13th annual Municipal Finance Conference


13th annual Municipal Finance Conference


All’s Not Always FAIR

May 1, 1999

Just when federal departments and agencies thought they had learned all the important acronyms that rule their lives—GPRA, NPR and the like—the Office of Management and Budget released its rules for implementing FAIR on March 1. The letters stand for Federal Activities Inventory Reform. Passed with minimal debate in Congress and signed into law by President Clinton between spin sessions on the Lewinsky scandal, FAIR represents the most important crowbar for opening the federal government to competition in two decades.

FAIR is deceptively simple. It merely requires agencies to publish annual lists of their commercial activities and the number of full-time-equivalent employees required to perform them. Under FAIR’s definition, drawn from OMB Circular A-76, a commercial activity is just about anything that could be purchased from the private sector, from ice cubes to cost-benefit analysis, trash hauling to management studies. Interested parties, whether inside government (federal labor unions) or outside (contractors), can appeal to the agency head the inclusion or exclusion of individual items on the list.

In theory, every item on the FAIR list must be reviewed for possible contracting out. Although Rep. Dennis Kucinich, D-Ohio, let his rhetoric get the best of him in declaring FAIR part of the “piecemeal dismantling of our republic,” he was right on target in concluding that “contractors would like the government to help them identify new business opportunities.”

That is why staying off the FAIR list may become the most interesting game in town. Some agencies will simply ignore the OMB rules and hope no one notices. After all, they have gotten away with avoiding A-76 for the better part of this decade. Between 1993 and 1997, when Sen. Craig Thomas, R-Wyo., began drafting the “Freedom from Government Competition Act” that eventually morphed into FAIR, the federal government conducted A-76 studies on just 34,688 federal jobs, of which all but 420 were in Defense. If non-Defense agencies want to know who created FAIR, they need look no further than themselves.

Agencies are bound to use the only FAIR exemption available by declaring their commercial activities inherently governmental. FAIR defines an inherently governmental function as one that is so “intimately related to the public interest as to mandate performance by government employees.” No one knows quite what that means, which is exactly why some agencies will use it.

But agencies should think twice about evading FAIR. The fact is that it could have been much tougher. Thomas’ original proposal would have given the courts the power to review the annual lists and would have prohibited agencies from obtaining commercially available goods or services from other federal departments and agencies?hence, the title “Freedom from Government Competition.” FAIR is just about the fairest thing that could have happened given the growing anger on Capitol Hill about agency foot-dragging on A-76.

The problem with FAIR is that it uses the wrong cross hairs in forcing government to compete. The critical issue is not whether an activity is commercial or inherently governmental, but whether it is essential to the core mission of the agency. Core activities should always remain in house; non-core activities should always be pushed out.

Why switch from FAIR to a core-activities approach? One answer is that it is the best way for the federal workforce to shrink. And the workforce is sure to shrink. The word around Washington these days is that Vice President Al Gore may soon propose to cut another 300,000 federal jobs, taking the total federal workforce below 1.5 million employees to pre-Korean War levels. If he does not make the proposal, Texas governor and presidential hopeful George W. Bush or one of his Republican competitors almost certainly will. Unlike attrition and voluntary buy-outs, which work through mostly random means, a core-activities approach would force agencies to inflict the pain where it will hurt core missions the least, not just where it is easiest.

Another answer is that core activities are infinitely easier to identify than inherently governmental activities. The definitional skeleton is already in place under the Government Performance and Results Act. Agencies could easily adapt their GPRA strategic plans to build an inventory of core activities, which in turn could be used to push non-core activities out and pull core activities back in.

A core-activities inventory would produce many of the same items as FAIR, but also some surprises. NASA would probably keep at least some satellite-making capacity in house to ensure core competency in overseeing contractors; the Environmental Protection Agency would probably pull back some of its Superfund community relations work; the Housing and Urban Development Department might push out more of its housing inspections. But at least the debate would be about the right question: What do agencies need to be doing to achieve their core missions? It is a debate that is well worth having.