Streamlining Government: Opportunities Exist to Strengthen OMB's Approach to Improving Efficiency Page: 27 of 73
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2008. The agency provides federal assistance to eligible students by
partnering with postsecondary schools, financial institutions, and guaranty
agencies (state and nonprofit agencies that guarantee loans against
default). Program officials told us they used information from this
measure to establish targets for reduced unit costs for their lending
transactions. For example, they reported using the data to negotiate a
lower cost for the origination of direct student loans by a sole-source
contractor.41 FSA used a contractor to originate the loans made directly to
students. The contract allowed for a certain quantity of loan originations
for a set price, up to a maximum number of loans each year. According to
program officials, the sharp reduction in credit availability due to the
financial crisis beginning in 2008 led to an increase in demand for FSA
direct loans. FSA had projected that demand for direct student loans in the
4th quarter of fiscal year 2009 would exceed the contract maximum by
3 million loans. The contractor proposed a price of $8.9 million for the
additional loans, arguing that the added volume would require higher
infrastructure costs associated with greater call center capacity. FSA
officials told us they analyzed historical data for their efficiency measure
and found that the unit cost to originate loans decreased as volume
increased. They used this analysis to challenge the contractor's bid and
succeeded in lowering the agreed price to $4.9 million. Officials reported
that legislation, federal cost accounting standards, and our previous
recommendations all contributed to pressure to track unit costs and try to
lower administrative costs. Consequently, the agency had developed a
number of cost models, which facilitated their developing the efficiency
measure for PART.
The Department of the Interior's Fisheries program provides an example
in which the efficiency measure showed a net loss but officials said they
used the efficiency measure data to make management decisions. The
efficiency measure tracked the efficiency (pounds per dollar) of producing
healthy rainbow trout for recreation. For the first 4 years examined, fiscal
years 2004 through 2007, the efficiency measure varied slightly, indicating
that overall efficiency was relatively stable. For fiscal year 2008, however,
the measure fell, indicating a significant drop in efficiency. Officials
attributed this drop to a 31 percent increase in feed, energy, and utility
41A sole-source contract is a contract award without competition from other companies.
Such contracts are used in instances in which only one source is deemed able to provide
the service or product needed at the time. Without the pressure of competing bids to keep
prices in check, having information on costs is critical to negotiating the terms of such
GAO-10-394 Streamlining Government
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United States. Government Accountability Office. Streamlining Government: Opportunities Exist to Strengthen OMB's Approach to Improving Efficiency, report, May 7, 2010; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc302236/m1/27/: accessed May 26, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.