How fair is the FAIR Act?

A contractor asked the following questions: What does the FAIR Act require of government agencies? What is new in the act? How does it help contractors? How fair is it?

The Federal Activities Inventory Reform Act (Pub. L. No. 105-270, 112 Stat. 2382) was signed into law on Oct. 19, 1998. The act requires government agencies to provide a list, not later than July 30 and annually thereafter, to the Office of Management and Budget that identifies "activities performed by federal government sources for the executive agency that, in the judgment of the executive agency, are not inherently governmental functions." [Emphasis added.] The law does not require agencies to identify the activities that they consider to be inherently governmental.

The law defines an inherently governmental function as "a function that is so intimately related to the public interest as to require performance by federal government employees." The act also includes a description of representative functions that are included within that definition and a description of functions that are excluded from it.

But the definition of inherently governmental functions, and the related information included in the law, are virtually identical to the definition found in the 1983 version of OMB Circular A-76 and repeated in many other government rules. FAIR adds nothing to the already well-established definition of inherently governmental functions.

According to FAIR, OMB is to review each agency's list and "consult" with the agency on its contents. Afterward, the agency is to "make the list available to the public," and OMB is to "publish in the Federal Register a notice that the list is available."

Again, there is nothing new here. Since at least 1983 the official supplement to OMB Circular A-76 has required agencies to compile such lists and make them available to the public.

On a more substantive note, FAIR requires that any time an agency considers contracting with a private-sector source to perform a function included on the agency's list, it must use a "competitive process" to select the successful source unless otherwise provided by law or by any other governmentwide guidelines. In addition, FAIR requires each agency to consider all direct and indirect government costs when determining whether to hire a private-sector source or to perform the work with government resources.

Again, there is nothing new here. OMB Circular A-76 and its supplement have included virtually identical rules for many years. Indeed, OMB's proposed regulatory guidance for implementing FAIR contains nothing but minor editorial changes to the pre-existing Circular A-76 Supplement. [See 64 Fed. Reg. 10031 (March 1, 1999).] Nothing else was required by the law.

FAIR, however, did make one significant change in the prior law. The act established a procedure under which an "interested party" could challenge an agency's omission from or inclusion of a particular activity on the public list. According to FAIR, all such challenges must be submitted to the agency within 30 days after the notice informing the public of the list is published.

This new challenge procedure greatly diminishes a contractor's ability to market its services to government agencies. Prior to FAIR, any contractor with an idea for commercializing a government activity was free to market the idea to the relevant agency any time it made sense to do so. With the passage of FAIR, however, it will be easy for an agency to categorize such efforts as untimely challenges to the agency's list and to ignore the contractor.

FAIR was passed amid considerable hype, with expectations that it would help agencies outsource some of their work. With the exception of one provision, however, there was nothing new in FAIR. Furthermore, the new provision does more to hurt contractors than to help them.

You can judge for yourself how fair FAIR is.

--Peckinpaugh is a member of the government contracts section of the law firm Winston & Strawn, Washington, D.C.