenge.4

OMB revised its Circular A-76, "Performance of
Commercial Activities" and its Circular A-76
Supplemental Handbook on June 24, 1999, to
implement the FAIR Act.  This guidance contains
function codes to characterize the various types
of commercial activities performed by agency
employees, for example "Health Services: Medical
Records," and reason codes for agencies to
categorize whether the commercial activities they
listed were exempt from, or could be considered
for, competition.  The FAIR Act provides that when
an agency considers contracting with a private
sector source for a commercial activity on its
list, the agency shall use a competitive process
to select the source unless it is exempted from
doing so.

Results in Brief
Ninety-eight executive agencies developed and
published inventories of their commercial
activities under the FAIR Act's first year of
implementation, identifying about 904,000 full-
time equivalent (FTE) employees performing
commercial activities.5  Compared to prior efforts
to inventory commercial activities, the initial
implementation of the FAIR Act increased the
number of agencies identifying and reporting on
their commercial activities and increased the
amount of information about agencies' commercial
activities that is publicly available.

However, the clarity and understandability of the
five FAIR Act inventories we reviewed was limited.
OMB's June 1999 list of function codes used by
agencies to characterize the types of commercial
activities they perform was incomplete.  Because
OMB allowed agencies to use an expanded list of
function codes for their FAIR Act inventories that
was not contained in OMB's June 1999 guidance, it
may have been more difficult for interested
parties who did not have the expanded list to
identify the activities agencies are performing.
Function codes on both the official and expanded
lists are vague, and OMB has not defined them.
Agency officials said that OMB's function codes
were not adequate to clearly categorize the
commercial activities that their employees
perform.  As outlined in its budget procedures
memorandum, the purpose of OMB's reviews was to
seek to ensure consistency within and across the
inventories; but the formats differed, and some
agencies used unique function codes to categorize
some of their activities.  This limited the
ability of interested parties to identify
potentially similar activities, such as automatic
data processing or administrative activities that
are conducted across the government.

The five agencies exempted a range of from 37 to
99 percent of the commercial activities they
identified from consideration for competition.6
For example, the Federal Emergency Management
Agency (FEMA) exempted 99 percent (2,302 FTEs) of
its commercial activities from competition because
they perform emergency functions, according to the
agency. Interested parties may challenge the
omission of a particular activity from, or the
inclusion of a particular activity on, an agency's
inventory.  However, since the FAIR Act does not
require that commercial activities be competed, it
does not provide for challenges to agencies'
decisions to exempt commercial activities listed
on the inventories from competition.

Finally, we found that some of the supplemental
information that the five agencies included
enhanced the understandability of the FAIR Act
inventories.  For example, although the FAIR Act
does not require agencies to identify their
inherently governmental activities, GSA's
inventory listed both its commercial and
inherently governmental activities.  Including
this information provided a fuller perspective
about the range of activities that GSA performs.

In enacting the FAIR Act, Congress made agencies'
inventories of their commercial activities
available to the public and subject to challenges
and appeals by interested parties.  In order for
the inventories to be informative, however, they
must be clear and understandable.  Accordingly, we
recommend that the Director of OMB reexamine the
function codes in OMB's guidance so that agencies'
identifications of the activities they are
performing are clear and understandable to
Congress and the public, including interested
parties.  We also recommend that the Director of
OMB reinforce the principles established in OMB's
budget procedures memorandum for OMB staff to
enhance the consistency of the inventories within
and across executive agencies.

Background
Before the FAIR Act was passed, there had been
considerable debate that agencies, with some
exceptions, were not making a serious effort under
Circular A-76 to ensure that they rely on the
private sector for commercial goods and services
to the extent that it is cost effective.  OMB
Circular A-76, issued in 1966, establishes federal
policy for the government's performance of
commercial activities.  Under Circular A-76,
executive agencies are to conduct cost-comparison
studies of commercial activities performed by
government personnel to determine whether it would
be more cost effective to maintain the activities
in-house or contract with the private sector for
their performance.  In 1979, OMB issued a
supplemental handbook to the circular to provide
guidance for determining whether agencies'
activities are inherently governmental or
commercial and for agencies to inventory their
commercial activities.  This supplemental handbook
includes OMB's list of function codes for agencies
to use to identify their commercial activities.

In an attempt to devote more attention to the
implementation of Circular A-76, on May 12, 1998,
OMB's then Director, Franklin Raines, requested
agencies to submit to OMB inventories of their
full- and-part-time positions involving commercial
and inherently governmental activities.  Often

referred to as the "Raines lists," agencies were
to group their activities as either

ï¿½    inherently governmental;
ï¿½    commercial, but specifically exempt from the
cost-comparison requirements of OMB Circular A-76;
ï¿½    commercial and should be competed; or
ï¿½    commercial, but must be retained in-house.

 OMB requested that agencies submit their Raines
lists by October 31, 1998.  An OMB official said
that OMB had intended to provide agencies with
feedback on their lists but did not do so because
the Raines lists were "overtaken by events,"
specifically the passage of the FAIR Act.  (App. I
describes how the agencies we reviewed used their
Raines lists in developing their FAIR Act
inventories.)

     Our prior work has shown that savings are
possible when agencies undertake a disciplined
approach, such as that called for under Circular A-
76, to review their operations and implement the
changes to become more efficient themselves or
contract with the private sector for services.7
Agencies' experiences with the Circular A-76
process suggests that competition is a key to
realized savings, regardless of whether functions
are eventually performed by private sector sources
or retained in-house.  However, despite the
federal policy on commercial activities, a minimal
amount of Circular A-76 activity occurred in the
past, particularly among civilian agencies since
the late 1980s.8  For example, in fiscal year
1997, the Department of Defense was the only
executive agency that reported to OMB that it had
completed any Circular A-76 cost-comparison
studies for federal positions.

OMB implemented the FAIR Act by revising its
Circular A-76 guidance and supplemental handbook,
which included adding the new elements required by
the FAIR Act to the data elements already called
for in the agencies' Circular A-76 inventories of
commercial activities.  Like Circular A-76, the
FAIR Act does not require that commercial
activities be competed.  OMB issued its revised
guidance for the first year's implementation of
the FAIR Act in the Federal Register on June 24,
1999, about a week before the first inventories
were due to OMB for "review and consultation," as
required by the act.

To meet its "review and consultation"
responsibilities under the FAIR Act, OMB issued
budget procedures memorandum number 829 on July
12, 1999, instructing its staff to review
agencies' inventories to seek to ensure
consistency within an agency and across the
Government.  However, OMB's budget procedures
memorandum states that OMB will not be seeking to
confirm, or validate, each and every element of
the detailed information contained in the
agencies' inventories; that the FAIR Act provides
for such a detailed review to take place in the
agencies' development of their inventories and in
the revisions that may result from any challenges
and appeals; and, in preparing its FAIR Act
submission, each agency needs to assess its
operations to identify which are commercial and
which are inherently governmental.

Increased Congressional Interest
Scope and Methodology
At your request, we reviewed the initial
implementation of the FAIR Act by the
Environmental Protection Agency (EPA), FEMA, GSA,
the Department of Transportation (DOT), and
Commerce.9  We selected four agencies that are
within the Subcommittee's jurisdiction and added
the Department of Commerce to include an
additional cabinet-level department with component
agencies that have broad and crosscutting
responsibilities.  We collected the five agencies'
FAIR Act inventories and any related documentation
and developed databases to analyze this
information.  We examined and compared the
development, content, and format of these
agencies' FAIR Act inventories and related
supporting material to identify instances that
might reasonably aide or impede comprehension or
use of the inventories by Congress and the public,
including interested parties.  We also interviewed
the appropriate officials at each of the five
agencies about the processes they used to develop
their FAIR Act inventories, the characteristics of
these inventories, and to obtain their comments on
OMB's guidance.  In addition, we interviewed OMB
officials about the guidance they provided to
agencies and their responsibilities to review and
consult with agencies about the contents of their
FAIR Act inventories.

We conducted our work between July 1999 and
January 2000 at OMB, EPA, FEMA, GSA, DOT, and
Commerce headquarters in Washington, D.C., in
accordance with generally accepted government
auditing standards.  We provided a draft of this
report for review and comment to the Directors of
OMB and FEMA, the Secretaries of Transportation
and Commerce, and the Administrators of EPA and
GSA.  Their comments are reflected in the agency
comments section of this report.

FAIR Act Increased the Identification of
Commercial Activities but Understandability Was
Limited
Compared to prior efforts under Circular A-76 to
inventory commercial activities, the initial
implementation of the FAIR Act has increased the
number of inventories developed by executive
agencies, resulting in an increased number of FTEs
identified as performing commercial activities.
The FAIR Act has also made this information
available to Congress and the public.  However, in
order for the inventories to be informative, they
must be clear and understandable.  The clarity and
understandability of the five agencies' FAIR Act
inventories we reviewed was limited.  OMB's June
1999 list of function codes to categorize
commercial activities was incomplete, vague in
some cases, and did not adequately capture
agencies' activities.  Although OMB reviewed them,
the agencies' inventories were not always
consistent.

Agencies Are Performing Commercial Activities
Information OMB published in the Federal Register
for the first year's implementation indicates that
98 executive agencies submitted FAIR Act
inventories to OMB.10  According to an OMB
official, the inventories listed 904,000 FTEs
performing commercial activities, an increase over
the number of FTEs previously identified through
the Circular A-76 process.

As shown in table 1, of the 5 agencies we
reviewed, DOT identified the largest number of
FTEs (12,796) performing commercial activities,
representing about 13 percent of DOT's total
number of FTEs.  Therefore, it appears that DOT
has determined that 86,079 FTEs (87 percent) of
its FTEs are performing inherently governmental
activities.

Table 1: Number and Percent of FTEs Agencies
Identified as Performing Commercial Activities
Agency     Number (and      Number (and    Total FTEs
          percent)         percent)
          of FTEs          of inherently
          performing       governmental
          commercial       FTEs
          activities
Commercea  8,466    (27%)   23,112  (73%)     31,578
EPA         829     (5%)   17,160  (95%)     17,989
FEMA       2,324    (76%)     746  (24%)      3,070
GSA        7,249    (51%)   7,029  (49%)     14,278
DOT        12,79    (13%)   86,079  (87%)     98,875
              6
aCommerce's total number of FTEs performing
commercial activities is based on our analysis.
Commerce's summary table included in its FAIR Act
submission showed 8,530 FTEs, but we found a
discrepancy within Commerce's supporting
databases, indicating that the total number of
FTEs performing commercial activities is 8,466.
Source: GAO analysis of selected agencies' FAIR
Act inventories and interviews with agency
officials.

FEMA identified the highest percentage (76
percent) of its total 3,070 FTEs as performing
commercial activities.  In contrast, EPA
identified the lowest percentage (5 percent) of
its total 17,989 FTEs as performing commercial
activities.  EPA's Deputy Chief Financial Officer
said that he does not expect the percentage of
activities EPA identifies as commercial to remain
static.  He also emphasized that EPA is already
very reliant on contractor support to fulfill its
mission.

To provide public access to their inventories,
both FEMA and GSA placed their inventories on
their Internet websites.  The other agencies
(Commerce, EPA, and DOT) provided printed copies
of their inventories to interested parties upon
request.

The Clarity and Understandability of the
Inventories Was Limited
In order for the inventories to be informative for
Congress and the public, the inventories must be
clear and understandable, but the clarity and
understandability of the agencies' inventories we
reviewed was limited.  The list of function codes
included in OMB's June 1999 guidance did not list
all of the function codes agencies used in their
inventories.  Some of OMB's codes are vague and
there are no definitions available.  In addition,
according to officials from some agencies, OMB's
function codes do not adequately capture the
activities their employees perform.  Although OMB
reviewed them, the agencies' inventories were not
always consistent either within an agency or
across executive agencies.

OMB's June 1999 guidance and the information
available on its website do not provide the
complete list of function codes agencies used in
their FAIR Act inventories.  This lack of
information could make it more difficult for
interested parties to be able to understand what
activities the agencies are performing.  The June
1999 guidance contains 12 major categories with
163 function codes listed in the supplemental
handbook.  For example, one category is "health
services" with function codes such as "dental
care" and "pharmacy services."  A prior draft of
this list, which was never completed by OMB and
did not become part of its June 1999 guidance,
included 21 major categories with 385 function
codes.  An OMB official said that they never
completed the expanded list because of the lack of
time to revise the function codes and have them
cleared for use in developing the FAIR Act
inventories.

OMB's official guidance and website do not contain
9 major categories of activities that include 222
specific function codes, many of which agencies
used in the inventories we reviewed.  For example,
over half of the function codes used in DOT's
inventory are not included in OMB's official list
of function codes.  To understand DOT's inventory,
some interested parties needed to contact the
agency or OMB to obtain the expanded list of
function codes.

Even when agencies used OMB's official list of
function codes, in some cases, it is still not
clear what activities the agencies' employees are
performing because some of OMB's function codes
are vague.  For example, one of OMB's categories
is "other nonmanufacturing operations."  It is not
clear exactly what the 130 FTEs DOT listed as
providing administrative support for other
nonmanufacturing operations are actually doing.
Some of the other official codes are more
specific.  For example, DOT listed 114 FTEs as
performing "intermediate, direct or general repair
and maintenance of electronic and communication
equipment."

Codes from the expanded list are also vague in
some cases.  One of the categories on the expanded
list is "other selected functions."  Commerce's
inventory lists 600 FTEs involved in providing
"management support" for "other selected
functions."  As a result, the information in the
inventory alone is insufficient to determine what
these activities involve.  Other codes on the
expanded list are more understandable.  For
example, Commerce lists 152 FTEs performing "data
center operations" under the "automatic data
processing" category.

OMB has not made available any further description
or elaboration of what specific types of
activities each of its function codes represent.
Officials from some agencies said that providing
definitions of the function codes would be helpful
in characterizing their agency's commercial
activities.  According to an OMB official,
however, creating definitions for all the function
codes would require a major commitment of time and
resources, which OMB does not have.

OMB has met with agency officials to receive their
input on revising OMB's guidance to agencies on
the preparation of the June 2000 FAIR Act
inventories.  In the past, we have noted that
OMB's work with interagency councils has been
successful in tapping talents that exist within
agencies, keeping management issues in the
forefront, and initiating important improvement
projects.11  We found that effective collaboration
with agencies-through such approaches as task
forces and interagency councils-has emerged as an
important central leadership strategy in
developing policies that are sensitive to
implementation concerns and in gaining consensus
and consistent follow-through within the executive
branch.  Therefore, one option would be for OMB to
lead an agency working group on FAIR Act issues,
which could require fewer OMB resources and
enhance agencies' involvement.

Officials from some of the agencies also said that
OMB's list of function codes does not work well
for describing civilian agencies' commercial
activities and that it would be useful to revise
these codes.  A GSA official, for example, said
that OMB's function codes are antiquated.  GSA
created several new function codes to describe the
policymaking activities involving compliance
reviews, the collection and analysis of data, or
the disposition of real property assets for the
federal government.  As a result, GSA created 10
new function codes under a category it developed
for governmentwide management policymaking duties.
GSA's codes include activities such as management,
administrative and automated data-processing
support.  FEMA created an entirely unique set of
function codes for all of its commercial
activities because it determined that all of its
functions are unique due to the nature of FEMA's
emergency management responsibilities.  Many of
FEMA's emergency management workers are on call 24-
hours a day, with duties that can change daily.  A
FEMA official said that FEMA wanted to be specific
and found OMB's function codes were vague in some
cases.

According to OMB's supplemental handbook, the
function codes are standardized to "facilitate the
aggregation of activities Government-wide and by
agency."  In addition to some agencies, such as
GSA and FEMA, who created their own function
codes, the agencies used different formats for
their lists, making it more difficult for
interested parties to compare potentially similar
commercial activities across agencies within the
30-day time period specified by the act to
challenge the inventories.  Because this was the
first effort to develop inventories under the FAIR
Act, the inventories varied in part because the
agencies did not approach their inventories from a
common starting point, interpreted OMB's guidance
differently, and adapted the codes to better meet
their specific circumstances.  In the future, more
consistent use of function codes and formats would
be helpful in trying to identify whether an
agency's inventory should be challenged under the
FAIR Act for including or excluding a particular
activity.  However, as part of the initial
implementation of the FAIR Act, OMB's reviews did
not achieve consistency in the use of function
codes and formats across agencies' inventories.

Agencies' Inventories Lacked Clarity and
Understandability
Generic Function Codes Too Vague
Agencies Listed Many Commercial Activities as
Exempt From Competition
Agencies exempted many of their FTEs performing
commercial activities from competition.  FEMA, for
example, exempted 99 percent (2,302 FTEs) of its
commercial activities from competition.  The
agencies do not intend to consider competing these
activities.  These decisions cannot be challenged
or appealed under the FAIR Act because the act
does not require that the activities listed be
competed.

OMB decided to revise its Circular A-76 guidance
to implement the FAIR Act.  As called for in this
guidance, agencies' inventories are to contain
"reason codes" that characterize the status of
each of their commercial activities, as shown in
table 2.  Because the responsibilities of an
activity may vary among agencies and even within
an agency, apparently similar activities may be
characterized with different reason codes.

Table 2: Reason Codes Contained in Circular A-76
Supplemental Handbook
Reaso Explanation
n
Code
  A   Indicates that the function is performed by
     Federal employees and is specifically exempt
     by the agency from the cost comparison
     requirements of the Circular and the
     Supplemental Handbook.
  B   Indicates that the activity is performed by
     Federal employees and is subject to the cost
     comparison or direct conversion requirements
     of the Circular and the Supplemental
     Handbook.
  C   Indicates that the activity is performed by
     Federal employees, but has been specifically
     made exempt from the provisions of the
     Circular and the Supplemental Handbook by
     Congress, Executive Order or OMB.
  D   Indicates that the function is currently
     performed by in-house Federal employees and
     is in the process of being cost compared or
     converted directly to contract or
     interservice support agreement performance.
  E   Indicates that the function is retained in-
     house as a result of a cost comparison.
  F   Indicates the function is currently being
     performed by Federal employees, but a review
     is pending force restructuring decision
     (i.e., base closure, realignment,
     consolidation, etc).
  G   Indicates that the function is prohibited
     from conversion to contract because of
     legislation.
  H   Waiver issued.
  I   Indicates the function is being performed in-
     house as a result of a cost comparison
     resulting from a decision to convert from
     contract to in-house performance.
Source: Codes and explanations taken directly from
appendix 2 of OMB's Circular A-76 Supplemental
Handbook.

As shown in table 3, the inventories of four of
the five agencies we reviewed listed about one-
half of the commercial FTEs as reason code A,
indicating that these activities are specifically
exempted by the agency from the cost comparison
requirements of the Circular A-76 process.  DOT,
for example, exempted 57 percent of the FTEs
performing commercial activities from
consideration for competition.  The agencies
exempted from 37 to 99 percent of their commercial
activities from competition, but we could not
determine how Commerce designated its commercial
activities.12  (For additional information on each
of the agencies' inventories, see app. II.)

Table 3: Number of Commercial FTEs Agencies
Designated by Reason Code
                    Reason Codes               
Agency      A    B    C    D    E    F Other  Total
                                          a
Commerce  n/a  n/a  n/a  n/a  n/a  n/a  n/a    n/a
b
EPA       775   30   24    0    0    0    0    829
FEMA     2,302   22    0    0    0    0    0  2,324
GSA       874    0    0    0    0    0 6,375  7,249
DOT      7,332 3,163 1,390  438  446   27    0 12,796
Total    11,28 3,215 1,414  438  446   27 6,375 23,198
            3
Note:  These agencies did not designate any FTEs
with reason codes G, H, or I.
aGSA created its own reason codes.
bFTEs were not clearly designated in Commerce's
FAIR Act inventory.
Source: GAO analysis of agencies' FAIR Act
inventories.

OMB's supplemental handbook states that agencies
may modify existing reason codes "as deemed
necessary."  For example, Commerce created six
different modifications for reason code B.
However, we could not determine the reason code
designations of Commerce's commercial activities
because the inventory also listed its FTEs under
three categories, which were "exempt, competitive,
and core."  Therefore, Commerce's inventory was
ambiguous and sometimes contradictory.  For
example, the International Trade Administration's
inventory listed 593 FTEs under the "Exempt"
column (i.e., exempt from competition) while also
assigning these FTEs reason code B (i.e., could be
considered subject to competition).  In addition,
Commerce did not assign any reason codes for a
substantial number of FTEs listed throughout its
FAIR Act inventory, so it is not clear how
Commerce characterized these commercial
activities.  OMB's review did not correct these
inconsistencies within Commerce's inventory before
the inventory was made available to Congress and
the public.

A Commerce official said that although "sorting
inconsistencies" occurred, the agency does not
plan to revise its inventory until its June 2000
submission.  She said that since interested
parties can only challenge whether an activity is
included on, or omitted from, the inventory,
clarifying the characterizations of Commerce's
commercial activities is not necessary to comply
with the act and would not affect any potential
challenges.  She emphasized, however, that
Commerce acknowledged these inconsistencies and
took steps to correct the problem internally.
According to Commerce officials, they have learned
a lot from their initial implementation
experiences.  They said that Commerce has taken
steps to ensure that a sound process is in place
to effectively develop the June 2000 inventory to
better comply with the spirit of the act.

GSA's use of the reason codes also differed
compared with other agencies' FAIR Act
inventories.  According to a GSA official, GSA
only used reason code A from the supplemental
handbook.  GSA created other reason codes based on
its Raines list, the Circular A-76 process, and
the FAIR Act.  For example, GSA created reason
codes for commercial activities that are
undergoing reinvention efforts that may
subsequently be redesignated and for commercial
activities that could be outsourced to other
federal or private sector providers.

Two agencies we reviewed provided general
explanations as to why they were using reason code
A to exempt commercial activities from
consideration for competition.  FEMA's submission
to OMB stated that the agency's mission to provide
the government's emergency response to natural and
man-made disasters justifies designating a high
percentage (99 percent) of its commercial
activities as exempt from competition.  EPA stated
that the majority of the activities on its FAIR
Act inventory represent commercial core
capabilities that should be retained in-house.
EPA exempted 775 FTEs, or 93 percent of its 829
commercial FTEs.  EPA cited its need to maintain
appropriate in-house expertise to effectively
apply and enforce the nation's environmental laws
in fulfilling its mission and meeting emergency
requirements.  It also pointed out that EPA has
been criticized as being too contractor dependent
and noted that in the past it has had to convert
some work that was being done under contract back
to in-house operations.

Supplemental Information Can Enhance the
Inventories
Beyond the requirements of the FAIR Act, some
agencies have included supplemental information in
their inventories that provides a useful
perspective about the range of activities that
these agencies perform.  This additional
information includes listing inherently
governmental activities, discussing how listed
activities contribute to agencies' strategic and
annual performance, and describing the scope of
activities currently under contract.13

Including Inherently Governmental Activities
Provides a Fuller Perspective
In addition to providing function codes and their
commercial designation, GSA's FAIR Act inventory
provides a fuller perspective about all of the
agency's activities by listing both its commercial
and inherently governmental activities.  Although
the FAIR Act does not require agencies to identify
their inherently governmental activities, GSA's
inventory lists its inherently governmental
activities (comprising 7,029 FTEs, which is almost
50 percent of GSA's total of 14,278 FTEs).
Information on agencies' inherently governmental
activities would be helpful for interested parties
to identify differences in how agencies classified
similar activities.  For example, one agency may
classify maintenance activities as inherently
governmental, while another agency may classify it
as commercial.  This information could be used in
determining what might be challenged.

Examining particular functions with this
information provides a fuller perspective of how
the agency's activities are carried out.  GSA
views some of its activities as entirely
inherently governmental, such as the 132 FTEs
providing legal services.  GSA's inventory also
shows that both inherently governmental and
commercial FTEs contribute to some activities.
For example, GSA designated almost 60 percent of
its vehicle acquisition and fleet management
activities as commercial, with about 40 percent
listed as inherently governmental.

Linking Commercial Activities to Agency Programs
and Performance Enhances Understandability
A key part of achieving results is recognizing how
an agency's strategies and day-to-day activities
contribute to achieving an agency's mission and
its programmatic goals.  Officials at Commerce and
FEMA said that their FAIR Act inventories were
being used as management tools to identify
possible efficiencies to their agencies' programs
and performance.  Relating an agency's commercial
efforts to its strategic and annual performance
plans can be useful to managers and decisionmakers
in determining how best to align agency programs
and activities to achieve results.  Information
linking activities to the agency's programs also
provides useful information for interested parties
who are trying to determine what activities agency
employees are currently performing.

EPA's inventory links each of the commercial
activities listed on its inventory to 1 or more of
its 10 strategic goals.  For example, EPA linked
153 of the 206 FTEs performing commercial research
support activities to its goal of achieving clean
and safe water.

Describing the Scope of Current Contracting
Efforts Provides Context for the Inventories
Along with their FAIR Act inventories, agencies
can also provide valuable supplemental information
about the role that contracting plays in acquiring
goods and services for the agency.  A description
of the scope of activities that have already been
contracted can provide an important perspective on
and context for the agency's operations.

For example, EPA stated that the amount of
services it obtains through contracting is
significant in relation to the agency's in-house
staffing needs.  EPA estimated that the amount of
resources it contracted in July 1999 would have
translated into 11,000 to 15,000 FTEs if EPA had
retained the work in-house, and it provided an
enclosure listing some of the types of services
that are currently contracted.  These services
ranged from activities such as elevator
maintenance to environmental clean-up activities
and oversight.

Similarly, GSA's inventory submission states that
the agency functions essentially as managers of
private sector contractors.  It states that nearly
94 percent of GSA's $13 billion budget is spent
for contractors who provide direct operational
support to federal agencies.

Conclusions
Under the first year's implementation of the FAIR
Act, 98 agencies have identified about 904,000
FTEs that are performing commercial activities.
The number of agencies that have inventoried their
activities and identified FTEs performing
commercial activities has increased compared with
prior efforts to inventory commercial activities.
However, the initial implementation of the FAIR
Act indicates that there are opportunities for
agencies to make further improvements in the
inventories provided to Congress and the public.

The clarity and understandability of the five
agencies' inventories we reviewed were limited.
OMB's guidance containing function codes for
agencies to identify their commercial activities
was incomplete and vague in some cases.  Officials
from some agencies said that the list of function
codes did not work well for describing some of
their commercial activities.  Although OMB
reviewed them, the agencies' inventories were not
always consistent making it difficult to compare
potentially similar activities across agencies.
Agencies used different formats, including unique
codes for identifying their activities.  While
some flexibility is important to accurately
reflect the diversity of the types of specific
activities that individual agencies perform, this
needs to be balanced with the benefits to
interested parties in being able to compare common
activities across agencies.  At a minimum, OMB's
list of function codes should identify all of the
codes agencies can use to identify their
particular activities.  More specifically, it
would be helpful if interested parties could look
across agencies' inventories to identify what
activities should or should not be included on the
inventories in order to file challenges within the
30-day time frame provided under the FAIR Act.

The five agencies we reviewed exempted many of the
FTEs performing commercial activities from
competition.  As a result, although the FAIR Act
has increased the number of FTEs identified as
performing commercial activities, the actual
number of FTEs that could be considered for
competition is substantially smaller than the
number of commercial FTEs listed.  FEMA's
inventory, for example, shows that it exempted 99
percent of its commercial activities from
competition (all but 22 of its 2,324 commercial
FTEs).  Designating these FTEs as exempt indicates
that FEMA does not intend to consider competing
these activities.  This decision cannot be
challenged or appealed under the FAIR Act, since
the act does not require activities listed by the
agencies to be competed.

We also found that some of the supplemental
information agencies included in their
inventories, which was not required under the FAIR
Act, was helpful.  GSA included all of its
activities (i.e., inherently governmental as well
as commercial) in its inventory.  This provides a
fuller perspective about all of the agency's
activities.  Other information included EPA's
inventory linking its commercial activities to the
agency's strategic goals and descriptions of the
scope of activities currently under contract.
Interested parties may find it helpful to have
this supplemental information about specific
agency operations available to them within the 30-
day period that the FAIR Act provides for filing
challenges to agency inventories.  These types of
supplemental information provide a context for an
agency's activities and can help enhance the
understandability of the FAIR Act inventories.

Recommendations
     In order to enhance the clarity and
understandability of agencies' FAIR Act
inventories, we recommend that the Director of OMB
reexamine the function codes appearing in appendix
2 of the Circular A-76 Supplemental Handbook.
This reexamination should include

ï¿½    revising the codes to more accurately capture
the activities agencies are performing,
ï¿½    defining the codes to ensure they are clearly
understood, and
ï¿½    ensuring that OMB's official guidance and its
website list all of the codes that agencies are
authorized to use, including codes that are
specific to individual agencies.

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

We also recommend that the Director of OMB
reinforce the principles established in OMB's
budget procedures memorandum for OMB staff to
enhance the consistency of the inventories within
and across executive agencies.

Agency Comments and Our Evaluation
On March 7, 2000, we requested comments on a draft
of this report from the Secretaries of Commerce
and Transportation, the Administrators of EPA and
GSA, and the Directors of FEMA and OMB.  We
obtained written comments from the Director of
FEMA, dated March 22, 2000.  The Director stated
that the report was a fair analysis of FEMA's
first implementation of the FAIR Act and expected
that the report would have a positive effect on
the evolving process of meeting the act's
requirements.  DOT had no comments on the draft
report.

Commerce, EPA, GSA, and OMB provided some
clarifying and technical comments to the draft
report.  We incorporated these changes into this
report where appropriate.  In addition, Commerce
wanted to emphasize that they have taken steps to
prevent inconsistencies in future inventories and
will develop its inventories to comply with both
the spirit and statutory requirements of the FAIR
Act.  EPA commented that it followed and complied
with OMB's guidance in preparing its inventory.

     We are sending copies of this report to
Representative James R. Traficant, Jr., Ranking
Democratic Member, Subcommittee on Oversight,
Investigations, and Emergency Management and to
Representative Bud Shuster, Chairman, and
Representative James L. Oberstar, Ranking
Democratic Member, House Committee on
Transportation and Infrastructure.  We will also
send copies to the Honorable Jacob J. Lew,
Director of OMB; the Honorable Rodney E. Slater,
Secretary of Transportation; the Honorable William
M. Daley, Secretary of Commerce; the Honorable
David J. Barram, Administrator of GSA; the
Honorable Carol M. Browner, Administrator of EPA;
and the Honorable James Lee Witt, Director of
FEMA.  We will also make copies available to
others on request.

Major contributors to this report are listed in
appendix III.  If you have any questions about
this report or would like to discuss it further,
please contact me or Susan Ragland, Assistant
Director, on (202) 512-8676.

     Sincerely yours,

J. Christopher Mihm
Associate Director
 Federal Management and Workforce Issues
_______________________________
1Section 5 of the FAIR Act, Public Law No. 105-
270, 112 Stat. 2382, 2384 to 2385, 31 U.S.C.  501
note (1998), defines an inherently governmental
function as "a function that is so intimately
related to the public interest as to require
performance by Federal Government employees."
2 Competitive Contracting: Preliminary Issues
Regarding FAIR Act Implementation (GAO/T-GGD-00-
34, Oct. 28, 1999).
3 As defined in section 3 of the FAIR Act,
interested parties are  (1) a private sector
source that is a prospective or actual offeror for
any contract who has a direct economic interest in
performing the activity and would be adversely
affected by a determination not to procure the
performance of the activity from a private sector
source, (2) a representative of any business or
professional association whose membership includes
private sector sources described in paragraph (1)
above, (3) an officer or employee of an
organization within the executive agency that is
an actual or prospective offeror to perform the
activity, and (4) the head of a labor
organization, referred to in 5 U.S.C.  7103
(a)(4) that includes members who are officers or
employees within an executive agency involved in
performing the activity.
4 We are looking at the issues raised during the
challenges and appeals process at the request of
the Chairman, Subcommittee on Government
Management, Information and Technology, House
Committee on Government Reform.
5 These inventories included submissions to OMB
stating that the agency has no commercial
activities.  They were also made available to
Congress and the public.  In addition to these
agency submissions, 16 Offices of Inspector
General separately submitted FAIR Act inventories
to OMB. The 98 agencies do not include
intelligence agencies (other than the Central
Intelligence Agency) because before obtaining a
copy of their inventories appropriate security
clearance and a need to know must be established.
FTEs are used to measure federal civilian
employment.  One FTE is equal to 1 work year of
2,080 hours.
6 Because of inconsistencies in Commerce's
inventory, we could not determine which activities
they determined would or would not be considered
for competition.  The 37 percent includes 12
percent exempted and 25 percent that GSA excluded
from consideration for competition until
reinvention efforts are completed.
7 OMB Circular A-76: Oversight and Implementation
Issues (GAO/T-GGD-98-146, June 4, 1998); DOD
Competitive Sourcing: Results of Recent
Competitions (GAO/NSIAD-99-44, Feb. 23, 1999); and
Defense Reform Initiative: Progress,
Opportunities, and Challenges (GAO/T-NSIAD-99-95,
Mar. 2, 1999).
8GAO/T-GGD-98-146, June 4, 1998.
9 You also asked for information regarding FAIR
Act implementation by the U.S. Army Corps of
Engineers.  As agreed, this information will be
included in our upcoming report to the Chairman of
the Military Readiness Subcommittee of the House
Armed Services Committee.  This report will
discuss the Department of Defense's efforts to
implement the FAIR Act.
10 Some agencies' inventories were submissions to
OMB stating that the agency had no commercial
activities.
11 Government Management:  Observations on OMB's
Management Leadership Efforts (GAO/T-GGD/AIMD-98-
148, May 12, 1998).
12 The 37 percent includes 12 percent (874 FTEs)
GSA exempted from competition under reason code A
and 25 percent (1,819 FTEs) that it excluded from
competition because these activities are
undergoing reinvention efforts.
13 GAO/T-GGD-00-34.

Appendix I
Agencies Rely on Raines Lists and Their Components
to Create FAIR Act Inventories
Page 23         GAO/GGD-00-68 FAIR Act Inventories
The five agencies we reviewed delegated much of
the responsibility for creating their FAIR Act
inventories to their components.  Commerce and the
Department of Transportation (DOT) instructed
their components to update their 1998 Raines lists
while the General Services Administration (GSA)
used its Raines list intact.  The Environmental
Protection Agency (EPA) and the Federal Emergency
Management Agency (FEMA) based their FAIR Act
inventories primarily on input from their
components.

Commerce, DOT, and GSA Used Their Raines Lists
To develop its FAIR Act inventory, officials from
Commerce's Office of the Chief Financial Officer
(CFO) and Assistant Secretary for Administration
instructed the department's bureaus and offices to
update their Raines lists.  According to a
Commerce official, bureaus made only minor
changes.

Similar to Commerce, DOT's CFO and Assistant
Secretary for Budget and Programs delegated the
responsibility for developing FAIR Act inventories
to each of DOT's 10 transportation modes, for
example the Federal Aviation Administration and
the Coast Guard.  DOT officials said that most of
the modes used the same information from their
Raines lists for their FAIR Act inventories.  For
example, the Coast Guard's FAIR Act inventory was
identical to its Raines list.  A few of the other
modes, such as the Federal Highway Administration
(FHWA), created new inventories because FHWA had
undergone a reorganization that had changed some
activities.

     GSA's FAIR Act inventory was basically
identical to its Raines list that had been
developed by an agencywide team organized by GSA's
CFO during the summer of 1998.  Team members
representing the agency's service divisions and
staff offices held discussions about what
functions should be considered commercial and
those that should be considered inherently
governmental.  Team members' input into these
discussions were based on information gathered
from the divisions, staff offices, and regions.

EPA and FEMA Used Components Input
EPA's Office of the CFO delegated the
responsibility of developing the agency's FAIR Act
inventory to EPA's 10 regional offices and 13
program offices.  According to an official in the
Office of the CFO, EPA's CFO did not want to
dictate how to define "commercial activities" but
instead wanted the regional and program officials
who were closer to the agency's activities to
decide how these activities should be designated
in the inventory.  To assist in this process,
officials from EPA's Office of the CFO met with
the regional and program officials and union
representatives about developing the inventory and
provided them with advice and material including
OMB's draft guidance.  EPA officials reviewed the
inventories for consistency and to ensure that the
determinations made were reasonable.  An EPA
official said that they did not use the Raines
list because when it was prepared in the fall of
1998 the agency did not have enough time to
complete a thorough analysis of its FTEs or
consult with its regional offices.

EPA officials encountered difficulties in deciding
whether activities were inherently governmental.
According to EPA documentation, officials in EPA's
regional and program offices sought guidance on
how to categorize FTEs that had duties involving
both inherently governmental and commercial
activities.  Because the agency was not aware of
any specific OMB guidance, EPA officials developed
a general rule that if less than 50 percent of a
FTE's activities are inherently governmental, then
the FTE should be allocated between inherently
governmental and commercial activities (e.g., 30
percent inherently governmental and 70 percent
commercial).  If more than 50 percent of the FTE's
duties are inherently governmental, the FTE should
be designated inherently governmental.

FEMA's Office of Policy and Regional Operations
(OPRO) developed its FAIR Act inventory by
coordinating with the agency's 10 regions, 20
offices, union representatives, and labor-
management partnership council.  FEMA hired a
private contractor to provide training and
assistance to FEMA's regions and offices to
develop its FAIR Act inventory.  FEMA's OPRO
checked the region and office submissions for
consistency.  FEMA officials made so many changes
to its Raines list that it no longer was
comparable to the FAIR Act inventory that was
eventually submitted to OMB.  Similar to EPA, FEMA
officials also encountered difficulties with
dividing the activities of its staff, in
particular, the duties of administrative support
staff for senior staff.  FEMA officials said that,
although private sector contractors could perform
these duties, these administrative support staff
need to be available on a 24-hour basis to respond
to federal emergencies and may on occasion perform
inherently governmental duties on behalf of senior
staff.  Therefore, FEMA exempted these FTEs from
consideration for competition.

Appendix II
Agencies Exempted Many Commercial FTEs From
Competition
Page 27         GAO/GGD-00-68 FAIR Act Inventories
Agencies exempted many of the FTEs performing
commercial activities from competition.
Commerce's inventory contained numerous
inconsistencies that prevented identifying how
many FTEs were subject to or exempted from
competition.  To determine the types of activities
the agencies exempted, we identified the five
function codes with the most FTEs that were exempt
from competition by EPA, GSA, FEMA, and DOT.  In
addition, because GSA and DOT designated a
relatively large number of FTEs as performing
activities that could be considered for
competition, we also identified the five function
codes with the most FTEs designated by GSA and DOT
as activities that could be considered for
competition.

Commerce's Inventory Contains Contradictions
In many instances, Commerce's FAIR Act inventory
shows contradictory information, preventing an
understanding of whether the activity could be
subject to competition or whether Commerce
considers the activity exempt from competition.
Commerce's inventory is based on the Raines lists
produced by the 10 major bureaus, offices, and
administrations within the department.  These
lists placed the FTEs among three columns
representing the Raines list's categories of
"Exempt," "Competitive," and "Core."  Next to
these columns is a "Reason" column containing the
Circular A-76 reason codes (A, B, C, D, etc.).
According to a Commerce official, "sorting
inconsistencies" occurred while updating and
consolidating these inventories.  As a result,
many FTEs were listed in columns that contradicted
their designated reason codes.  For example, of
the 80 FTEs in the National Telecommunications
Information Administration's inventory, 66 FTEs
were listed under the "Exempt" column (i.e.,
exempt from competition) while also being assigned
reason code B (i.e., could be considered subject
to competition).  Thus, the information is not
consistent.  These contradictions appear
throughout 9 of the 10 inventories that make up
Commerce's FAIR Act submission.

A Commerce official said that the agency
recognizes that its published inventory contains
contradictions and plans to correct them in its
June 2000 FAIR Act submission to OMB.  Despite
these contradictions, we were able to identify the
five function codes having most of Commerce's
FTEs, which are listed in table 1.

Table II.1: Five Function Codes in Commerce's
Inventory With the Most FTEs
Function Codes                                FTEs
Research, Development, Test, and             1,891
Evaluation Support-Applied Research
Other Selected Functions-Administrative        904
Support
Other Selected Functions-Other Functions       853
Other Selected Functions-Management            600
Support
Other Selected Functions-Maritime              429
Activities
Source: GAO analysis of Commerce's FAIR Act
inventory.

EPA Exempted Its Modified Function Codes From
Competition
EPA exempted 775 FTEs (or 93 percent of its FTEs
performing commercial activities) from
competition.  About 54 percent of these exempted
FTEs were associated with the five function codes
having the most commercial FTEs at EPA.  As shown
in table 2, two of these function codes, one
involving automatic data-processing activities and
the other involving environmental risk analysis
activities, were created especially by EPA.

Table II.2: Top Five Function Codes Exempted From
Competition by EPA
Function Codes                                FTEs
Research, Development, Test, and               191
Evaluation Support
Environment-Administrative Support             115
Automatic Data Processing-Information           53
Technology/Managementa
Environment-Federal Insecticide,                33
Fungicide, and Rodenticide Act/Food,
Drug, and Cosmetic Act (Risk Analysis)a
Finance and Accounting-Accounts Payable         29
a The function codes created by EPA.
Source: GAO analysis of EPA's FAIR Act inventory.

FEMA Exempted Almost All FTEs From Competition
FEMA exempted 2,302 FTEs (or 99 percent of the
FTEs performing commercial activities) from
competition.  Sixty-six percent of these exempted
FTEs were associated with the five function codes
having the most commercial FTEs at FEMA, which are
listed below in table 3.

Table II.3: Top Five Function Codes Exempted From
Competition by FEMA
Function Codesa                               FTEs
Response and Recovery Directorate-Multi-       695
Discipline Specialist
Preparedness, Training and Exercises           258
Directorate-Multi-Discipline Specialist
Information Technology Services                233
Directorate-Multi-Discipline Specialist
Mitigation Directorate-Multi-Discipline        216
Specialist
Response and Recovery                          124
Directorate-Management Support
aLike FEMA's entire inventory, all five of these
function codes are "emergency management" function
codes unique to FEMA and were used in its
inventory that was released by OMB.
Source: GAO analysis of FEMA's FAIR Act inventory.

Four of the 5 function codes are multidiscipline
specialists involving 1,402 FTEs from 4 of FEMA's
directorates.

Majority of GSA's Commercial FTEs Designated as
"Commercial Competitive"
Unlike the three other agencies in our review that
designated most of their commercial activities as
exempt from competition, GSA designated most of
its commercial FTEs (63 percent) as "commercial
competitive."  Of the 4,556 FTEs designated as
commercial competitive, 88 percent were associated
with the 5 function codes shown in table 4.

Table II.4: Top Five Function Codes Designated as
"Commercial Competitive" by GSA
Function Codes                                FTEs
Maintenance, Repair, Alteration, and         2,115
Minor Construction of Real
Property-Other Maintenance
Installation Services-Supply Operations      1,143
Installation Services-Vehicle                  520
Acquisition and Fleet Managementa
Personnel Management                           130
Installation Services-Transportation           102
Management Services
aGSA created this function code as a modification
of "installation services."
Source: GAO analysis of GSA's FAIR Act inventory.

In contrast to the other agencies that exempted a
majority of their commercial FTEs from
competition, GSA exempted only12 percent (or 874
FTEs) from competition.  Of the 874 FTEs exempted,
78 percent of the FTEs were associated with 5
function codes, as shown in table 5.

Table II.5: Top Five Function Codes Exempted From
Competition by GSA
Function Codes                                FTEs
Maintenance, Repair, Alteration, and           489
Minor Construction of Real
Property-Other Maintenance
Other Selected Functions-Information and        65
Telecommunications Program Management
Investigations-Inspector General                50
Services
Education and Training-Professional             48
Development Training
Maintenance, Repair, Alteration, and            34
Minor Construction of Real
Property-Management
Source: GAO analysis of GSA's FAIR Act inventory.

Many of DOT's Commercial FTEs Are Repair and
Maintenance Activities
DOT exempted 7,332 FTEs (or 57 percent of its FTEs
performing commercial activities) from
competition.  Of these FTEs, 63 percent were
associated with five function codes, which are
listed in table 6.

Table II.6: Top Five Function Codes  Exempted From
Competition by DOT
Function Codes                                FTEs
Intermediate, Direct or General Repair       2,881
and Maintenance of
Equipment-Aeronautical Support Equipment
Other NonManufacturing                         659
Operations-Administrative Support
Depot Repair, Maintenance, Modification,       429
Conversion or Overhaul of
Equipment-Vessels
Depot Repair, Maintenance, Modification,       351
Conversion or Overhaul of
Equipment-Aircraft
Other Nonmanufacturing                         272
Operations-Management Support
Source: GAO analysis of DOT's FAIR Act inventory.

DOT also designated 3,163 FTEs (or almost 25
percent of its commercial FTEs) as performing
activities that could be considered for
competition.    Of these FTEs, over half are
associated with the five function codes listed in
table 7.

Table II.7: DOT's Top Five Function Codes That
Could Be Considered for Competition
Function Codes                                FTEs
Other Nonmanufacturing Operations-Air          794
Transportation Services
Intermediate, Direct or General Repair         382
and Maintenance of Equipment-Maintenance
of Other Equipment
Intermediate, Direct or General Repair         267
and Maintenance of
Equipment-Aeronautical Support Equipment
Intermediate, Direct or General Repair         190
and Maintenance of Equipment-Vessels
Other Selected Functions-Administrative        132
Support
Source: GAO's analysis of DOT's FAIR Act
inventory.

Appendix III
GAO Contacts and Staff Acknowledgments
Page 28         GAO/GGD-00-68 FAIR Act Inventories
GAO Contacts
J. Christopher Mihm or Susan Ragland, (202) 512-
8676

Acknowledgments
     In addition to those named above, Steven
Lozano, Jerry Sandau, Tom Beall, and Susan Michal-
Smith made key contributions to this report.

*** End of Document ***