From the February 1999 issue of Entrepreneur

It seemed as if Congress was handing small business a crowbar of sorts to wrench away services performed by federal employees. But FAIR, the Federal Activities Inventory Reform Act (S.314), which was passed very quietly by Congress last October, was really a toothpick of a tool compared to the earlier, all-steel version introduced in March 1997.

"The final version wasn't as hard-hitting as the first draft," acknowledges Bob Scott, a director and vice chair of the Procurement Round Table, a Washington, DC, nonprofit consulting firm. "But it is a worthwhile first step."

The act essentially put into law what was already administration policy: Agencies are supposed to perform cost analyses to show that government workers are doing the work as cheaply and as well as a private-sector company could.

But the policy had no legal force. There were no penalties for agencies that failed to submit lists, performed skewed analyses or failed to contract out services on that list. "Unfortunately, that policy was fundamentally flawed and routinely ignored," says Sen. Craig Thomas (R-WY).

Pushed through Congress by Thomas and Sen. Sam Brownback (R-KS), FAIR changes these policy suggestions into law. Now, agencies must file lists annually beginning on June 30. Moreover, the law adds a new provision: Companies can challenge agency decisions not to contract out inherently nongovernmental services. However, the agency head, a hardly neutral party, makes the final decision on whether a disputed contract gets kicked outside the agency.

It was federal opposition to earlier versions of the bill that influenced modification of the legislation. In the process, some of the teeth in the earliest versions of the bill were pulled.

The U.S. Chamber of Commerce had pushed hard for a provision requiring a federal agency, when bidding out "inherently commercial" contracts, to use a standard cost-accounting methodology. That was contained in the House version of the bill but not Thomas' version. "Historically, agencies have had the option to adjust numbers to arrive at a desired outcome by using a different accounting system than the one the private-sector organization competing [for the work] is forced to use," says Doug Stevens, who is head of management consulting at Grant Thornton LLP in Washington, DC.

Although that provision was dropped, the new law will serve at least a minimal purpose. Small companies can, for the first time, see which contracts they could perform that are being kept in-house by the feds; they can protest those decisions; and if those protests are reasonable but nonetheless ignored by agency heads, Congress will have cause to inject a new dose of fairness into the FAIR Act.


Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

Contact Sources

Procurement Round Table, (703) 583-0332