Forest Service: Better Planning, Guidance, and Data Are Needed to Improve Management of the Competitive Sourcing Program
Published: 2008-01-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Competitive sourcing is aimed at promoting competition between federal employees and the private sector as a way to improve government operations. Key work activities--those that are either inherently governmental or core to the agency's mission--are generally exempt from competitions. In fiscal year 2004, Congress began placing spending limitations on the Forest Service's competitive sourcing program because of concerns about how the program was managed. Also, like other agencies, the Forest Service must report annually to Congress on the savings achieved from any competitions it conducted. GAO was asked to determine the extent to which the Forest Service has (1) plans and guidance to help implement its competitive sourcing program effectively and (2) sufficient cost data to ensure that it complied with its spending limitations and accurately reported its savings to Congress for fiscal years 2004 through 2006. To answer these objectives, GAO examined the agency's strategic plan, guidance, and available cost data for competitive sourcing and interviewed key agency officials.
section_title: What GAO Found
paragraphs: The U.S. Department of Agriculture's Forest Service lacks a realistic strategic plan and adequate guidance to help ensure that it can effectively implement its competitive sourcing program. For example, the Forest Service's current strategic plan is unrealistic because it does not take into account the likely availability of personnel and funding resources needed to implement the plan. Furthermore, the Forest Service lacks sufficient guidance on identifying key work activities that should be excluded from competitions. Although Forest Service officials do not believe that inappropriate work activities have been included in competitions that it has held, without clear guidance the Forest Service remains at risk of doing so. The agency also lacks a strategy on how to assess the cumulative effect that competitions could have on its ability to fight wildland fires and respond to other emergencies. Outsourcing a large number of federal jobs to the private sector could, over time, reduce the number of available responders. For fiscal years 2004 through 2006, the Forest Service lacked sufficiently complete and reliable cost data to (1) demonstrate its compliance with statutory spending limitations on its competitive sourcing activities and (2) accurately report competitive sourcing savings to Congress. Regarding compliance with spending limitations, the Forest Service did not collect cost data on all activities related to competitive sourcing because it believed that some costs were not subject to the limitations. For example, the Forest Service did not collect data on employees' salaries related to studying the feasibility of conducting a competition--a key component of its competitive sourcing process. GAO has interpreted the statutory spending limitations to generally apply to all costs attributable to the Forest Service's competitive sourcing program. Moreover, because the Forest Service's cost data used to determine compliance with statutory spending limitations were not reliable, the Forest Service cannot know if it exceeded the limitations. Regarding the savings achieved from its competitions, the Forest Service reported to Congress a savings totaling over $38 million between fiscal years 2004 and 2006. However, the Forest Service could not provide GAO with sufficient data or the methodology it used to calculate savings derived from competitions. In addition, GAO found that the Forest Service did not consider certain costs, which were substantial, in its savings calculations. As a result, Congress may not have an accurate measure of the savings from the Forest Service's competitive sourcing competitions during this period.

section_title: Letter
paragraphs: The 2001 President’s Management Agenda includes a governmentwide  initiative—known as competitive sourcing—that aims to improve  government efficiency and reduce the costs of government programs by  promoting competition between federal employees and private sector  organizations. The competitions determine who should perform  commercial activities—activities performed by the government that are  also regularly performed in the commercial marketplace, such as  information technology (IT), maintenance and property management, and  logistics. These competitions compare the public and private sector costs  of performing an activity and may result in outsourcing federal jobs to the  private sector. In its competitive sourcing strategic plan, known as the  Green Plan, the Forest Service, an agency within the U.S. Department of  Agriculture (USDA), sets forth the agency’s goal to conduct 14  precompetition studies in 5 years to evaluate the feasibility of subjecting  nearly two thirds of its total workforce to competitive sourcing  competitions.
The Forest Service manages about 193 million acres of land—about 30  percent of all federal lands—and has a workforce of about 37,000 full-time- equivalent staff (FTE). The employees are geographically dispersed  throughout the nation. In addition to its headquarters in Washington, D.C.,  the Forest Service has 9 regional offices, 155 forest offices, and about 600  district offices.
The Forest Service’s competitive sourcing program is subject to the  requirements of the Office of Management and Budget’s (OMB) Circular  No. A-76 (the circular) and the Federal Activities Inventory Reform Act of  1998 (the FAIR Act). Generally, the circular sets forth the competitive  process an agency must follow to determine whether federal employees or  private sector organizations should perform a commercial activity. The  competitive process can be divided into three stages: (1) a precompetition  planning stage that, among other things, determines the scope of the  competition; (2) a competition stage that begins with a public  announcement of a competition and ends with the selection of the  competition’s winner; and (3) a postcompetition accountability stage,  which involves such activities as monitoring and reporting on the winner’s  performance. The circular also directs agencies to create a staffing plan— which creates an organization of agency employees that is known as the  “Most Efficient Organization” (MEO)—to be used to represent the agency  in the competition. After allowing for a transition period, the winner of the  competition, whether the MEO or a private sector organization, is subject  to the provisions of the postcompetition accountability stage.
The FAIR Act, as implemented by the circular, requires federal agencies to  compile and submit to OMB for approval an annual inventory of the  activities their employees perform. The inventory must include the number  of FTEs that perform each activity and designate whether the activity is  inherently governmental or commercial. Inherently governmental  activities—such as setting policy or spending funds—are critical to the  role and function of government and, therefore, are exempt from  competition with the private sector. In contrast, commercial activities— those that are not inherently governmental and could be performed by the  private sector—are subject to competitive sourcing competitions, unless  the agency exempts the activity. The agency may still exempt a  commercial activity if, for example, it deems the activity to be core to the  agency’s mission (referred to as core-commercial).
In addition, the Consolidated Appropriations Act, 2004, requires executive  agencies to report annually to Congress on competitive sourcing  activities. Among other things, the act requires agencies to report actual  savings derived from implementing a competitive sourcing competition.  While the act does not provide direction on how to calculate actual  savings, OMB does provide this direction through annual guidance. The  Forest Service, through USDA, reported to Congress that it saved over   $38 million in fiscal years 2004 through 2006 as a result of competitive  sourcing competitions.
Because of concerns about how the Forest Service was managing its  competitive sourcing program, Congress limited the funds that the Forest  Service could spend on competitive sourcing activities during fiscal years  2004 through 2007. In fiscal year 2004, the spending limitation was   $5 million; in fiscal year 2005, it was $2 million; in fiscal year 2006, it was  $3 million; and in fiscal year 2007, it was also $3 million. The Forest  Service initiated 171 competitions in fiscal years 2002 and 2003, and it has  acknowledged that this first experience with the competitive sourcing  initiative fell short of expectations. For example, a congressional study  noted that nearly half of these competitions involved three or fewer FTEs,  and that, as a result, Forest Service officials acknowledged that the  competitions were unrealistic, adding that holding competitions involving  few FTEs often made it impossible for private sector organizations to  compete effectively. Two of the most important lessons the Forest Service  believes it has learned from this experience are that it should (1) centralize  responsibilities for competitions to increase control and oversight and   (2) plan competitions better by, for example, identifying the appropriate  scope of the competition.
The Forest Service has taken steps to improve the management of its  competitive sourcing program in both of these areas. In fiscal year 2003, it  strengthened headquarters’ oversight of competitive sourcing  competitions. In fiscal year 2004, USDA issued guidance directing the  Forest Service to perform studies to assess the feasibility of conducting a  competition—known as feasibility studies—before committing to a  competition. Although not required by the circular, feasibility studies are  conducted during the precompetition planning stage and help determine  whether to compete an activity. Also, some of the steps required by the  circular during the precompetition planning stage are completed as part of  the study. In fiscal years 2004 through 2006, the Forest Service completed  three feasibility studies. They were for communications activities  (completed June 2005), the Geospatial Service and Technology Center  (completed April 2006), and fleet management activities (completed   May 2006). During this time frame, the Forest Service also completed three  competitions, all begun in 2003 and completed in 2004. They were the IT  competition (1,200 FTEs, completed July 2004); the fleet maintenance  competition (57 FTEs, completed January 2004); and the road  maintenance competition (66 FTEs, completed January 2004).
As with the management of its competitive sourcing program in fiscal  years 2002 and 2003, the Forest Service’s most recent competitive sourcing  activities have raised questions about whether the program is being  effectively managed. In this context, you asked us to determine the extent  to which the Forest Service has (1) plans and guidance to help implement  its competitive sourcing program effectively and (2) sufficient cost data to  ensure that it complied with its competitive sourcing statutory spending  limitations and accurately reported its competitive sourcing savings to  Congress for fiscal years 2004 through 2006.
To address these two objectives, we focused on the Forest Service’s  competitive sourcing activities between fiscal years 2004 through 2006.  For the first objective, we examined the Forest Service’s Green Plan and  how the Forest Service scoped the three competitions it completed during  this period. In doing so, we collected and reviewed pertinent OMB, USDA,  and Forest Service guidance and documentation, including documentation  related to the three completed competitions. In addition, we interviewed  Forest Service officials familiar with the agency’s competitive sourcing  activities to better understand implementation of the program. For the  second objective, we examined the appropriations acts for fiscal years  2004 through 2006 to determine which costs incurred by the Forest Service  during that period were subject to the spending limitations. We obtained  available Forest Service cost data for activities associated with its  competitive sourcing program. We assessed the reliability of these data  and found them unreliable as a measure of the costs and savings  associated with the program. We conducted our work between October  2006 and January 2008 in accordance with generally accepted government  auditing standards. See appendix I for a more detailed description of our  objectives, scope, and methodology.
subsections: section_title: Background
paragraphs: The Forest Service’s mission includes sustaining the nation’s forests and  grasslands, managing the productivity of those lands for the benefit of  citizens, conserving open space, enhancing outdoor recreation  opportunities, and conducting research and development. To help fulfill its  mission, the Forest Service devotes considerable resources to suppressing  wildfires. To coordinate the firefighting efforts of the Forest Service and  other federal land management agencies, the interagency National Wildfire  Coordinating Group (NWCG) was established. This group adopted an  interagency incident command system (ICS) and firefighting standards for  responding to wildland fires. Federal employees in the land management  agencies assume specific roles within the ICS, a command structure used  at all levels of government and organized around five primary functional  areas: command, operations, planning, logistics, and finance and  administration.
There are about 80,000 federal employees and retirees who mobilize to  assist state and local organizations to fight fires and respond to national  emergencies as needed. These employees must receive standardized  training and be certified in specific ICS duties (e.g., communications,  aircraft management, and dispatch) before being available to respond to  wildfires and other emergencies.
Approximately 30,000 permanent Forest Service employees are ICS- certified, with 10,000 to 12,000 of these employees holding fire-related  positions. The remaining 18,000 to 20,000 employees are part of the  “Forest Service militia.” These are employees who are ICS-certified to fight  fires but for whom the militia duty is a volunteer, collateral duty. These  militia members will often leave their primary work duties and travel to  the incident scene to provide assistance. A militia member may typically  spend between 1 to 3 weeks each year fighting wildfires and responding to  emergency situations. Militia teams that assisted the Federal Emergency  Management Agency following Hurricane Katrina logged as many as 60 to  90 days of duty. As part of their militia duties, Forest Service employees  often perform activities related to their regular work duties. For example,  when responding to a wildfire, an employee whose regular duties involve  IT support might provide this support at the scene of the fire. Employees  may also perform militia duties that are unrelated to their regular work  duties. For example, an IT employee who is ICS-certified in logistics might  be responsible for providing food, supplies, and equipment at the scene of  a fire.
subsections: section_title: Competitive Sourcing Policy and Process
paragraphs: The federal government has had a long-standing acquisition policy that,  when permissible and cost-effective, agencies are to rely on the private  sector to perform activities that are regularly performed in the commercial  marketplace, such as IT, maintenance and property management, and  logistics. This policy was laid out in OMB’s 1966 Circular No. A-76, which  was last revised in 2003. The circular’s stated goal is to obtain maximum  value for taxpayers’ dollars by taking advantage of competitive forces.  This policy, described in the 2001 President’s Management Agenda as  competitive sourcing, is one of five governmentwide initiatives intended to  improve the federal government’s management and performance so that  resources entrusted to the federal government are well managed and used  wisely. In addition, the circular provides agency management with a  structured process to compare the public and private sector costs of  performing an activity and to select the lowest cost provider through  competition. This comparison may result in outsourcing federal jobs to the  private sector.
The first step toward competitive sourcing is identifying work activities  that are suitable for competition. The FAIR Act, as implemented by the  circular, requires federal agencies to annually inventory all of the activities  that federal employees perform—the FAIR Act inventory. For the  inventory, activities are classified as inherently governmental or  commercial. Specifically:  Inherently governmental activities are those activities that are so  intimately related to the public interest that they require performance by  federal government employees. The circular exempts these activities  from competition.
Commercial activities are those that are not inherently governmental and  could be performed by the private sector. Commercial activities listed in  the FAIR Act inventory are subject to the competition process detailed in  the circular, unless they are placed in a subcategory of commercial  activities that are exempt from competition.
Core-commercial activities are those in a subcategory of commercial  activities that are identified to be essential, or “core,” to the agency’s  mission. The circular allows agencies to exempt these activities from  competition with sufficient written justification.
To determine whether federal employees or private sector organizations  should perform commercial activities, the circular establishes the  following three-stage competitive process (referred to as an A-76  competition):    A precompetition planning stage that, among other things, determines the  scope of the competition. In this stage, the agency determines the  commercial activities to be competed and the precompetition cost to  perform that activity. It also appoints competition officials who will be in  charge of developing, for example, the performance work statement  (PWS), which specifies the work to be performed by the winning bidder.  In addition, agency officials unaffiliated with the PWS create the MEO,  which is generally a smaller, streamlined version of the government  organization that is currently doing the work.
A competition stage that begins with a public announcement of a  competition and ends with the selection of the competition’s winner.  During this stage, an agency develops and issues a solicitation, receives  offers, and follows a process to select the winning bidder.
A postcompetition accountability stage that involves such activities as  monitoring and reporting on the winner’s performance, whether that  winner is the MEO or a private sector organization.
The circular also directs agencies to designate a competitive sourcing  official (CSO) with responsibility for implementing the circular who, with  certain exceptions, may delegate those responsibilities to other officials in  the agency. USDA designated its Chief Financial Officer as its CSO. He and  his office, the Office of the Chief Financial Officer (OCFO), provide  oversight to USDA and its agencies, including the Forest Service.
In 2002, the Forest Service established the Competitive Sourcing Program  Office (CSPO) in its headquarters. The CSPO oversees the preparation of  the FAIR Act inventory and provides written guidance to employees  throughout the agency. In 2003, competitive sourcing responsibilities were  further centralized in the CSPO to include oversight of A-76 competitions  and postcompetition reporting. Supporting the CSPO are regional, national  forest, and district office staffs.
section_title: Forest Service Green Plans and Feasibility Studies
paragraphs: OMB requires that agencies develop a strategic plan—known as a Green  Plan—for implementing their competitive sourcing programs. OMB’s  guidance on how to develop a Green Plan describes it as a long-range plan  to ensure that competitive sourcing is a carefully and regularly considered  option for improving the cost-effectiveness and quality of an agency’s  commercial activities. According to the guidance, agencies should include  in the plan a description of how they are going to take timely and effective  advantage of competition, a list of activities being announced for  competition, an overview of their decision-making process, and a strategy  to limit potential constraints on competition. The guidance also requires  that agencies update their plans as organizational conditions change. To  comply, the Forest Service has periodically submitted its Green Plan to  USDA for incorporation into the department-level Green Plan, which is  then presented to OMB for approval. Since December 2003, the Forest  Service has submitted at least five versions of its Green Plan to USDA. The  Forest Service’s most recent OMB-approved Green Plan was issued in  December 2005 and covers fiscal years 2005 through 2009.
In its Green Plan, the Forest Service proposes conducting a series of  competitive sourcing feasibility studies before holding A-76 competitions.  Feasibility studies enable an agency to first examine the practicality of  subjecting activities to a competition before committing to one. OMB  recognizes the value of this step and has recommended in its guidance that  agencies conduct feasibility studies to streamline the competitive sourcing  process. The OCFO issued guidance in May 2004 on conducting feasibility  studies that outlined USDA agencies’ responsibilities and specific  procedures to be followed during a feasibility study.
The Forest Service typically assembles a team of six to eight employees to  conduct a feasibility study. Each study usually involves one or more  requests for data from field offices, which may require information from  several hundred Forest Service employees. In addition to recommending  whether to proceed with an A-76 competition, a Forest Service feasibility  study can make other recommendations, such as to reorganize the way in  which the Forest Service performs the activity being studied without  engaging in an A-76 competition. When the feasibility study is completed,  the Chief of the Forest Service reviews the study team’s report and  recommendations and decides on the best course of action, which may or  may not be an A-76 competition.
In fiscal years 2004 through 2006, the Forest Service completed three A-76  competitions (see table 1).
section_title: Competitive Sourcing Reporting Requirements and Spending Limitations
paragraphs: The Consolidated Appropriations Act, 2004, requires executive agencies,  such as USDA, to report to Congress on their competitive sourcing  activities for the prior fiscal year, including the total number of  competitions announced and completed; the incremental costs directly  attributable to conducting these competitions; and the total savings  actually, or estimated to be, derived from such competitions. As an agency  within USDA, the Forest Service must report this information to USDA for  inclusion in USDA’s report to Congress.
Congress also limited the Forest Service’s funds available for “competitive  sourcing studies and related activities” in each year’s appropriations act  for fiscal years 2004 through 2007, because of concerns about how the  Forest Service had implemented its competitive sourcing initiative.  Specifically, the spending limitations were $5 million (fiscal year 2004),   $2 million (fiscal year 2005), $3 million (fiscal year 2006), and $3 million  (fiscal year 2007).
section_title: The Forest Service Does Not Have a Realistic Strategic Plan or Adequate Guidance to Effectively Implement Its Competitive Sourcing Program
paragraphs: The Forest Service lacks a realistic strategic plan and adequate guidance  to help ensure that it can effectively and efficiently implement its  competitive sourcing program. Specifically, the Forest Service’s Green  Plan proposes to subject all commercial activities to feasibility studies  without identifying the personnel and funding resources that are likely to  be available for the studies. Furthermore, Forest Service officials  responsible for planning the three competitions completed in fiscal year  2004 told us that they did not find the FAIR Act inventory data useful for  identifying and exempting inherently governmental and core-commercial  activities, and that they received little guidance on how to supplement the  inventory data or how to identify inherently governmental and core- commercial activities without using the inventory data. Nevertheless,  Forest Service officials told us that the lack of guidance did not result in  competing inherently governmental and core-commercial activities  because of the small size and commercial nature of these competitions.  However, without clear guidance, we believe that the agency risks  subjecting inherently governmental and core-commercial activities to  future A-76 competitions. In addition, the Forest Service does not have a  strategy on how to assess the cumulative effect that competing activities  could have on its ability to fight wildland fires and respond to other  emergencies, even though outsourcing a large number of federal jobs to  the private sector could reduce the availability of certified responders in  the long term.
subsections: section_title: The Forest Service’s Strategic Plan for Managing Its Competitive Sourcing Program Is Not Realistic
paragraphs: The Forest Service’s December 2005 Green Plan for managing its  competitive sourcing program is not realistic because it does not take into  account the personnel and funding resources that are likely to be available  to implement the plan, even though it proposes to subject all commercial  activities—performed by approximately 24,500 FTEs—to feasibility  studies during fiscal years 2005 through 2009. This is a significant increase  over the activities it proposed to study in a draft of this plan issued   5 months earlier in July 2005. The July 2005 draft Green Plan scheduled   13 feasibility studies for activities associated with 6,180 FTEs for fiscal  years 2005 through 2009. The Forest Service selected these activities by  identifying good candidates for feasibility studies and then selecting a  level of effort the officials believed could be managed over the next   5 years. For example, in selecting the studies, the officials said they  considered the complexity of the studies, the additional workload that  would result from conducting them, and the personnel resources required  in selecting these activities. The Forest Service used the following nine  criteria as the basis for identifying good candidates for feasibility studies:    Potential for savings. An activity with greater potential for savings  through more effective or efficient performance is considered a stronger  candidate for a feasibility study.
Availability of private sector contractors. An activity performed by a  large number of commercial companies is considered a stronger candidate  for a feasibility study.
Severability. An activity that can be performed by an independent  business unit is considered a stronger candidate for a feasibility study.
Preferred government performance. An activity that management prefers  to be performed by a government position is considered a weaker  candidate for a feasibility study.
Location. An activity that does not have to be performed locally is  considered a stronger candidate for a feasibility study.
Fragmentation. An activity that is the minor responsibility of a large  number of positions, while difficult to compete, may benefit from  restructuring and is considered a stronger candidate for a feasibility study.
Centrality of performance. An activity that is typically performed at a  central location is considered a stronger candidate for a feasibility study.
Potential for process improvement. An activity with a greater potential for  improvement through modernization, reorganization, or some other means  is considered a stronger candidate for a feasibility study.
Impact on incident support. An activity that supports emergency  situations, such as firefighting, is considered a weaker candidate for a  feasibility study.
However, after reviewing the Forest Service’s proposed Green Plan, USDA  directed the Forest Service to revise its plan to include all 24,512  commercial FTEs eligible for competition in either a feasibility study or an  A-76 competition. In response, the Forest Service issued a revised Green  Plan in December 2005, which OMB subsequently approved. The revised  plan included a single “catch-all” feasibility study—labeled “All Other  Commercial B Activities”—which had 15,000 FTEs associated with it,  nearly all of the commercial FTEs not already identified in the draft Green  Plan. According to a Forest Service official, the additional feasibility study  was added to comply with the USDA directive to include all commercial  FTEs in the Green Plan, not because it included activities that might  benefit from an A-76 competition. OCFO officials explained to us that  USDA agencies have an option to perform feasibility studies to identify  good candidates for more targeted feasibility studies, and that this was the  purpose of the 15,000 FTE feasibility study. As of September 30, 2007, the  Forest Service had not started this study.
As table 2 shows, the Forest Service had completed only five of the nine  feasibility studies scheduled to be completed by September 30, 2007. The  completed studies account for only 2,580 FTEs of the approximately  19,000 FTEs that were scheduled to be studied by this date.
In our previous work, we found that effective strategic plans take into  account the resources required to implement the plan, such as human  capital, technology, and information. While Forest Service officials could  not provide us with any documents showing resources involved in  conducting feasibility studies, the effort does not appear to be  insignificant. According to OCFO guidance, 13 separate steps are involved  in conducting feasibility studies, with many of the procedures involving  several additional subtasks. Table 3 shows OCFO’s guidance for  conducting feasibility studies.
According to a senior Forest Service official, while the agency considered  personnel requirements when selecting the original 13 activities for  feasibility studies, it did not do so when it expanded the Green Plan to  include all commercial FTEs. According to this official, there would be no  practical way to conduct the 15,000-FTE study because it would include so  many dissimilar activities. Consequently, FTEs would first need to be  grouped into many separate activities, each requiring its own feasibility  study, and as the number of studies increased, so too would the demands  placed on Forest Service personnel. Several senior Forest Service officials  with whom we spoke said that it is inconceivable that the schedule of  feasibility studies in the OMB-approved Green Plan for fiscal years 2005  through 2009 could be met.
Just as it did not take into account personnel resources in its OMB- approved December 2005 Green Plan, the Forest Service also did not  consider congressionally directed funding limitations. While the Forest  Service’s July draft Green Plan acknowledged the fiscal year 2005   $2 million statutory spending limitation on the Forest Service’s  competitive sourcing activities, the December Green Plan did not. In  directing the Forest Service to include all commercial activities in the  plan, USDA said to do so as if there were no funding limitations. Because  Congress had placed limitations on the Forest Service’s spending for  competitive sourcing activities in the previous 2 fiscal years—2004 and  2005—factoring in the possibility of limited funds available in future years  would have been appropriate.
section_title: The Forest Service Lacks Guidance to Ensure That Key Work Activities Are Excluded from A-76 Competitions
paragraphs: Since an agency’s FAIR Act inventory designates all of an agency’s FTEs as  inherently governmental, commercial, or commercial but exempt from  competition (e.g., core-commercial), the development of an accurate  inventory becomes the foundation for determining which activities  agencies select for competition. As we have previously reported, other  agencies have had difficultly in classifying positions when preparing their  FAIR Act inventories, and the Forest Service is no exception. The Forest  Service’s difficulty is exemplified by significant fluctuations in the  percentages of inherently governmental activities in its inventory data for  fiscal years 2004 through 2006. In addition, there are differences between  the Forest Service’s initial classifications and those reported in the  agency’s OMB-approved Fair Act inventory. See table 4.
According to a Forest Service official involved in preparing the agency’s  FAIR Act inventory, the fluctuations in the percentages of FTEs  designated as inherently governmental—ranging from a high of over 50  percent to a low of 7 percent—were the result of changes from year to  year in both the Forest Service’s criteria for classifying activities, and the  methodology it used to calculate the percentages of FTEs performing  inherently governmental activities. In addition, the differences in the  percentages of FTEs designated as core-commercial activities stemmed  from disagreements between the Forest Service and OMB about what  constituted a core-commercial activity. Specifically, in fiscal years 2004  and 2005, OMB did not approve the Forest Service’s written justifications  for core-commercial activities. Instead, it directed the Forest Service to  reclassify all of the activities the agency had identified as core-commercial  activities to commercial, thus making these activities eligible for  competition.
The Forest Service’s lack of consistency in its classification methodology,  coupled with disagreement between the Forest Service and OMB  regarding activity classifications, call into question the accuracy and  usefulness of the Forest Service’s FAIR Act inventory data for identifying  inherently governmental and core-commercial activities when planning  specific A-76 competitions. Forest Service officials told us that the FAIR  Act inventory represents only a “rough snapshot” of the inherently  governmental and core-commercial activities within the Forest Service,  and that much additional work must be done to identify specific activities  suitable for competition. They raised the following concerns about using  FAIR Act inventory data to identify inherently governmental and core- commercial activities:  Improper classification of activities in the FAIR Act inventory.  Disagreements between the Forest Service and USDA regarding activity  designations raise questions about appropriate classification.  Furthermore, agency employees may be tempted to classify an activity as  either inherently governmental or core-commercial to exempt it from  competition.
Mandatory use of OMB function codes. The Forest Service is required by  OMB to use OMB-assigned function codes for the FAIR Act inventory.  Although the guidance allows the Forest Service flexibility in defining the  codes, the officials told us that some of the codes were too broad to be of  any use or did not capture the actual work activities Forest Service  employees carried out.
Because Forest Service officials did not find the agency’s FAIR Act  inventory data useful during the A-76 precompetition planning stage, those  officials responsible for the three completed competitions—IT  infrastructure, road maintenance, and fleet maintenance—said that they  developed their own methodologies to classify inherently governmental  and core-commercial activities. For each competition, agency officials  collected additional work activity information from field offices and  performed additional analysis beyond that conducted for the FAIR Act  inventory. In doing so, officials said, they received little guidance on how  to supplement the FAIR Act inventory data or how to identify inherently  governmental and core-commercial activities during the precompetition  stage of the completed competitions.
Despite the lack of guidance, Forest Service officials involved in the three  completed competitions said that they succeeded in identifying and  exempting from competition inherently governmental and core- commercial activities by relying on intuitive knowledge and outside  consultants. Officials were confident of their success because of their  expertise in the activity being competed; the clearly commercial nature of  the activities; and the small size of the competitions, especially the fleet  maintenance and the road maintenance competitions. However, the three  completed competitions may not be representative of future competitions.
Since these competitions, USDA and the Forest Service have taken steps  to better define inherently governmental and core-commercial activities  for the purposes of completing the FAIR Act inventory. However, while  we believe that the FAIR Act inventory data could be a useful tool for  planning competitive sourcing activities at an agencywide level—for  example, they can form the basis of the Green Plan—we believe that  additional guidance will be needed on how to classify work activities  during the precompetition planning stage of an A-76 competition to ensure  that key work activities are excluded from the specific competition being  planned. Without such guidance, the Forest Service is at risk of subjecting  inherently governmental and core-commercial activities to A-76  competitions. This is particularly true as the Forest Service continues to  implement its Green Plan, which could potentially subject up to two thirds  of its FTEs to A-76 competitions.
section_title: The Forest Service Lacks a Strategy to Assess the Cumulative Effect That A-76 Competitions Could Have on Its Ability to Respond to Wildland Fires and Other Emergencies
paragraphs: For the three competitions the Forest Service completed—IT  infrastructure, road maintenance, and fleet maintenance—officials  responsible for planning the competitions told us they likely had a  negligible effect on the Forest Service militia’s ability to fight fires and  respond to emergencies for the following reasons:    The three competitions affected a relatively small number of Forest  Service employees—1,323—compared with the approximately 80,000  federal employees who are ICS-certified.
Contract provisions required the winning organization to provide  emergency incident support for activities within the scope of the contract.  For example, the MEO that won the road maintenance competition was  obligated to provide road maintenance, if needed, to support the response  to a wildfire incident.
The largest of the three competitions—the IT infrastructure, which  affected 1,200 FTEs—was won by the MEO. Because the MEO is still a  unit of the Forest Service and staffed by Forest Service employees, the  agency was able to direct the MEO to allow ICS-certified employees to   volunteer to fight wildfires and respond to other emergencies by  performing non-IT-related duties.
While the Forest Service has thus far minimized the impact of A-76  competitions on the availability of ICS-certified personnel to fight wildfires  and respond to other emergencies, the following other factors may affect  the availability of ICS-certified personnel in the future:    The Forest Service cannot realistically expect a private sector firm to  provide emergency services unrelated to the activity being competed. For  example, the Forest Service could not hold a competition for fleet  maintenance and expect firms that specialize in fleet maintenance to  provide unrelated services at the scene of the fire, such as providing food  and supplies.
Whether an MEO or a private sector firm wins a competition, the  availability of ICS-certified personnel could decline. As with any  reorganization, competitive sourcing may cause some personnel to leave  the Forest Service. These employees could retire or be hired by other  federal agencies that participate in the NWCG, and thus they could  continue to fight fires and respond to other emergencies. Other  employees, however, may no longer be available if their new employment  situation does not allow them to take extended leaves of absence to fight  fires and respond to other emergencies.
In its fiscal years 2006 and 2007 appropriations for the Forest Service,  Congress required the agency, in carrying out any competitive sourcing  competition involving Forest Service employees, to take into account the  potential effect that contracting with a private sector organization would  have on the agency’s ability to fight and manage wildfires. For the only   A-76 competition started since the law was passed—the communications  competition—the 130 employees potentially affected by the competition  were asked to report the amount of time they spent responding to  emergencies during the previous year. However, the Forest Service did not  collect information on what specific duties those employees performed  during the emergency response, nor the ICS-qualifications they hold.
Without this information, the Forest Service cannot assess the full impact  of this competition on its emergency response capability.
While it is important to know the impact of individual competitions, it is  even more important to know the cumulative impact of multiple  competitions. However, the Forest Service does not have a strategy to  assess the cumulative impact that future competitions could have on its  firefighting capability. The absence of such a strategy could prove  significant if the Forest Service implements its plan to consider over  24,000 FTEs—or nearly two thirds of its workforce—for A-76 competition.
section_title: The Forest Service Does Not Have Sufficient Competitive Sourcing Cost Data to Demonstrate Compliance with Its Statutory Spending Limitations or to Accurately Report Savings to Congress
paragraphs: The Forest Service does not know how much it spent on competitive  sourcing activities and, therefore, cannot be assured that it stayed within  the spending limitations or that it accurately reported savings to Congress.  For fiscal years 2004 through 2006, we found that the Forest Service   (1) narrowly interpreted the spending limitations to exclude certain costs  and (2) lacked sufficiently complete and reliable cost data to demonstrate  its compliance with the appropriations acts’ spending limitations on its  competitive sourcing activities. Furthermore, Congress may not have an  accurate measure of the savings from the Forest Service’s A-76  competitions because the agency (1) does not have complete and reliable  cost data and (2) did not include all costs associated with its competitive  sourcing program.
subsections: section_title: The Forest Service’s Interpretation of Costs That Are Subject to Statutory Spending Limitations Was Too Narrow
paragraphs: For fiscal years 2004 through 2006, the Forest Service did not attempt to  collect cost data on all competitive sourcing activities because it believed  that some costs associated with these activities were not subject to the  spending limitations of $5 million, $2 million, and $3 million, respectively,  as established in its appropriations acts. Specifically, the Forest Service  reasoned that it did not have to collect all the cost data because it  interpreted the spending limitations as being intended to restrict the  number of A-76 competitions it conducted. It, therefore, asserted that the  costs associated with the competition stage were subject to the spending  limitations, while costs associated with the FAIR Act inventory;  precompetition planning; and postcompetition accountability activities  should not be included.
However, we found that the Forest Service’s interpretation of which  competitive sourcing activities are subject to the spending limitations was  too narrow. Specifically, we concluded that, with only a limited exception,  the spending limitations apply to all costs attributable to the Forest  Service’s competitive sourcing program, including feasibility studies and  other precompetition planning activities, the competition itself,  postcompetition accountability activities, and the CSPO’s costs to manage  the program. Only the costs incurred to comply with the FAIR Act, such as  those to develop the inventories of activities, are exempt from the  limitations because the Forest Service is statutorily required to perform  FAIR Act-related activities even if it makes no effort to conduct  competitive sourcing. (See app. II for further discussion on our legal  interpretation.)
In April 2007, we sought the opinion of the USDA’s General Counsel on  whether certain Forest Service competitive sourcing activities are subject  to the annual statutory spending limitations. Our interpretation of the  costs that were subject to the spending limitations for fiscal years 2004  through 2006 is consistent with the interpretation that USDA’s General  Counsel provided to us. The USDA’s General Counsel further stated that it  believed that the Forest Service may not have complied with the spending  limitations in fiscal years 2004 through 2006.
section_title: The Forest Service Did Not Ensure That Cost Data Used to Comply with Statutory Spending Limitations Are Reliable
paragraphs: Even when it used its own interpretation of costs subject to the spending  limitations, the Forest Service still did not know whether it complied with  the limitations because it did not have a cost accounting system sufficient  to track costs related to competitive sourcing. First, the Forest Service  failed to establish tracking codes, known as job codes, in its financial  management system to enable it to distinguish cost data on the activities  that it believed were subject to the spending limitations from other cost  data. Forest Service officials could not explain why the agency had not  established these job codes.
Second, the Forest Service lacked guidance and management oversight to  ensure that employees were accurately and consistently using the job  codes that were established for competitive sourcing activities. In  particular, Forest Service officials could not provide us with any guidance  that employees could use to determine when to charge time to these job  codes and when to charge time to codes associated with their regular  duties. Officials acknowledged that without this guidance, employees  probably continued to charge time spent on competitive sourcing activities  to their regular job codes. For example:  In fiscal year 2004, Forest Service employees charged only 0.07 FTEs to  the job code established to track costs with the IT infrastructure  competition, even though competitive sourcing activities for the  competition took place throughout the entire fiscal year.
In fiscal years 2005 through 2006, Forest Service employees charged only  0.22 FTEs to the job code established to track costs associated with the  communications competition, even though competitive sourcing activities  for the competition began in fiscal year 2005 and were ongoing at the end  of fiscal year 2006.
In consultation with Forest Service officials, we agreed that it was not  feasible to reconstruct cost data for competitive sourcing activities  between fiscal years 2004 and 2006 to determine if the Forest Service  exceeded the appropriations acts’ spending limitations. Forest Service  officials told us it would require a significant amount of time and  resources to query employees on their past work activities associated with  competitive sourcing. Furthermore, it is unlikely that employees could  reliably report the time they spent on competitive sourcing activities that  took place months and years ago. Finally, officials told us that many  employees involved with the competitions have since left the agency.
Recognizing these shortcomings, the Forest Service has made some efforts  to improve its policies and guidance on how to establish job codes and  how employees are to use them to track competitive sourcing costs. In  fiscal year 2007, the Forest Service issued general policy on when to  charge time to competitive sourcing job codes. Among other things, it  issued a directive specifying that the cost of performing some  precompetition planning activities be charged to competitive sourcing job  codes. However, the Forest Service has yet to provide details on how it  intends to implement this policy, and thus we were not able to evaluate it.
section_title: The Forest Service Could Not Substantiate Savings Reported to Congress
paragraphs: The Consolidated Appropriations Act, 2004, establishes a governmentwide  requirement for each executive agency to report to Congress on the actual  savings derived from the implementation of competitions for the prior  fiscal year. In addition, OMB provides guidance on preparing the report,  including how to calculate savings. According to the guidance, savings  from completed competitions is defined as the difference between the cost  to the federal government of performing the activity prior to the  competition—the baseline cost—and the cost to the government of  performing the activity or paying for it after the winner of the competition  has begun performing the activity. This is the postcompetition cost.   Figure 1 shows how savings from competitions are calculated.
While OMB guidance specifies the postcompetition cost to the government  if a private sector contractor wins the competition, it does not provide  specific direction on how to calculate the postcompetition cost to the  government if the MEO wins the competition. Instead, the guidance  suggests determining the cost of in-house performance using a  methodology similar to that used to calculate the baseline costs.
In its reports to Congress on the actual savings derived from the  implementation of competitions, USDA reported that the Forest Service  saved over $38 million between fiscal years 2004 through 2006 as a result  of the three completed competitions—IT infrastructure (approximately  $35.2 million), fleet maintenance (approximately $716,000), and road  maintenance (approximately $2.2 million).
For these three competitions, Forest Service officials at the agency’s  headquarters and in the regions could not provide us with the information  necessary to fully substantiate the savings reported to Congress.  Headquarters officials directed us to the regions responsible for the  competitions, where officials were able to provide some cost data, but  overall could not provide us with the information necessary to  substantiate the savings reported to Congress. GAO’s document entitled  The Standards for Internal Control in the Federal Government requires  that all transactions and other significant events, such as the Forest  Service competitive sourcing costs and savings analyses, be clearly  documented, and the documentation should be readily available for  examination. Specifically, we found the following:  IT infrastructure. Officials could not tell us the methodology they used to  determine postcompetition costs and did not have available the data they  used to calculate savings. They reconstructed the personnel and overhead  costs for operating the MEO, but could not reconstruct the cost of outside  contractors that the MEO employed because these costs were not  discernable from other cost data that the Forest Service collected.  Ultimately, these officials could only speculate about what the contract  costs might have been and how savings were calculated.
Fleet maintenance. As with the IT infrastructure competition, officials  could not tell us the methodology they used to determine postcompetition  costs and did not have available all of the data they used to calculate  savings. Although officials provided us with the bulk of the  postcompetition cost data—the payments made to Serco, the private  sector organization that won the competition—they could not provide us  with all of the costs.
Road maintenance. Unlike the other two competitions, officials  responsible for this competition described the methodology. However,  they were unable to provide us with baseline cost data for fiscal year 2004,  and, as a result, we could not verify the reported savings for that year.
In April 2007, OMB issued guidance to help agencies substantiate the  savings they have achieved through A-76 competitions. The guidance  describes agency responsibilities related to tracking and reviewing cost  data to ensure savings are being realized. It also requires all agencies to  develop plans to independently validate a sampling of competitions to  confirm projected savings. Among other things, the guidance requires  agencies to assess the completeness and accuracy of cost data. Forest  Service officials told us that the agency is working to implement OMB’s  guidance. USDA told us that it is directing the Forest Service to validate  the savings from the IT infrastructure competition by the fourth quarter of  fiscal year 2008.
section_title: The Forest Service Did Not Include All Costs Associated with Its Competitive Sourcing Program When Calculating Savings Reported to Congress
paragraphs: While the Forest Service could not substantiate the savings it reported to  Congress using OMB’s guidance, the guidance itself allows agencies to  exclude some costs associated with A-76 competitions, which, if excluded,  may not provide Congress with an accurate measure of the savings  produced by the competitions. Although Forest Service officials could not  tell us all of the costs that were included or excluded in their savings  estimates, they stated with confidence that some costs were excluded.  Specifically, they said that transition costs associated with transferring  responsibilities to the winning organization were not included in the  savings calculations for the three competitions we reviewed. Transition  costs include costs associated with decreasing the size of the workforce  through buyouts and retirements, and costs to transfer employees who are  being retained to other locations. These are not necessarily one-time costs  because an agency is required to complete a follow-on competition for an  activity, generally after about 3 to 5 years. In the three competitions we  reviewed, we found the following transition costs were excluded:  IT infrastructure. Forest Service officials told us that they excluded  approximately $40 million in transition costs from the savings calculations  that were reported to Congress. These costs exceeded by about   $5 million the $35.2 million that the Forest Service reported to have saved  during fiscal years 2005 and 2006 as a result of the competition.
Fleet maintenance. Forest Service officials told us they excluded about  $670,000 in transition costs from the savings calculations that were  reported to Congress, nearly equaling the approximately $716,000 that the  Forest Service reported to have saved since fiscal year 2005 as a result of  the competition.
Road maintenance. Forest Service officials told us they excluded about  $320,000 in transition costs from the savings calculations that were  reported to Congress. These costs are approximately 15 percent of the  total $2.2 million in reported savings since fiscal year 2004.
In addition to transition costs, there are also precompetition planning  costs (including, as of May 2004, feasibility study costs). Like transition  costs, OMB guidance does not direct that precompetition planning costs  be included in the savings calculations.  A Forest Service official told us  that precompetition planning costs were excluded from the savings  calculations for the three completed competitions. Forest Service officials  could not provide us with estimates of these costs because they were not  tracked.
OMB guidance also does not direct agencies to include in their savings  calculation other potential costs associated with the termination of a  contract. To illustrate, 14 months after the private sector contractor,  Serco, began performing fleet maintenance activities, the Forest Service  terminated the contract. Under the terms of the contract, the Forest  Service must negotiate with Serco on any costs associated with the  termination itself. Forest Service officials stated that in March 2007, Serco  proposed a settlement amount that it contends would reimburse it for  costs such as those associated with vacating sites as well as administrative  costs and attorneys’ fees. Serco also contends that the Forest Service owes  it additional compensation unrelated to the contract termination. Serco’s  claim stems from a disagreement with the Forest Service over the terms of  the contract. Finally, Forest Service officials also told us that the agency  has incurred additional costs—exceeding its costs for fleet maintenance  before the Serco contract—because maintenance work is now being  performed by retail venders. Officials told us that the Forest Service is  precluded from returning the work to the agency for in-house  performance. Because these issues are still pending, we did not include  the dollar amounts of Serco’s claims or the additional costs incurred by  the Forest Service, and the Forest Service officials told us that they did not  want to comment further on this issue.
section_title: Conclusions
paragraphs: The government’s goal is to obtain high-quality services at a reasonable  cost, regardless of whether these services are performed by the public or  private sector. Competition between the public and private sectors is an  important tool in reaching this goal. The 2001 President’s Management  Agenda has reemphasized the importance of using this tool as a means to  deliver the best value to the American taxpayer.
In keeping with the President’s Management Agenda, the Forest Service  established a competitive sourcing program and began holding A-76  competitions. The agency now has plans to consider competing up to two  thirds of its workforce against the private sector. This is a massive  undertaking whose long-term success will depend on a realistic strategic  plan, clear guidance to identify the key work activities that should be  excluded from competition, and a strategy to assess the cumulative effect  that outsourcing a large number of federal jobs could have on its  firefighting capability. Unfortunately, the Forest Service has none of these  in place. Because the Forest Service has just begun to implement its  competitive sourcing program—having competed less than 5 percent of its  workforce against the private sector—these problems have not yet had a  significant impact on the Forest Service’s competitive sourcing program.  However, as the Forest Service implements its Green Plan and greatly  expands the scope of its competitive sourcing program, the problems we  have identified could, in the long term, severely impact its ability to  implement this program effectively—jeopardizing not just the overall  success of the program, but the nation’s ability to fight fires and respond  to other emergencies.
More immediate is our concern that the Forest Service did not collect  complete and reliable cost data related to its competitive sourcing  program during fiscal years 2004 through 2006. As a result, the agency did  not know how much it had spent on competitive sourcing activities and,  consequently, whether it had complied with statutory spending limitations.  We are also concerned about the usefulness of the cost savings that the  Forest Service reported to Congress. The Forest Service could not provide  us with sufficient data to verify the accuracy of the reported savings and  excluded substantial costs from the savings calculations. Although the  agency followed OMB guidance in calculating savings, we believe the  guidance provides the Forest Service with the latitude to include the other  costs we identified—some of which were substantial. Including these  costs would have provided Congress with a more realistic picture of the  extent to which the Forest Service’s competitive sourcing program is  saving the American taxpayers’ money.
section_title: Recommendations for Executive Action
paragraphs: To improve the Forest Service’s management of its competitive sourcing  program, we recommend that the Secretary of Agriculture direct the Chief  of the Forest Service to take the following five actions:    Revise the Green Plan to establish an implementation schedule that takes  into account resource limitations.
Develop clear guidance on when and how to identify inherently  governmental and core-commercial activities so they are excluded from  competitive sourcing competitions.
Develop a strategy for assessing the cumulative effect of competitive  sourcing competitions on the Forest Service’s firefighting and emergency  response capabilities.
Collect complete and reliable cost data on competitive sourcing activities  to ensure that the Forest Service is able to comply with the appropriations  acts’ spending limitations.
Ensure that the savings reported to Congress are a realistic measure of the  actual savings resulting from A-76 competitions by (1) verifying the  accuracy of the data and (2) including costs such as planning costs and  transition costs when calculating the savings.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the U.S. Department of Agriculture  for review and comment. The Forest Service responded. It generally  agreed with our recommendations but had concerns about some of the  specific findings and conclusions in the report. We present the agency’s  concerns and our responses to them in appendix III.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution for 30 days from the  report date. At that time, we will send copies of this report to interested  congressional committees, the Secretary of Agriculture, and the Chief of  the Forest Service. We will also make copies available to others upon  request. In addition, the report will be available at no charge on the GAO  Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report discusses the extent to which the U.S. Department of  Agriculture’s (USDA) Forest Service has (1) plans and guidance to help  implement its competitive sourcing program effectively and (2) sufficient  cost data to ensure that it complied with its competitive sourcing statutory  spending limitations and accurately reported its competitive sourcing  savings to Congress for fiscal years 2004 through 2006.
To address these two objectives, we focused on Forest Service  competitive sourcing activities between fiscal years 2004 and 2006. For the  first objective, we compared the Forest Service’s Green Plan, including  draft versions of the plan, with previous work that GAO has performed  that identified the elements of effective strategic plans. We also reviewed  the guidance that the Office of Management and Budget (OMB) and USDA  provided to the Forest Service on how to construct its Green Plan.  Furthermore, we examined how the Forest Service scoped the three  competitions that it completed during this time frame. Specifically, we  examined how the Forest Service ensured that it did not include inherently  governmental and core-commercial activities in the competitions, and how  it assessed the impact that competitions could have on the nation’s ability  to fight wildland fires and respond to other emergencies. Finally, we  examined the guidance currently available to Forest Service employees  responsible for scoping competitive sourcing competitions and  interviewed Forest Service officials familiar with the agency’s competitive  sourcing activities.
To respond to the second objective, we examined the appropriations acts  for fiscal years 2004 through 2006 to determine which costs incurred by  the Forest Service during those fiscal years were subject to the spending  limitations. Appendix II explains this analysis in greater detail. We then  asked the Forest Service to provide us with cost data for activities  associated with its competitive sourcing program, including cost data we  had determined were subject to the spending limitations. We assessed the  reliability of these data and found them unreliable as a measure of the  costs and savings associated with the program. Specifically, our review of  cost data from the USDA’s Federal Financial Information System (FFIS)  and subsequent discussions with Forest Service officials, including the  Chief Financial Officer, confirmed that the Forest Service had not issued  formal guidance on which costs where to be charged to competitive  sourcing job codes in FFIS, and that there was a lack of institutionalized  policies and procedures to guide employees in tracking the time and costs  associated with competitive sourcing activities. As a result, Forest Service  officials, including the Chief Financial Officer, agreed that it was likely  that employees used job codes inconsistently and that the accounting of  competitive sourcing expenditures between fiscal years 2004 and 2006  were unreliable and inaccurate. We also asked the Forest Service for data  to substantiate the annual savings resulting from competitive sourcing  competitions it reported to Congress in fiscal years 2004 through 2006. For  the three competitions completed during this time frame, Forest Service  officials either could not provide us with the methodology used to  calculate the savings, or could not provide us with all of the data used to  calculate the savings. As a result, we were unable to replicate the Forest  Service’s savings calculations, and thus we determined the reported  numbers were unreliable because data reporting strategies were absent or  inconsistent, there were no internal processes for verifying the accuracy of  the data, and there was no documentation with which we could verify the  accuracy of the data. Finally, in the course of our work, we identified  categories of costs that were not included in the Forest Service’s savings  calculations. We include examples of these costs in this report to show  their magnitude relative to the savings reported to Congress; however, we  did not independently verify the accuracy of these costs. We conducted  our work between October 2006 and January 2008 in accordance with  generally accepted government auditing standards.
section_title: Appendix II: Limitations on Use of Appropriations for “Competitive Sourcing Studies and Related Activities”
paragraphs: Appendix II: Limitations on Use of  Appropriations for “Competitive Sourcing  Studies and Related Activities”
The Forest Service relies on both federal employees and private  contractors to perform commercial activities—activities performed by the  government that are also regularly performed in the commercial market  place—such as data entry, photocopying, and other administrative support  services. To determine whether to convert the performance of such  activities from federal employees to private contractors, or vice versa, the  Forest Service follows the competitive process set out in Office of  Management and Budget (OMB) Circular No. A-76, Performance of  Commercial Activities (May 29, 2003), as revised, which establishes  executive branch policy for the competition of commercial activities. The  Forest Service is also subject to the requirements of the Federal Activities  Inventory Reform Act of 1998 (FAIR Act), which mandates agencies to  develop inventories of their activities, and the President’s Management  Agenda (PMA), launched in 2001, which includes a governmentwide  “competitive sourcing” initiative to increase and to make more efficient  and effective agencies’ use of the circular’s competitive process. To  implement these requirements, the Forest Service established a  competitive sourcing program that is administered by the Competitive  Sourcing Program Office.
A provision in each of the annual appropriations acts funding the Forest  Service for fiscal years 2004 through 2006 limited the amount of  appropriated funds available to the Forest Service for “competitive  sourcing studies and related activities” to between $2 million and $5  million (spending limitations). Five members of the U. S. Senate requested  that we determine which costs incurred by the Forest Service in fiscal  years 2004 through 2006 were subject to the spending limitations. In our  view, these spending limitations apply to all costs under the Forest  Service’s competitive sourcing program, except for costs incurred to carry  out the FAIR Act.
subsections: section_title: Background
paragraphs: OMB Circular No. A-76 includes, in appendix B, detailed guidance on the  competitive process a federal agency should follow to determine whether  an activity should be performed by a public or private source. The process  is divided into three stages: (1) a precompetition preliminary planning  stage, consisting, at minimum, of nine specified steps; (2) a competition  stage that starts with a formal public announcement of a standard or  streamlined competition between private and public sources and ends  with announcing a performance decision; and (3) a postcompetition  accountability stage, which mandates such actions as transferring  performance of the activities to the winning entity, maintaining a database  to track the execution of competitions, monitoring performance, and  submitting reports to OMB. To avoid the mistakes it made during earlier  competitions, the Forest Service has supplemented this process since 2004  by first conducting studies to determine the feasibility of carrying out this  competitive process (feasibility studies) for each activity. In 1998,  Congress enacted the FAIR Act, which requires federal agencies to submit  to OMB their annual inventories of commercial activities and, after a  period of review and consultation with OMB, transmit the final inventories  to Congress and make them available to the public. Appendix A to OMB  Circular No. A-76 (Inventory Process) implements the FAIR Act.
In August 2001, the Administration launched the PMA as its reform agenda  for improving management and performance in the federal government.  The PMA includes a competitive sourcing initiative to simplify and  improve the process for choosing private or public sources. To implement  the PMA competitive sourcing initiative, the Forest Service stated in its  fiscal year 2004 budget justification that it planned to conduct  competitions for activities associated with a total of 11,000 full-time  employees or their equivalent (FTEs), and that competitive sourcing costs  were expected to rise. Concerned about how the Forest Service had  implemented the PMA competitive sourcing initiative, the House and  Senate appropriations committees included language in the appropriations  bills for fiscal year 2004 that led to the enactment of the following  spending limitation: “Of the funds appropriated by this Act, not more than  $5,000,000 may be used in fiscal year 2004 for competitive sourcing studies  and related activities by the Forest Service.” The Forest Service’s  appropriations acts for fiscal years 2005 and 2006 included spending  limitations with identical language, except that the maximum amount  available for this purpose was $2 million and $3 million, respectively. At  issue here is determining the range of Forest Service activities that are  covered by the appropriations acts’ spending limitations on “competitive  sourcing studies and related activities.”
section_title: Discussion
paragraphs: Construing the meaning of a statutory provision starts with the statutory  language. The appropriations acts for fiscal years 2004 through 2006  define a “competitive sourcing study” for purposes of the spending  limitations as  “a study on subjecting work performed by Federal  Government employees or private contractors to public- private competition or on converting the Federal  Government employees or the work performed by such  employees to private contractor performance under the  Office of Management and Budget Circular A–76 or any  other administrative regulation, directive, or policy.”
Unfortunately, by defining a “competitive sourcing study” as a “study,”  albeit in the context of private versus public source performance, the  appropriations acts do not clearly indicate the breadth of Forest Service  activities that fall within its meaning. At the very minimum, however, the  phrase includes the competition stage (the second stage) of the OMB  Circular No. A-76 process because it represents the formal structured  process of soliciting and evaluating proposals from public and private  sources. The Forest Service takes the position that the annual spending  limitations apply only to costs attributable to the competition stage. We  disagree, as does the U. S. Department of Agriculture’s General Counsel,  who provides legal assistance to the Forest Service. Even if we were to  read the word “study” as narrowly as the Forest Service apparently does,  the additional words “and related activities” in this context make clear that  the statutory language includes more than simply the competitions.
The statutes do not define “related activities” or set out specific criteria for  identifying them. While a broad range of activities are “related,” in the  sense of having some logical connection to competitive sourcing studies,  we believe Congress intended to focus on those activities that the Forest  Service performs as part of its implementation of the President’s  competitive sourcing initiative. In other words, “related activities” are  those activities the Forest Service performs if it is considering whether to  conduct a public-private competition. Under the Forest Service’s  competitive sourcing program, no competition is conducted until the  completion of a feasibility study, the objective of which is to evaluate  whether an activity should be subject to the A-76 competitive sourcing  process. Likewise, no competition is conducted under OMB Circular No.  A-76 until the completion of the precompetition stage (the first stage),  which also includes tasks such as conducting market research and  developing an acquisition plan. Feasibility studies and precompetition  planning activities are thus prerequisites to a competition and, therefore,  in our view, “related activities.” Similarly, the postcompetition stage is a  required consequence of conducting a competition. The Forest Service’s  Competitive Sourcing Program Office supports and manages these and  other activities in the Forest Service’s competitive sourcing program.  Because these activities further the Forest Service’s objective of  conducting competitions under the competitive sourcing initiative, we  view them as “related activities” subject to the spending limitation.
While it can be argued that the words “and related activities” include  activities the Forest Service performs to carry out the FAIR Act, such as  preparing inventories and reporting to Congress, we think the better view  is that these costs are not encompassed in this limitation. Congress by law  expressly requires these activities, even absent any other competitive  sourcing program activities. Moreover, complying with the FAIR Act does  not further the Forest Service’s progress on the PMA competitive sourcing  initiative, and it was the Forest Service’s cost to implement this initiative  to which the congressional committees were reacting. Our interpretation  is consistent with the interpretation provided to us by the USDA Office of  General Counsel.
section_title: Conclusion
paragraphs: Accordingly, we conclude that the spending limitations on “competitive  sourcing studies and related activities” included in the appropriations acts  funding the Forest Service for fiscal years 2004 through 2006 apply to all  costs attributable to the Forest Service’s competitive sourcing program,  including the following:    conducting feasibility studies to evaluate which activities should be  subject to the competitive sourcing process set out in OMB Circular   No. A-76;   engaging in the competitive sourcing process set out in OMB Circular   No. A-76, including activities related to precompetition planning,  competitions between sources, and postcompetition accountability; and   managing the agency’s competitive sourcing program.
The appropriations acts spending limitations, however, do not apply to  costs incurred for complying with the FAIR Act, which the Forest Service  must do even if it applies no efforts to competitive sourcing.
section_title: Appendix III: Comments from the Forest Service
paragraphs: The following are GAO’s comments on the Chief of the Forest Service  letter dated December 31, 2007.
subsections: section_title: GAO Comments
paragraphs: 1.  We believe that the Forest Service’s comments misstate our position  regarding its guidance for ensuring that key work activities are  excluded from A-76 competitions. Our report does not state that the  Forest Service has no guidance, but rather that it lacks clear guidance.  Without clear guidance, we do not believe that the Forest Service’s  current process can offer sufficient safeguards to ensure that key work  activities are excluded from A-76 competitions, especially in light of  the agency’s plan to examine the activities of two thirds of its  workforce. For example, regarding the FAIR Act inventory, we found  significant fluctuations in the percentages of inherently governmental  activities in the inventory data for fiscal years 2004 through 2006,  suggesting that the Forest Service had difficulty classifying positions  when preparing the inventory. In addition, Forest Service officials told  us that the inventory data represents only a “rough snapshot” of the  inherently governmental and core-commercial activities within the  Forest Service, and that much additional work must be done to  identify specifics activities suitable for competitions. Finally, the  Forest Service officials responsible for the three completed  competitions—IT infrastructure, road maintenance, and fleet  maintenance—told us that they developed their own methodologies to  classify inherently governmental and core-commercial activities  because they did not find the agency’s FAIR Act inventory data useful  and received little guidance on how to identity inherently  governmental and core-commercial activities. Nevertheless, these  officials were confident that they successfully identified and exempted  from competition inherently governmental and core-commercial  activities because of, among other reasons, the clearly commercial  nature of the activities. However, the three completed competitions  may not be representative of future competitions, particularly if the  Forest Service proceeds with its plan to examine the work activity of  two thirds of its workforce.  2.  As we state in our report, OMB guidance on how to calculate  competitive sourcing savings reported to Congress does not specify all  of the costs that should be included in the calculations, thus providing  the Forest Service with some discretion on which costs to include.  Although the Forest Service followed OMB guidance in calculating  savings, we believe the guidance provides the Forest Service with the  latitude to include the other costs we identified—some of which  substantially reduce or even exceed the savings reported to Congress.
Including these costs would have provided Congress with a more  realistic picture of the extent to which the Forest Service’s competitive  sourcing program is saving the American taxpayers’ money.  3.  At the Forest Service’s request, we excluded from our report much of  the information we received related to termination of the Serco  contract because negotiations between the Forest Service and Serco  are ongoing. However, excluding all mention of the types of possible  additional costs would provide the false impression that the savings  already reported to Congress resulting from the fleet maintenance  competition have been realized, when in fact they are being called into  question.  4.  Although the Forest Service does not believe it exceeded the spending  limitations, even under the broader interpretation, we found that it  does not have the data to substantiate this claim. Specifically, as we  state in our report, the Forest Service did not collect complete and  reliable cost data related to its competitive sourcing program during  fiscal years 2004 through 2006 because it did not have a cost  accounting system sufficient to track costs related to competitive  sourcing. Furthermore, in consultation with Forest Service officials,  we agreed that it was not feasible to reconstruct cost data for  competitive sourcing activities for these years because doing so would  require a significant amount of resources and would not likely provide  reliable data. Because the Forest Service was unable to provide us  with complete and reliable cost data and it was not feasible to  reconstruct the data, neither the Forest Service nor GAO can  determine with an appropriate degree of certainty if the Forest Service  exceeded the appropriations acts’ spending limitations.
In addition, we acknowledge in our report that the Forest Service has  made efforts to improve its policies and guidance on how to establish  job codes and how employees are to use them for tracking purposes,  including a directive specifying that the cost of performing some  precompetition planning activities be charged to competitive sourcing  job codes.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Andrea Wamstad Brown,  Assistant Director; F. Abe Dymond; Charles T. Egan; Lauren S. Fassler;  Peter Grinnell; David Perkins; Aaron Jay Shiffrin; and Carol Herrnstadt  Shulman made key contributions to this report.