My primary goal for writing this blog is to figure out ways that our Government can deliver better for its own citizens. One thing that holds us back is the way we over-interpret rules. Usually, the interpretation is overly-restrictive—the rule/law/regulation doesn’t actually prevent what the interpretation prevents. In a lot of cases, once an interpretation is made, it is not re-examined in light of new facts or new interpretations. In this article, I’m going to elaborate upon three examples: Financial Assistance competition requirements; Department of Energy cost sharing requirements; and the Paperwork Reduction Act.
Financial Assistance Competition Requirements
Virtually all Federal Financial Assistance (FA) is posted publicly.1 This is what FA regulations call “openly competed.” I suspect that 99% of people working in Federal FA believe that this manner of open competition is required. It is not: Here’s the regulation (2 CFR 200.204):
The Federal agency must announce specific funding opportunities for Federal financial assistance that will be openly competed. The term openly competed means opportunities that are not directed to one or more specifically identified applicants.
Unlike the Federal Acquisition Regulation, you’ll notice that this does not require “open competition.” The FA regulation doesn’t instruct users on how to determine whether to use open competition. It doesn’t articulate any alternative process or requirement for using something less than open competition. As a result, agencies default to open competition. In the minds’ of most FA practitioners, there is not an alternative.
Like many agencies, the Department of Energy (DOE) has a Guide to Financial Assistance. DOE’s guide says,
It is DOE policy to use competition in the award of grants and cooperative agreements to the maximum extent feasible. This policy conforms to 31 USC 6301(3) which encourages the use of competition in awarding all grants and cooperative agreement.”
Here again, nothing in that guidance requires open competition.2
Why does this matter? It matters because defaulting to open competition via public posting of solicitations results in agencies being inundated with proposals. In almost all cases, agencies get far more awardable/meritorious proposals than they possibly fund. The financial and time costs are massive. The system is so inefficient, that some research suggests that the costs in money and time of failed research proposals exceeds the total scientific value of the research that the funding supports.
The alternative is to conduct in-depth market intelligence and solicit only the most qualified sources. As long as multiple sources are solicited, the proposals are considered competitive. Contracting officers have long used this strategy when fulfilling needs on GSA schedules.
Here is a real life example of how this could work. During my time at DOE, OCED had a program intended to decarbonize various industrial sectors. We put out an extremely broad solicitation that got hundreds of proposals across multiple sectors. Some of the sectors we were targeting had a small number of players. Take steel for example—Wikipedia tells me there are 9 integrated steel mills and 112 “mini-mills” in the United States. Relative few of those facilities would be well suited for a $500M decarbonization project. Could OCED have moved awards in the steel sector faster if it had had conversations with those companies and then only solicited the companies that were interested, willing, and able? I think so.3
I’m not suggesting that all FA should be conducted in this “directed competition” manner. Rather, I’m suggesting that certain segments of an agency’s mission might be better served by it. If we want the government to work better, then it needs to match means and ends.
DOE Cost Sharing Requirements
I’ve written before that DOE cost sharing requirements are broken. I also wrote about how to fix it, and I won’t rehash those ideas here. The point I want to make here is this: The way cost sharing is interpreted is so confusing and shape shifting that complying with it becomes all encompassing. Here is what the Energy Policy Act of 2005 requires for cost sharing:
…the Secretary shall require that not less than 50 percent of the cost of a demonstration or commercial application activity described in subsection (a) to be provided by a non-Federal source.4
It seems simple, but it is not. I’ll give two examples. First, projects have different funding needs. For major project development, the planning phases often need more Federal financial support. This is what DOE’s Nuclear Energy (NE) office found when they awarded a project to develop a small modular reactor. They front loaded the cost share—meaning DOE provided more than 50% of the early stage costs. This isn’t specifically prohibited by the law, but the project failed and now the Inspector General says the project is, “…at risk of losing almost $143.5 million…” Was the risk in front loading the cost share worth it? I don’t know for sure, but I bet NE will tell you that doing so was the only way to get the project initiated. My point is that where and when cost share is needed varies by project and DOE ought to at least try to meet its partners where they are. When we talk ourselves out of offering this flexibility, we’ve done a disservice to our project partners.
Second, accounting for cost share is complex. Every dime that is contributed by a project partner is treated as if it were a Federal tax dollar. Projects end up with different percentages of cost share—some will propose the minimum (50%) and others will propose more.5 Keeping track of all of this across a portfolio of projects is a nightmare. (This is an instance of “If you aren’t in it, you can’t understand the complexity.”) My office at DOE spent hours, days, and months debating and arguing over cost-share policies.6 We also spent hours and weeks training and preparing staff on the issue. When you have these sorts of issues, a good thing to do is try to reduce the complexity. At least in my experience, DOE resists the reduction of complexity.
One simpler way to handle all of this is to say, “DOE will pay 50% of the allowable, allocable, and reasonable costs of each invoice up to the total amount of Federal commitment.” This is a simple policy statement that I pitched and found no purchase. Rather, my office chose to track the cost share percentage of each project separately. This increased the complexity of our compliance oversight. We also overcomplicated long lead procurement. (Long lead procurement is reimbursable upon submission of an invoice in the same manner as any other incurred cost.) What I’m getting at here, is that DOE overcomplicated this—not some external party and not the rule itself. We overinterpreted the law, created the complexity, and then didn’t handle it well. We should stop doing that.
The Paperwork Reduction Act
I’m not an expert in the Paperwork Reduction Act (PRA)—I know what everyone else knows: If you are collecting data from more than 9 people or organizations, you have to comply with PRA. I have read some on the topic, especially Jennifer Pahlka, who has written extensively on PRA. Here’s what she says,
There’s a surprising amount to say about the Paperwork Reduction Act because it's a case study in a wide variety of common dysfunctions. For one, it’s easy to see the “cascade of rigidity” in action here; the way agencies interpret the statute is far more onerous than the law or even the office responsible for compliance intend. For another, it acts on what’s essentially an anachronism, like many statutes that have simply been overtaken by events. But ultimately, its theory of change is just wrong: it operates at a chokepoint too far downstream to be useful. It’s trying to improve something through compliance and control that is mostly improved through the creation of capacity where the work actually happens.
Jennifer is right about PRA, and I encourage you to read her whole column. The part I want to focus on is how inconsistently PRA is applied, and how this inconsistency pushes agencies towards the most risk averse posture.
Let me relate a quick story as to how this impacts agencies. When we were developing our Funding Opportunities at DOE, we applied the PRA. This limited the forms available to us for collecting data from the proposers. The approved forms available to us, did not reflect the information we needed—especially for cost data. But since PRA applied, we used the approved forms anyway, and then asked the proposer for more information during negotiations. It actually made the burden worse for the proposers!
What’s even dumber is that we were afraid to make any changes to the form because we thought it might trigger a PRA review. So we attached forms to our Funding Opportunities that were branded by the DOE sister organization that had applied for the OMB control number in accordance with PRA. That’s right, we were afraid to change the name of the organization in the header of the document.
As I was coming up, I worked primarily in FAR based procurement. PRA didn’t come up that often—I was many years into my career until I encountered a situation during contract performance where PRA came into play. But it never affected how I collected information from organizations in the form of a proposal. According to Don Mansfield, an OG procurement expert, this is probably wrong:
In competitive acquisitions, it is common for solicitations to require offerors to conduct surveys of their past and present customers using standard questionnaires developed by the contracting office. Offerors are typically instructed to send the questionnaires to their customers with instructions to send the completed surveys to the contracting office. This information is then used to evaluate the offeror past performance. In effect, individual contracting offices have shifted the burden for collecting information about offeror past performance to the public.
The problem with this practice is that it is done without regard for the requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) (PRA).
(Author’s note: It looks like past performance questionnaires in the context of FAR part 15 are covered by OMB 9000-0142. However, that doesn’t necessarily cover past performance in the FAR part 8, 13, 14, or 16 context. Nor does it necessarily cover other proposal information like technical proposals, cost proposals, and resumes.)
What I’m getting at is that I solicited proposers on FAR based contracts for a dozen or more years a no one—not a single lawyer, supervisor, or HCA—ever suggested that PRA might apply. I don’t think I’ve ever seen a past performance questionnaire with an PRA OMB control number. So, either Don is wrong and there is some sort of PRA exemption for FAR based contracts, or it’s largely or completely unenforced.
Here we have an anachronistic law that throttles agencies from collecting information they need to make decisions. It is largely unenforced. It’s hard to suggest that we should simply ignore a law—that’s not good government either. But what are we to do when that law worsens outcomes for everyone involved in the process? What are we to do when the law is, at best, inconsistently enforced, and operates without sanction for a violation? Getting a single form approved takes 9 months. Is that good government?
Here’s how I’d answer those questions: We should try to reduce the burden on people and organizations interested in working with us to the maximum extent possible. Where we can get relevant data from public sources, we should. We should not ask for the same information in multiple places, and what information we should have a plan to use what information we do ask for. If we can’t articulate how we are going to use a piece of information, we shouldn’t ask for it. We should consider the timing of our information requests—full cost data isn’t necessary at the early stages. Especially with our growing ability to handle and process unstructured data, we should be more open to flexibility in our data structures. But above all of that, we need to think carefully about where to take PRA risks. Because if we don’t do that, we’ll end up applying it to everything, and that will slow us down.
Conclusion
I offer these examples as just that—examples. There are thousands of large and small ways that the bureaucracy gets in its own way. If you’ve worked in Government, you probably have your own examples. It’s a learned habit and we need to unlearn it. Our ability to deliver for our fellow citizens depends on it.
Grants.gov is the primary place, but individual agencies post their FA solicitations on their own websites as well and then link to Grants.gov.
As an aside, competition for most FA doesn’t do what competition is supposed to do. In the classic situation, competition drives prices down and drives quality up. Companies compete through price and quality tradeoffs. But we don’t make these sorts of tradeoffs in FA. I’ve never seen an agency fund a FA proposal because it was cheaper than another proposal.
Proposals for this solicitation were due on August 11, 2023. The last award for the program was made in January 2025.
For basic and applied research and development, the minimum cost share is 20%.
I saw non-Federal cost share percentages as high as 90%.
Eventually, we ended up on a fairly risk averse path—organizations had to meet their cost sharing commitments by the end of each phase.