Franchise Funds

Our government has long opposed private monopolies while creating public ones. A federal manager needing some administrative service -- like help from personnel, legal, procurement, financial, or computer specialists -- had to go to the departmental monopoly in charge of that service. This approach was thought to offer economies of scale.

Today almost everybody understands that monopolies provide poor services at high costs. So the original National Performance Review report recommended introducing competition by lifting the requirement that agencies buy supplies from the General Services Administration. GSA's Federal Supply Service gave up its monopoly on office supplies in 1994 and has been competing successfully for government business ever since. Their new motto is "Better, faster, cheaper, or not at all."

The National Performance Review also encouraged agencies to promote competition by establishing "franchise funds." (20) These funds allow selected agencies to offer their common administrative services to other agencies. Congressional approval was obtained in May 1996 for franchise funds in Interior, Treasury, Veterans Affairs, the Environmental Protection Agency, and Commerce. The funds will allow these agencies to sell to other agencies such services as mainframe computing, records storage, personnel and accounting systems, background checks, and travel management.