The Heritage Foundation

Executive Summary #1615

November 25, 2002

November 25, 2002 | Executive Summary on

Executive Summary: Expanding Competition for Federal Grants

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.

These changes alone, however, will not bring about increased competition in noncompetitive grant programs, such as SCSEP or the following:

  • Job Access Program
    For FY 2000 and FY 2001, program administrators at the Federal Transit Administration ignored the authorizing legislation that requires full and open competition and instead sole-sourced the grants according to the non-binding recommendations of congressional appropriators. Congress approved $25 million in new spending in FY 2002, in addition to the $100 million available to the Department of Transportation for this program through the Highway Trust Fund.
  • Susan Harwood Training Grants
    Managed by DOL's Occupational Safety and Health Administration, this program limits participation to past federal grantees. Last year, DOL rescinded a set of over-budget Clinton-era grant awards and later reissued the grant applications under tighter budget limitations. But DOL failed to strike the requirement for past receipt of federal funding. Recent DOL appropriations acts do not mention Harwood grants specifically, yet the program will distribute an estimated $11.2 million in grants this year under prior statutory authority.
  • Hazardous Waste Worker Training Program (HWWTP)
    This program, operated by the National Institutes of Health (and formerly known as Superfund Worker Training), was designated six years ago as one of the "Top Ten Political Slush Funds" by Heritage analysts because it gave its grants to politically influential labor organizations. Most of these same groups continue to receive funding today because of built-in preferences for previous awardees. Recent appropriations acts do not mention the program, yet it will distribute an estimated $25 million in grants this year under statutory authority.
  • Fund for the Improvement of Post-Secondary Education (FIPSE)
    Congress earmarks more than 80 percent of the money in this "discretionary" grant stream, overseen by the Department of Education's Assistant Secretary for Postsecondary Education, leaving less than one-fifth open to competition by qualified applicants. For FY 2002, it earmarked $149.7 million. Though recent appropriations acts do not mention the fund specifically, FIPSE will distribute an estimated $181 million in grants (including earmarks) this year under statutory authority.

Increasing 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.

--Christopher Yablonski is Manager of the Government Integrity Project at The Heritage Foundation.

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