Executive Summary #1615
November 25, 2002
Under the leadership of President George W. Bush, who has made competitive bidding for the provision of government services a priority, the Administration has begun to take steps to expand competition for federal grants. This is good policy. Not only does competitive bidding for federal monies promote basic fairness, but it also encourages greater efficiencies and cost savings--up to 50 percent, according to the Bush Administration. With billions of dollars awarded each year in federal grants, the need for efficiency and accountability is significant.
In 2001 the government gave out more money by federal grant ($325 billion) than it did by federal contract ($235 billion). Although about two-thirds of the money awarded by federal contract was subject to the competitive bid process, a similar analysis of federal grants is not possible. There simply are no mechanisms in place to establish how many federal grants, in what total amounts, were put out for competitive bids.
Without true competition and accountability, "discretionary" grant programs can become less than discretionary, locking many potential applicants out of the process. Grant funds can be subject to congressional micromanagement, such as earmarking; programs may choose to restrict applicants to those that have already received grants in the past; or agency staff may ignore the language of the authorizing statute to follow the non-binding guidance of appropriators.
The U.S. Department of Labor (DOL) is leading the way in competing out previously noncompetitive grants, notably in the Senior Community Service Employment Program (SCSEP). For a quarter of a century, the Employment and Training Administration had doled out 80 percent of this program's money to just 10 preferred "national sponsors" at the expense of smaller organizations located closer to the target population. This month, DOL announced the first-ever national grant competition for $342 million of the $445.1 million Congress appropriated for SCSEP in FY 2002.
President George W. Bush began taking
steps to improve access to grants for non-traditional grantees in
his Faith-Based and Community Initiative. His Administration
identified grants that require past receipt of federal funds and
removed some of
these requirements from its solicitations for grant applications--a good way to open doors and increase competition. But there is more that can be done.
The Office of Management and Budget (OMB) proposed several steps to improve federal grantmaking in general that also would expand competition for grants. For example, OMB proposes (1) standardizing and simplifying audit requirements for prospective grantees; (2) making it easier to obtain the 501(c)(3) nonprofit tax status that is required for many grants; and (3) creating a uniform electronic portal for all federal grants.
Competition for Grants
To expand competition for federal grants, President Bush should end agency administrative preferences for large national grantees and for the non-binding recommendations of congressional appropriators when authorizing statutes require fair and open competition. Wherever practical, eligibility requirements for past grant experience should be removed. The President should challenge Congress to reduce the use of earmarks that choke agency discretionary grantmaking by threatening to veto any unwieldy appropriations bills. Outreach to non-traditional grant applicants in his Faith-Based Initiative was a good start to extend competitive sourcing to the universe of federal grantmaking, but there is much more that the President and Congress can do to broaden the pool of applicants and increase competition for federal grants.