oversight

H.R. 7691, a Bill to Distinguish Federal Grant and Cooperative Agreement Relationships from Federal Procurement Relationships and for Other Purposes

Published by the Government Accountability Office on 1977-06-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           DOCUMENT   RESUME

02633 - [A1812855]

H.R. 7691, a Bill to Distinguish Federal Grant and Cooperative
Agreement Relationships from Federal Procurement Relationships
and for other Purposes. June 22, 1977. 3 pp. + enclosure (3
pp.)

Testimony before the House Committee on Government Operations:
Legislation and National Security Subcommittee; by James D.
Martin, Deputy Director, Human Resources Div.

Is.uc Area: Federal Procurement of Goods and Services (1900);
     Intergovernmental Relations and Revenue Sharing: Federal,
     State, Area-wide, and Local Coordination (402).
Contact: Human Resources Div.
?udget Function: General Government: Executive Direction and
     Management (802); General Government: Other General
     Government (806).
Organizaticr  Concerned: Commission on Covernment Procurement.
Coingressional Relevance: House Committee on Government
    Operations:   Legislation and National Security Subcommittee.
Authority: H.R. 7691 (95th Cong.).    S. 3514 (94th Cong.). H.R.
    15499 (94th Cong.).

         The purposes of H.R. 7691 were outlined and support
recommended. The bill is intended to characterize the
relationship between the Federal Government and recipients in
the acquisition of property and services and in the furnishing
of assistance by the Federal Government. This would promote a
better understanding of Federal spending and help eliminate
unnecessary administrative requirements. It would also establish
Government-wide criteria for selection of appropriate     legal
instruments, a clear definition of the relationships they
reflect, and a better understanding of the responsibilities of
the parties. It would promote increased discipline in the
selection and use of types of contract or agreement and maximize
competition. It would require a study of the relationship
between the Federal Government and recipients in Federal
assistance programs, and the feasibility of developing a system
of guidance in carrying out such programs. Enactment of the bill
would have the effect of adopting two recommendations of the
Commission on Government Procurement supported by the
Comptroller General. The first recommendation related to
clarifying differences between grant-type relationships and
contracts; the second related to standardization of assistance
methods and establishing a system of guidance fir management of
assistance programs. (HTW)
                  UNITED STATES GENERAL ACCOUNTING OFFICE
                          WASHINGTON, DC 20548



                                            FOR RELEASE ON DELIVERY
'0M                                         EXPECTED AT 9:30 a.m. EDT
C(>                                         WEDNESDAY, JUNE 22, 1977



Xis                            STATEMENT OF
                    JAMES D. MARTIN, DEPUTY DIRECTOR
                        HUMAN RESOURCES DIVISION
                               BEFORE THE
                       SUBCOMMITTEE ON LEGISLATION
                          AND NATIONAL SECURITY
                HOUSE COMMI'TEE ON GOVERNMENT OPERATIONS
                                   ON
                                H.R. 7691
                A BILL TO DISTINGUISH FEDERAL GRANT AND
                  COOPERATIVE AGREEMENT RELATIONSHIPS
                 FROM FEDERAL PROCUREMENT RELATIONSHIPS
                         AND FOR OTHER PURPOSES




      Mr. Chairman and Members of the Subcommittee:

           I am pleas_   to present our -iews on EI.R. 7691.

           The purposes of the bill are:

           (1) to characterize the relationship between the Federal

      Government and contractors, State and local governments, and

      other recipients in the acquisition of property and services

      and in the furnishing of assistance by the Federal Government

      so as to promote a better understanding of Federal spending

      and help eliminate unnecessary administrative requirements on

      recipients of Federal awards;
     (2)   to establish Government-wide criteria for selection

of appropriate legal instruments to achieve uniformity in the

use by the executive agencies of such instruments, a clear

definition of the relationships they reflect, and a better

understanding of the responsibilities of the parties;

     (3) to promote increased discipline in the selection and

use of types of contract, grant agreement, and cooperative

agreements and to maximize competition in the award of con-

tracts and encourage competition, where deemed appropriate,

in the award of grants and cooperative agreements; and

     (4) to require a study of the relationship between the

Federal Government and grantees and other recipients in Federal

assistance programs and the feasibility of developing a compre-

hensive system of guidance for the use of grant and cooperative

agreements, and other forms of Federal assistance in carrying

out such programs.

     Enactment of the bill would have the effect of adopting the

substance of two recommendations      (F-1 and F-2) of the Commission

on Government Procurement.     As you know, the Comptroller General

was a statutory member of the Commission and supported each of

the two recommendations.     I have attached to my statement a

brief description of the Commission's rationale in support of

the two recommendations and of their relationship to each other

in the context of this bill.

                               - 2-
     On July 10, 1974, we testified before the Ad Hoc Sub-

committee on Federal Procurement and the Subcommittee on

Intercovernmental Relations, Senate Committee on Government

Operations, regarding the then proposed similar bill S. 3514.

On November 25, 1974, we also testified before the House Sub-

committee on Legislation and Military Operations, regarding

S. 3514 as it passed the Senate on October 9, 1974.     On

September 13, 1976, we again testified on the then proposed

similar bill H.R. 15499 before this Subcommittee.     We sup-

ported on these occasions, and support now, the adoption of

both Commission recommendations, as provided for in H.R. 7691

and for the same basic reasons offered by the Commission.

     We believe enactment of d.R. 7691 would b. a signifi-

cant step forward and that the study called for by section 8,

addressing the matters set forth in the relevant part of the

Commission's report, should set the basis for further signifi-

cant progress.

     We will be happy to answer any questions you may have

Attachment




                            -3-
                                                     ATTACHMENT




     In connection with recommendation F-1, the Commission

found that there is a fundamental conceptual difference

between grant-type relationships and contracts, i.e., grant..

type relationships are customarily used where Federal assis-

tance of activities having a beneficial effect on public

policy is desired while contracts are customarily used for

the procurement of goods and services required for the con-

duct of the Government's busiiiess.    Despite this fundamental
difference, the Commission found confusion among Government

agencies and in the non-Federal sector as tc when contracts
as opposed to grant-type agreements should be used and vice-
versa.   The Commission also found that in.many instances,
Governmert agencies have been forced to use contracts in
situations where a grant-type agreement would be more appro-
priate because they lack necessary statutory authority for
the use of grant-type agreements.     Finally, the Commission
drew a distinction between grant-type activities wherein
little Government involvement is required during performance
and those which require substantial Federal involvement dur-
ing performance, recommending that the latter activities be
classified as "cooperative agreements" and that instruments
creating such agreements detail the nature and extent of
Federal involvement contemplated.
                                                      ATTACHMENT
                                                      Page 2


      In connection with recommendation F-2, the Commission
pointed out that much of the attention devoted
                                               to the hun-
dreds of assistance programs is concentrated
                                             on achievirg
 individual program objectives.    It said much less eiff-r
has been devoted to generalizing from the methods
                                                  used in
assistance programs. The Commission said that
                                               if assistance
methods can be standardized and catalogued, it
                                                should be
possible to take a long step in the direction
                                               of consistency
and simplicity, and at the same time enhance
                                              program effective-
ness by establishing a system of guidance f,
                                               generic aspects
of the management of assistance programs.

     The Commission said that the system that needs
                                                    to be
developed should cover all types of assistance
                                               relationships.
It said the need is to:     (1) identify the assistance universe
comprehensively;    (2) examine existing techniques and related
considerations;    (3) generalize to the extent possible from
such data; and (4) explore the possibilities of
                                                developing
new techniques.    Further, it said an analysis and evaluation
of assistance techniques should consider, in
                                             addition to the
usual grant-type transactions, loans, direct payments,
                                                        and
all forms of nonfinancial assistance. The Commission
                                                       said
the study also should consider subsidies which
                                               usually are
not regarded as "assistance" and that it also may
                                                  be desirable
to consider the applicability of assistance techniques
                                                        to
                                                    ATTACHMENT
                                                    Page 3


'revenue sharing."    The Commission said systematic review of
all forms of federal assistance and their operational methods

and techniques could assist in decisions on how new fores of

assistance should be structured to achieve   desired end,
     The Commission recognized in its report that other

studies had been attempted but that more was needed.

     Although there is some relationship between the two

recommendations of the Commission, the basic issues in-

volved are quite separable.   Recommendation F-l, dealt
with in sections 3 through 7 of the bill, was designed to

clearJy distinguish between Federal procurement and Federal

assistance and to require the use of legal instruments which

are consistent with the different Federal/non-Federal rela-

tionships involved.   Recommendation F-2, dealt with in

section 8 of the bill, was designed to gain a setter under-

standing of the alternative means of implementing Federal

assistance programs and to assess the feasibility of develop-

ing a comprehensive system of guidance to govern the adminis-

tration of such programs.