Why It Matters

The Economy Act gives federal agencies a way to obtain goods and services from other agencies, either through direct orders or another agency’s contracting operations, according to a new Congressional Research Service report. That authority applies when the servicing agency lacks more specific statutory authority for the work or goods, making the law a fallback for interagency transactions. The arrangement moves money between appropriation and fund accounts for goods or services furnished or expected to be furnished.

The Economy Act became law on June 30, 1932, as Section 601 of the Legislative Branch Appropriation Act for 1933.

There is no government-wide requirement for agencies to report their Economy Act use to Congress. For Congress, the policy question is whether existing internal controls provide enough visibility or whether additional notification, submission, and database requirements are warranted.

The Big Picture

The original law permitted direct or unassisted acquisition through another agency’s existing contracts when that approach was more convenient and cheaper than contracting out.

A 1942 amendment extended assisted-acquisition authority to certain defense-related agencies, and a 1982 amendment authorized any agency to perform contracting services for another agency.

A Senate subcommittee examined interagency contract off-loading in the early 1990s and reported that agencies had used it to avoid competition, bypass limits on expiring funds, and evade contract audits and oversight.

The 1994 statutory provisions required the Federal Acquisition Regulation to be updated to permit interagency contracting only if the servicing agency had an existing contract for the good or service, was better qualified to enter into or administer the contracts, or was authorized by law to provide the good or service. The 1994 statutory requirements required advance approval by authorized agency officials for covered purchases and prohibited agency payments exceeding actual or estimated costs.

Section 865 of the FY2009 National Defense Authorization Act required written agreements for all interagency acquisitions assigning responsibility for contract administration and management, as well as an Office of Management and Budget report to Congress on the frequency of interagency acquisitions, management controls, cost-effectiveness, and savings generated.

The Bottom Line

The statutory framework now pairs broad interagency authority with conditions tied to funding, federal interest, agency capability, and the availability of private providers. The head of the requesting agency must determine that the order is in the best interests of the United States and that the goods or services cannot be provided as conveniently or cheaply by a private contractor, and the requesting agency must have funds available. Although the Economy Act does not expressly require a written agreement, GAO has derived such a requirement from common sense and the recording statute and recommends that interagency agreements specify the legal authority, performance terms and conditions, cost of performance, mode of payment, and approvals by appropriate officials.

For an Economy Act transaction in which one agency uses another agency’s procurement contract to acquire goods or services, the Federal Acquisition Regulation requires a determination and findings document stating that the interagency acquisition is in the Government’s best interest, that the supplies or services cannot be obtained as conveniently or economically by contracting directly with a private source, and that at least one specified circumstance applies. The unresolved policy choice is how much of that transaction-level documentation should become visible beyond agency files, since the available framework does not provide a government-wide dataset or a government-wide reporting requirement.

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