Subject:
Implementation of the Federal Activities Inventory Reform Act of
1998 (Public Law 105-270) ("FAIR Act")
Agency:
Office of Management and Budget, Executive Office of the President
Action:
OMB issues final guidance on the Implementation of the FAIR Act.
Summary:
The Office of Management and Budget (OMB) hereby issues guidance
to implement the "Federal Activities Inventory Reform Act of
1998".
To facilitate and ensure
agency implementation of the "Federal Activities Inventory
Reform Act of 1998" (Public Law 105-270) ("FAIR Act"),
OMB is revising its existing guidance on the management of commercial
activities through revisions to OMB Circular A-76, "Performance
of Commercial Activities," and to its Supplemental Handbook.
These revisions inform agencies of the FAIR Act's requirements;
implement the statutory requirements of the FAIR Act; avoid duplication
and confusion by conforming guidance to the FAIR Act, and place
the FAIR Act's requirements in the context of the Federal Government's
larger reinvention, competition and privatization efforts.
Dates:
This guidance is effective upon publication in the Federal Register.
For Further
Information Contact: Mr. David Childs, Office of Management
and Budget, NEOB Room 6002, 725 17th Street, N.W., Washington, D.C.
20503, telephone: (202) 395-6104, FAX: (202) 395-7230
Availability:
Copies of the updated versions of OMB Circular A-76, its Revised
Supplemental Handbook and this Transmittal Memorandum 20 are available
from OMB on the Internet at:
/OMB/circulars/index-procure.html
Supplementary
Information:
I. The Federal
Activities Inventory Reform Act.
On October 12, 1998,
President Clinton signed into law the "Federal Activities
Inventory Reform Act of 1998" ("FAIR Act" or "Act").
The FAIR Act directs Federal agencies to submit each year an
inventory of all their activities that are performed by Federal
employees but are not inherently Governmental (i.e., are commercial).
OMB is to review each agency's Commercial Activities Inventory
and consult with the agency regarding its content. Upon the
completion of this review and consultation, the agency must
transmit a copy of the inventory to Congress and make it available
to the public. The FAIR Act establishes an administrative appeals
process under which an interested party may challenge the omission
or the inclusion of a particular activity on the inventory.
Finally, the FAIR Act requires agencies to review the activities
on the inventory. Each time that the head of an executive agency
considers contracting with a private sector source for the
performance of such an activity, the head of the executive
agency shall use a competitive process. When conducting cost
comparisons, agencies must ensure that all costs are considered.
In enacting the FAIR
Act, Congress did not displace longstanding Executive Branch
policy regarding the performance of commercial activities.
The Federal Government seeks to achieve economy and enhance
productivity and quality through competition to obtain the
best service at least cost to the American taxpayer. This Federal
policy regarding the performance of commercial activities has
been provided by OMB Circular A-76, "Performance of Commercial Activities."
Specific guidance regarding the implementation of this policy
is provided by the March 1996 Revised Supplemental Handbook
to OMB Circular A-76 and by agency consultation with OMB.
The Act codified
some of this guidance in law. In particular, the FAIR Act codified
the pre-existing requirement for agencies to inventory their
commercial activities, as well as the pre-existing definition
of "inherently
governmental function."
Each time an agency
considers changing from Government employee performance of
a commercial activity on the inventory, the FAIR Act requires
that a competitive process be used and that cost comparisons "shall ensure that
all costs ... are considered and that the costs considered are
realistic and fair". Here, too, the Act codifies or defers
to pre-existing Executive Branch policy.
II. Implementation
of the FAIR Act.
OMB Circulars are
a well-established vehicle for directing agencies on the management
of their activities. Together, Circular A-76 and its Supplemental
Handbook have established the broad principles, individual definitions
and specific directives on the management of commercial activities,
including the inventory and other items codified by the FAIR Act.
OMB wanted to provide the agencies with prompt and clear guidance
on how to implement the Act within the short time-frame available.
OMB concluded that the best way to provide agencies with clear
and prompt guidance on how to implement the FAIR Act was to revise
the current circular and handbook so that they conform to the
FAIR Act. OMB's goal in drafting these revisions was to ensure
that the agencies fully implement the FAIR Act's requirements,
and that the agencies do so without confusion, wasted effort or
delays caused by uncertainty about the applicability of current
guidance.
Accordingly, on March
1, 1999, OMB requested agency and public comments on proposed
revisions to the Handbook to implement the FAIR Act (64 FR 10031).
The proposed revisions would inform agencies of the FAIR Act requirements
and, to avoid confusion, conform the Handbook's provisions so
that they cross-reference and parallel relevant FAIR Act provisions.
To implement the
FAIR Act's inventory requirement, OMB proposed to make conforming
changes to the Handbook's pre-existing inventory requirement.
The changes incorporated the statutory due date of June 30th
for agency submissions to OMB and added, to the inventory's description
of each activity, two new data elements required by the FAIR Act.
In addition, OMB
proposed provisions to the Handbook to address the FAIR Act's
other requirements. These provisions:
(1) reiterated the
requirements for OMB to review the commercial activity inventories
and to consult with the agencies regarding them; for the agencies,
after OMB's review-and-consultation is completed, to send the
inventories to Congress and to make them available to the public;
and for the agencies to hear and decide administrative "challenges"
in which interested parties challenge an agency's decision
to include an activity in (or exclude an activity from) the
inventory; and
(2) incorporated
the FAIR Act's requirement that agencies "review" the
activities on the inventory; that an agency, each time it considers
contracting with a private sector source for the performance of
an activity listed on the inventory, use a competitive process
to select the source (unless otherwise provided "in a law
other than this Act, an Executive order, regulations, or any Executive
Branch circular"); and that, when comparing costs, "all
costs...are considered and...are realistic and fair."
OMB proposed that
agencies rely on and implement the existing guidance with respect
to the cost-comparison competition requirements of the FAIR Act.
These procedures are well-established and direct agencies to create
a competitive process that compares costs completely, accurately,
and fairly.
OMB received 82 responses
to its request for comments: 10 Federal agencies, 61 industry
or trade groups, and 8 employee organizations responded, in addition
to 4 letters from members of Congress. A discussion of the significant
comments, and OMB's responses to those comments, is provided in
the Appendix to this notice.
After considering
all comments received on the proposed guidance, OMB is issuing
final guidance to the agencies for implementing the FAIR Act.
The guidance consists of changes to the A-76 Circular, itself,
as well as its Supplemental Handbook.
In order to implement
the FAIR Act, OMB is making several changes to the guidance as
proposed on March 1:
OMB has revised Circular
A-76, itself, in addition to the Supplemental Handbook, to conform
to the requirements of the FAIR Act;
To ensure that agencies
comply with the FAIR Act's requirement for review on an inventory
within a reasonable time, OMB will now require annual reports
that will, among other things, discuss the implementation, status,
and results of the FAIR Act process;
OMB has clarified
that agencies should, as appropriate, permit employee involvement
in the development of the inventory;
OMB is revising agency
reporting requirements so that reporting is clearer on activities
that have been converted from contract performance to in-house
performance or retained in-house as a result of a cost-comparison.
With the issuance
of these revisions, agencies have been provided guidance for implementing
the FAIR Act. OMB will continue, as it has in the past, to consult
with individual agencies and provide informal guidance as necessary.
III. Executive
Branch Management of Commercial Activities Generally
Implementing the
FAIR Act is only a part of the Government's reinvention and management
responsibilities. Improving the quality, and reducing the cost,
of commercial activities is an integral part of managing the Nation's
resources. The agencies and OMB have an ongoing responsibility
to ensure that these activities are performed in a manner that
is cost-effective and in the best interest of the taxpayer. Developing
an inventory of each agency's commercial activities is a necessary
first step in pursuing this objective, one that has now been codified
by the FAIR Act. Once these inventories are developed, they will
then be reviewed, by the agencies and OMB, to identify ways to
improve the performance of the Federal Government's commercial
activities.
Equally important,
however, is how the agencies manage these activities after they
are identified. In order better to manage commercial activities,
OMB revised the Supplemental Handbook in 1996. The Revised
Supplemental Handbook seeks the most cost-effective means of
obtaining commercial support services and provided new administrative
flexibility in the Government's "make or buy" decision
process. The revision modified and, in some cases, eliminated
cost comparison requirements for recurring commercial activities
and the establishment of new or expanded interservice support
agreements; reduced reporting and other administrative burdens;
provided for enhanced employee participation; eased transition
requirements to facilitate employee placement; maintained a
level playing field for cost comparisons between Federal, interservice
support agreement and private sector offers, and improved accountability
and oversight to ensure that the most cost effective decision
is implemented.
As part of this guidance,
OMB is now taking the additional step of requiring agencies to
submit annual reports that will discuss the implementation, status,
and results of the FAIR Act process. As we develop experience
with the FAIR Act and these procedures, we will consider whether
additional guidance is needed, either for implementation of the
FAIR Act in particular or on management of commercial activities
in general.
Jacob J. Lew
Director
Circular
No. A-76 (Revised)
Transmittal Memorandum No. 20
June 14, 1999
TO THE HEADS OF
EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Implementing
the Federal Activities Inventory Reform Act Through Conforming
Changes to OMB Circular No. A-76 and its March 1996 Revised
Supplemental Handbook
This Transmittal
Memorandum implements the statutory requirements of the Federal
Activities Inventory Reform Act ("The FAIR Act"), Public
Law 105-270. As part of its longstanding role in the review and
oversight of agency management and the allocation of resources,
OMB has established policies regarding the performance of commercial
activities by Federal agencies. These policies are outlined in
OMB Circular No. A-76 and its Revised Supplemental Handbook. The
FAIR Act reinforced these policies and procedures; codified certain
requirements with respect to the development by agencies of an
annual commercial activities inventory, and added an opportunity
for interested parties to challenge the contents of the annual
inventory.
The changes to the
Circular's Revised Supplemental Handbook (Attachment 1) inform
agencies of the FAIR Act's requirements; implement the statutory
requirements of the FAIR Act; avoid duplication and confusion
by conforming the Supplemental Handbook to the provisions of the
FAIR Act; and place the FAIR Act's requirements in the context
of the Federal Government's larger reinvention, competition and
privatization efforts. As a result of these changes, the Circular
is also being updated with conforming changes necessary to reflect
the requirements of the FAIR Act (Attachment 2). The previous
OMB Circular A-76 was published in the August 16, 1983, Federal
Register at pages 37110-37116. The March 1996 Revised Supplemental
Handbook was issued through Transmittal Memorandum 15, published
in the April 1, 1996, Federal Register at pages 14338-14346.
Under the FAIR Act,
agencies are required to submit their commercial activity inventories
to OMB by June 30th of each year, starting this year. THE
FIRST FAIR ACT INVENTORIES ARE, THEREFORE, DUE IN TWO WEEKS.
OMB looks forward to working with the agencies during our review
of these inventories, and stands ready to assist the agencies
as the Executive Branch moves forward in its implementation of
the FAIR Act.
Questions regarding
the FAIR Act or this guidance may be addressed to Mr. David Childs
(phone: (202) 395-6104, Fax: (202) 395-7230).
Jacob J. Lew
Director
Attachments
Attachment
1
Revisions
to the OMB Circular A-76 March 1996 Revised Supplemental Handbook
1.
The Introduction to the Supplemental Handbook (p. iii) is revised
to reflect the fact that challenges to the activities listed in
the Commercial Activities Inventory are permitted under the FAIR
Act, by adding to the end of the last sentence on page iii the following:
"...and as
set forth in Appendix 2, Paragraph G, consistent with Section
3 of the Federal Activities Inventory Reform Act of 1998 (FAIR
Act, P.L. 105-270)."
2.
Part I, Chapter 1, paragraphs A, B.1 and F, of the Supplemental
Handbook (pp. 3,5) are revised to reflect the requirements of the
FAIR Act. As revised, paragraphs A, B.1 and F read as follows:
"A.
General
This Part sets forth
the principles and procedures for managing the Government's
acquisition of recurring commercial support activities, implementing
the "Federal Activities Inventory Reform Act of 1998"
("The FAIR Act"), P.L. 105-270, and Circular A-76.
Exhibit 1 summarizes the conditions that permit conversion to
or from in-house, contract or Inter-Service Support Agreement
(ISSA) performance. The requirements of the FAIR Act apply to
the following executive agencies: (1) an executive department
named in 5 USC 101, (2) a military department named in 5 USC
102, and (3) an independent establishment as defined in 5 USC
104. The requirements of the FAIR Act do not apply to: (1) the
General Accounting Office, (2) a Government corporation or a
Government controlled corporation as defined in 5 USC 103, (3)
a non-appropriated funds instrumentality if all of its employees
are referred to in 5 USC 2105(c), or (4) Depot-level maintenance
and repair of the Department of Defense as defined in 10 USC
2460."
"B. Inherently
Governmental Activities
1. Inherently
Governmental activities are not subject to the FAIR Act, Circular
A-76 or this Supplemental Handbook. As a matter of policy, an
inherently Governmental activity is one that is so intimately
related to the exercise of the public interest as to mandate
performance by Federal employees. The Office of Federal Procurement
Policy (OFPP) Policy Letter 92-1, dated September 23, 1992 (Federal
Register, September 30, 1992, page 45096), provides guidance
on the identification of inherently Governmental activities
(see Appendix 5). This guidance conforms to the definition provided
at Section 5, paragraph 2, of the FAIR Act."
"F. Commercial
As required by the
FAIR Act, Circular A-76 and this Supplemental Handbook, each
agency will maintain a detailed inventory of all in-house commercial
activities performed by its Government employees. This inventory,
as described at Appendix 2 of this Supplement, and any supplemental
information requested by OMB, will be submitted not later than
June 30 of each year. Agencies should, as appropriate, permit
employee involvement in the development of this Commercial Activities
Inventory."
3.
Part II, Chapter 1, Paragraph A.1 of the Supplemental Handbook (p.
17) is revised by adding a reference to the FAIR Act. As revised,
Paragraph A.1 reads as follows:
1. Part II provides
generic and streamlined cost comparison guidance to comply with
the provisions of the FAIR Act and Circular A-76. This includes
guidance for developing in-house costs based upon the Government's
Most Efficient Organization (MEO) and other adjustments to the
contract and inter-service support agreement (ISSA) price. It
also sets out the principles for development of cost-based performance
standards or other measures that are comparable to those used
by commercial sources. Appendices 6 and 7 provide sector-specific
cost comparison guidance."
4.
The title of Appendix 2 of the Supplemental Handbook (p. 38) and
the corresponding entry in the Table of Contents are revised from
"OMB Circular No. A-76 Inventory" to "Commercial
Activities Inventory." Portions of this inventory are now required
by the FAIR Act, as a matter or law.
5.
Paragraph A of Appendix 2 of the Supplemental Handbook (p. 38) is
revised in several ways. The introductory sentences now refer to
the FAIR Act's requirements for a Commercial Activities Inventory
and incorporate its due date (June 30th) for submission to OMB of
each agency's inventory. Two data elements are added to the inventory's
description of an activity. These additional data elements (g and
h, below) correspond to the new data elements required under Section
2(a)(1) and (3) of the FAIR Act. In addition, the existing data
element for "Location / organization unit" is being separated
into two elements ("Location" and "Organization Unit").
Finally, a concluding sentence is added to clarify that agencies
have the flexibility to automate and structure the inventory so
long as all the listed data elements are included. As revised, Paragraph
A reads as follows:
"A.
Annual Inventory Submission
In accordance with
the FAIR Act, Circular A-76 and this Handbook, each agency must
submit to OMB, by June 30 of each year, a detailed Commercial
Activities Inventory of all commercial activities performed
by in-house employees, including, at a minimum, the following:
-
Organization
unit.
-
State(s).
-
Location(s).
-
FTE.
-
Activity function
code.
-
Reason code.
-
Year the activity
first appeared on FAIR Act Commercial Activities Inventory
(initial value will be 1999).
-
Name of a
Federal employee responsible for the activity or contact
person from whom additional information about the activity
may be obtained.
-
Year of cost
comparison or conversion (if applicable).
-
CIV/FTE savings
(if applicable).
-
Estimated
annualized Cost Comparison dollar savings (if applicable).
-
Date of completed
Post-MEO Performance Review (if applicable).
Agencies have the
discretion to automate and to structure the initial submission
of the detailed inventory as they believe most appropriate,
so long as the inventory includes each of these data elements.
Agencies must transmit an electronic version of the inventory
to OMB as well as two paper copies. The electronic version should
be in a commonly used software format (commercial off-the-shelf
spreadsheet, database or word processing format). OMB anticipates
issuing additional guidance on the structure and format of future
inventory submissions, based on the experience gained from the
first annual review and consultation process."
6.
To reflect the FAIR Act's requirement that information on full time
employees (or its equivalent) be included, paragraph C of Appendix
2 of the Supplemental Handbook (p. 38) has been revised as follows:
"C.
FTE
Enter the number
of authorized full-time employees or FTE (as applicable) in
the commercial activity function or functions as of the date
of the inventory. Employees performing inherently Governmental
activities are not reported in the Commercial Activities Inventory."
7.
Paragraph E "A-76 Reason Codes" of Appendix 2 of the Supplemental
Handbook (p. 38) is retitled "Reason Codes." The phrase
"agency A-76 inventories" is changed to "Commercial
Activities Inventory" and "Reason code E" is revised
and a new reason code "I" is added as follows:
-
Indicates that
the function is retained in-house as a result of a cost
comparison.
- Indicates
the function is being performed in-house as a result of a
cost comparison resulting from a decision to convert from
contract to in-house performance.
8.
Appendix 2 of the Supplemental Handbook (p. 38) is further revised
by adding three new paragraphs. New paragraph "G" describes
the review and publication of the detailed agency Commercial Activities
Inventory and the challenge-and-appeals process pertaining to its
content, as required by the FAIR Act. The new paragraph "H"
includes the FAIR Act's requirements that agencies review the commercial
activities in their inventories and use a competitive process or
established cost comparison procedures each time an agency considers
contracting with a private-sector source for the performance of
an activity on the inventory. New paragraph "I" alerts
agencies to the requirement for an annual Report on Agency Management
of Commercial Activities. The new paragraphs read as follows:
"G.
Inventory Review and Publication; Challenges and Appeals.
1. Review
and Publication: In accordance with Section 2 of the FAIR Act,
OMB will review the agency's Commercial Activities Inventory
and consult with the agency regarding its content. After this
review is completed, OMB will publish a notice in the Federal
Register stating that the inventory is are available to
the public. Once the notice is published, the agency will transmit
a copy of the detailed Commercial Activities Inventory to Congress
and make the materials available to the public through its Washington,
D.C. or headquarters offices.
2. Challenges
and Appeals: Under Section 3 of the FAIR Act, an agency's decision
to include or exclude a particular activity from the Commercial
Activities Inventory is subject to administrative challenge
and, then, possible appeal by an "interested party."
Section 3(b) of the FAIR Act defines "interested party"
as:
a. A private
sector source that (A) is an actual or prospective offeror
for any contract or other form of agreement to perform the
activity; and (B) has a direct economic interest in performing
the activity that would be adversely affected by a determination
not to procure the performance of the activity from a private
sector source.
b. A representative
of any business or professional association that includes
within its membership private sector sources referred to
in a. above.
c. An officer
or employee of an organization within an executive agency
that is an actual or prospective offeror to perform the activity.
d. The head
of any labor organization referred to in section 7103(a)
(4) of title 5, United States Code that includes within its
membership officers or employees of an organization referred
to in c. above.
3. An interested
party may submit to an executive agency an initial challenge
to the inclusion or exclusion of an activity within 30 calendar
days after publication of OMB's Federal Register notice
stating that the inventory is available. The challenge must
set forth the activity being challenged with as much specificity
as possible, and the reasons for the interested party's belief
that the particular activity should be reclassified as inherently
Governmental (and therefore be deleted from the inventory) or
as commercial (and therefore be added to the inventory) in accordance
with OFPP Policy Letter 92-1 on inherently Governmental functions
(see Appendix 5) or as established by precedent (such as when
other agencies have contracted for the activity or undergone
competitions for this or similar activities).
4. The agency
head may delegate the responsibility to designate the appropriate
official(s) to receive and decide the initial challenges. As
mandated by the FAIR Act, the deciding official must decide
the initial challenge and transmit to the interested party a
written notification of the decision within 28 calendar days
of receiving the challenge. The notification must include a
discussion of the rationale for the decision and, if the decision
is adverse, an explanation of the party's right to file an appeal.
5. An interested
party may appeal an adverse decision to an initial challenge
within 10 working days after receiving the written notification
of the decision. The agency head may delegate the responsibility
to receive and decide appeals to the official identified in
paragraph 9.a of the Circular (or an equivalent senior policy
official), without further delegation. Within 10 working days
of receipt of the appeal, the official must decide the appeal
and transmit to the interested party a written notification
of the decision together with a discussion of the rationale
for the decision. The agency must also transmit to OMB and the
Congress a copy of any changes to the inventory that result
from this process, make the changes available to the public
and publish a notice of public availability in the Federal
Register."
"H.
Agency Review and Use of Inventory.
Section 2(d) of
the FAIR Act requires that each agency, within a reasonable
time after the publication of the notice that its inventories
are publicly available, review the activities on the detailed
commercial activities inventory. Agencies will report to OMB
on this process as part of the Report on Agency Management of
Commercial Activities required under Paragraph I, below. In
addition, Section 2(d)-(e) of the FAIR Act provides that, each
time the head of the executive agency considers contracting
with a private-sector source for the performance of an activity
included on the inventory, the agency must use a competitive
process to select the source and must ensure that, when a cost
comparison is used or otherwise required for the comparison
of costs, all costs are considered and the costs considered
are realistic and fair. In carrying out these requirements,
agencies must rely on the guidance contained in Circular A-76
and this Supplemental Handbook to determine if cost comparisons
are required and what competitive method is appropriate. All
competitive costs of in-house and contract performance are included
in the cost comparison, when such comparison is required, including
the costs of quality assurance, technical monitoring, liability
insurance, retirement benefits, disability benefits and overhead
that may be allocated to the function under study or may otherwise
be expected to change as a result of changing the method of
performance."
"I.
Annual Report on Agency Management of Commercial Activities.
As part of ongoing
agency responsibility to manage their performance of commercial
activities and ongoing OMB oversight, OMB will require agencies
to report annually on such management. The content of the reports
is likely to vary depending upon the progress made by each agency
in reviewing their inventory and on the experience OMB gains
from the first round of inventory submissions, review, challenges
and appeals mandated by the FAIR Act. OMB anticipates issuing
subsequent guidance if it determines that supplemental reports
or other information is needed for future inventory submissions
to assure that agencies have correctly implemented all of the
provisions of the FAIR Act and taken advantage of the management
information inherent in the detailed Commercial Activities Inventory."
Attachment
2
CIRCULAR
NO. A-76 (REVISED 1999)
August 4, 1983
TO THE HEADS OF
EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Performance
of Commercial Activities
1. Purpose.
This Circular establishes Federal policy regarding the performance
of commercial activities and implements the statutory requirements
of the Federal Activities Inventory Reform Act of 1998, Public
Law 105-270. The Supplement to this Circular sets forth the
procedures for determining whether commercial activities should
be performed under contract with commercial sources or in-house
using Government facilities and personnel.
2. Rescission.
OMB Circular No. A-76 (Revised), dated March 29, 1979; and Transmittal
Memoranda 1 through 14 and 16 through 18.
3. Authority.
The Budget and Accounting Act of 1921 (31 U.S.C. 1 et seq.),
The Office of Federal Procurement Policy Act Amendments of 1979.
(41 U.S.C. 401 et seq.), and The Federal Activities
Inventory Reform Act of 1998. (P. L. 105-270).
4. Background.
a. In the
process of governing, the Government should not compete with
its citizens. The competitive enterprise system, characterized
by individual freedom and initiative, is the primary source
of national economic strength. In recognition of this principle,
it has been and continues to be the general policy of the
Government to rely on commercial sources to supply the products
and services the Government needs.
b. This national
policy was promulgated through Bureau of the Budget Bulletins
issued in 1955, 1957 and 1960. OMB Circular No. A-76 was issued
in 1966. The Circular was previously revised in 1967, 1979,
and 1983. The Supplement (Revised Supplemental Handbook) was
previously revised in March 1996 (Transmittal Memorandum 15).
5. Policy.
It is the policy of the United States Government to:
a. Achieve
Economy and Enhance Productivity. Competition enhances
quality, economy, and productivity. Whenever commercial sector
performance of a Government operated commercial activity is
permissible, in accordance with this Circular and its Supplement,
comparison of the cost of contracting and the cost of in-house
performance shall be performed to determine who will do the
work. When conducting cost comparisons, agencies must ensure
that all costs are considered and that these costs are realistic
and fair.
-
b. Retain
Governmental Functions In-House. Certain functions are
inherently Governmental in nature, being so intimately related
to the public interest as to mandate performance only by Federal
employees. These functions are not in competition with the
commercial sector. Therefore, these functions shall be performed
by Government employees.
c. Rely
on the Commercial Sector. The Federal Government shall
rely on commercially available sources to provide commercial
products and services. In accordance with the provisions
of this Circular and its Supplement, the Government shall
not start or carry on any activity to provide a commercial
product or service if the product or service can be procured
more economically from a commercial source.
6. Definitions.
For purposes of this Circular:
a. A commercial
activity is one which is operated by a Federal executive
agency and which provides a product or service that could
be obtained from a commercial source. Activities that meet
the definition of an inherently Governmental function provided
below are not commercial activities. A representative list
of commercial activities is provided in Attachment A. A commercial
activity also may be part of an organization or a type of
work that is separable from other functions or activities
and is suitable for performance by contract.
b. A conversion
to contract is the changeover of an activity from Government
performance to performance under contract by a commercial
source.
c. A conversion
to in-house is the changeover of an activity from performance
under contract to Government performance.
d. A commercial
source is a business or other non-Federal activity located
in the United States, its territories and possessions, the
District of Columbia or the Commonwealth of Puerto Rico, which
provides a commercial product or service.
e. An inherently
Governmental function is a function which is so intimately
related to the public interest as to mandate performance by
Government employees. Consistent with the definitions provided
in the Federal Activities Inventory Reform Act of 1998 and
OFPP Policy Letter 92-1, these functions include those activities
which require either the exercise of discretion in applying
Government authority or the use of value judgment in making
decisions for the Government. Services or products in support
of inherently Governmental functions, such as those listed
in Attachment A, are commercial activities and are normally
subject to this Circular. Inherently Governmental functions
normally fall into two categories:
(1) The act
of governing; i.e., the discretionary exercise of Government
authority. Examples include criminal investigations, prosecutions
and other judicial functions; management of Government programs
requiring value judgments, as in direction of the national
defense; management and direction of the Armed Services;
activities performed exclusively by military personnel who
are subject to deployment in a combat, combat support or
combat service support role; conduct of foreign relations;
selection of program priorities; direction of Federal employees;
regulation of the use of space, oceans, navigable rivers
and other natural resources; direction of intelligence and
counter-intelligence operations; and regulation of industry
and commerce, including food and drugs.
(2) Monetary
transactions and entitlements, such as tax collection
and revenue disbursements; control of the Treasury accounts
and money supply; and the administration of public trusts.
f. A cost
comparison is the process of developing an estimate of
the cost of Government performance of a commercial activity
and comparing it, in accordance with the requirements of the
Supplement, to the cost to the Government for contract performance
of the activity.
g. Directly
affected parties are Federal employees and their representative
organizations and bidders or offerors on the instant solicitation.
h. Interested
parties for purposes of challenging the contents of an
agency's Commercial Activities Inventory under the Federal
Activities Inventory Reform Act of 1998 are:
(1) A private
sector source that (A) is an actual or prospective offeror
for any contract or other form of agreement to perform the
activity; and (B) has a direct economic interest in performing
the activity that would be adversely affected by a determination
not to procure the performance of the activity from a private
sector source.
(2) A representative
of any business or professional association that includes
within its membership private sector sources referred to
in (1) above.
(3) An officer
or employee of an organization within an executive agency
that is an actual or prospective offeror to perform the
activity.
(4) The head
of any labor organization referred to in section 7103(a)
(4) of Title 5, United States Code that includes within
its membership officers or employees of an organization
referred to in (3) above.
7. Scope.
a. Unless
otherwise provided by law, this Circular and its Supplement
shall apply to all executive agencies and shall provide administrative
direction to heads of agencies.
b. This Circular
and its Supplement apply to printing and binding only in those
agencies or departments which are exempted by law from the
provisions of Title 44 of the U.S. Code.
c. This Circular
and its Supplement shall not:
(1) Be applicable
when contrary to law, Executive Orders, or any treaty or
international agreement;
(2) Apply to
inherently Governmental functions as defined in paragraph
6.e.;
(3) Apply to
the Department of Defense in times of a declared war or
military mobilization;
(4) Provide
authority to enter into contracts;
(5) Authorize
contracts which establish an employer-employee relationship
between the Government and contractor employees. An employer-employee
relationship involves close, continual supervision of individual
contractor employees by Government employees, as distinguished
from general oversight of contractor operations. However,
limited and necessary interaction between Government employees
and contractor employees, particularly during the transition
period of conversion to contract, does not establish an
employer-employee relationship.
(6) Be used
to justify conversion to contract solely to avoid personnel
ceilings or salary limitations;
(7) Apply to
the conduct of research and development. However, severable
in-house commercial activities in support of research and
development, such as those listed in Attachment A, are normally
subject to this Circular and its Supplement; or
(8) Establish
and shall not be construed to create any substantive or
procedural basis for anyone to challenge any agency action
or inaction on the basis that such action or inaction was
not in accordance with this Circular, except as specifically
set forth in Part 1, Chapter 3, paragraph K of the Supplement,
"Appeals of Cost Comparison Decisions" and as
set forth in Appendix 2, Paragraph G, consistent with Section
3 of the Federal Activities Inventory Reform Act of 1998.
d. The requirements
of the Federal Activities Inventory Reform Act of 1998 apply
to the following executive agencies:
(1) an executive
department named in 5 USC 101,
(2) a military
department named in 5 USC 102, and
(3) an independent
establishment as defined in 5 USC 104.
e. The requirements
of the Federal Activities Inventory Reform Act of 1998 do
not apply to the following entities or activities:
(1) the General
Accounting Office,
(2) a Government
corporation or a Government controlled corporation as defined
in 5 USC 103,
(3) a non-appropriated
funds instrumentality if all of its employees are referred
to in 5 USC 2105(c), or
(4) Depot-level
maintenance and repair of the Department of Defense as defined
in 10 USC 2460.
8. Government
Performance of a Commercial Activity. Government performance
ofa commercial activity is authorized under any of the following
conditions:
a. No
Satisfactory Commercial Source Available. Either no commercial
source is capable of providing the needed product or service,
or use of such a source would cause unacceptable delay or
disruption of an essential program. Findings shall be supported
as follows:
(1) If the
finding is that no commercial source is capable of providing
the needed product or service, the efforts made to find
commercial sources must be documented and made available
to the public upon request. These efforts shall include,
in addition to consideration of preferential procurement
programs (see Part I, Chapter 1, paragraph C of the Supplement)
at least three notices describing the requirement in the
Commerce Business Daily over a 90-day period or,
in cases of bona fide urgency, two notices over
a 30-day period. Specifications and requirements in the
solicitation shall not be unduly restrictive and shall not
exceed those required of in-house Government personnel or
operations.
(2) If the
finding is that a commercial source would cause unacceptable
delay or disruption of an agency program, a written explanation,
approved by the assistant secretary or designee in paragraph
9.a. of the Circular, must show the specific impact on an
agency mission in terms of cost and performance. Urgency
alone is not adequate reason to continue in-house operation
of a commercial activity. Temporary disruption resulting
from conversion to contract is not sufficient support for
such a finding, nor is the possibility of a strike by contract
employees. If the commercial activity has ever been performed
by contract, an explanation of how the instant circumstances
differ must be documented. These decisions must be made
available to the public upon request.
(3) Activities
may not be justified for in-house performance solely on
the basis that the activity involves or supports a classified
program or the activity is required to perform an agency's
basic mission.
b. National
Defense.
(1) The Secretary
of Defense shall establish criteria for determining when
Government performance of a commercial activity is required
for national defense reasons. Such criteria shall be furnished
to OMB, upon request.
(2) Only the
Secretary of Defense or his designee has the authority to
exempt commercial activities for national defense reasons.
c. Patient
Care. Commercial activities performed at hospitals operated
by the Government shall be retained in-house if the agency
head, in consultation with the agency's chief medical director,
determines that in-house performance would be in the best
interests of direct patient care.
d. Lower
cost. Government performance of a commercial activity
is authorized if a cost comparison prepared in accordance
with the Supplement demonstrates that the Government is operating
or can operate the activity on an ongoing basis at an estimated
lower cost than a qualified commercial source.
9. Action
Requirements. To ensure that the provisions of this Circular
and its Supplement are followed, each agency head shall:
a. Designate
an official at the assistant secretary or equivalent level
and officials at a comparable level in major component
organizations to have responsibility for implementation
of this Circular and its Supplement within the agency.
b. Establish
one or more offices as central points of contact to carry
out implementation. These offices shall have access to
all documents and data pertinent to actions taken under
the Circular and its Supplement and will respond in a timely
manner to all requests concerning inventories, schedules,
reviews, results of cost comparisons and cost comparison
data.
c. Be guided
by Federal Acquisition Regulation (FAR) Subpart 24.2 (Freedom
of Information Act) in considering requests for information.
d. Implement
this Circular and its Supplement with a
minimum of internal instructions. Cost comparisons shall
not be delayed pending issuance of such instructions.
e. Ensure
the reviews of all existing in-house commercial activities
are completed within a reasonable time in accordance with
the Federal Activities Inventory Reform Act of 1998 and
the Supplement.
10. Annual
Reporting Requirement. As required by the Federal Activities
Inventory Reform Act of 1998 and Appendix 2 of the Supplement,
no later than June 30 of each year, agencies shall submit
to OMB a Commercial Activities Inventory and any supplemental
information requested by OMB. After review and consultation
by OMB, agencies will transmit a copy of the Commercial Activities
Inventory to Congress and make the contents of the Inventory
available to the public. Agencies will follow the process
provided in the Supplement for interested parties to challenge
(and appeal) the contents of the inventory.
11. OMB
Responsibility and Contact Point. All questions or inquiries
should be submitted to the Office of Management and Budget,
Room 6002 NEOB, Washington, DC 20503. Telephone number (202)
395-6104, FAX (202) 395-7230.
12. Effective
Date. This Circular and the changes to its Supplement are
effective immediately.
Attachment
A
OMB Circular No. A-76
EXAMPLES
OF COMMERCIAL ACTIVITIES
Audiovisual Products
and Services
Photography (still,
movie, aerial, etc.)
Photographic processing (developing, printing, enlarging, etc.)
Film and videotape production (script writing, direction, animation,
editing, acting, etc.)
Microfilming and other microforms
Art and graphics services
Distribution of audiovisual materials
Reproduction and duplication of audiovisual products
Audiovisual facility management and operation
Maintenance of audiovisual equipment
Automatic Data
Processing
ADP services - batch
processing, time-sharing, facility management, etc.
Programming and systems analysis, design, development, and simulation
Key punching, data entry, transmission, and teleprocessing services
Systems engineering and installation
Equipment installation, operation, and maintenance
Food Services
Operation of cafeterias,
mess halls, kitchens, bakeries, dairies, and commissaries
Vending machines
Ice and water
Health Services
Surgical, medical,
dental, and psychiatric care
Hospitalization, outpatient, and nursing care
Physical examinations
Eye and hearing examinations and manufacturing and fitting glasses
and hearing aids
Medical and dental laboratories
Dispensaries
Preventive medicine
Dietary services
Veterinary services
Industrial Shops
and Services
Machine, carpentry,
electrical, plumbing, painting, and other shops
Industrial gas production and recharging
Equipment and instrument fabrication, repair and calibration
Plumbing, heating, electrical, and air conditioning services,
including repair
Fire protection and prevention services
Custodial and janitorial services
Refuse collection and processing
Maintenance,
Overhaul, Repair, and Testing
Aircraft and aircraft
components
Ships, boats, and components
Motor vehicles
Combat vehicles
Railway systems
Electronic equipment and systems
Weapons and weapon systems
Medical and dental equipment
Office furniture and equipment
Industrial plant equipment
Photographic equipment
Space systems
Management Support
Services
Advertising and
public relations services
Financial and payroll services
Debt collection
Manufacturing,
Fabrication, Processing, Testing, and Packaging
Ordnance equipment
Clothing and fabric products
Liquid, gaseous, and chemical products
Lumber products
Communications and electronics equipment
Rubber and plastic products
Optical and related products
Sheet metal and foundry products
Machined products
Construction materials
Test and instrumentation equipment
Office and Administrative
Services
Library operations
Stenographic recording and transcribing
Word processing/data entry/typing services
Mail/messenger
Translation
Management information systems, products and distribution
Financial auditing and services
Compliance auditing
Court reporting
Material management
Supply services
Other Services
Laundry and dry
cleaning
Mapping and charting
Architect and engineer services
Geological surveys
Cataloging
Training -- academic, technical, vocational, and specialized
Operation of utility systems (power, gas, water steam, and sewage)
Laboratory testing services
Printing and
Reproduction
Facility management
and operation
Printing and binding -- where the agency or department is exempted
from the provisions of Title 44 of the U.S. Code
Reproduction, copying, and duplication
Blueprinting
Real Property
Design, engineering,
construction, modification, repair, and maintenance of buildings
and structures; building mechanical and electrical equipment
and systems; elevators; escalators; moving walks
Construction, alteration, repair, and maintenance of roads and
other surfaced areas
Landscaping, drainage, mowing and care of grounds
Dredging of waterways
Security
Guard and protective
services
Systems engineering, installation, and maintenance of security
systems and individual privacy systems
Forensic laboratories
Special Studies
and Analyses
Cost benefit analyses
Statistical analyses
Scientific data studies
Regulatory studies
Defense, education, energy studies
Legal/litigation studies
Management studies
Systems Engineering,
Installation, Operation, Maintenance, and Testing
Communications systems
- voice, message, data, radio, wire, microwave, and satellite
Missile ranges
Satellite tracking and data acquisition
Radar detection and tracking
Television systems - studio and transmission equipment, distribution
systems, receivers, antennas, etc.
Recreational areas
Bulk storage facilities
Transportation
Operation of motor
pools
Bus service
Vehicle operation and maintenance
Air, water, and land transportation of people and things
Trucking and hauling
Appendix
Summary
of Comments Received
OMB received 82 responses
to its March 1, 1999, Federal Register request for comments:
10 Federal agencies; 61 industry or trade groups, and 8 employee
organizations responded, in addition to 4 letters from members
of Congress. A discussion of the significant comments, and OMB's
responses (including resulting changes that have been made to
Circular A-76 and its Supplemental Handbook), is provided below.
1. The
Development and Submission of the Commercial Activities Inventory
OMB received a number
of comments regarding the proposed revisions to Appendix 2 of
the Supplemental Handbook that address the requirement in Section
2(a) of the FAIR Act that agencies develop and submit to OMB,
by June 30th of each year, "a list of activities
performed by Federal Government sources for the executive agency
that, in the judgment of the head of the executive agency, are
not inherently Governmental functions."
- Comment:
One agency commenter stated that it would be burdensome for
the agency to include in the agency's inventory the name of
a Federal employee with respect to each listed commercial
activity.
Response:
This data element is specifically required by Section 2(a)(3)
of the FAIR Act itself.
- Comment:
Several commenters asked for changes to the data elements
to prevent any implication that agency savings could only
be achieved by "outsourcing" (converting work from
in-house to contract performance) but not by "insourcing"
(converting work from contract to in-house performance). Specifically,
the commenters asked that OMB delete the commercial activity
data element for "CIV/FTE Savings" (item g, of the
Supplemental Handbook's Appendix 2). The commenters also asked
for savings information to be collected when a conversion
is from contract to in-house performance. Finally, the commenters
asked that agencies provide, as part of the data that is collected
pursuant to paragraph "F" in Appendix 2 of the Handbook,
aggregate data on the numbers of contractor employees performing
work for the agency.
Response:
The cost-comparison process under Circular A-76 provides a
level playing field for agencies to determine whether savings
would result from a conversion of work, whether that conversion
is from in-house to contract performance or from contract
to in-house performance. Moreover, the cost-comparison process
can result in savings even if no conversion occurs. The commercial
activity data element for "CIV/FTE Savings" reflects
the number of civilian FTE saved as a result of conducting
a cost comparison, whether the function is retained in-house
or converted to contract. This data element, therefore, is
not meant to suggest that savings can only occur through outsourcing.
With respect to
the request for additional information on savings that result
from conversions from contract to in-house performance, the
inventories will include an additional data element (a "reason
code") to identify those commercial activities that are
"being performed in-house as a result of a cost comparison
resulting in a decision to convert from contract to in-house
performance" (new reason code "I"). A corresponding
change has been made to limit reason code "E" to
functions retained in-house as a result of a cost comparison.
The request for information on the aggregate number of agency
contractor employees is beyond the scope of the FAIR Act,
which is limited to performance of commercial activities by
Federal employees.
- Comment:
Several commenters suggested that additional "reason
codes" be included that would identify commercial functions
that, in the agency's view, should not be subject to conversion
to contract because of its need for a cadre of highly skilled
employees, in a specialized technical or scientific development
area, to ensure that a minimum in-house capability ("core
capability") in the area is maintained.
Response:
The inclusion of a function on the agency's inventory of commercial
activities does not mean that the agency is required to compete
the function for outsourcing. Rather, the FAIR Act in Section
2(d) requires each agency to review its inventory of commercial
activities. Presumably, this review would include consideration
of outsourcing, consolidation, privatization, other reinvention
alternatives or maintaining the status quo. Not all
commercial activities performed by Federal employees should
be performed by the private sector, though all such activities
should be inventoried under the provisions of the FAIR Act
and Circular A-76. The decision as to which commercial functions
represent "core capabilities," and thus should be
retained in-house, remains with the agency head. Accordingly,
a specific reason code for "core capability" was
not added to the inventory.
- Comment:
A number of commenters requested that the inventory be expanded
to include inherently Governmental positions, along the lines
of the information requested of the agencies on May 12, 1998
(Memorandum M-98-10, "Inventory of Commercial Activities").
Response:
The FAIR Act requires agencies to develop an inventory of
the agency activities that "are not inherently Governmental
functions." The FAIR Act does not request any information
on inherently Governmental activities; its focus is limited
to commercial activities.
As part of its
pre-FAIR Act oversight function to evaluate how agencies determine
what functions performed by Federal employees are classified
as commercial, OMB requested summary information from agencies
that also included functions they classified as not commercial
(i.e., inherently Governmental functions). When OMB conducts
its FAIR Act review and consultation on the Commercial Activities
Inventory submissions, it will do so in light of the information
gained from its review of the agencies' responses to OMB's
Memorandum M-98-10.
- Comment:
Several commenters expressed their views as to which positions
in the Department of Defense should be designated as inherently
Governmental and, therefore, excluded from the Commercial
Activities Inventory.
Response:
Under the FAIR Act, the agency head makes the determination
of which activities are to be excluded from the Commercial
Activities Inventory because they are "inherently Governmental",
as defined by the Act and existing guidance. Part of OMB's
review of the agencies' submissions will be to review these
judgments, and to consult with the agencies on them.
- Comment:
One commenter interpreted the Act's use of the term "full-time
employees (or its equivalent)" to mean that the Act applied
only to civilian employees and, thus, to exclude military
positions from the Act's Commercial Activities Inventory requirement.
Response:
All activities of the Federal Government that "are not
inherently Governmental" are to be inventoried under
the FAIR Act. This requirement is not limited to civilian
employees. Accordingly, military personnel performing commercial
activities are subject to the FAIR Act and must be inventoried.
For clarity, the data element FTE described in Appendix 2,
paragraph "C" has been clarified to include "authorized
full-time employees or FTE (as applicable)."
- Comment:
Several commenters stated that agencies should, in accordance
with the principles of Executive Order 12871 ("Labor-Management
Partnerships"), permit employee involvement in the development
of the agencies' inventories of commercial activities.
Response:
Executive Order 12871 does apply. Agencies should seek employee
input in the development of the Commercial Activities Inventory,
as appropriate, and the guidance has been revised to say so.
It remains up to the agency head to make the determination
whether a function is commercial or inherently Governmental
in nature. The FAIR Act also provides that Federal employees
and their representatives are "interested parties"
who may challenge the contents of the inventory.
2. OMB's
Review of the Commercial Activities Inventory and the Availability
of the Inventories to the Public
- Comment:
Under Section 2(b) of the FAIR Act, OMB "shall review
the executive agency's list for a fiscal year and consult
with the head of the executive agency regarding the contents
of the final list for that fiscal year." When that review
and consultation is completed, the inventory is then made
available to the public under Section 2(c), with a notice
of availability published by OMB in the Federal Register.
Several commenters expressed concern that the FAIR Act did
not establish a timetable for OMB's review of agency inventories
or their availability for public review.
Response:
OMB intends to complete its review and consultation in a timely
manner. Since this is a new process, OMB cannot set a firm
timetable at this time. However, it is anticipated that the
review and consultation should take about 60 days after OMB
receives the agency inventory and any requested supplemental
information. The notice of the inventory's public availability
would be published within a few days thereafter.
- Comment:
Several commenters stated that, if an employee's activities
are considered commercial and are therefore included on the
agency's list, the Handbook should require timely notification
to those employees.
Response:
In accordance with Section 2(c) of the FAIR Act, OMB will
publish a notice in the Federal Register when the
inventories are available to the public (after the completion
of OMB's review-and-consultation). The FAIR Act and the revised
Handbook require each agency to make its inventory available
to the public, which, of course, includes its employees and
their representatives.
3. "Competition"
and "Cost Comparison" Provisions
- Comment:
Section 2(d) of the FAIR Act provides that, "[w]ithin
a reasonable time after" an agency's inventory has been
made available to the public, the head of the agency "shall
review the activities on the list." Several commenters
recommended that OMB define what constitutes a "reasonable
time" for the agency to review its inventory of commercial
activities. One commenter suggested a time frame of 1 to 2
years, depending on the number of commercial activities on
an agency's inventory. One commenter also suggested that agencies
should be required to publish for public comment their timetable
for reviewing the inventory.
Response:
The FAIR Act does not provide a definition of the phrase "reasonable
time." OMB believes that agencies should conduct such
review in conjunction with their larger ongoing review of
all functions for possible re-engineering, privatization,
consolidation or other reinvention under the NPR and the Government
Performance and Results Act. As part of its ongoing oversight
of agency management of commercial activities performance,
OMB will now require agencies to provide annual reports to
OMB on the FAIR Act process, including their review and use
of the Commercial Activities Inventory.
- Comment:
Several commenters took issue with the statement in the preamble
to the proposal that "the FAIR Act requires agencies
. . . to review the activities on the list for possible performance
by the private sector." (64 FR 10031) They pointed out
that Section 2(d) of the FAIR Act does not specify a particular
purpose for the review.
Response:
The FAIR Act inventory provides information that can assist
the agency in considering a wide variety of options for how
to satisfy its commercial activity needs that are performed
by Federal employees. These options include both the possibility
of the private sector fulfilling the need (through such actions
as direct conversion, competition, and privatization), as
well as continued agency reliance on Federal employees (with,
perhaps, improvements that can flow from process changes suggested
in the competition).
- Comment:
Several commenters interpreted Section 2(d) of the FAIR Act
as permitting the direct conversion, without a cost comparison,
of any commercial activity on the list (of any size
or type) to performance by the private sector. In their view,
FAIR does not preclude an agency from utilizing any of the
processes allowed by law, including private-private competition
as prescribed in FAR Part 8, 15 and 36. Other commenters expressed
concern that the proposed revisions to the Supplemental Handbook
required public-private cost comparisons in situations where
such cost comparisons are not presently required.
Response:
The FAIR Act envisions the use of competition to select a
source when an agency considers contracting with a private
sector source for performance of an activity on the list,
but the law did not modify existing policies regarding the
conduct of competitions. Existing guidance provides guidelines
for determining when cost comparisons are required and, if
required, how they are conducted.
- Comment:
Several commenters viewed the FAIR Act as prohibiting an agency
from converting commercial work from contract to in-house
performance under any condition.
Response:
The FAIR Act addresses only inventories of commercial activities
that are performed by Federal employees. It does not address
commercial activities that are performed through contract
and, therefore, does not address the conversion of contract
work to in-house performance.
- Comment:
Several commenters stated their view that the FAIR Act requires
substantial changes to the Circular A-76 costing rules so
that they incorporate "all costs," and in particular
the costs listed in the parenthetical in Section 2(e) (i.e.,
the costs of quality assurance, technical monitoring of the
performance of such function, liability insurance, employee
retirement and disability benefits, and all other overhead
costs).
Response:
Existing guidance already requires agencies, in conducting
cost comparisons, to consider all the fair and reasonable
costs addressed in Section 2(e) of the FAIR Act. (See 64 FR
10032). The Supplemental Handbook requires consideration of
all costs to the taxpayer that could be expected to change
as a result of a conversion to or from performance by in-house
or contract employees.
- Comment:
Several commenters suggested that public-private competitions
must be based on "best-value" principles. They were
concerned that OMB's proposed guidance relies on "cost-only
competitions," thus ignoring the potential use of the
best-value approach in the cost comparison process.
Response:
Existing guidance is not limited to "cost-only competitions."
It also allows for best value tradeoffs between cost and other
factors. The competitive-source selection process outlined
at Part 1, Chapter 3, paragraph H of the Supplemental Handbook
permits use of the best value source selection approach in
the context of public-private competition.
4. The
FAIR Act "Challenge" Process
- Comment:
Section 3 of the FAIR Act provides for an administrative "challenge"
process under which "interested parties" may challenge
the agency's omission, or inclusion, of an activity on its
FAIR Act inventory. Under this process, an "initial decision"
is rendered by an agency official designated by the agency
head. The interested party may then file an appeal of an adverse
decision to the agency head. Several commenters suggested
that, in the case of an appeal, the agency should publish
its initial decision and the appeal in the Federal Register
and request comments of other interested parties so that they
may be considered by the agency head. It was further suggested
that the final appeal should be reviewed by OMB, the Small
Business Administration, the General Accounting Office, and
relevant congressional appropriations and authorization committee
staff.
Response:
The requested procedures would go far beyond the FAIR Act.
In addition, since Section 3 provides the agency head with
10 days to decide an appeal, there is not sufficient time
for the agency to solicit, receive, and consider public comments.
5. Implementing
the FAIR Act Via Revisions to A-76 & the Supplemental Handbook
Comment:
A number of commenters suggested that OMB use an alternative
vehicle to implement the FAIR Act guidance, such as issuing
regulations or a separate circular, rather than making changes
to the existing guidance on the performance of commercial
activities contained in OMB Circular A-76 and its Supplemental
Handbook.
Response:
Circulars are a well-established vehicle for directing agencies
on management of their activities. Circular A-76 already establishes
the broad principles and the Revised Supplemental Handbook
provides the specific definitions and direction on management
of commercial activities, including the inventory and other
activities that are codified by the FAIR Act. For this reason,
it makes much more sense to revise the existing guidance than
to develop a new circular. More importantly, however, OMB
wanted to provide the agencies with prompt and clear guidance
on how to implement the Act within the short time frame available
and without confusion or wasted effort on the part of the
agencies. Without revising the Handbook to conform to the
FAIR Act, repetitive and competing guidance would exist in
a number of areas. For example, the Handbook already requires
agencies to develop an annual inventory of their commercial
activities and specifies what information (data elements)
is to be included. It also contains guidance for when and
how agencies are to conduct cost comparisons and what costs
should be included. These are all specific areas addressed
by the FAIR Act. Ironically, the confusion that could result
from issuing a new circular might slow agencies down rather
than speeding them up.
Revising the Circular
and Supplemental Handbook so that they conform to the FAIR Act
is the best way to provide agencies with clear and prompt guidance
on how to implement the Act.
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