March 24, 1999

Circular No. A-76 (Revised)
Transmittal Memorandum No. 19

TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

SUBJECT:   Performance of Commercial Activities

This Transmittal Memorandum updates the Federal pay raise assumptions and inflation factors used for computing the Government's in-house personnel and non-pay costs, as generally provided in the President's Budget for Fiscal Year 2000.

The non-pay inflation factors are for purposes of A-76 cost comparison determinations only. They reflect the generic non-pay inflation assumptions used to develop the FY 2000 Budget baseline estimates required by law. The law requires that a specific inflation factor (GDP FY/FY chained price index) be used for this purpose. These inflation factors should not be viewed as estimates of expected inflation rates for major long-term procurement items or as an estimate of inflation for any particular agency's non-pay purchases mix.

 

Federal Pay Raise Assumptions	Military/Civilian
Effective Date
January 2000	4.4%
January 2001	3.9%
January 2002	3.9%
January 2003	3.9%
January 2004	3.9%

Non-Pay Categories (Supplies and Equipment, etc.)
FY 1998	1.2%
FY 1999	1.3%
FY 2000	2.0%
FY 2001	2.1%
FY 2002	2.1%
FY 2003	2.1%
FY 2004	2.1%

Geographic pay differentials received in 1999 shall be included for the development of in-house personnel costs. The above pay raise factors shall be applied after consideration is given to the geographic pay differentials. The pay raise factors provided for 2000 and beyond shall be applied to all employees, with no assumption being made as to how they will be distributed between possible locality and ECI-based increases.

In addition, the standard retirement cost factors for the weighted average CSRS\FERS pension and Federal retiree health cost numbers are reduced from those published in the March 1996 A-76 Supplemental Handbook. These numbers are being revised because of downward estimates in actuarial normal cost estimates, which more than offset the gradual shift toward FERS in the total. However, the post-retirement health cost was revised up by a full percentage point. The net result is that the cost factors provided at Part II, Chapter 2, paragraph B.6. f. 1.a., are up by 0.3 to 0.6 percentage points. In addition, the current benefit component for Federal employee insurance and health benefits at Part II, Chapter 2, paragraph 6. f. 1.b is revised up by 0.1 percentage points on the health side to 5.7 percent. The Medicare factor of 1.45 at Part II, Chapter 2, paragraph 6. f. 1.b and the cost of miscellaneous fringe benefits of 1.7 percent at Part II, Chapter 2, paragraph 6. f. 1.c ., are unchanged.

Current Handbook - as printed in the March 1996 Revised Supplemental Handbook at Part II, Chapter 2, Paragraph 6.f.1.a (page 20):

23.7% Regular (19.6 pension + 4.1 retiree health)
32.3% Air Traffic Controllers (28.2 pension + 4.1 retiree health)
37.7% Law Enforcement (33.6 pension + 4.1 retiree health)

Revised Handbook - as provided by this Transmittal at Part II, Chapter 2, Paragraph 6.f.1.a (page 20):

24.0% Regular (18.9 pension + 5.1 retiree health)
33.0% Air Traffic Controllers (27.9 pension + 5.1 retiree health)
38.2% Law Enforcement (33.1 pension + 5.1 retiree health)

Other Current Benefits - as provided at Part II, Chapter 2, Paragraph 6.f.1.b (page 20):

Current Handbook (March 1996) 5.6%
Revised per this Transmittal 5.7%

These updates are effective as follows: all changes in the Transmittal Memorandum are effective immediately and shall apply to all cost comparisons in process where the Government's in-house cost estimate has not been publicly revealed before this date.

Agencies are reminded that OMB Circular No. A-76, Transmittal Memoranda 1 through Transmittal Memorandum 14 are canceled. Transmittal Memorandum No. 15 provided the Revised Supplemental Handbook, and is dated March 27, 1996 (Federal Register, April 1, 1996, pages 14338-14346). Transmittal Memoranda No. 16, 17 and 18, which provided the last three year's OMB Circular A-76 Federal pay raise and inflation factor assumptions are also canceled.

Sincerely,

Jacob J. Lew
Director